Q3 2023 IDEXX Laboratories Inc Earnings Call

Please standby we are about to begin.

Good morning, and welcome to the IDEXX Laboratories third quarter 2023 earnings Conference call. As a reminder, today's conference is being recorded participating in the call. This morning are Jay Mizelle ski President and Chief Executive Officer, Brian Mckeon, Chief Financial Officer, and John Ravens, Vice President of Investor relation.

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

Conciliation of these non-GAAP financial measures to the most directly comparable GAAP measures are provided in our earnings release, which May also be found by visiting the Investor Relations section of our web site and reviewing our third quarter 2023 results. Please note all references to growth organic growth in comparable growth refer to growth compared to the equivalent period in 2022.

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. Today's prepared remarks will be posted to the Investor Relations section of IDEXX Dot Com. After the earnings conference call concludes I would now like to turn.

The call over to Brian Mckeon.

Good morning, and welcome to our third quarter earnings call.

Today I'll take you through our Q3 results and review our updated financial outlook for 2023.

In terms of highlights IDEXX achieved solid revenue growth and strong profit gains in the third quarter.

Overall revenues increased 8% organically supported by 9% organic growth in CAG diagnostic recurring revenues net of approximately 50 basis points of negative impact from fewer equivalent selling days.

Organic revenue growth was supported by sustained benefits from IDEXX execution drivers, including continued strong premium instrument placements and solid new business gains high levels of customer retention and high growth in recurring veterinary software revenues.

Overall, CAG diagnostics recurring revenue gains in the quarter were moderated by a 2% same store decline in U S clinical visits.

This was below our expectations for relatively flattening U S clinic visit trends, reflecting ongoing capacity management challenges at U S clinics and relatively softer wellness visit levels.

Operating profit results were ahead of our expectations supported by gross margin gains and operating expense leverage which enabled EPS delivery of $2 53 per share up 18% as reported and 16% on a comparable basis.

Based on our strong financial results in the quarter were updating our full year EPS outlook aligned with the higher end of our previous guidance range.

This reflects expectations for strong comparable operating margin gains this year.

We're also updating our full year revenue guidance ranges to incorporate our Q3 results and recent sector trends as well as to reflect the recent strengthening of the U S. Dollar.

We'll review our updated guidance detail later in my comments, let's begin with a review of our third quarter results.

Third quarter organic revenue growth of 8% was driven by 8% organic CAG gains and 7% organic growth in our water business.

Overall organic revenue growth was moderated by 2% organic growth in our LPG business and approximately $3 million of headwind related to lower op medical revenues, including effects from the wind down of our human Covid testing business.

CAG diagnostic recurring revenue increased 9% organically, reflecting eight 3% gains in the U S and 10, 3% growth in international regions net of 0.5% global growth headwind from equivalent days effects.

Okay diagnostic organic recurring revenue growth in Q3 was supported by average global net price improvement of approximately 7%.

In line with our expectations for 6% to 7% gains in the second half of this year.

Overall organic revenue growth was supported by 13% organic growth in veterinary software and diagnostic imaging revenues.

Driven by continued strong gains in recurring software revenues.

TEG instrument Robbins were down 10% organically, reflecting comparisons to high prior year levels program pricing effects and global mix.

IDEXX CAG diagnostic recurring revenue growth remained solidly above sector growth levels.

In the U S. CAG diagnostic recurring revenue organic growth was eight 3%, including approximately 50 basis points of negative impact from fewer selling days in Q3.

This reflects an approximate 1100 basis point normalized growth premium compared to the same store U S clinic visit growth levels, which declined an estimated 2% overall in the quarter.

<unk> growth results reflect continued increases in diagnostic frequency and utilization per clinical visit at the practice level.

Strong benefits from IDEXX take execution drivers, including higher net price realization solid new business gains and sustained high customer retention levels.

As noted same store U S clinic visit declines of 2% well below our expectations for relatively flat clinic visit growth in the second half of 2023.

Softer trends in Q3 appear to have been impacted by ongoing capacity management challenges at U S clinics.

<unk> effects from high staff turnover.

We also saw a relative slowdown in wellness visits in the quarter, which may reflect some macro impacts on demand at the clinic level.

We've refined our full year revenue outlook to capture potential impacts from these trends in Q4, while reinforcing our strong outlook for 2023 profitable for us.

Fedex International CAG diagnostic recurring revenue growth was 10, 3% Q3, reflecting continued benefits from higher net price realization and improved volume gains.

Our National results were also supported by strong IDEXX execution reflected in sustained new business gains and high Q3 premium instrument placements.

Supported a double digit expansion of our premium instrument installed base.

Double digit growth rate benefits from IDEXX execution, offset negative impacts from international macro conditions, which continued to pressure same store volume growth trends in the quarter.

Globally Q3 results were supported by strong growth of IDEXX in clinic CAG diagnostic recurring revenues.

Thanks, Bette lab consumable revenues increased 11% organically with double digit gains in U S and international regions.

Consumable gains were supported by 11% year on year growth of our global premium instrument installed base, reflecting strong gains across our catalyst premium hematology instead of your platforms.

We placed 4000 and 571 CAG premium instruments in Q3, a decrease of 4% year on year compared to record prior year levels, which included benefits from our international launch of <unk> one.

The quality of instrument placements continues to be excellent reflected in solid global gains in evi metrics and sustained high new and competitive catalyst placements in the U S.

Global catalyst placements decreased 2% overall, reflecting tough comparisons to high prior year international placement levels.

Of course like one installed base expansion continued at a solid pace reflected in our global installed base of over 12000 instruments.

Global rapid assay revenues expanded 8% organically in Q3 supported by strong growth in the U S, including benefits from higher net price realization.

Global lab revenues increased 7% organically, reflecting high single digit gains in the U S and relatively improved mid to high single digit growth in international regions.

In other areas of our CAG business veterinary software and diagnostic imaging revenues increased 13% organically.

Results were supported by continued high levels of organic growth in recurring software and diagnostic imaging revenues and ongoing momentum in cloud based software placements.

Water revenues increased 7% organically in Q3 compared to strong prior year growth levels.

Growth was driven by continued solid gains in the U S, including benefits from net price improvement.

Protective Pds acquisition integration continues to progress well and added approximately 1% to reported water growth.

Livestock poultry and dairy revenues increased 2% organically as strong gains in the U S continue to be moderated by constraints on international growth.

<unk> impacts from lower herd health screening revenues related to reduced China import testing.

Turning to the P&L Q3 profit results were supported by high comparable operating margin gains, including benefits from operating expense leverage.

Gross profit increased 8% in the quarter as reported and on a comparable basis.

Those margins were 59, 9% up 30 basis points on a comparable basis compared to strong prior year levels.

Gross margin gains reflected benefits from higher net price realization business mix and improvement in software service gross margins.

As expected reported gross margin gains were moderated by a 60 basis point negative impact related to FX driven by the lapping of prior hedge gains.

We're projecting an approximate 70 basis point gross margin headwind in Q4 related to FX again, primarily related to the lapping of prior year hedge gains.

On a reported basis operating expenses increased 4% year on year as reported and on a comparable basis, reflecting benefits from cost controls and lapping of prior year R&D and commercial investments.

We're planning for a higher level of Opex growth in Q4, as we advance our U S commercial expansion and increase R&D investments aligned with our innovation initiatives, including our planned 2024 new platform launch.

EPS was $2 53 per share in Q3, an increase of 18% as reported and 16% on a comparable basis.

Foreign exchange reduced operating profit by $1 million and EPS by <unk> <unk> per share in the quarter.

Including impacts from the lapping of $9 million in prior year hedge gains.

Impacts from 'twenty to 'twenty, three foreign exchange hedges resulted in a $1 million gain in the quarter.

Free cash flow was $238 million in the third quarter.

On a trailing 12 month basis, our net income to free cash flow conversion ratio was 83%.

For the full year, we're updating our outlook for free cash flow conversion to 85% to 90% of the outcome at the higher end of earlier projections, reflecting estimated capital spending of $160 million to $180 million.

Our balance sheet remains in a strong position we ended the quarter with leverage ratios of 0.8 times gross and 0.6 times net of cash.

Share repurchases over the last year supported over 0.1% reduction in diluted shares outstanding for the quarter.

Unknown Executive: Please stand by, we are about to begin. Good morning, and welcome to the IDEX Laboratories' third quarter, 2023 earnings conference call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer, Brian McKeon, Chief Financial Officer, and John Ravens Vice-President Investor Relations.

We allocated $35 million of capital to share repurchases in the third quarter as we continue to manage our balance sheet relatively more conservatively in the current interest rate environment.

Turning to our 2023 P&L guidance, we're updating our full year outlook to incorporate our Q3 results and our revised estimates for foreign exchange impacts, reflecting the recent strengthening of the U S dollar.

Unknown Executive: IDEX 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 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 IDEX.com.

Our updated full year guidance for reported revenues of $3 billion $635 million to $3.650 billion, reflecting a seven 9% to eight 4% reported growth range.

We update our reported revenue outlook includes a $20 million reduction for FX impacts compared to prior estimates.

No estimate FX will reduce full year reported growth by approximately 0.5% with limited year on year revenue growth effects in Q4.

Unknown Executive: During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAP. A reconciliation of these non-GAP financial measures to the most directly comparable GAP measures are provided in our earnings release, which may also be found by visiting the Investor Relations section of our website. In reviewing our third quarter 2023 results, please note all references to growth, organic growth, and comparable growth referred to growth compared to the equivalent period in 2022 unless otherwise noted.

In terms of our operational revenue growth outlook, we're updating our full year organic growth guidance to eight 3% to eight 8%.

Supported by an outlook for CAG diagnostic recurring revenue organic growth of nine 8% to 10, 3%.

This aligns with the lower end of our most recent guidance ranges and the midpoint of our original guidance for 2023.

Our organic growth guidance assumes a level of continued pressure on U S same store clinical visits and international same store sales levels in Q4.

Unknown Executive: 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. Today's prepared remarks will be posted to the Investor Relations section of IDEX.com after the earnings conference call concludes.

Reflecting ongoing clinic capacity management dynamics and macroeconomic impacts on demand.

Consistent with earlier guidance our outlook for CAG diagnostic recurring revenue growth reflects continued solid positive benefits from IDEXX execution drivers, including consistent expectations for 6% to 7% net price improvement in the second half of 2023.

Brian Mckeon: I would now like to turn the call over to Brian McKin. Good morning and welcome to our third quarter earnings call. Today I'll take you to our Q3 results and review our updated financial outlook for 2023.

For Q4, we expect global net price improvement within this range with U S. Net price gains of approximately 6%, reflecting the lapping of prior year price increases.

Brian Mckeon: In terms of highlights, IDEX achieved solid revenue growth and strong profit gains in the third quarter. Overall, revenues increased 8% organically, supported by 9% organic growth and CAG diagnostic recurring revenues, net of approximately 50 basis points of negative impact from fewer equivalent selling days. Organic revenue growth was supported by sustained benefits from IDEX execution drivers, including continued strong premium instrument placements, solid new business gains, high levels of customer retention and high growth and recurring veterinary software revenues.

Our Q4 outlook also incorporates a 1% equivalent day volume growth headwind.

We're maintaining the high end of our reported EPS outlook and narrowing our full year EPS guidance range to $9 74 to $9 90 per share.

An increase of five cents per share at midpoint.

At midpoint, we're maintaining a consistent operational EPS outlook as revisions to our organic revenue growth range are offset by positive adjustments to our projections for operating margins incorporating our strong year to date performance.

Brian Mckeon: Overall CAG diagnostics, recurring revenue gains in the quarter were moderated by a 2% same-store decline in US clinical visits. This was below our expectations for relatively flattening US clinic visit trends, reflecting ongoing capacity management challenges at US clinics and relatively softer wellness visit levels. Operating profit results were ahead of our expectations, supported by gross margin gains and operating expense leverage which enabled EPS delivery of $2.53 per share of 18% as recorded and 16% on a comparable basis.

We've increased the outlook for reported operating margins to 29, 6% to 29, 8% for the full year.

This reflects an outlook for 360 to 380 basis points in comparable operating margin expansion.

Quoting approximately 280 basis points in combined benefit from the $16 million Q1 customer contract resolution payment and the lapping of $80 million of discrete R&D investment in the second quarter of 2022.

Our updated full year EPS guidance incorporates a <unk> 11 per share and positive revisions combined to our interest expense and tax rate outlook.

Brian Mckeon: Based on our strong financial results in the quarter, we're updating our full year EPS outlook aligned with the higher end of our previous guidance range. This reflects expectations for strong comparable operating margin gains this year. We're also updating our four-year revenue guidance ranges to incorporate our Q3 results and recent sector trends as well as to reflect the recent strengthening of the US dollar. We'll review our updated guidance detail later in my comments.

Including <unk> and upsides related to share based compensation tax benefits.

These gains are partially offset by five cents of negative impact from foreign exchange changes that updated rates.

We now estimate that foreign exchange impacts will decrease EPS by <unk> 25 per share for the full year and will reduce full year operating margins by approximately 70 basis points, including impacts from the lapping of $26 million in 2022 hedge gains.

Brian Mckeon: Let's begin with a review of our third quarter results. Third quarter, organic revenue growth of 8% was driven by 8% organic CAD gains and 7% organic growth in our water business. Overall, organic revenue growth was moderated by 2% organic growth in our LPD business and approximately 3 million of dollars of headwind related to lower opti medical revenues, including effects from the wind down of our human COVID testing business. Tag Diagnostic Recurring Revenue increased 9% organically, reflecting 8.3% gains in the US and 10.3% growth in international regions, net of a 0.5% global growth headwind from equivalent days of effects.

We provided details on our updated 2023 outlook in the press release tables and earnings now shops.

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

Thank you, Brian and good morning.

<unk> continued to make excellent progress in advancing our business strategy in Q3, while delivering solid organic revenue growth and strong financial performance our strategy of high touch commercial engagement supported by relevant testing and workflow innovations drove continued adoption of IDEXX is world class products and services.

<unk> solution support our customers' mission to deliver high standards of care enabled through the continued expansion of diagnostics frequency and utilization at the practice level.

Brian Mckeon: Tag Diagnostic Organic Recurring Revenue Growth in Q3 was supported by average global and that price improvement of approximately 7%. In line with our expectations for 6% to 7% gains in the second half of this year. Overall, organic revenue growth was supported by 13% organic growth in veterinary software and diagnostic imaging revenues driven by continued strong gains in recurring software revenues. Tag gains from its revenues were down 10% organically reflecting comparisons to high priority levels, program pricing effects, and global mix.

Diagnostics revenue remains the fastest growing area of veterinary clinic revenues, a durable trend since the determination of a patient's health status and the best treatment path very often requires testing.

<unk> strong financial performance in Q3 was supported by solid gains in CAG diagnostics recurring revenues across our major regions. The expansion of recurring revenues benefit from multiple IDEXX execution drivers, including solid placements of premium instruments building a high prior year levels sustained new business gains net price realization.

Brian Mckeon: At XCag Diagnostic Recurring Revenue Growth remained solidly above sector growth levels. In the US, Cag Diagnostic Recurring Revenue Organic Growth was 8.3% including approximately 50 basis points of negative impact from fewer selling days in Q3. This reflects an approximate 1,100 basis point normalized growth premium compared to same store US clinic visit growth levels, which declined and estimated 2% overall in the quarter. At XCag Diagnostic Recurring Revenue Growth Results reflected continued increases in diagnostic frequency and utilization per clinical visit at the practice level.

And continued momentum in placements of cloud based software solutions. These gains are offsetting near term headwinds and overall clinic visit levels globally.

<unk> ongoing capacity management challenges and veterinary practices as well as impacts from macro economic dynamics productivity remains a top priority for veterinary clinics, who continue to refine their business approach and make trade offs necessary to balance staffing management challenges with strong demand for medical services IDEXX.

I'd access solutions anchored by our software enabled multi modality offerings give critics of tools to address these dynamics.

Brian Mckeon: And strong benefits from might exit execution drivers, including higher net price realization, solid new business gains and sustained high customer retention levels. As noted, same store US clinic visit declines of 2% were below our expectations for relative with flat clinic visit growth in the second half of 2023. Software trends in Q3 have been impacted by ongoing capacity management challenges at US clinics, including effects from high staff turnover. We also saw a relative slowdown in wellness visits in the quarter, which may reflect some macro impacts on demand at the clinic level.

Today I'll review, how we're advancing our strategy focused on developing the significant long term growth opportunity for our business, while delivering strong financial performance I'll start with an update on our global commercial performance and how our focus on customer engagement supports the increase in adoption and utilization of diagnostics.

IDEXX commercial teams are highly engaged in a customer centric model that supports both existing customers, who use of diagnostics and expanding our customer base.

Commercial professionals delivered another excellent quarter of results in Q3 solid CAG diagnostics recurring revenue reflects benefits from our expanding loyal installed base and our veterinary partnership model to communicate the importance of diagnostics to clinicians. It also reflects benefits from our focus on placing high value analyzer.

Brian Mckeon: We've refined our full year revenue outlook to capture potential impacts from these trends in Q4 while reinforcing our strong outlook for 2023 profit performance. I'd X International Cag Diagnostic Recurring Revenue Growth was 10.3% Q3, reflecting continued benefits from higher net price realization and improved volume gains. International results were also supported by strong I'd X execution, reflected in sustained new business gains and high Q3 premium instrument placements, which supported a double digit expansion of our premium instrument install base.

Or is it existing and competitive accounts in order to drive profitable future recurring revenues, including 5% competitive catalyst placement growth in North America, which supported solid evi growth are.

Our continued progress on this front reflects our relentless focus on providing busy clinicians with the products services and the support they need to serve the high demand for veterinary services and meet the expectations of pet owners, who seek an increasingly demand no compromises in care for their pets.

Brian Mckeon: Double digit growth rate benefits from IDEX execution, offset negative impacts from international macro conditions, which continued to pressure same store volume growth trends in the quarter. Global acute results were supported by strong growth of IDEX in clinic, CAG agnostic recurrent revenues. IDEX Betlab consumable revenues increased 11% organically with double digit gains in US and international regions. Consumable gains were supported by 11% year-and-year growth at our global premium instrument install base, reflecting strong gains across our catalyst, premium hematology and set of your platforms.

In addition to driving the core growth in medical services in a clinic diagnostics are also a key profit center continued growth in both diagnostics frequency and utilization preclinical visit were supported by gains in wellness testing per visit building at substantial increases as the pandemic. This demonstrates that veterinarians continue to incorporate.

Brian Mckeon: We placed 4,571 CAG premium instruments in Q3, a decrease of 4% year-and-year compared to record priority levels, which included benefits from our international launch of ProSide One. The quality of instrument placements continues to be excellent, reflected in solid global gains in EVI metrics and sustain high new and competitive catalyst placements in the US. Global catalyst placements decrease 2% overall, reflecting tough comparisons to high prior year international placement levels. ProSide One install base expansion continued at the solid pace, reflected in a global install base at over 12,000 instruments.

Great and expand the use of diagnostics in their care protocols, while pet owners continue to show willingness to spend on their pets. That's focused supported solid 7% gains in same store diagnostic revenue gains at the practice level.

That is being achieved despite ongoing headwinds in clinical visit growth and are resource constrained and challenging macro environment.

This performance shows that pet owners continue to prioritize health care for their pets, which reinforces the resiliency of our sector.

And IDEXX customers are growing even faster supported by our direct customer engagement model and superior integrated diagnostic solutions IDEXX has experienced sales professionals deep partnership with the veterinarian. They serve supported sector diagnostics revenue growth that outpaced both practice revenue and political revenue growth by two <unk>.

Brian Mckeon: Global rapid assay revenues expanded 8% organically in Q3, supported by strong growth in the US, including benefits from higher net price realization. Global lab revenues increased 7% organically, reflecting high single digit gains in the US and relatively improved mid to high single digit growth in international regions. In other areas of our CAG business veterinary software and diagnostic imaging revenues increased 13% organically. Results were supported by continued high levels over a granic growth and recurring software and diagnostic imaging revenues and ongoing momentum and cloud-based software placements.

Plus basis points in Q3 building on our strong momentum in helping to advance pet health care diagnostics testing.

Growing our commercial footprint in a disciplined way is a key element of our customer engagement strategy as we shared at Investor day extensive practice data analysis shows that customers using our broader dx offering generate approximately 200 basis points higher practice clinical and diagnostics revenue growth consistent with.

Our execution trends this benefits the patient practice economics and by extension IDEXX. Our U S. Commercial expansion is progressing to plan and we expect to enter the new year with an expanded team in place. This is the first U S expansion in four years in many territories have appreciably increased in size since then.

Brian Mckeon: Water revenues increased 7% organically in Q3 compared to strong prior year growth levels. Growth was driven by continued solid gains in the US, including benefits from net price improvement. Our tech-to-PDF acquisition integration continues to progress well and added approximately 1% to reported water growth. Livestock poultry and dairy revenues increased 2% organically, as strong gains in the US continue to be moderated by constraints on international growth, including impacts from lower fertile screening revenues related to reduced China import testing.

Increasing reach and engagement with clinics in our largest and most developed region prepares us well to support the growing portfolio of IDEXX innovations.

Outside of the U S. We remain focused on deploying our commercial playbook and countries across the world.

We are encouraged to report the third quarter International CAG diagnostic recurring revenues benefited from another quarter of improving volume growth.

Brian Mckeon: According to the P&L, Q3 profit results were supported by high comparable operating margin gains, including benefits from operating expense leverage. Growth profit increased 8% in the quarter as reported and on a comparable basis. Growth margins were 59.9% of 30 basis points on a comparable basis compared to strong prior year levels. Growth margin gains reflected benefits from higher net price realization, business mix, and improvement in software service growth margins. As expected, reported growth margin gains were moderated by a 60 basis point negative impact related to FX driven by the laughing of prior hedge gains.

Higher reached a revenue metric strengthened relationships between IDEXX commercial professionals and in region veterinarians are increased commercial presence as a result of seven international commercial expansion. Since 2020 helped drive solid double digit year over year gains in our international premium instrument installed base across platforms. This.

This includes record third quarter instrument placements in the Asia Pacific region, which helped drive a 13% growth in our international installed base. This growth demonstrates that our highly capable sales teams have the right products at the right time and reinforced the significant potential associated with the development of international regions.

Brian Mckeon: We're projecting an approximate 70 basis point growth margin ahead 1 and Q4 related to FX, again primarily related to the laughing of prior year edge gains. On a reported basis, operating expense increased 4% year-on-year as reported and on a comparable basis, reflecting benefits from cost controls and laughing of prior year R&D and commercial investments. For planning for a higher level of office growth in Q4 as we advance our US commercial expansion, an increase R&D investments aligned with our innovation initiatives, including our plan 2024 new platform launch EPS was $2.53 per share in Q3 an increase of 18% as reported and 16% on a comparable basis.

These geographies represent an outsized portion of our long term opportunity of over 200000 incremental premium placements for existing instrument categories.

Turning to our innovation agenda software is a key pillar in our growth strategy and an area of important focus in the clinic that trend that we are well positioned to facilitate and enable clinics.

Clinics are embracing software to improve efficiency in all aspects of their business from patient processing and billing to diagnostics interpretation and pet owner communication.

Higher software adoption is driven by the desire to realize the benefits of modern technology and applications to address a significant workflow pain points. It also positions practices to incorporate solutions that increase engagement with pet owners rescheduling and other tools that they use and rely on.

Brian Mckeon: Quarant exchange reduced operating profits by $1 million and EPS by $1 per share in the quarter, including impacts on the lapping of $9 million in prior year hedge gains. Impact from 2023 Quarant exchange hedges resulted in a $1 million dollar gain in the quarter. Precashful was $238 million in the third quarter. On a trailing 12 month basis, our net income to pre-cashful conversion ratio was 83%. For the full year, we're updating our outlook for pre-cashful conversion to 85 to 90% of an income at the higher end of earlier projections, reflecting estimated capital spending of $160 to $180 million.

Other aspects of their lives the multiplier benefit to our business from the adoption of IDEXX software significant reflected in third quarter growth in our software and diagnostics imaging segment with high teen organic gains in our highly profitable recurring annuity stream.

Excellent commercial execution and strong customer interest drove outstanding third quarter pimps placements, most notably our cloud based <unk> products represented 95% of total Kim's placements and as a result now comprise over 50% of our PMC installed base. This achievement reflects broad based adoption.

Brian Mckeon: Our balance sheet remains in a strong position. We ended the quarter with leverage ratios of 0.8 times gross and 0.6 times net of cash. Share repurchases over the last year supported a 0.1% reduction in deluded shares outstanding for the quarter. We allocated $35 million in capital share repurchases in the third quarter as we continue to manage our balance sheet relatively more conservatively in the current interest rate environment.

With cloud based products that reflects an inflection point in technology adoption.

Veterinarians earlier in their careers are more digitally native sales profiles indicate that customers of all career stages. Appreciate the workflow benefits and ease of use of our wide ranging software stack. The common denominator is that contemporary software solutions allow them to better focus on the delivery of care and minimize non value add.

Brian Mckeon: Turning to our 2023 P&L guidance, we're updating our full year outlook to incorporate our Q3 results and revised estimates for foreign exchange impacts, reflecting the recent strengths. Our updated full year guidance for reported revenues is $3,635 million to $3,650 million, reflecting a 7.9% to 8.4% reported growth range. The updated reported revenue outlook includes a $20 million reduction for FX impacts compared to prior estimates. We now estimate FX will reduce fully reported growth by approximately 0.5% with limited year and year revenue growth effects in Q4.

Administrative activities our software product offering also includes an integrated diagnostics portal that connect plus with IDEXX decision IQ, but it only provides testing results, but also our decision support critical insights and next step considerations across a growing range of critical use cases.

IDEXX software and data solutions situate us well to benefit from these trends as well as the accretion in operating margin dropped through associated with the revenue base that is increasingly recurring in nature.

Our software innovation is deeply integrated with our diagnostics innovation approach as evidenced by our highly successful instrument platform strategy enabled by cloud based capabilities and connectivity that enhanced practice insight and workflow. We're very excited about our continued progress in bringing transformative solutions to point of care and we are on plan to announce.

Brian Mckeon: In terms of our operational revenue growth outlook, updating our full year organic growth guidance to 8.3% to 8.8%, supported by an outlook for CAD diagnostic recurring revenue organic growth of 9.8% to 10.3%. This aligns with the lower end of our most recent guidance ranges and the midpoint of our original guidance for 2023. Our organic growth guidance assumes a level of continued pressure on US same-store clinical visits and international same-store sales levels in Q4, reflecting ongoing clinic capacity management dynamics and macroeconomic impacts on demand.

Our new platform it via Max in January our product development efforts continue to advance aligned to our timing expectations and we're excited to share more details in just a few short months and how add to our over 200000 placement opportunity estimate for existing instrument categories.

We also continue to advance our innovation engine in other areas like advanced test menu innovation and assays that provide new clinical insights earlier in disease States is especially valued by veterinarians since they drive higher standards of care aligned with the goal of improving health outcomes for their patients earlier this year, we announced the launch of <unk>.

Brian Mckeon: Consistent with earlier guidance, our outlook for CAD diagnostic recurring revenue growth reflects continued solid positive benefits from IDX execution drivers, including consistent expectations for 6-7% net price improvement in the second half of 2023. In Q4, we expect global net price improvement within this range with US net price gains of approximately 6%, reflecting the lapping of prior year price increase. Our Q4 Outlook also incorporates a 1% equivalent-day volume growth headline. We're maintaining the high end of our reported EPS Outlook and narrowing the four-year EPS guidance range to $9.74 to $9.90 per share, an increase of 5% per share at midpoint.

Important new testing assay snap and b that expands our industry, leading renal portfolio and will be available in early December beginning with our North American Lab network.

Brian Mckeon: At midpoint, we're maintaining a consistent operational EPS Outlook as revisions to our organic revenue growth range are offset by positive adjustments to our projections for operating margins, incorporating our strong-year-to-date performance. We've increased the Outlook for reported operating margins to 29.6% to 29.8% for the full year. This reflects an Outlook for 360 to 380 basis points in comparable operating margin expansion, including approximately 280 basis points in combined benefit from the $16 million Q1 customer contract resolution payment, and the lapping of $80 million of discrete R&D investment in the second quarter of 2020.

Brian Mckeon: Our updated four-year EPS guidance incorporates 11% per share and positive revisions combined to our interest expense and tax rate Outlook, including four cents and upsides related to share-based compensation tax benefits. These gains are partially offset by five cents of negative impact from foreign exchange changes that updated rates. We now estimate that foreign exchange impacts will decrease EPS by 25 cents per share for the full year, and will reduce full-year operating margins by approximately 70 basis points, including impacts to the lapping of 26 million in 2022 edge gains.

Sure its customers will receive faster turnaround times for test results, enabling them to make timely and informed decisions for their patients wellbeing IDEXX provides the only veterinary dedicated and accredited reference laboratory network in Australia, and New Zealand. So bringing this location online is an important achievement as we strive to deliver sustainable longterm van.

Expansion of our global reference left footprint is just one way we are addressing the approximately two thirds of our estimated tam opportunity outside of the U S. It area of focus.

Brian Mckeon: We've provided details on our updated 2023 Outlook and the press release tables and earnings snapshots.

With that I'll now conclude the prepared remarks portion of the call before he moved to Q&A I Wanna take a moment to express our heartfelt sympathy for everyone affected by the events in Lewiston, Maine last week, we are deeply saddened by the senseless act of violence impacting our communities keeping our colleague safe supporting each other and providing health and wellbeing.

Brian Mckeon: That concludes our financial review.

Jay Mazelsky: I'll now turn the call over to Jay for his comments. Thank you, Brian. In good morning, IDEX continued to make excellent progress in advancing our business strategy in Q3 while delivering solid, organic revenue growth and strong financial performance. Our strategy of high-touch commercial engagement, supported by relevant testing and workflow innovations, drove continued adoption of IDEX's world-class products and services. IDEX's solutions support our customer's mission to deliver high standards of care, enabled through the continued expansion of diagnostics frequency and utilization at the practice level.

For it is a top priority during this difficult time.

I also want to thank law enforcement and public safety personnel are working tirelessly to keep our communities safe and medical teams to continue to aid all who have been impacted.

Wow, that's open the line for Q&A.

Thank you, ladies and gentlemen, if he would like to ask a question that is star one on your Touchtone telephone keypad again that is star one for any questions or comments at this time.

Jay Mazelsky: Diagnostics revenue remains the fastest growing area of veterinary clinic revenues, a durable trend since the determination of a patient's health status and the best treatment path very often requires testing. IDEX's strong financial performance in Q3 was supported by solid gains and CAG diagnostics recurring revenues across our major regions. The expansion of recurring revenues benefit for multiple IDEX execution drivers, including solid placements of premium instruments building up high prior year levels, sustained new business gains, net price realization and continued momentum in placements of cloud-based software solutions.

Well the first time I call Rifkind, a bank of America. Your line is open. Please go ahead [noise].

Hey, guys. Thanks for taking my question.

First I want to talk about the broader market I mean as you you know vet visit trends as you've said you know the pressures remain saw some of the numbers and the snapshot relatively consistent with what we expected from.

Third party data so not a huge surprise there, but I think it's safe to say that it's the last thing a lot longer than anyone had expected going into this year.

Jay Mazelsky: These gains are offsetting near-term headwinds and overall clinic-visual levels globally, reflecting ongoing capacity management challenges and veterinary practices as well as impacts from macroeconomic dynamics. Productivity remains a top priority for veterinary clinics who continue to refine their business approach and make trade-offs necessary to balance staffing management challenges with strong demand for medical services. IDEXX Solutions, anchored by our software-enabled multi-modality offering, give clinics the tools to address these dynamics.

If this continues without any significant improvement how does this impact your longterm model and and longer term expectations of the business I'm going to need to put another way. You know you are targeting 8.5% organic growth. This year well below your 10% you know long term target and that's despite taking seven to eight per cent price so if pricing powers.

Not there were not there to the same extent and volleyball recover I mean, what other levers do you have to offset that.

Jay Mazelsky: Today I'll review how we're advancing our strategy focused on developing the significant long-term growth opportunity for our business while delivering strong financial performance. I'll start with an update on our global commercial performance and how our focus on customer engagement supports the increase in adoption and utilization of diagnostics. IDEXX commercial teams are highly engaged in a customer-centric model that supports both existing customers' use of diagnostics and expanding our customer base. Our commercial professionals delivered another excellent quarter of results in Q3.

Yeah. Good morning, like this J.

Just a couple of things maybe at a higher level and I'll I'll turn it over to Brian Tuck about some of the specifics related to the bottle you know keep in mind. The the the backdrop of the sectors very positive. It's just been an expanded pet population I think the human health human help them.

But he has very very strong or execution drivers as a company that thinks that you know we could directly influence have been very strong we've seen that an instrument placements and pin placements yet.

Jay Mazelsky: Solid CAG diagnostics, recurring revenue, reflects benefits from our expanding loyal and small base and our veterinary partnership model to communicate the importance of diagnostics to clinicians. It also reflects benefits from our focus on placing high-value analyzers at existing and competitive accounts in order to drive profitable future recurring revenues, including 5%, competitive catalyst placement growth in North America, which supported solid EVI growth. Our continued progress on this front reflects relentless focus on providing busy clinicians with the products, services, and the support they need to serve the high demand for veterinary services and meet the expectations of pet owners who seek and increasingly demand no compromises in a care for their pets.

Retention pricing realization. So all those things I think are are very good you know, we think there's been very good and customer demand as as we decided you know there are some constraints related to practice capacity and some challenges there I think the you know the good news on that front is.

The practices you know have hired there may be some you know some.

Some additional churn that they're working through but they are investing heavily in in technology, we see that with the use of our our lab equipment, both in clinic as well as reference labs, and obviously the the appetite for for software and applications that help them with optimize our workflow has continued to grow and.

Jay Mazelsky: In addition to driving the core growth and medical services in a clinic, diagnostics are also a key profit center. Continued growth in both diagnostics frequency and utilization per clinical visit, what's supported by gains and wellness testing per visit, building on substantial increases through the pandemic. This demonstrates that veterinarians continue to incorporate and expand the use of diagnostics in their care protocols while pet owners continue to show willingness to spend on their pets.

Then overall you know our competitive position is is very strong and we think as a result of our innovation you know pipeline will continue to be strong enough for some differentiated advantages. So you know I think from an industry standpoint, it's a very positive story I think we're well positioned to capitalize.

Jay Mazelsky: This focus supported solid 7% gains in same-store diagnostic revenue gain at the practice level, growth that is being achieved despite ongoing headwinds in critical visit growth and a resource constrained and challenging macro environment. This performance shows that pet owners continue to prioritize health care for their pets, which reinforces the resiliency of our sector. In Idaq's customers are growing even faster, supported by our direct customer engagement model and superior integrated diagnostic solutions.

And those trends and the the practices just continue to to work through some of the constraints with sighted.

Yeah, My God just to reinforce J as points I think are long term, 10% growth potential the key drivers Ed that we walk towards and we see a lot of positive of factors sustaining in terms of their.

Are competitive positioning expansion of diagnostics frequency and utilization.

The the adoption of IDEXX technologies, the long term demand dynamics that we see associated with the expanded pet population and favorable demographics in terms of pet ownership. So all of those factors are positive I think the the thing that we're working through is is a combination of near.

Jay Mazelsky: Idaq's experienced sales professionals, deep partnership with the veterinarians they serve, supported sector diagnostics revenue growth that outpaced both practice revenue and clinical revenue growth by 200 plus basis points in Q3, building on our strong momentum and helping to advance pet healthcare through diagnostics testing. Growing our commercial footprint in a disciplined way is a key element of our customer engagement strategy. As we shared an investor day, extensive practice data analysis shows that customers using our broader DX offering generate approximately 200 basis points higher practice clinical and diagnostics revenue growth consistent with our execution trends.

Near term capacity management challenges at the clinics and I think that's something we're assisting with in and we will have solutions to help with that over time, but that is something that has has continued and I think as a as a factor impacting your term grow.

As well as some of the near term macro impact so I think the.

Date of many times in the past who were business, that's very resilient, but not immune to those types of impacts and that's something that that I think is also impacting our near term growth at the margin, but we don't see that.

Jay Mazelsky: This benefits the patient, practice economics and by expansion items. Our US commercial expansion is progressing to plan and we expect to enter the new year with an expanded team in place. This is the first US expansion in four years and many territories have appreciably increased in size since increasing reach and engagement with clinics in our largest and most developed region prepares us well to support the growing portfolio of IDEX innovations. Our increased commercial presence as a result of seven international commercial expansion since 2020 helped drive solid double digit year of year gains in our international premium instrument install base across platforms.

Either of those factors as being longterm constraints to the to the growth potential for the for the company and I think from a competitive positioning point of view where <unk>.

Stronger position as we've ever been in terms of our ability to support the continued expansion of the sector globally.

Okay, Alright, maybe I'll use my follow up just be a little bit more direct than on on 24, I know you're not getting for twenty-four I'm not asking for twenty-four guide, but just looking at work consensus is right now it is still at that roughly 10% number just given what we see about market conditions as we said today I.

In November we've already got a pretty good sense of where they are do you think that there's a risk that 24 2024 is also below that long term trend line.

Jay Mazelsky: This includes records, third quarter instrument placements in the Asia Pacific region, which helped drive 13% growth in our international install base. This growth demonstrates that our highly capable sales teams have the right products at the right time and reinforce a significant potential associated with the development of international regions. These geographies represent an outsized portion of our long term opportunity of over 200,000 incremental premium placements for existing instrument categories.

Longterm model, we're not going to be guiding obviously today, but I I think we've got a number of positive factors that we see you heading into next year in terms of our execution Ah the competitive position that I noted the the innovation pipeline.

The the we're looking forward to sharing moron as we move forward and you know I think those are all things that will be.

Bleeding onto to continue delivering solid growth and and can tell delivering strong financial performance, which I think we're demonstrating our ability to do this year. So we'll we'll share more on that front as we get into to next year, we're focusing on the the drivers that we have a direct impact on and and we feel very good about our execution on that front.

Jay Mazelsky: Turning to our innovation agenda, software is a key pillar in our growth strategy in an area of important focus in the clinic, a trend that we are well positioned to facilitate and enable clinics are bracing software to improve efficiency in all aspects of their business from patient processing and billing to diagnostics, interpretation and pedo and communication. Higher software adoption is driven by the desire to realize the benefits of modern technology and applications to address these significant workflow pain points.

Thanks.

Our next question comes from Nathan Rich like Goldman Sachs. Your line is open. Please go ahead.

Hi, Good morning can you hear me.

Yeah, we we do Oh, great Hey, good morning. Thanks for the questions just wanted to ask about the U S. CAC diagnostic recurring performance in the third quarter and maybe just if you could go into a little bit more detail on how that played out relative to.

Jay Mazelsky: It also positions practices to incorporate solutions that increase engagement with pet owners through scheduling and other tools that they use and rely on in other aspects of their lives. The multiplier benefit to our business from the adoption of IDEC software is significant, reflected in third quarter growth in our software and diagnostics imaging segment with high teen organic gains in our highly profitable recurring annuity stream. Excellent commercial execution and strong customer interest drove outstanding third quarter PIMS placements.

<unk> you know, obviously traffic decelerated during the quarter, but you know from a diagnostic volume standpoint, I'd Wonder if you could maybe was there anything from a category standpoint that you know was more challenging than you had expected.

And I'll I'll stop there and then maybe I'll ask my follow up next.

The the the performance in the quarter just to reinforce some of the the metrics I share with no J can expand on this was.

Jay Mazelsky: Most notably our cloud-based PIMS products represent 95% of total PIMS placements and as a result now comprise over 50% of our PIMS installed base. This achievement reflects broad-based adoption of cloud-based products that reflects an inflection point in technology adoption. While veterans earlier in their careers are more digitally native, sales profiles indicate the customers of all career stages appreciate the workflow benefits and easy use of our wide-ranging software stack. The common denominator is that contemporary software solutions allow them to better focus on the delivery of care and minimize non-value ad administrative activities.

Our our execution dimensions were very much in line with what we expected the difference here was where.

Planning for flattening Ah clinical visit trends and they they were down two per cent in the quarter. We did see some softening through the quarter and it was a relatively more on the wall on the side. So I think that that was it was a smaller part of the overall testing volume, but that is something that we did see relative impact so that that was.

It was the visit trend that was different than we.

Have been planning for were hoping for and you know the execution metrics hold up well not enabled or solid.

Solid growth on a on a in terms of the cat gigs recurring revenues couple couple additional comments.

Jay Mazelsky: Our software product offering also includes an integrated diagnostics portal that connect plus with IDEC's decision IQ that not only provides testing results but also decision support, critical insights and next step considerations across a growing range of critical use cases. IDEC's software and data solutions situate as well to benefit from these trends as well as the accretion in operating margin drop-through associated with the revenue base that is increasingly recurring in each. Our software innovation is deeply integrated with our diagnostics innovation approach, as evidenced by our highly successful instrument platform strategy, enabled by cloud-based capabilities and connectivity that enhance practice insight and workflow.

Comments for the car you know, we always start with the end customer demand and from what we've seen in in talking with our customers that there's good and market demand certainly it'll pay that nurse continue to prioritize and against all other spending categories, bringing they're bringing their pets because of.

Marion and making sure that they get the care they need the other piece that we've been spending time looking at it just overall employment levels within the practice and we think that that is increase and that's in a good position. You know we don't necessarily have insights in terms of how many hours. They they may be working.

Jay Mazelsky: We're very excited about our continued progress in bringing transformative solutions to point of care, and we are unplanned to announce our new platform at VMX in January. Our product development efforts continue to advance aligned to our timing expectations, and we're excited to share four details in just a few short months, and how we'll add to our over 200,000 placement opportunity estimate for existing instrument categories. We also continue to advance our innovation engine in other areas, like advanced test menu.

But in terms of just availability of staff within practices. We think that's in reasonably good shape. We have done some qualitative survey there is some additional churned within practices a stack of practice the practice that you know.

It's obviously something that will work you know its way through the system.

Just picking up what would Brian mentioned against you know not to not wellness are sick patient visits versus the wellness visits the diagnostics usage on the non wellness side is is higher it's it's much higher at 70%.

Jay Mazelsky: Innovation and assays that provide new clinical insights earlier in disease states is especially valued by veterinarians, since they drive higher standards of care aligned with the goal of improving health outcomes for their patients. Earlier this year, we announced a launch of an important new testing assays to staff and be that expands our industry-leading renal portfolio, and will be available in early December beginning with our North American lab network. This will be followed by international launches over the course of 2024.

You know or so I think we we that that out as part of an investor day, and so that's I think an important tailwind for the business and I think that I would point out is the realm.

Relative frequency and utilization of diagnostics continues to grow within the practice, we've seen that the.

U S. We think that's a very positive trend. Obviously, you know veterinarians see the importance of Corp, medical services and to be able to treat a patient. They very often have to first test. So it's great to see that does try and stuff yeah held up and continue to grow and we think that's.

Jay Mazelsky: This novel marker uses IDEXIP to help clinicians detect kidney injury earlier and more definitively, and is receiving broad support from key opinion leaders. Notably, a recent article in the Journal of Internal Veterinary Medicine, co-authored by multiple renal inter-society members, highlights beneficial insights in distinguishing progressive from stable kidney disease by detecting active injury. These clinical insights represent important medical contributions, and the test will be included in close to two million urine panels run at IDEX reference labs in our first year post launch.

Positive.

And if I could just ask on margins you know I guess.

You know if you see sort of the the visit pressure persist just the ability to to kind of grow margins in line with the kind of 50 to 100 basis point kind of constant currency range into next year.

Jay Mazelsky: Looking forward, we will announce an additional expansion to our reference lab testing menu in Q1.

Jay Mazelsky: In addition to these examples of product and service innovation, we continued to advance differentiated service delivery as a key element of our expansion strategy. We made a notable advancement in this area early in a third quarter when we opened our newest reference laboratory in Perth, West in Australia. Perth is an economically vibrant city that is five and a half hour flight from our Brisbane laboratory, including a two-hour time difference, making it particularly difficult to service in the past.

You know if you do see an overall kind of soft our top line environment, just I'm curious on on kind of how much kind of leverage.

Jay Mazelsky: In addition to this new lab to our global network, ensures customers will receive faster turnaround times for test results, enabling them to make timely and informed decisions for their patient's well-being. IDEX provides the only veterinary dedicated and accredited reference laboratory network in Australia and New Zealand. So bringing this location online is an important achievement as we strive to deliver sustainable long-term value. The expansion of our global reference lab footprint is just one way we are addressing the approximately two-thirds of our estimated 10 opportunity outside of the US, an area of focus.

How much of the margin expansion is dependent on that that top line growth.

Thank you.

I I think we been consistently demonstrating our ability to perform well on that front and despite some of the headwinds that we've seen this year, so I think or or.

Updated outlook for margins if you take out the if you normalize for the.

The customer credit that we've highlighted as well as the lapping of R&D and foreign exchange, where we're most recent guidance as to be 80 to 100 bps above prior year and that's just by some of the headwinds that we've seen this year. So we've we've consistently demonstrated an ability to.

To leverage a business model, which which we have a number of favorable dynamics that support that.

The strong growth in the software business. That's that's a positive driver force as we grow and and I think we've got investments that we can leverage and we've got new innovation coming to market. So a number of factors that I think will help us in position swelled to keep building on that's wrong margin delivered shrimp.

Jay Mazelsky: With that, I'll now conclude the prepared remarks portion of the call.

Jay Mazelsky: Before we move to Q&A, I want to take a moment to express our heartfelt sympathy for everyone affected by the events in Lewis and Maine last week. We are deeply saddened by the senseless act of violence impacting our communities, keeping our colleagues safe, supporting each other, and providing health and well-being support as a top priority during this difficult time. I also want to thank law enforcement and public safety personnel who are working tirelessly to keep our community safe. In medical teams to continue to aid all who have been impacted.

Thank you.

Once again, ladies and gentleman that was star one if you had a question about math next to Aaron right with Morgan Stanley. Please go ahead.

Alright. Thanks mm has there been any early testing on the new platform you <unk>. So like what's the initial feedback and and on the second <unk> technology that on track as well, we'll both of I'll add in 2024, and we'll both had material country the 20th.

Unknown Executive: Thank you, ladies and gentlemen, if you would like to ask your question, it is star one on your touch on telephone keypad. Again, that is star one for any questions or comments at this time.

Fine thanks.

Yeah, good morning, I'm not gonna.

Talk about the you know the new platform other than just to reiterate we're looking forward to it as just a couple months away from being Max and we can talk more about that you know more more generally speaking the way the new product development process.

Michael Ryskin: Well, the first to Michael Ryskin of Bank of America, your line is open, please go ahead. Okay, guys, thanks for taking the question. First, I want to talk about the broader market. I mean, as you, you know, that visit trends. As you've said, you know, the pressure is remain. I've saw some of the numbers in the snapshot, relatively consistent with what we expected from third party data, so not a huge surprise there, but I think it's safe to say that it's lasting a lot longer than anyone expected going into the year.

Works as you develop prototypes, but in in the hands of of customers. They provide feedback and it goes through and edited.

Process, you get ready.

They go to market place. So we're we're excited we think I'd say you know we think it's a platform that will make will have the right political and business cut.

Contribution, but where I can't go into additional details beyond that.

Jay Mazelsky: If this continues without any significant improvement, how does this impact your long-term model, and longer-term expectations to the business? I mean, you put another way, you know, you're targeting eight and a half percent organic growth this year, well below your 10 percent long-term target, and that's despite taking seven to eight percent price. So, if pricing powers not there or not there to the same extent, and while you're going to recover, I mean, what other levers do you have to all set that?

Okay, and thinking about getting a broader question just thinking about the competitive landscape and you have this unique positioning now the last thing in Hamburg, then you're <unk> when you're here in reference that particularly in the U S. I guess.

Can you talk a little bit more about your ability to take her you know put this accelerate particularly with the <unk>, new innovation, but with any disruption associated with the other models of your Pierre then and and how are you <unk> now in in in in how are you taking any advantage of may.

Jay Mazelsky: Yeah, good morning, Mike, this is Jake. Just a couple things, maybe at a higher level, I'll turn it over to Brian, talk about some of the specifics related to the model. You know, keep in mind the backdrop of the sector's very positive. It's just been an expanded pet population. I think the, you know, human health and pet plot has very, very strong. Our execution drivers, as a company, the things that, you know, we could directly influence, to have been very strong.

Be thinking that it it landscaper Atkins today.

Yeah. So you know a couple of maybe a high level of points and then I'll get more specific they are are strategic and innovation approach is really to bring an integrated solution set you up to the market place. So that's.

Jay Mazelsky: We've seen that in instrument placements and in pins placements at net retention, pricing, realization. It's all those things I picked are very good. You know, we think there's been very good and customer demand, as we cited, you know, there are some constraints related to the practice capacity and some challenges there. I think the, you know, the good news about that front is the practices, you know, have hired, there may be some, you know, some additional churn that they're working through, but they're investing heavily in technology.

Clinic, as well as reference lab, and the connectivity and workflow Ah optimization provided by our software suite. We think is is highly differentiated it supports what the practices. You know are trying to accomplish in terms of improved standards of care optimization stuff staff.

Productivity.

[noise] communications, all all of the important things and we continue to innovate through menu expansion and then more specifically do platforms and get a new platform. It's an important component.

Jay Mazelsky: We see that with the use of our lab equipment both e-clinic as well as reference labs. And obviously the, the appetite for software and applications that help them with optimized workflow has continued to grow. And then overall, you know, our competitive position is very strong. And we think as a result of our innovation, you know, pipeline will continue to be strong and offer some differentiated advantages. So, you know, I think from an industry standpoint, it's a very positive story.

Of you know, our our business bottle in terms of being.

Being able to give our our customers are.

Reference lab quality testing capability within the practice, we place it we tend to place the thrill.

Getting programs I'd X 360, being the primary one customers are able to get that get that play spent then then he is.

Reference labs are rapid essay or our software as a service based payment systems as part of a a dollar volume Tibet met so there's a significant multiplier you know impact when you come out with new innovations. We just continue to build it through a technology for life philosophy, so well.

Jay Mazelsky: I think we're well positioned to capitalize on those trends. And the practice is just continued to work through some of the constraints we cited. Yeah, my God, just to reinforce stage points, I think our long-term 10% growth potential, the key drivers said that we look towards, we see a lot of positive factors sustaining in terms of our, our competitive positioning expansion of diagnostics frequency and utilization. The, the adoption of ITX technologies, the long-term demand dynamics that we see associated with the expanded population and favorable demographics in terms of pet ownership.

We have existing platforms on the market place, we will continue to innovate with new slides for example, in chemistry or lots and lots and lots of other examples Pico energy and within the reference labs, so that becomes more valuable critically overtime with customers use more of it as they grow.

Jay Mazelsky: So all of those factors are positive. I think the, the thing that we're working through is, is a combination of near term capacity management challenges at the clinics. And I think that's something we're assisting with. And we will have solutions to help with that over time. But that is something that is has continued. And I think is a, is a factor impacting near term growth as well as some of the near term macro impacts.

Oh I have an extra crushed shot with J P. Morgan. Your line is open. Please go ahead.

Great. Thanks, so much just two questions for me I guess, just coming back to the dynamics with with the visit trends that we're seeing versus your expectations is it possible to tease out how much of what you're seeing right now is macro versus how much. This capacity. So I guess I'm trying in my hands around is this a situation where we're now seeing some.

Jay Mazelsky: I think, as we stated many times in the past where business, that's very resilient, but not immune to those types of impacts. And that's something that I think is also impacting our near term growth at the margin. But we don't see that either of those factors is being long-term constraints to the growth potential for the company. And I think from a competitive positioning point of view, we're in a strong position as we've ever been in terms of our ability to support the continued expansion of the sector.

Macro pressures and capacity just isn't getting better relative to where maybe you stood at mid year or are we also seeing some setbacks on the vet capacity side as well as we think about the updated guidance from step one follow up from there.

Yeah. Good morning, Chris We you know we think it's primarily capacity continues to be capacity I think practices are definitely you know working working through that makes it a number of things that practices. You know have have done and the it. It takes time I mean, they're making investments I think they're the best thing in their staff as well as.

Jay Mazelsky: Okay, all right, and maybe I'll use my follow up to just be a little bit more direct than on 24. I know you're not guiding for 24. I'm not asking for 24 guide, but just looking at where a consensus is right now, it is still at that roughly 10% number, just given what we see about market conditions as we sit today. I mean, in November we've already got a pretty good sense of where they are.

You know technology, they they've hired yeah. They're also just trying to balance the yeah. The work life balance of of their team. So that they don't get all those folks and make sure that you know it can be it can be stabilised Ah. So I think that's that's important that we do think that the the marching there could be some macro.

Jay Mazelsky: Do you think that there's a risk that 24, 20, 24 is also below that long-term trend line? Well, we're not going to be guiding out of a plate today, but I think we've got a number of positive factors that we see heading into next year in terms of our execution, the competitive position that it noted, the innovation pipeline that we're looking forward to sharing more on as we move forward. And I think those are all things that will be leaning on to continue delivering solid growth and continuing delivering strong financial performance, which I think we're demonstrating our ability to do this year.

[noise] impacts that we've C N N and wellness and I would just you know also point out that the wellness pieces of relatively lower use at 10 city wives of diagnostics.

Jay Mazelsky: So we'll, we'll hear more in that front as we get into next year. We're focusing on the the drivers that we have a direct impact on and we feel very good about our execution on that front.

70% of diagnosed 70 plus percent of diagnostics are consumed through non wellness or the sick patient visits and Chris are just a it's a it's a great question I think we've we've always said that the it turns a macro where we might see it is on the on the wellness side, where the maybe more of a discretionary choice for.

The pet owner interestingly, well the visits were down and wellness quarter frequency and utilization of diagnostics per wellness visit was up actually stronger than non walnut. So for the pet owners that are able to come in and get their pets in and they are actually doing more diagnostic testing, but oh.

Nathan Rich: Next question comes from Nathan Rich with Goldman Sachs. Your line is open. Please go ahead. Hi, good morning. Can you hear me? Yeah, we do. We're in there. Oh, great. Hey, good morning. Thanks for the questions. Just wanted to ask about the the U.S. Cag Diagnostic Recurring Performance in the third quarter. And maybe just if you could go into a little bit more detail on how that played out relative to expectations.

We're all we saw you know lower levels of of wellness visits. So it's you know it does get probably commingled into some of the dynamics that are going on with with capacity management and there may be a level of impact there. We we have seen that international markets that we've been highlighting as we go and so it was something that we're paying attention.

We're we're planning appropriately for but I think it's it's J pointed out I think we we think this is continues to be more of an impact from the.

Ongoing ability of the practices to to staff and be able to manage the demand that they're they're facing.

Nathan Rich: You know, obviously traffic accelerated during the quarter, but you know, from a diagnostic volume standpoint, I'd wonder if you could maybe. Was there anything from a category standpoint that, you know, was more challenging than you had expected.

Okay, great. Thanks for Arts and and just the second question was just like you mentioned a little bit about U S. First international could you just kind of bigger picture are you seeing noticeable differences in terms of what's happening in the U S vs. Some you if your international markets and just as part of that is this guidance update kind of assuming a global impact in terms of a visit slowdowns or is this.

Jay Mazelsky: And I'll stop there and then maybe I'll find follow up next. Yeah, the the performance in the quarter, just to reinforce some of the the metrics I shared and then Jake and expand on this was. Our execution dimensions were very much in line with what we expected. The difference here was we're planning for flattening clinical visit trends and they were down 2% in the quarter. We did see some softening through the quarter, and it was relatively more on the one side.

Skewing more U S versus the first international. Thank you, we we definitely saw more of an impact to internationally on for.

Jay Mazelsky: So I think that that was a smaller part of the world testing volume, but that is something that we did see relative impact. So that that was it was the visit trend that was different than we had been planning for or hoping for and, you know, the execution metrics held up well and not enabled us to go or. I would go on a on a in terms of the gag geeks recurring revenues.

Macro pressure's really starting at the end of 2021, and I would say that that has normalized overtime is now relatively more in line with the the U S trends, we've done quite well internationally, where we're doing benefiting from our premium instrument installed base expansion, so that really helps our growth rate.

And we highlighted this quarter, we've seen actually for a few quarters now relative improvement in the volume trends. So I think the it's more in line I think with with what we're seeing sort of some of the U S pressures more recently and it does seem to be normalizing and relatively improving you can see that in some of the the international.

Jay Mazelsky: Yeah, a couple additional, you know, comments for a car, you know, we always start with the end customer demand and for what we've seen and the in talking with our customers. That this good in market demand, you know, certainly it'll put owners continue to prioritize and against all other spending categories that are bringing their bring their pets to the veterinarian and making sure that they get the care that they need. The the other piece that we've been spending time looking at is just overall employment levels within the practice and we think that that is increased and that's in a good position.

Metrics things like Wicker reference lab growth was was improved in Q3, so that that's a that's a positive trend and we're just being realistic about the macro backdrop that we're facing and implanting appropriately and and keep in mind, you know what the international Ah sectors, just a bit different in terms of its overall care.

Fix it tends to be more of a sick patient or rollout testing.

Approach from a veterinary practice standpoint, so C. Obviously that that scenario Richard diagnostics usage, it's an area less less sensitive to some of the discretionary spend that you may see in a difficult macro environment. So you know it's Bryan said, we're we're happy with our <unk>.

Jay Mazelsky: You know, we don't necessarily have insights in terms of how many hours they they may be working and but in terms of just availability of staff within practices. We think that's in the reason we good shape. We have done some qualitative serving. There is some additional, you know, sharing within practices is staff goes from practice practice practice that you know, obviously something that will work, you know, it's way through the system.

Aggress that continues the.

We think that the team is executing extremely well and the opportunity over time is very substantial.

Jay Mazelsky: Just picking up what would Brian mentioned against, you know, not the not wellness or sick patient visits versus the wellness visits. You know, the diagnostic usage on the non wellness side is higher, it's it's much higher, 70 percent. You know, or so I think we we map that out as part of an investor day. And so that's I think an important tailwind for the business. The other thing that I would point out is the, you know, relative frequency and utilization of diagnostics continues to grow within the practice.

Thank you.

We'll go next to John Block with people. Your line is open. Please go ahead.

Thanks, guys good morning.

Maybe just to start with you that the three huge twenty-three sale.

Sales and marketing expense was down roughly 3% to 4% you remember Q.

I've got it usually like flat to slightly up to you to three Q.

And this year's decline despite ongoing increases that you guys had called out.

On the commercial investment so I'm guessing ethics may I played a little bit of a rule. He will review this year 2023, but I think the highlight of what cause you were able to take out in the us at M side that drove the sequential decline.

Jay Mazelsky: We've seen that in the US. We think that's a very positive trend. Obviously, you know, veterans are see the importance of core medical services and to be able to treat a patient. They very often have the first task. So it's great to see that those trends have held up and continue to grow. And we think that's a strong positive.

You know what you were able to do or lead on even in light of the commercial investments that seemed to be ongoing through the end of the year.

Yeah.

Personally laughing dynamic we last year in Q3 had some relatively higher sales and beating cause specifically there there was some discreet costs on both the sales or marketing and the the R&D side that there were lapping and so it as I noted in our our outlook, we're expecting a rare.

Jay Mazelsky: And if I could just ask on margins, you know, I guess, you know, if you see sort of the the visit pressure persists, just the ability to kind of grow margins in line with the kind of 50 to 100 basis point kind of constant currency range in the next year. Or, you know, if you do see an overall kind of software top line environment, just I'm curious on kind of how much kind of leverage, you know, how much of the margin expansion is dependent on that that top line grow.

Typically higher level of offers growth in queue for so would you it's more related to this year on your gum specific factor dynamic.

Okay, sorry, just my question was sequentially not year over year. So my apologies <unk> three Q was down 3% to 4%, it's usually a one person you're making commercial investments I guess, what I'm trying to get it a little bit it's like managing the bottom line in the near term.

Jay Mazelsky: Thank you. I think we've been consistently demonstrating our ability to perform well on that front in despite some of the head ones that we've seen this year. So I think our updated outlook for margins. If you take out the if you normalize for the customer credit that we've highlighted as well as the laughing of R&D and foreign exchange were most recent guidance is to be 80 to 100 bits above prior year.

And getting to the EPS number excuse me P. S number.

Was there anything in sales and marketing that you've scaled back on and light the light of revenue double again <unk>.

No you have there's typically some variation in.

No cause quarter to quarter that that are unrelated to things like stabbing. So we haven't scaled back on anything.

Jay Mazelsky: And that's despite some of the head ones that we've seen this year. So we've we've consistently demonstrated an ability to we, you know, leverage a business model, which which we have a number of favorable dynamics that that support that. We highlighted the strong growth in the software business that's that that's a positive driver for us. As we grow and I think we've got investments that we can leverage and we've got new innovation coming to market so a number of factors that I think will help us and positions while the keep building on that strong margin delivery trend. Thank you. Once again, ladies and gentlemen, it was star one.

Okay, and then maybe it's a ship your second question I'm Gonna show My age in flashback. Instead of you. Initially you guys expected I think it was three to 6000 Inconsumable revenue per box. Instead of you I gave it a couple of quarters in that forecast came down to 3000 to 4500, maybe you can just talk.

About how that eventually you took out you know as that product cycle matured and and any comments on the idec in view trademark which hit last week. It seems like the honest that's probably the BMX analyzer and then how to think about the Reds per box on the new system. Thanks.

Aaron Wright: If you had a question, we will move next to Aaron Wright with Morgan Stanley. Please go ahead. Thanks.

And so on instead of you if I got your question right. The the the utilization per placement played out actually quite very much in line with what we expected. So I think we have an updated for for a bit but I think that that was tracked consistently in line with their original list.

Aaron Wright: Has there been any early testing on the new platform you plan to launch at BMX and if so, like what's the initial feedback and and on the second platform technology is that on track as well will both roll out in 2024 or will both have material contributions in 2024. Thanks. Yeah.

Two minutes and sustained over time, so I think that the.

Has been on track tour estimates and you know I I, it's it's premature for us to get into the specifics on the on the new instrument launch. We look forward to you know sharing more than that next year. Just reinforces you know these as you know these types of platforms build over time really to the.

Jay Mazelsky: Good morning Aaron. Not going to you know talk about the you know the new platform other than just reiterate we're looking forward. It's just a couple months away from BMX and we can talk more about that. You know more more generally speaking the way the new product development process works is you develop prototype. You put it in hands of customers they provide feedback and it goes through an additive you know process you get ready you know to go to marketplace. So we're we're excited. We think it's a you know we think it's a platform that will make we'll have the right clinical and business contribution but we really can't go into additional details beyond that.

The biggest effects from them or that they open the door for conversation with veterinarians to.

To talk about IDEXX technology and innovations in in adopt them in their practice and so we're we're very excited about you.

[noise] thing on the momentum when we had from per site one to to to catch any of those dialogues and deepen our relationships with their with their customers help them grow faster and.

Jay Mazelsky: Okay, and thinking about, and this is kind of a broader question, just thinking about the competitive landscape, and you have this unique positioning now, seeing less in Hamburg than your closest peers, in both one-to-care and reference lab, because in the U.S., I guess, can you talk a little bit more about your ability to take share, you know, put this accelerate, particularly with also your, you know, in your innovation, but with any disruption associated with the other models of your peers, and how are you capitalizing on this now, and how are you taking advantage of maybe the competitive landscape where it's been today? Yeah, so, you know, a couple may be high level points, and then I'll get more specific.

We'll we'll share more on the specifics relating to the new innovation says, where we get with get into next year. Yeah tried any other things that I would add to that is I think we shared some data through wind up like Ericsson presented on the evolution of menu and how is it that you know impacts the overall.

Economic value you know over time, and our technology for life approach, where we we come to the they come out to the market place. We introduced product obviously the installed base grows over time, but as we continue to add menu and improve that.

More.

More revenue more economics are generated and we've been able to demonstrate that through our platforms, including the reference clubs.

Thank you.

Jay Mazelsky: Our strategic and innovation approach is really to bring an integrated solution set, you know, to the marketplace, so that's, uh, the included as well as reference lab, and the connectivity and workflow optimization provided by our software, you know, we think is highly differentiated, it supports what the practices, you know, are trying to accomplish in terms of improved standards of care, optimizations, staff productivity, client communications, all of those important things, and we continue to innovate, remove menu expansion, and then more specifically, do platforms. And, you know, do platforms, it's an important component of, you know, our, our business model, in terms of really being able to give our customers, uh, reference lab quality, uh, testing, capability within the practice, we place it, we tend to place these through marketing programs, uh, IDX 360 being the primary, one customer's are able to, you know, get that, get that placement, then use, uh, reference labs or rapid assay, or our software service space, pin systems as part of a dollar volume commitment.

Yeah, well I live next to Brandon basketball with William Blaring. Your line is open. Please go ahead.

Hi, everyone. Thanks for taking the question at first wanted to just follow up maybe.

On some of the headwinds in the quarter slightly different you know, there's wellness and there's a little bit of labor.

Question I wanted to ask is are those getting are deteriorating are those headwinds increasing as we go into the end of the year I guess I'm trying to ask for a little clarification or things stable, maybe just not improving as much as we thought or are we going into your and Ah with those two dynamics kind of a worsening a little bit.

You know I I think the key change here relative to what we expect it to happen in the quarter was we're looking for flapping visit trends in in the U S and they came in at minus 2%. So if you go are fundamentally was different than what we expected. That's it I think our execution was wrong and and all those dimensions gonna played out the way that we had hoped.

The clinic U S kind of go visit trends were minus one you know one per cent and if you do [noise] excuse me and to do and.

There's two per cent in Q3 on a on a two year basis, they're pretty similar I think it's you know we did see some relative softening through the quarter some relative Ah relatively weaker wellness clinical visit trends more at the margin and I think the bigger bigger story here. It was you know we we.

Jay Mazelsky: So there's a significant multiplier, you know, impact when you come out with new innovations, and we just continue to build it through a technology for life, philosophy. So we have existing platforms on the marketplace, we will, we will compete to innovate with new slides, for example, in chemistry, or, uh, lots, lots of, lots of other examples, fecal energy in within the reference labs, so that it becomes more valuable, critically, over time, it customers use more of it as they grow, we grow.

I would hope that we had to work through the pullback effects on capacity and when she some normalization there and I think we're still working through some of the the management dynamics. So that that is very much reflected in our our balance of your outlook think recalibrated for that appropriately while we're reinforcing our profit delivered so.

Able to manage that well and teams are executing very well and again excited about a number of the things that we've got.

Christopher Schott: Well, maybe next to Chris Shah, which AP Morgan, your line is open, please go ahead. Great. Thanks so much. Just two questions for me.

Oh going into next year in relative to our positioning is a company in new innovation, bringing to market and look for.

Or to continue delivering solid growth in that context yeah.

Jay Mazelsky: I guess just coming back to the dynamics with, with the visit trends that we're seeing versus your expectations, is it possible to tease out how much of what you're seeing right now is macro versus how much is capacity, so I'm trying to get my hands around is this situation where we're now seeing some macro pressures and capacity just isn't getting better, relative to where maybe you stood at mid-year, or we also seeing some setbacks on the vet capacity side as well, as we think about the updated guidance and stuff one follow up from there. Good morning, Chris.

Keep in mind.

[noise] expanded pet population has been very very substantial so we know that the end and customer demand is there. There's a lot of interest I think that the bryans point, yes, we work through that capacity.

The clinic level, there, there's unmet unserved demand out there.

Okay, Great and maybe there's a follow up you know you guys are expanding your salesforce now that seems on track as we go into 24 can you just talk about expectations, how long does it take to get those new reps train you know, you'll probably also have a new innovative products for them next year in your system.

Jay Mazelsky: We, you know, we think it's primarily capacity and continues to be capacity. I think practices are definitely, you know, working, working through that. We've seen a number of things that practices, you know, have, have done. And the, it, it takes time. I mean, they're making investments. I think they're investing in their staff as well as, you know, technology. They, they've hired, you know, they're also just trying to balance the, you know, the work life balance of, of their teams.

So what's the timeline to kind of 13 leverage both sales and kind of margin benefits from the experiment salesforce. Thank you.

Jay Mazelsky: So that they don't, you know, loose folks and make sure that, you know, it could be, it could be stabilized. So I think that's, that's important. We do think at the, you know, at the margin, there could be some macro impacts that we've seen in, in wellness. And I would just, you know, also point out that the wellness pieces are relatively lower use intensity wise of, of diagnostics. 70% of diagnostics 70 plus percent of diagnostics are consumed through non wellness or the sick patient visits.

This is something that you know we've been we've been doing for a long time I think we have a very successful formula in terms of how we how we expand the overall commercial ecosystem and footprint in North America tends.

Tends to be a relatively short time to ramp we have you know I pick up if they're protective training approach.

And when we bring.

No folks into the system, they're they're well trained and they.

Come up to speed within quarters now they continue to become more productive overtime.

But they get a lot of support you know through professional service fats and and you know the field service representatives the entire ecosystem is there to support them.

Jay Mazelsky: And Chris, just, it's a, it's a great question. You know, I think we, we've always said that the terms of macro where we might see it is on the, on the wellness side where that may be more of a discretionary choice for the pet owner. Interestingly, well, the visits were down in wellness quarter, frequency and utilization of diagnostics per wellness visit was up actually stronger than non wellness. So for the pet owners that are able to come in and get their pets in, they're actually doing more diagnostic testing, but overall we saw, you know, lower levels of wellness visits.

Okay. Thank you for for your questions will not conclude our Q and a portion of this morning's call before we end today's call I'd like to extend my thanks to the nearly 11000 IDEXX colleagues for delivering another quarter of strong execution against dark Anneke growth strategy, our sector remains very dynamic.

<unk> and your steadfast commitment to providing a better future for animals people on our planet has helped us maintain momentum and deliver strong results not only have you deliver it the day in the third quarter, but your efforts position as well to continue to develop our sector and support our customers well into the future. So I'd behalf and the management team. Thank you for your continued focus on.

Jay Mazelsky: So it's, you know, it does get probably commingled into some of the dynamics that are going on with, with capacity management, and there may be a level of impact there. We, we have seen that international markets, you know, that we've been highlighting as we go. And so it's something that we're paying attention for, we're planning appropriately for, but I think it's, as Jay pointed out, I think we, we think this is continues to be more of an impact from the ongoing ability of the practices to, to staff and be able to, to manage the demand that they're, they're facing. Okay. Great. Thanks. Right.

Enhancing the health and wellbeing.

Pets people and lifestyle, so that will conclude the call. Thank you.

Thank you, ladies and gentlemen that does conclude today's call. We thank you for your participation you may disconnect at this time.

[music].

Jay Mazelsky: And, and just a second question was just, and you mentioned a little bit about us first international. Can you just kind of bigger picture? Are you seeing noticeable differences in terms of what's happening in the US versus some of your international markets and just as part of that? Is this guidance update kind of assuming a global impact in terms of visits slowdowns or is this, you know, skewing more US versus first international?

Jay Mazelsky: Thank you. We, we, we, we definitely saw more of an impact internationally on, from macro pressures, really starting at the end of 2021. And I would say that that has normalized over time is now relatively more in line with the US trends. We've done quite well internationally. We're doing, we're doing benefiting from our premium instrument install basic expansions so that really helps our growth rate. And we highlighted this quarter. We've seen actually for a few quarters now relative improvement in the volume trends.

Jay Mazelsky: So I think the, it's more in line, I think with, with what we're seeing, sort of some of the US pressures more recently. And it does seem to be normalizing and relatively improving. You can see that in some of the international metrics, things like, quick, our reference lab growth was, was improved. Roomed in Q3. So that's a positive trend and we're just being realistic about the macro backdrop that we're facing and planning for through it.

Jay Mazelsky: And keep in mind, you know, the international sectors, just a bit different in terms of its overall characteristics. It tends to be more of a sick patient or roll out testing approach from a veterinary practice standpoint. So, obviously, that's an area of richer diagnostics usage, it's an area less sensitive to some of the discretionary spend that you may see in a difficult macro environment. So, you know, as Brian said, we're happy with our progress. It continues to improve. We think the team is executing extremely well and the opportunity over time is very substantial. Thank you.

John Block: We'll go next to John Block with Teethle. Your line is open. Please go ahead. Thanks, guys. Good morning. Brian, maybe just to start with you that the 3Q-23 sales and marketing expense was down roughly three to four percent to a review. I've got to usually like flat to slightly up to Q to 3Q. And this year's decline was, you know, despite ongoing increases that you guys have called out on the commercial investment.

John Block: So, I'm guessing FX may have played a little bit of a role. You will review this year in 2023, but anything that highlights on what costs you were able to take out in the F&M side that drove this sequential decline. You know, what you were able to do were leaned on even in light of the commercial investments that seemed to be ongoing to the end of the year. Yeah, John, it's personally a laughing dynamic week.

John Block: We last year in Q3 had some relatively higher sales and meeting costs specifically. There was some discrete costs on both the sales and marketing and the R&D side that they were laughing. And so it, as I noted in our, our artwork, we're expecting a relatively higher level of opera growth and Q4, so it's more related to this year and you're come specific factor dynamic.

Brian Mckeon: Okay, sorry, just my question was sequentially not year over year. So, my apologies. The two Q to three Q was down three to four percent. It's usually of one percent. You're making commercial investments. I guess what I'm trying to get it a little bit is like managing the bottom line in the near term, you know, in getting the EPS number, excuse me, P.S, number. Were there anything in sales and marketing that you scaled back on in light of the light of revenue double, again, Q over Q is no.

Brian Mckeon: No, you have, there's typically some variation in, you know, cost quarter to quarter that are unrelated to things like staffing, so we haven't scaled back on anything. Okay, and then maybe just a shift year a second question. I'm going to, you know, show my age and flashback instead of you. Initially, you guys expected, I think it was three to six pounds in a considerable revenue per box instead of you. I get a couple quarters in that forecast came down to 3,000 to 4,500.

Brian Mckeon: Maybe you can just talk about how that eventually took out, you know, as that product cycle matured. And then any comments on the I-X in view, trademark, which hit last week, you know, it seems like to us that's probably the BMX analyzer and then how to think about the reds per box on the new system. So, instead of you, if I got your question right, the utilization per placement, played out, actually quite, very much aligned with what we expected, so I think we haven't updated that for a bit, but I think that that was tracked consistently in line with our original estimates and sustained over time.

Brian Mckeon: So I think that that has been on track to our estimates and, you know, it's premature for us to get into the specifics on the new instrument launch, we look forward to sharing more in that next year. Just reinforce those, you know, these, as you know, these types of platforms build over time, really the, the biggest effects from them are that they open the door for conversation with veterans to, to talk about IDX technology and innovations and in adopt them in their practice and so we're, we're very excited about, you know, moving on the momentum when we had from first sight one to, to continue those dialogues and deepen our relationships with, with our customers, help them grow faster and, you know, we'll, we'll share more on the specifics related to new innovations as we get, we'll get into next year.

Brian Mckeon: Yeah, John, the other things that I would add to that is I think we shared some data through wind up by car accident presented on the evolution of menu and how that that, you know, impacts the overall, you know, economic value, you know, over time, and our technology for life approach where, you know, we, we come to the, we come out to the marketplace, we introduce product obviously the installed base grows over time, but as we continue to add menu and improve that. More, more revenue, more economics are generated and we've been able to, you know, demonstrate that through our platforms, including the reference loss. Thank you.

Brandon BassQuest: And we'll move next to Brandon BassQuest with William Blair, your line is open, please go ahead. Everyone, thanks for taking the question. I first wanted to just follow up, maybe asked on some of the headwinds in the quarter slightly different, you know, there's wellness and there's a little bit of labor. The, the question I want to ask is are those getting, or they deteriorating are those headwind increasing as we go into the end of the year, I guess I'm trying to ask for a little clarification.

Brandon BassQuest: Our things stable, maybe just not improving as much as we thought, or are we going into year end with those two dynamics kind of worsening a little bit. You know, I think the key change here, relative to what we expected to happen in the quarter was we're looking for flattling visit trends and in the US, and they came in at minus 2%. So if you go fundamentally, what's different than what we expected, that's it, I think our execution was strong and and all those dimensions going to play out the way that we had hoped.

Brandon BassQuest: The kind of US kind of go visit trends were minus 1% you know, 1% you do, excuse me, you do and minus 2% and you three on a two year basis they're pretty similar, I think. It, you know, we did see some relative softening through the quarter some relative relatively weaker wellness clinical visit trends. More at the margin, I think the bigger bigger story here was, you know, we had hoped that we had worked through the pull back effects on capacity and when season normalization there and I think we're still working through some of the management dynamics so that that is very much reflected in our.

Brandon BassQuest: Or balance your outlook, do we calibrate for that appropriately while we're reinforcing our our profit delivery so it, able to manage that well and teams are executing very well and again excited about a number of the things that we've got going into next year and relative to our positioning as a company and new innovation and bringing to market and look forward to continuing delivering solid growth in that context. And keep in mind the expanded pet population has been very, very substantial.

Brandon BassQuest: So we know that the end customer demand is there. There's a lot of interest. I think that the Brian's point. Yeah, as we work through that capacity, you know, at the political level, there's there's unmet unserved demand out there. Great, and maybe as a follow-up, you know, you guys are expanding the US sales force now that seems on track as we go into 24. Can you just talk about expectations? How long does it take to get those new reps trained?

Brandon BassQuest: You know, you'll probably also have a new innovative products for them next year, new system. So what's the timeline to kind of start team leverage both sales and kind of margin benefits from the expanded sales force? Thank you. This is something that, you know, we've been doing for a long time. I think we have a very successful formula in terms of, you know, how we expand the overall commercial ecosystem and footprint in North America.

Brandon BassQuest: You know, it tends to be a relatively short time to wrap. We have, you know, I take a, this is their effective training approach. And when we bring two folks into the system that they're well trained and they, very come up to speed within quarters. Now they continue to become more productive over time. But there's, they get a lot of support, you know, through professional service paths and you know, the field service representatives, the entire ecosystem is there to support them. Okay, thank you for your questions.

Jay Mazelsky: We'll not preclude our Q&A portion of this morning's call. Before we end today's call, I'd like to extend my thanks to the nearly 11,000 items colleagues for delivering another quarter strong execution against our GANIC growth strategy. Our sector remains very dynamic and your steadfast commitment to providing a better future for animals, people in our planet has helped us maintain momentum and deliver strong results. Not only have you delivered the day in the third quarter, but your efforts position as well to continue to develop our sector and support our customers well into the future. So on behalf of the management team, thank you for your continued focus on enhancing the health and wellbeing that pets, people, and livestock.

Unknown Executive: So now we'll conclude the call. Thank you. Thank you, ladies and gentlemen.

Unknown Executive: That does conclude today's call. We thank you for your participation. You may disconnect at this time.