Q4 2023 IDEXX Laboratories Inc Earnings Call

Operator: Good morning, and welcome to the IDEXX Laboratories' fourth quarter 2023 earnings conference call. As a reminder, today's conference is being recorded.

Good morning, and welcome to the IDEXX Laboratories fourth quarter 2023 earnings Conference call. As a reminder, today's conference is being recorded participating in the call. This morning are Jamie Selsky, President and Chief Executive Officer.

John Ravis: Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer, Brian McKeon, Chief Financial Officer, and John Ravis, Vice President, Investor Relations. IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking statements that are subject 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 included 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 During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.

Brian Mckeon, Chief Financial Officer, and John <unk>, Vice President Investor Relations IDEXX would like to preface the discussion today with a caution regarding forward looking statements listeners are reminded that our discussion during the call will include forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those disk.

Today <unk>.

Brian Patrick McKeon: 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.

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

John Ravis: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the investor relations section of our website. In reviewing our fourth quarter 2023 results and initial 2024 guidance, please note all references to growth, organic growth, and comparable growth refer to growth compared to the equivalent prior year period 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.

Brian Mckeon: A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which May also be found by visiting the Investor Relations section of our website.

Brian Mckeon: In reviewing our fourth quarter 2023 results and initial 2024 guidance. Please note all references to growth organic growth and comparable growth refer to growth compared to the equivalent prior year period, 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.

John Ravis: 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 IDEXX.com, Investors, after the Earnings Conference call concludes. I would now like to turn the call over to Brian McKeon.

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 IDEXX dot com investors. After the earnings conference call concludes I would now like to turn the call over to Brian Mckeon.

Brian Patrick McKeon: Good morning, everyone. I'm pleased to take you through our fourth quarter and full year 2023 results and to provide an overview of our financial outlook for 2024. IDEXX had a strong finish in 2023, reflected in our fourth quarter performance. Revenues increased 8% organically, supported by 10% organic gains in CAG diagnostic recurring revenues, net of a 1% growth headwind from pure equivalent selling days. Operating profits increased 8% as reported and 10% on a comparable basis, benefiting from solid gross margin gains and OPEX leverage. These factors and a lower-than-expected effective tax rate supported delivery of $2.32 per share in EPS and Q4, up 17% on a comparable basis.

Brian Patrick McKeon: Good morning, everyone I'm pleased to take you through our fourth quarter and full year 2023 results and to provide an overview of our financial outlook for 2024.

Brian Patrick McKeon: IDEXX had a strong finish to 2023 reflected in our fourth quarter performance.

Brian Patrick McKeon: Revenues increased 8% organically supported by 10% organic gains in CAG diagnostic recurring revenues net of a 1% growth headwind from fewer equivalent cylinders.

Brian Patrick McKeon: Operating profit increased 8% as reported and 10% on a comparable basis benefiting from solid gross margin gains and opex leverage.

Brian Patrick McKeon: These factors and a lower than expected effective tax rate supported delivery of $2 32 per share EPS in Q4 up 17% on a comparable basis.

Brian Patrick McKeon: IDEXX execution enabled delivery of strong full-year financial results reflected in 9% overall organic revenue growth and high comparable operating margin gains. This supported a 29% increase in EPS for the full year on a comparable basis, including 12% of combined EPS growth benefit from a customer contract resolution payment and the lapping of discrete 2022 R&D investment. These results were driven by 10.5% full-year organic growth in CAG diagnostic recurring revenues, reflecting 11% organic gains in the U.S. and 10% organic growth in international regions, aligned with our original full-year growth target. We also achieved 19% four-year organic growth in recurring software and digital imaging revenues, sustained high customer retention levels, and placed a record number of CAG premium instruments, which drove an 11% expansion of our global premium install base

Brian Patrick McKeon: IDEXX execution enabled delivery of strong full year financial results reflected a 9% overall organic revenue growth and high comparable operating margin guidance.

Brian Patrick McKeon: This supported a 29% increase in EPS for the full year on a comparable basis, including 12% of combined EPS growth benefit from a customer contract resolution payment and the lapping of discrete 2022 R&D investments.

Brian Patrick McKeon: These results were driven by 10, 5% full year organic growth in CAG diagnostic recurring revenues, reflecting 11% organic gains in the U S and 10% organic growth.

Brian Patrick McKeon: International regions aligned with our original full year broke targets.

Brian Patrick McKeon: We also achieved 19% full year organic growth in recurring software and digital imaging revenues.

Brian Patrick McKeon: Sustained high customer retention levels and placed a record number of CAG premium instruments, which drove an 11% expansion of our global premium installed base.

Brian Patrick McKeon: These strong execution trends position us well as we enter 2024 and advance our growth strategy. This year, we're charting 10% organic revenue growth at the high end of our initial guidance range of 7% to 10% overall organic revenue growth. Supported by 7.5% to 10.5% organic gains in CAG diagnostic recurring revenue. We're also planning for solid comparable operating margin gains, building on our long-term track record, supporting continued high comparable EPS growth. We'll walk through the details of our financial guidance later in my comments.

Brian Patrick McKeon: These strong execution trends position us well as we enter 2024 and advance our growth strategy.

Brian Patrick McKeon: This year, we're targeting 10% organic revenue growth at the high end of our initial guidance range of 7% to 10% overall organic revenue growth.

Brian Patrick McKeon: Supported by seven 5% to 10, 5% organic gains in CAG diagnostic recurring revenues.

Brian Patrick McKeon: We're also planning for solid comparable operating margin gains building on our long term track record supporting continued high comparable EPS growth.

Brian Patrick McKeon: Well walk through the details of our financial guidance later in my comments, let's begin with a review of our fourth quarter results.

Brian Patrick McKeon: Let's begin with a review of our fourth quarter results. Fourth quarter organic revenue growth of 8% was driven by 9% organic gains in our CAG business. CAG diagnostic recurring revenue increased 10% organically in Q4, reflecting 9% gains in the U.S. and 12% growth in international regions, net of a 1% global growth headwind from the equivalent days effect.

Brian Patrick McKeon: Fourth quarter organic revenue growth of 8% was driven by 9% organic gains in our CAG business.

Brian Patrick McKeon: CAG diagnostic recurring revenue increased 10% organically in Q4, reflecting 9% gains in the U S and 12% growth in international regions net of a 1% global growth headwind from equivalent days effects.

Brian Patrick McKeon: That diagnostic organic recurring revenue growth in Q4 was supported by average global net price improvements of 6 to 7%, with US net price gains at the low end of this range. IDEXX execution drivers supported volume gains of 4% in both U.S. and international regions, normalized for days' effects, reflecting an improvement from Q3 volume growth levels and the strongest normalized volume growth quarter in 2023. IDEXX CAG Diagnostics for current revenue growth remained solidly above the sector growth level. In the U.S., CAG diagnostic recurring revenue increased 9% organically and had a 1% negative growth rate impact from fewer equivalent selling days in Q4. This reflects a 1,050 basis point normalized growth premium compared to U.S. clinical visit growth levels, which declined an estimated 0.5% in the quarter on a same store basis.

Brian Patrick McKeon: Okay diagnostic organic recurring revenue growth was in Q4 was supported by average global net price improvement of 6% to 7%.

Brian Patrick McKeon: With U S net price gains at the low end of this range.

Brian Patrick McKeon: IDEXX execution drivers supported volume gains of 4% in both U S and international regions normalized for days effects, reflecting an improvement from Q3 volume growth levels and the strongest normalized volume growth quarter in 2023.

Brian Patrick McKeon: IDEXX CAG diagnostics recurring revenue growth remains solidly above sector growth levels.

Brian Patrick McKeon: In the U S. CAG diagnostic recurring revenue increased 9% organically net of 1% negative growth rate impact from fewer equivalent selling days in Q4.

Brian Patrick McKeon: This reflects a 1050 basis points normalized growth premium compared to U S clinical visit growth levels, which declined an estimated <unk>, 5% in the quarter on a same store basis.

Brian Patrick McKeon: IDEXX execution drivers showed solid U.S. value growth in the quarter, reflecting benefits from new business gains, high customer retention levels, and sustained diagnostic frequency levels per visit. International CAG diagnostic recurring revenue growth was 12% in Q4, reflecting benefits from higher net price realization and improved volume gains. International results were also supported by strong IDEXX execution, reflected in continued solid growth in premium instrument placements, which supported a 13% year-on-year increase in our international premium instrument install base. IDEXX achieved solid organic gains across our major testing modalities in the fourth quarter.

Brian Patrick McKeon: IDEXX execution drivers rose solid U S volume broken in the quarter, reflecting benefits from new business gains high customer retention levels and sustained diagnostic frequency levels per visit.

Brian Patrick McKeon: International CAG diagnostic recurring revenue growth was 12% in Q4, reflecting benefits from higher net price realization and improved volume guidance.

Brian Patrick McKeon: International results were also supported by strong IDEXX execution reflected in continued solid growth in premium instrument placements, which supported a 13% year on year increase in our international premium instrument installed base.

Brian Patrick McKeon: IDEXX achieved solid organic gains across our major testing modalities in the fourth quarter.

Brian Patrick McKeon: IDEXX Vet Lab consumable revenues increased 13% organically, reflecting double-digit gains across U.S. and international regions. Consumable gains were supported by an 11% increase in our global premium install base in 2023, reflecting strong gains across our Catalyst, Premium Hematology, and CetaV platform. For the full year 2023, we achieved a record 19,000 premium instrument placements with excellent quality, reflected in sustained high new and competitive catalyst placements. In Q4, we placed 5,241 premium instruments, up 3% from high-priority levels, driven by strong gains in CW placements and continued expansion of ProCyte 1. Overall CAG instrument revenues declined 3% organically in the quarter, reflecting comparisons to high priority levels, program pricing effects, and global metrics.

Brian Patrick McKeon: I would ask about lab consumable revenues increased 13% organically, reflecting double digit gains across U S and international regions.

Brian Patrick McKeon: Consumable gains were supported by an 11% increase in our global premium installed base in 2023, reflecting strong gains across our catalysts premium hematology instead of your platforms.

Brian Patrick McKeon: For the full year 2023, we achieved a record 19000 premium instrument placements with excellent quality reflected in sustained high new and competitive catalyst placements.

Brian Patrick McKeon: In Q4, we placed 5241 premium instruments up 3% from high prior year levels, driven by strong gains instead of your placements and continued expansion of <unk> one.

Brian Patrick McKeon: Overall, CAG instrument revenues declined 3% organically in the quarter, reflecting comparisons to high prior year levels program pricing effects and global mix.

Brian Patrick McKeon: Rapid assay revenue grew 9% organically in Q4, supported by benefits from net price increases and solid volume gains in the U.S. Global lab revenues expanded 7% organically, reflecting high single-digit gains in the U.S. and sustained solid organic revenue growth in international regions. CAG veterinary software and diagnostic imaging revenues increased 6% organically in Q4, compared to strong prior year levels.

Brian Patrick McKeon: Rapid assay revenue grew 9% organically in Q4 supported by benefits from net price increases and solid volume gains in the U S.

Brian Patrick McKeon: Global lab revenues expanded 7% organically, reflecting high single digit gains in the U S and sustained solid organic revenue growth in international regions.

Brian Patrick McKeon: CAG veterinary software and diagnostic imaging revenues increased 6% organically in Q4 compared to strong prior year levels.

Brian Patrick McKeon: Results continue to be supported by double-digit growth and recurring revenues and ongoing momentum in Cloud-Based Software Placement. For the full year, veterinary software and diagnostic imaging revenues increased 11% organically, supported by 19% organic gains in recurring revenues. In our other business segments, water revenues increased 5% organically in Q4 compared to strong prior year levels, supported by continued solid gains in the U.S. and Europe. Overall growth in the quarter was moderated by lower Chinese revenues and year-end order time. For the full year, water revenues grew 8% overall and 7% organically. Livestock poultry and dairy revenues decreased 4% organically in Q4, as solid gains in the U.S., Europe, and Latin America were offset by declines in herd health screening revenues in comparison to higher prior swine testing levels in China.

Brian Patrick McKeon: Results continued to be supported by double digit growth in recurring revenues.

Brian Patrick McKeon: And ongoing momentum in cloud based software placements.

Brian Patrick McKeon: For the full year veterinary software and diagnostic imaging revenues increased 11% organically supported by 19% organic gains in recurring revenues.

Brian Patrick McKeon: In our other business segments water revenues increased 5% organically in Q4 compared to strong prior year levels supported by continued solid gains in the U S and Europe.

Brian Patrick McKeon: Overall growth in the quarter was moderated by lower China revenues and year end order timing.

Brian Patrick McKeon: For the full year water revenues grew 8% overall and 7% organically.

Brian Patrick McKeon: Livestock poultry and dairy revenues decreased 4% organically in Q4.

Brian Patrick McKeon: Solid gains in the U S Europe, and Latin America were offset by declines in herd health screening revenues and comparisons to higher prior swine testing levels in China.

Brian Patrick McKeon: For the full year, LPD revenues were down 1% organically, as solid gains across our core ruminant poultry and swine businesses were offset by declines in areas like herd health screening, reflecting regional macro dynamics. We expect to work through comparison issues and herd health screening post the first quarter of 2024. Turning to the P&L, Q4 operating profits increased 8% as reported and 10% on a comparable basis, supported by a solid comparable operating margin gain. Gross profit increased 9% as reported and on a comparable basis. Gross margins were 58.4% of 50 basis points on a comparable basis, adjusting for 70 basis points of negative FX impact, primarily related to the lapping of prior hedge gains.

Brian Patrick McKeon: For the full year LPG revenues were down 1% organically as solid gains across our core ruminant poultry and swine businesses were offset by declines in areas like herd health screening, reflecting regional macro dynamics.

Brian Patrick McKeon: We expect to work through comparison issues in herd health screening post the first quarter of 2024.

Brian Patrick McKeon: Turning to the P&L Q4, operating profit increased 8% as reported and 10% on a comparable basis supported by solid comparable operating margin gains.

Gross profit increased 9% as reported and on a comparable basis.

Brian Patrick McKeon: Gross margins were 58, 4% of 50 basis points on a comparable basis adjusting for 70 basis points of negative FX impact primarily related to the lapping of prior year hedge gains.

Brian Patrick McKeon: Gross margin gains reflected benefits from net price improvement, which offset inflationary cost impacts, favorable business mix impacts from strong consumable growth, and higher software service gross margins. Operating expenses were up 9% as reported and 7% on a comparable basis in the quarter, reflecting growth in commercial investments and increases in R&D spending aligned with advancing our innovation initiatives, including our new instrument platform. For the full year 2023, operating margins were 30%, including approximately 40 basis points of benefit from the Q1 customer contract resolution page. On a comparable basis, four-year operating margins increased 390 basis points, including 280 basis points of combined benefit from the customer contract resolution payment and the lapping of discrete 2022 R&D investment. For the full year, foreign exchange reduced operating margin gains by 60 basis points, primarily related to the lapping of prior hedge gains.

Brian Patrick McKeon: Gross margin gains reflected benefits from net price improvement, which offset inflationary cost impacts.

Brian Patrick McKeon: <unk> business mix impacts from strong consumable growth and higher software service gross margins.

Brian Patrick McKeon: Operating expenses were up 9% as reported and 7% on a comparable basis in the quarter, reflecting growth in commercial investments and increases in R&D spending aligned with advancing our innovation initiatives, including our new instrument platforms.

Brian Patrick McKeon: For the full year 2023, operating margins were 30%, including approximately 40 basis points of benefit from the Q1 customer contract resolution paper.

Brian Patrick McKeon: On a comparable basis for your operating margins increased 390 basis points, including 280 basis points of combined benefit from the customer contract resolution payment and the lapping of discrete 2022 R&D investments.

Brian Patrick McKeon: For the full year foreign exchange reduced operating margin gains by 60 basis points, primarily related to the lapping of prior year hedge gains.

Brian Patrick McKeon: Q4 EPS was $2.32 per share, up 17% on a comparable basis. In Q4, EPS benefitted from a lower effective tax rate. This reflected the release of valuation allowances in certain jurisdictions, which lowered our full-year effective tax rate by approximately 100 basis points and increased EPS by 10 cents per share. Fourth quarter EPS also included $0.02 in tax benefits from share-based compensation activity and $0.04 in headwind from foreign exchange changes primarily related to the lapping of the 2022 hedge game. FX hedge gains were $2 million in the quarter. Foyer EPS was $10.06 per share, an increase of 29% on a comparable basis, including 12% of combined EPS growth benefit from the Q1 customer contract resolution payment and the lapping of discrete 2022 R&D investments. For the full year, stock-based compensation activity provided $14 million, or 16 cents per share, in tax benefits, lowering our effective tax rate by 130 basis points.

Brian Patrick McKeon: Q4, EPS was $2 32 per share up 17% on a comparable basis.

Brian Patrick McKeon: In Q4, EPS benefited from a lower effective tax rate.

Brian Patrick McKeon: Reflecting the release of valuation allowances in certain jurisdictions, which lowered our full year effective tax rate by approximately 100 basis points and increase EPS by <unk> 10 per share.

Brian Patrick McKeon: Fourth quarter EPS included <unk> and tax benefits from share based compensation activity in <unk> and headwinds from foreign exchange changes primarily related to the lapping over 2022 hedge gains.

Brian Patrick McKeon: FX hedge gains were $2 million in the quarter.

Brian Patrick McKeon: Full year EPS was $10 <unk> per share an increase of 29% on a comparable basis, including 12% of combined EPS growth benefit from the Q1 customer contract resolution payment and the lapping of discrete 22 into R&D investments.

Brian Patrick McKeon: For the full year stock based compensation activity provided $14 million or <unk> 16 per share in tax benefit lowering our effective tax rate by 130 basis points.

Brian Patrick McKeon: As noted full year comparable EPS growth also benefited by <unk> 10 per share or approximately 1% from the release of tax valuation allowances in certain jurisdictions.

Brian Patrick McKeon: As noted, full-year comparable EPS growth also benefited by $0.10 per share, or approximately 1%, from the release of tax valuation allowances in certain jurisdictions. Foreign exchange increased Q4 and full year revenue growth by approximately 1% and 0%, respectively. For the full year, foreign exchange reduced operating profits by $25 million and EPS by 24 cents per share, primarily related to the lapping of 2022 hedging it.

Brian Patrick McKeon: Foreign exchange increased Q4, and full year revenue growth by approximately 1% and zero percent respectively for.

Brian Patrick McKeon: For the full year foreign exchange reduced operating profits by $25 million and EPS by <unk> 24 per share.

Brian Patrick McKeon: Primarily related to the lapping of 2022 hedge gains and.

Brian Patrick McKeon: In 2023 full year foreign exchange hedge gains were $4 million.

Brian Patrick McKeon: Free cash flow was $773 million for 2023 or 91% of net income.

Brian Patrick McKeon: Free cash flow conversion was above the high end of earlier projections, reflecting timing and control capital spending.

Brian Patrick McKeon: In 2023, full-year Horn Exchange hedge gains were $4 million. Pre-cash flow was $773 million for 2023, or 91% of net income. Recastro conversion was above the high end of earlier projections, reflecting timing and control of capital spending. Capital spending was $134 million for the four-year period, or 3.7% of revenue.

Brian Patrick McKeon: Capital spending was $134 million for the full year or three 7% of revenue.

Brian Patrick McKeon: Our balance sheet remains in a strong position, we entered 2023 with leverage ratios of 0.7 times gross and 0.4 times net of cash our.

Brian Patrick McKeon: Our 2020 for interest expense outlook incorporates recent forward interest rates and expectations for similar leverage ratios this year.

Brian Patrick McKeon: Our balance sheet remains in a strong position. We ended 2023 with leverage ratios of 0.7 times gross and 0.4 times net of cash. Our 2024 Interest Expense Outlook incorporates recent forward interest rates and expectations for similar leverage ratios this year. We allocated $38 million to repurchase 90,000 shares in the fourth quarter.

We allocated $38 million to repurchase 90000 shares in the fourth quarter.

Brian Patrick McKeon: For the full year 'twenty to 'twenty, three we allocated $83 million to repurchase 175000 shares.

Brian Patrick McKeon: Targeted deployment of cash to share repurchases supports our projected 0.5% to 1% reduction in diluted shares outstanding for the full year 2024.

Brian Patrick McKeon: Turning to our 2020 for full year outlook, we are providing initial guidance for revenues of $3.930 billion to $4 billion and $40 million, an increase of seven 5% to 10.5% on a reported basis.

Brian Patrick McKeon: For the full year 2023, we allocated $83 million to repurchase 175,000 shares. Targeted deployment of cash to share repurchases supports our projected 0.5% to 1% reduction in diluted shares outstanding for the full year 2024. Turning to our 2024 four-year outlook, we're providing initial guidance for revenues of $3,930,000,000 to $4,040,000,000, an increase of 7.5% to 10.5% on a reported basis. On an organic basis, this reflects a growth range of 7% to 10% overall, supported by 7.5% to 10.5% organic growth in CAG-diagnostic recurring revenues. At current exchange rates, we expect foreign exchange to have a limited impact on full-year revenue growth.

Brian Patrick McKeon: On an organic basis. This reflects a growth range of 7% to 10% overall supported by seven 5% to 10, 5% organic growth in CAG diagnostic recurring revenues.

Brian Patrick McKeon: Current exchange rates, we expect foreign exchange to have limited impact in full year revenue growth.

Our reported revenue growth outlook includes approximately $15 million of projected revenue from our recent software acquisitions, which Jay will highlight in his comments.

Jay: In terms of the key drivers of our 2020 for organic growth outlook, the midpoint of our CAG diagnostic recurring revenue growth range incorporates expectations for global net price gains of approximately 5%.

Jay: Volume gains of approximately 4%.

Jay: Aligned with assumptions for relatively flat U S clinical visit same store growth levels post Q1.

Brian Patrick McKeon: The reported revenue growth outlook includes approximately $15 million of projected revenue from a recent software acquisition, which Jay will highlight in his comments. In terms of the key drivers of our 2024 organic growth outlook, the midpoint of our CAG diagnostic recurring revenue growth range incorporates expectations for global net price gains of approximately 5% and volume gains of approximately 4%, aligned with assumptions for relatively flat U.S. clinical visit same-store growth levels post-Q1. As we'll discuss, we have seen some effects from severe U.S. weather trends in January, which we expect will impact overall Q1 clinical visit growth levels.

Jay: As we'll discuss we have seen some effects from severe U S weather trends in January which we expect will impact overall Q1 clinical visit growth levels.

Jay: Our full year outlook reflects a U S volume growth premium to U S clinical visits aligned with their trends in the second half of 2023.

Supported by expectations for continued solid global growth benefits from IDEXX execution drivers.

Jay: The higher end of our CAG diagnostic recurring revenue growth the outlook range captures the potential for improved sector visit and same store growth trends and overall IDEXX volume growth potential.

Jay: The lower end of the range calibrates for potential risk to our targeted growth goals, including effects from macroeconomic conditions.

Jay: The high end of our overall organic revenue growth guidance of 10% is aligned with our long term goals. We expect overall organic growth to be constrained somewhat by expectations for modest organic growth that it won't be D and comparisons to strong prior year instrument placement levels.

Brian Patrick McKeon: Our full year outlook reflects a U.S. volume growth premium to U.S. clinical visits aligned with our trends in the second half of 2023, supported by expectations for continued solid global growth benefits from IDEXX execution drivers. The higher end of our diagnostic recurring revenue growth to outlook range captures the potential for improved sector visit and same store growth trends and overall IDEXX volume growth potential. The lower end of the range calibrates for potential risks to our target growth goals, including effects from macroeconomic conditions.

Jay: Our reported operating margin guidance for the full year of 2024 is 32% to 37%.

On a comparable basis. This reflects an outlook for 20% to 70 basis points of improvement in comparable annual operating margins net of a negative 40 basis point operating margin impact related to the lapping of the Q1 2023 customer contract resolution payment.

Brian Patrick McKeon: The high end of our overall Organic Revenue Growth Guide of 10% is aligned with our long-term goals, but we expect overall organic growth to be constrained somewhat by expectations for modest organic growth at LPD in comparison to strong prior instrument placement levels. Our reported operating margin guidance for the full year 2024 is 30.2% to 30.7%. On a comparable basis, this reflects an outlook for 20 to 70 basis points of improvement and comparable annual operating margins, net of a negative 40 basis point operating margin impact related to the lapping of the Q1 2023 Customer Contract Resolution Panel. We're planning for solid gross margin gains on a comparable basis in 2023, supported by continued strong growth in CAG diagnostic recurring revenues, expansion of our cloud-based software business, and benefits from lab productivity initiatives. We expect limited impact from foreign exchange on 2024 revenue growth and operating margin at the rates assumed in our press release. We estimate foreign exchange will increase fully or EPS by two cents per share given the current hedge position.

We're planning for solid gross margin gains on a comparable basis in 2023 supported by continued strong growth in CAG diagnostic recurring revenues expansion of our cloud based software business and benefits from lab productivity initiatives.

Jay: We expect limited impact from foreign exchange on 2020 for revenue growth and operating margin at the rates assumed in our press release.

Jay: We estimate foreign exchange increased full year EPS by <unk> <unk> per share given current hedge positions.

Jay: In terms of sensitivities to changes to the foreign exchange rates assumed in our press release, we projected a 1% change in the value of the U S. Dollar would impact full year reported revenue by approximately $13 million and operating income by approximately $4 million net of hedges.

Our 2024 EPS outlook is $10 84 to $11 33 per share.

Jay: This reflects an increase of 8% to 13% as reported and on a comparable basis net of a 2% EPS growth headwind from the lapping of the customer contract resolution payment.

Jay: 1% of headwind related to the lapping of benefits from tax valuation reserve releases in 2023.

Jay: Our EPS outlook factors in a one 5% increase in our overall effective tax rate to approximately 22% in 2024.

Brian Patrick McKeon: In terms of sensitivities to changes to the foreign exchange rates assumed in our press release, we projected a 1% change in the value of the U.S. dollar would impact 4-year reported revenue by approximately $13 million and operating income by approximately $4 million, net of hedges. Our 2024 BPS outlook is $10.84 to $11.33 per share. This reflects an increase of 8% to 13% as reported and on a comparable basis, net of a 2% EPS growth headwind from the lapping of the customer contract resolution payment and 1% of headwind related to the lapping of benefits from tax valuation reserve releases in 2023. Our EPS outlook factors in a 1.5% increase in our overall effective tax rate to approximately 22% in 2024, reflecting these lapping impacts and lower projected benefits from share-

Jay: Reflecting these lapping impacts and lower projected benefits from share based compensation activity.

Jay: Our EPS outlook captures expected benefits in 2024 from lower interest expense compared to 2023.

Jay: As well as expectations for reductions in average share count.

Jay: Our 2020 for free cash flow outlook is for our net income into free cash flow conversion ratio of 90% to 95% aligned with our long term goals.

Jay: This reflects estimated capital spending of $180 million or approximately four 5% of revenues.

Jay: Overall, we're well positioned to deliver continued strong financial performance in 2024.

Jay: In terms of our operational outlook for Q1, we're planning for overall organic revenue growth of 6% to 8%.

Jay: Factoring in approximately 1% of negative growth impact from severe weather in the U S. In January.

Jay: And constraints on Q1 growth in areas like L. P D related to tougher year on year comparisons.

Brian Patrick McKeon: Our EPS Outlook captures expected benefits in 2024 from lower interest expense compared to 2023, as well as expectations for reductions in average share accounts. Our 2024 free cash flow outlook is for a net income to free cash flow conversion ratio of 90 to 95%, aligned with our long-term goal. This reflects estimated capital spending of $180 million, or approximately 4.5% of revenues.

Jay: Reported revenue growth should be largely in line with organic revenue growth estimates.

Jay: In terms of our profit outlook, we're planning for reported operating margins of 29, 4% to 29, 8% in Q1.

Jay: This reflects an outlook for flat to moderate expansion in comparable operating margins adjusting for the lapping of the prior year of $16 million customer contract resolution payment recorded in Q1, 2023, as an offset to operating expense.

Jonathan Mazelsky: Overall, we're well positioned to deliver continued strong financial performance in 2024. In terms of our operational outlook for Q1, we're planning for overall organic revenue growth of 6% to 8%, factoring in approximately 1% of negative growth impact from severe weather in the U.S. in January and constraints on Q1 growth in areas like LPD related to tougher year-on-year comparisons. Reported revenue growth should be largely in line with organic revenue growth estimates. In terms of our profit outlook, we're planning for reported operating margins of 29.4% to 29.8% in Q1. This reflects an outlook for flat to moderate expansion in comparable operating margins, adjusting for the lapping of the prior year's $16 million customer contract resolution payment recorded in Q1 2023 as an offset to operating expenses. That concludes our financial review. I'll now turn the call over to Jay for his comment.

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

Jay: Thank you, Brian and good morning, IDEXX delivered strong performance in the fourth quarter capping a year, where we advanced our strategic priorities, while driving strong business growth and excellent financial results our high touch commercial model the focus on the customer and accelerated innovation driver supported ongoing sector development.

Jay: I use it growth and relevant diagnostic testing generates important clinical insights that inform veterinarians mission to deliver better medical care.

Jay: Selling their businesses and a highly profitable diagnostics category.

Jay: High levels of execution against our strategy drove double digit CAG diagnostics recurring revenue growth in the fourth quarter and for the full year 2023.

This was aligned with our original full year growth targets and reflected strong gains across our major regions high growth in our durable high return annuity revenues included strong growth in our recurring software and digital imaging annuity streams.

Jay: These gains reflected the cumulative impact of double digit growth in our global premium instrument installed base supported by high quality instrument placements solid new business gains expansion of integrated cloud based software solutions and net price realization aligned with the value we deliver.

Jonathan Mazelsky: Thank you, Brian, and good morning. IDEXX delivered strong performance in the fourth quarter, capping a year where we advanced our strategic priorities while driving strong business growth and excellent financial results. Our high-touch commercial model, deep focus on the customer, and accelerated innovation drivers supported ongoing sector development. The use and growth of relevant diagnostic testing generates important clinical insights that inform veterinarians' missions to deliver better medical care while growing their businesses in a highly profitable diagnostics category.

Jay: Our next commercial teams delivered improved volume gains this quarter as we continue to work through factors constraining clinical visit levels.

Jay: Solid growth momentum, we carry through 2023 demonstrates that customers of all types depreciate IDEXX is purpose built solutions and take these tools and services to achieve sought after efficiency gains.

Jonathan Mazelsky: High levels of execution against our strategy drove double-digit CAG diagnostics recurring revenue growth in the fourth quarter and for the full year 2023. This was aligned with our original full-year growth targets and reflected strong gains across our major regions. High growth in our durable, high-return annuity revenues included strong growth in our recurring software and digital imaging annuity streams. These gains reflected the cumulative impact of double-digit growth in our global premium instrument-installed base supported by high-quality instrument placements, solid new business gains, expansion of integrated cloud-based software solutions, and net price realization aligned with the value we deliver. IDEXX commercial teams delivered improved volume gains this quarter as we continue to work through factors constraining clinical visit levels. The solid growth momentum we will carry through 2023 demonstrates that customers of all types appreciate IDEXX's purpose-built solutions and seek these tools and services to achieve sought-after efficiency gains. We're excited to build on this momentum in 2024.

Jay: We're excited to build on this momentum in 2024.

Jay: Today I'll highlight the key capabilities that initiatives that have advanced our strategy to address the long term growth opportunity for our business there direct commercial partnership and innovation to enhance care delivery.

Jay: I'll start with a review of our global commercial execution, and it's foundational role in creating awareness education and ultimately the increase use of IDEXX diagnostics.

Jay: IDEXX commercial team spring deep subject matter expertise and the partnership mindset that has resulted in gains about sector growth levels.

Solid premium instrument placement growth in Q4 capped off a year of record premium instrument placements outstanding full year performance was reflected in sustained high levels of catalyst placements at new and competitive accounts.

Jay: <unk> record, new and competitive placement levels in the U S.

Jay: We also realized double digit expansion of our premium hematology and save your installed basis.

Jay: High quality high evi placements, coupled with sustained customer retention rates in the 97% to 99% range for the U S and similarly high levels globally.

Jonathan Mazelsky: Today, I'll highlight the key capabilities and initiatives that have advanced our strategy to address the long-term growth opportunity for our business through direct commercial partnership and innovation to enhance care delivery. I'll start with a review of our global commercial execution and its foundational role in creating awareness, education, and ultimately, the increased use of IDEXX diagnostics. IDEXX commercial teams bring deep subject matter expertise and a partnership mindset that has resulted in gains above sector growth levels. Solid premium instrument placement growth in Q4 capped off a year of record premium instrument placement.

Jay: Solid foundation for future CAG diagnostics recurring revenue growth. It also demonstrates our customers' appreciation for IDEXX is easy to use and clinic platforms that provide them with deep diagnostic insights necessary to delivering high levels of pet health care, while managing workflow effectively and are busy and dynamic clinic backdrop.

Jay: Our effectiveness and growing the installed base for premium instruments, not only benefits our consumables recurring revenue stream, but also drives growth across our diagnostic modalities as testing begets testing and our customers are inspired to expand their use of IDEXX solutions. This adoption of our multi modality offerings supported by strong customer interest.

Jonathan Mazelsky: Outstanding full-year performance was reflected in sustained high levels of catalyst placements at new and competitive accounts, including record new and competitive placement levels in the U.S. We also realized double-digit expansion of our premium hematology and CetiVue-installed base. High quality, high EBI placements, coupled with sustained customer retention rates in the 97 to 99 percent range for the U.S. Similarly, high levels globally set a solid foundation for future CAG Diagnostics recurring revenue. It also demonstrates our customers' appreciation for IDEXX's easy-to-use in-clinic platforms that provide them with deep diagnostic insights necessary to deliver high levels of paid health care while managing workflow effectively in a busy and Our effectiveness in growing the installed base for premium instruments benefits our consumables for our current revenue stream but also drives growth across our diagnostic modalities as testing begets testing, and our customers are inspired to expand their use of IDEXX solutions.

Jay: Marketing programs like IDEXX, 360, which makes the adoption of IDEXX technology easy and financially appealing.

Jay: The adoption of these technologies help support sector diagnostics revenue growth in the U S. In the fourth quarter, which benefited from diagnostic frequency expansion in wellness visits and diagnostics utilization gains overall.

Jay: Diagnostics remains one of the fastest growing areas in the veterinary practice reflected in solid and sustained high single digit same store revenue growth at the practice level, our long term investments in commercial and R&D resources position <unk> well to help our customers build on this momentum.

Jay: Our growing global direct commercial capability is an important element of this strategy is the same strong CAG diagnostics recurring revenue growth.

Jay: Our most recent commercial expansion was completed in the U S. During Q4 and is the first in four years as many of our territories have become very large it complements the seven targeted international expansion, we've advanced since 2021 countries around the world.

Jonathan Mazelsky: This adoption of our multimodality offering is supported by strong customer interest in marketing programs like IDEXX 360, which makes the adoption of IDEXX technology easy and financially appealing. The adoption of these technologies helps support sector diagnostics revenue growth in the U.S. in the fourth quarter, which benefited from diagnostic frequency expansion in wellness visits and diagnostics utilization gains overall. Diagnostics remains one of the fastest-growing areas in the veterinary practice.

Jay: These are attractive high return investments that support future growth by delivering high touch commercial engagement in our fastest growing regions and our commercial teams have consistently shown the ability to complete these expansions, while still delivering strong business results.

Our international business performance is showing the benefits of our expanded global commercial capability. We continued to achieve strong new business gains reflected in the 13% expansion of our international premium installed base. This year driven by double digit installed base growth across our chemistry, hematology and urine sediment and client platforms.

Jonathan Mazelsky: This is reflected in solid and sustained high single-digit same-store revenue growth at the practice level. Our long-term investments in commercial and R&D resources position IDEXX well to help our customers build on this momentum. Our growing global direct commercial capability is an important element of this strategy to sustain strong CAG diagnostics recurring revenue growth. Our most recent commercial expansion was completed in the U.S. during Q4 and is the first in four years as many of our territories have become very large.

Jay: These gains drove improved international CAG diagnostics recurring revenue growth, specifically four sequential quarters of volume growth normalized for days, despite macro headwinds that have pressured same store sales levels. The expanded footprint of our VDC based commercial model and international regions customer friendly marketing programs like IDEXX.

Jay: 360, and an expanded international lab network gives us the right tools to successfully address the approximately two thirds of the total opportunity estimate which exists outside the U S.

Jay: In addition to growth in CAG diagnostics recurring revenues IDEXX also delivered very strong performance. This year in expanding our veterinary software services and diagnostic imaging segment.

Jonathan Mazelsky: It complements the seven targeted international expansions we've advanced since 2021 in countries around the world. These are attractive, high-return investments that support future growth by delivering high-touch commercial engagement in our fastest-growing regions, and our commercial teams have consistently shown the ability to complete these expansions while still delivering strong business results. Our international business performance is showing the benefits of our expanded global commercial capability.

Jay: Software and imaging solutions provide busy customers with an intuitive and efficient way to access diagnostic insights and manage important workflow and communications across your clinics.

Jay: <unk> continued to embrace the opportunity to embed software in many aspects of their business and use technology to generate diagnostic insights eliminate pain points across backend areas of the clinic and it'll be meaningful lines of communication with their increasingly younger customer demographic.

Jonathan Mazelsky: We continue to achieve strong new business gains, reflected in a 13% expansion of our international premium installed base this year, driven by double-digit installed base growth across our chemistry, hematology, and urine sediment in-clinic platform. These gains drove improved international CAG diagnostics recurring revenue growth, specifically four sequential quarters of volume growth normalized for days. Despite macro headwinds that are pressured, same-store sales levels.

Jay: Adopting these contemporary software solutions clinicians and their staff are significantly better able to focus on providing high levels of care for their patients and reduce or time spent on unrewarded administrative activities that would either help their practice medicine or help them drive business growth.

Jay: Imported by excellent commercial engagement and performance fourth quarter pins placements continued to be driven by interest in cloud native products, which represented over 90% of placements in the fourth quarter and for the full year 2023, supporting strong double digit cloud <unk> installed base growth for the year. This high adoption of IDEXX software solutions.

Jonathan Mazelsky: The expanded footprint of our VDC-based commercial model in international regions, customer-friendly marketing programs like IDEXX 360, and an expanded international lab network give us the right tools to successfully address the approximately 2 3rds of the total opportunity estimate, which exists outside the U.S. In addition to growth in CAG diagnostics recurring revenues, IDEXX also delivered very strong performance this year in expanding its veterinary software services and diagnostic imaging segment. Our software and imaging solutions provide busy customers with an intuitive and efficient way to access diagnostic insights and manage important workflow and communications across their clinics. Clinics continue to embrace the opportunity to embed software in many aspects of their business and use technology to generate diagnostic insights, eliminate pain points across back-end areas of the clinic, and open meaningful lines of communication with their increasingly younger customer demographic. By adopting these contemporary software solutions, clinicians and their staff are significantly better able to focus on providing high levels of care for their patients and reduce their time spent on unrewarded administrative activities that neither help them practice medicine nor help them drive business growth.

Jay: Drove 19% organic gains in our highly profitable recurring revenues in our veterinary software diagnostic imaging segment this year.

Jay: These gains to provide a growing attractive profit stream to the company and delivers a multiplier of benefit as loyal software customers grow their diagnostic revenues faster.

Jay: Our veterinary software services and diagnostic imaging recurring revenues benefit from growth in our Crimson installed base and from our focus on expanding IDEXX is subscription based service portfolio.

Jay: <unk> web Pacs are cloud native workflow engine for digital imaging is a great example, we're pleased with the continued double digit web pacs subscriber growth.

Jay: Which thousands of practices have adopted and fully integrated into the IDEXX software technology stack. We've recently added advanced dental imaging workflows to web Pacs addressing a major pain point for the 75% of practices, who regularly take dental X rays. These integrated dental imaging workflows, including full dental charts and tooth.

Jay: Specific image sorting streamlines, what is otherwise a complicated and time intensive process for practices.

Jay: These results demonstrate the benefits from our innovative integrated software offering that is globally relevant to a wide variety of clinics. We're building on our momentum with existing platforms, such as that connect plus and with new solutions to further drive efficiencies within the clinic. One example of which is an updated user experience for the IDEXX <unk> station.

Jonathan Mazelsky: Supported by excellent commercial engagement and performance, fourth quarter PIMS placements continued to be driven by interest in cloud-native products, which represented over 90% of placements in the fourth quarter and for the full year 2023, supporting strong double-digit cloud PIMS installed-based growth for the year. This high adoption of IDEXX software solutions drove 19% organic gains in our highly profitable recurring revenues in the veterinary software diagnostic imaging segment this year. These gains provide a growing, attractive profit stream to the company and deliver a multiplier benefit as loyal software customers grow their diagnostic revenues fast. Our veterinary software services and diagnostic imaging recurring revenues benefit from growth in our PIMS and fall base and from our focus on expanding IDEXX's subscription-based service portfolio. IDEXX WebPACs, our cloud-native workflow engine for digital imaging, is a great example.

Jay: Which is a practice teams one stop control panel and workflow engine announced recently at B M X and coming to our customers in the second half of 2024.

Jay: This new interface will deliver two times faster in clinic diagnostic workflows for all instruments across the IDEXX that light sweet.

Jay: Additionally, while both our diagnostics and software businesses rely primarily on organic growth. We continue to look for attractive and strategic acquisition to deliver more value to our customers and their clients.

Jay: We recently closed the acquisition of a private U S based software and data platform that enhances our software ecosystem and further accelerates our growth in that business. This acquisition extends our pins cloud native workflow and deliver strategic data solutions to our customers and their clients.

Jay: As we integrate its capabilities deeply inside <unk> platforms. We believe there will be sector growth benefits from deeper engagement between manufacturers customers and pet owners to drive adoption of highly relevant clinical offerings.

Jonathan Mazelsky: We're pleased with the continued double-digit WebPAC subscriber growth, which thousands of practices have adopted and fully integrated into the IDEXX software technology stack. We recently added advanced dental imaging workloads to WebPACS, addressing a major pain point for the 75% of practices who regularly take dental x-rays. These integrated dental imaging workloads, including full dental charts and tooth-specific image sorting, streamline what is otherwise a complicated and time-intensive process for practice.

Jay: Innovation is a bedrock of how IDEXX has been able to provide our customers with critical diagnostic insights that enable and drive the medical care envelope, we've invested over $2 billion over the last 20, plus years and instrument platform development differentiated assay discovery and customer facing software data and connectivity our commitment and leadership.

Jonathan Mazelsky: These results demonstrate the benefits of our innovative, integrated software offering that is globally relevant to a wide variety of clinics. We're building on our momentum with existing platforms, such as VetConnect+, and with new solutions to further drive efficiencies within the clinic, one example of which is an updated user experience for the IDEXX VetLab station, which is a practice team's one-stop control panel and workflow engine. Announced recently at BMX and coming to our customers in the second half of 2024, this new interface will deliver two times faster in-clinic diagnostic workflows for all instruments across the IDEXX VetLab suite.

Jay: And innovation, that's driven sector development through higher standards of care and global animal health.

Jay: Recent example of our commitment to transformational innovation is within our point of care business. The IDEXX in view Dx cellular analyzer is in advanced optics, and AI platform cellular imaging that removes the need for clinic staff to prepare and interpret size.

Jay: Delivering clinically insightful diagnostic test results, we're giving valuable time back to the practice. It works by interrogating in interpreting sells an intracellular structures in their natural state providing spectacular three D images that enables a differential diagnosis of fly based methods and near term. Many for this new platform will address.

Jonathan Mazelsky: Additionally, while both our diagnostics and software businesses rely primarily on organic growth, we continue to look for attractive and strategic acquisitions to deliver more value to our customers and their clients. We recently closed the acquisition of a private U.S.-based software and data platform that enhances our software ecosystem and further accelerates our growth in that business. This acquisition extends our PIMS cloud-of-native workflow and delivers strategic data solutions to our customers and their clients.

Jay: Really relevant high volume established categories, including your cytology and blood morphology, both available when we began shipping the product in Q4 of this year with fine needle aspirate testing on lumps and bumps to be available next.

Jay: With built in advanced optics powerful AI, leveraging our global pathology expertise and two way connectivity. The IDEXX <unk> analyzer allows for continued menu expansion building off our proven track record of increasing value over time of IDEXX products and service offerings.

Jonathan Mazelsky: As we integrate its capabilities deeply inside PIMS platforms, we believe there will be sector growth benefits for deeper engagement between manufacturers, customers, and pet owners to drive adoption of highly relevant clinical offerings. Innovation is a bedrock of how IDEXX has been able to provide our customers with critical diagnostic insights that enable and drive the medical care envelope. We've invested over $2 billion over the last 20-plus years in instrument platform development, differentiated assay discovery, and customer-facing software, data, and connectivity. Our commitment, leadership, and innovation have driven sector development through higher standards of care and global animal health. The most recent example of our commitment to transformational innovation is within our point of care business. The IDEXX InViewDx Cellular Analyzer is an advanced optics and AI platform for cellular imaging that removes the need for clinic staff to prepare and interpret slides. Delivering Clinically Insightful Diagnostic Test Results, while giving valuable time back to the practice. It works by interrogating and interpreting cells in intracellular structures in their natural state, providing spectacular 3D images that enable differential diagnosis of slide-based methods.

Jay: We estimate at 20000 global placement opportunity over five years from the point of shape into Q4 of this year driven by a highly relevant menu and intuitive time saving workflow customer response to initial trials into our announcements BMX were overwhelmingly positive.

Jay: In addition to the IDEXX <unk> analyzer. We also recently announced the latest addition to our fecal Dx antigen platform at our reference labs already the gold standard for fecal diagnostics fecal Dx antigen platform now identify Cisco Isospora, a common intestinal parasite that typically impacts young dogs and cats representing.

Jay: The second extension in as many years available at no additional cost starting next month. The addition of Cisco Isospora will make the best even better and help clinicians have even greater confidence when they choose IDEXX reference labs for one of the most common time consuming preventive screening tests.

In addition to this expansion of our fecal Dx androgen panel as plan. We have successfully launched of IDEXX staffing be in North America in December adding kidney injury detection to what is already the most comprehensive menu for kidney health in the industry since launch about 10000 IDEXX customers have benefited.

Jonathan Mazelsky: The near-term menu for this new platform will address highly relevant, high-volume established categories, including ear cytology and blood morphology, both available when we begin shipping the product in Q4 of this year, with fine-needle aspirate testing on mumps and bumps to be available next. With built-in advanced optics, powerful AI leveraging our global pathology expertise, and two-way connectivity, the IDEXX InViewDX analyzer allows for continued menu expansion, building up our proven track record of increasing the value over time of IDEXX products and service offerings. We estimate a 20,000 global placement opportunity over five years from the point of shipment to Q4 of this year, driven by a highly relevant menu and intuitive time-saving workflow. Customer response to initial trials and to our announcement at VMX was overwhelmingly positive. In addition to the IDEXX InView DX Analyzer, we also recently announced the latest addition to our Fecal DX Antigen platform at a reference. Already the gold standard for fecal diagnostics, the fecal de-expansion platform now also identifies cystoisostomes. A common intestinal parasite that typically impacts young dogs and cats, this is the second extension in as many years.

Jay: From over 200000, IDEXX is that that would be tests in North America.

Jay: Overall, we're very proud of the accomplishments, we have been able to advance this year and expanding our business capabilities and value added partnerships with our customers are focused on attractive investment and innovation opportunities, while delivering strong financial results helped drive exceptional return on invested capital in 2023.

Jay: With that I'll conclude by thanking our nearly 11000 IDEXX colleagues for their ongoing commitment to our purpose and their strong execution against our strategy. These business results require coordinated intensive work across the organization and IDEXX teams rose to the challenge.

Jay: Our performance across the company both delivered today in 2023 and set us up well to build off this growth through 2024.

Jay: Theres, a significant attractive opportunity to continue to inspire the adoption and utilization of diagnostic solutions and related products. Our IDEXX teams continued to work tirelessly to address this opportunity while pursuing our mission to provide a better future for animals people and our planet. It's an honor to report IDEXX as progress and results on behalf.

Speaker Change: Of our colleagues so on behalf of the IDEXX management team. Thank you for all your efforts this year.

Jonathan Mazelsky: Available at no additional cost starting next month, the addition of Cystoisospora will make the best even better and help clinicians have even greater confidence when they choose IDEXX's reference labs for one of the most common, time-consuming preventive screening tests. In addition to this expansion in our fecal DX antigen panel, as planned, we successfully launched IDEXX Cystaphin B in North America in December, adding kidney injury detection to what is already the most comprehensive menu for kidney health in the industry. Since launch, about 10,000 IDEXX customers have benefited from over 200,000 IDEXX Cystaphin B tests in North America. Overall, we're very proud of the accomplishments we've been able to achieve this year in expanding our business capabilities and value-added partnerships with our customers.

Speaker Change: With that we'll now conclude our prepared remarks and open the line for Q&A.

Speaker Change: Thank you.

Speaker Change: If you would like to ask a question. Please sickness by pressing star one on your telephone keypad.

Speaker Change: If you're using a speaker phone. Please make sure your mute function is turned off to allow your sigma to reach our equipment.

Speaker Change: <unk> pumped on the phone line well indicate when your line is open.

Speaker Change: Again, Please press star one to ask a question.

Speaker Change: Our first question today comes from.

Chris Scott of J P. Morgan. Please go ahead.

Christopher Thomas Schott: Great. Thanks, so much for the question all the color on the remarks here I guess my question here is just it seems like you are a bit wider range on the 2020 for revenue guidance, but in the past. So I just would like a little bit more color in terms of what's driving that range.

Jonathan Mazelsky: Our focus on attractive investment and innovation opportunities, while delivering strong financial results, will help drive exceptional return on invested capital in 2023. With that, I'll conclude by thanking our nearly 11,000 IDEXX colleagues for their ongoing commitment to our purpose and their strong execution against our strategy. These business results require coordinated, intensive work across the organization, and IDEXX teams rose to the challenge.

Christopher Thomas Schott: Where are you seeing the most uncertainty in the year and maybe it's just part of that just latest thinking on the macro environment, and how you're kind of reflecting kind of the broader macro environment and the guidance for this year. Thanks, so much.

Speaker Change: Thanks, Chris.

Speaker Change: The guidance range.

Speaker Change: That's about a 3% range as we highlighted in our comments some of the logic around the midpoint outlook, which largely captures I think the underlying sector trends that we've seen recently in the business as well as the benefits that we're getting from our execution.

Jonathan Mazelsky: High levels of performance across the company both delivered the day in 2023 and set us up well to build off this growth through 2024. There's a significant, attractive opportunity to continue to inspire the adoption and utilization of diagnostic solutions and related products. Our IDEXX teams continue to work tirelessly to address this opportunity while pursuing our mission to provide a better future for animals, people, and our planet. It's an honor to report IDEXX's progress and results on behalf of our colleagues.

Speaker Change: The higher end of the range really.

Speaker Change: Builds and the potential for sector improvement I think that we'd be.

Speaker Change: Clinical visit growth level of same store sales levels internationally have been below what we think will be the longer term trends in our sector and so that captures.

Speaker Change: Potential for upside on that front as well as you know, we even stronger execution for our teams and I think the.

Speaker Change: Downside from that mid point of view is capturing.

Speaker Change: Risks, including macro risks and so it's not all that different than I think where we started last year and we.

Operator: So, on behalf of the IDEXX management team, thank you for all your efforts this year. With that, we'll now conclude our prepared remarks and open the line for Q&A. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open.

Speaker Change: It up delivering at the higher end of our range supported by strong execution. So we will always strive to do that but that will involve some improvement of the secretary hands in terms of the assumptions that we laid out.

Speaker Change: Our next question today comes from Nathan Rich of Goldman Sachs. Please go ahead.

Jonathan David Block: Great. Good morning, Thanks for the questions, maybe just kind of following up on that I wanted to make sure I kind of understood. The kind of underlying end market assumptions that's embedded in guidance.

Christopher Thomas Schott: Again, please press star 1 to ask a question. Our first question today comes from Chris Scott of J.P. Morgan. Please go ahead. Great, thanks so much for the question, all the color, and the remarks here. I guess my question here is just, it seems like you have a bit wider range on the 2024 revenue guidance than in the past, so I just would like a little bit more color in terms of what's driving that range and where you're seeing the most uncertainty in the year. And maybe it's just part of that latest thinking on the macro environment and how you're kind of reflecting the broader macro environment and in the guidance for this year. Thanks so much.

Jonathan David Block: I guess can you maybe kind of talk us through you know.

Jonathan David Block: How you see the year playing out I know you said 100 basis point impact from weather, but I'd be I'm kind of interested if you can maybe just detail your kind of clinical visit expectations for the first quarter.

Jonathan David Block: And then you said kind of flat same store visits kind of post Q1, you know would you expect to be around that level in Q2, and then over the balance of the year.

Jonathan David Block: And you know the other thing that I think stood out from your prepared remarks was just the strongest kind of normalized volume growth in the fourth quarter of 2023, just any color you could share on kind of what what drove that and maybe what youre kind of expecting over the balance of 24. Thank you.

Brian Patrick McKeon: Thanks, Chris. Yes, the guidance range represents about a 3% range, as we highlighted in our comments, some of the logic around the midpoint outlook, largely capped. Sector Trends that www. IDEXX.org. The higher end of the range really builds in the potential for the sector.

Speaker Change: Yes, maybe I can start with your last question just to set context, but we had a very good finish to the year in terms of our performance as I mentioned the <unk>.

Brian Patrick McKeon: Medical Visit Growth Levels, Saemster Sales Levels, Internationally, www.idexx.com in our sector, and so that Potential for upside on that front as well, www.IDEXX.org downside from that midpoint, including macro risks, It's not all that different from where we started, delivering at the higher end. www.idexx.org will always strive to do that, but, you know, that involves some Please go ahead. Great. Good morning.

Speaker Change: The volume trends when you normalize for days effects, we had 4% volume growth U S and internationally that was.

Speaker Change: Improved from a softer Q3, and actually was our strongest volume growth quarter for the year. So we feel very good about that and.

Speaker Change: Flex the ongoing benefits that we're getting from the the the strong execution by our teams as we as we thought about our outlook for in our plans for 2024.

Speaker Change: We're looking to build on that we highlighted that that's our or volume growth expectation for the year at midpoint is roughly in line with the strong trends we are coming out of the second half, we'll get additional benefit from the pricing that we noted I.

Jonathan David Block: Thanks for the questions. Maybe just kind of following up on that, I wanted to make sure I kind of understood the kind of underlying end market assumptions that are embedded in guidance. You know, I guess, could you maybe kind of talk us through how you see the year playing out? You know, I know you said a 100 basis point impact from weather, but I'd be kind of interested if you could maybe just detail your kind of clinical visit expectations for the first quarter. And then you said kind of flat, same sort of visits kind of post Q1, you know, would you expect to be around that level in Q2 and then over the balance of the year? And, you know, the other thing that I think stood out from your prepared remarks was just the strongest kind of normalized volume growth in the fourth quarter of 2023. Just any color you could share on kind of what drove that and maybe what you're kind of expecting over the balance of 24.

Speaker Change: I think before the weather impacts that we highlighted we were.

Speaker Change: Our mid point of view was largely flat clinical visits and.

Speaker Change: In 2024 in the U S and somewhat similar trends in international which had improved in the second half of last year, but were still somewhat of a headwind.

Speaker Change: We explicitly factored in we were about $10 million of impact we think in the U S from the severe weather in January. So we're just trying to capture that in Q1 and flowing that through.

Speaker Change: Year, but we think that's isolated.

Speaker Change: Isolated to January where we're hopeful we'll see.

Speaker Change: Or at least assuming we get a flattening of trends and hopefully we'll see some improvement overtime blind.

Speaker Change: Aligned with the long term growth potential.

Speaker Change: Yeah.

Speaker Change: To add some color.

Speaker Change: Remarks, yeah, the end market appears to be stabilized.

Speaker Change: Healthy there's good underlying client and the pet owner demand. If you take a look at both practice revenue and clinic revenue. It's about it was about 5% in the fourth quarter from a positioning standpoint, I think customers. Appreciate the technology solutions that we bring across all of the diagnostics testing modalities.

Speaker Change: Even more so with with software I think there's a new hunger for really looking at tools that can help them run their practices better whether it's a workflow productivity play.

Speaker Change: Play communications client and internal communications, but also as part of the delivery of care and the way at all.

Brian Patrick McKeon: Thank you. Thanks, Nate. Yeah, maybe I can start with your last question. Contacts, but we had a very good finish.

Speaker Change: Integrate so I think the.

Speaker Change: The assumption is that customers will continue to work through some of the capacity challenges that they've had and look.

For tools and partnerships to be able to do that a bit more, especially I think well positioned to help them.

Brian Patrick McKeon: This is the end of the year in terms of our performance, as I mentioned. The Volume Trends Winning Norm Wides for Days Effect, www. IDEXX.org Thank you for joining us. For more information, visit www. IDEXX.org, order for the year, so we felt very about that and it reflects the ongoing benefits that we're getting from and The New York Times. Thank you. Thank you. As we as we thought about our outlook for in our plans. 24. We're looking to build on that.

Speaker Change: Great. Thank you.

Speaker Change: Our next question today comes from Mike Ruskin of Bank of America.

Michael Ryskin: Hey, Thanks for taking the question guys and congrats on the quarter strong into the year.

One of expand a little bit on the interview you guys had a great launch with EMACS those really informative I'm. Just curious you talked about the way 2020 for launch for <unk> launch are you embedding any contribution in numbers. This year, obviously since it's only going to be a couple of months and that'll be meaningful, but I'm just wondering of that revenue target.

Brian Patrick McKeon: Highlighted, or volume growth expectancy, year, https://www.idexx.org.au or midpoint view is for largely flat, for the U.S., ahead when we explicitly factored in. We were about 10 million. For more information, visit www.IDEXX.org, Capture that, www.

Michael Ryskin: How much are you attributing to interview already.

Michael Ryskin: And then the other question I'll just throw them both at once you talked about 5% of net price. This year that compares to I believe you ended last year at seven to eight so you're kind of starting to moderate back down to historical levels.

Jonathan Mazelsky: IDEXX.org Isolated to January, we're, or at least assuming we had a flattening in transit Line. And just to add some color to Brian's remarks, you know, the end market appears. Stabilized and being healthy, there's good underlying client and pet owner demand if you take a look at both practice revenue. Practice revenue, it's about 5% in the fourth quarter, you know, from a positioning standpoint. The technology solutions that we bring across and all the diagnostic testing modalities. You know, even more so with software, I think. Thank you, Alexander, for really looking at tools to run their practices better, whether it's a productivity tool, you know, play, communications, client and internal... but also as part of the delivery of care and the Way It All, you know, integrates.

Michael Ryskin: I'm just wondering you know what sort of been the feedback to price recently as you've announced the 2024 price rollout.

Michael Ryskin: If you've heard any any difference on U S versus O U S price that'd be helpful. Thanks.

Speaker Change: Like when I just briefly address the guidance question and then what Jay talked more about the interview launch but the.

Speaker Change: We've we've included the assumptions for the launch and our overall guidance it will be principally instrument revenue.

Jonathan Mazelsky: You know, the assumption is that we continue to work through some of the capacity challenges that they've had and look for tools and partnerships to be able to do that. And we're especially, I think, well-positioned. Great, thank you.

Speaker Change: Benefits in the fourth quarter.

As we build the annuity revenues over time from that instrument, but that's it's all captured.

Jay: Yeah, just as a follow up commentary on big launch customers I think.

Very excited to learn more about that.

Michael Ryskin: Our next question today comes from Michael Ryskin of Bank of America. Hey, thanks for taking the question, guys, and congrats on the quarter strung into the year. I want to expand a little bit on the InView.

Jay: Our commercial organization.

Jay: Going to the customers who are looking for for help with a very high volume relevant.

Jay: Tests that they do today, I think with their psychology and blood morphology, it certainly fits into that profile.

Michael Ryskin: You guys did a great launch at VMX that was really informative. Just curious, you talked about a late 2024 launch or 4Q launch. Are you embedding any contribution in numbers this year? Obviously, since it's only going to be a couple of months, it's not going to be meaningful, but I'm just wondering how much of that revenue target you are attributing to InView already? And then the other question; I'll just throw them both at once.

Jay: It helps address what I think is a.

Jay: A gap from a care standpoint, especially on the blood morphology standpoint, where they'd like to do more blood morphologies, but due to the complexities and variability and patent constraints. The slides. They don't always do as many as they would like to do so we're very excited.

Michael Ryskin: You talked about 5% net price this year. That compares to, I believe you ended last year at 7 to 8, so you're kind of starting to moderate back down to historical levels. Just wondering, you know, what's sort of been the feedback on price recently as you've announced the 2024 price rollout? And if you've heard any difference between U.S. versus O.U.S.

Jay: By that and I think it fits the market place and fits that need and importantly, it doesn't add work, it's not moving work around it eliminates work that would otherwise practices are left with so I think it hits on both the selling day yourself delivering excellent medical care, but also.

Jay: Well productivity improvements.

Jay: We will now take a question from Paul.

Brian Patrick McKeon: price, that'd be helpful. Thanks. Mike, why don't I just briefly address the guidance question and let Jay talk more about that, launch. We've included the assumptions for the launch in our overall guidance, and it will be principally instrument-relevant.

Paul: Hi, Michael you had also asked about the pricing piece of it yes.

Paul: Keep in mind that you know.

Paul: Pricing is if.

Paul: Theres a mix a combination by different customer types and so there's not a.

Jonathan Mazelsky: Banner bill the annuity revenues over time from that instrument, but that's, it's all captured. Yeah, just some follow-up commentary on the, you know, E&P launch. Customers, I think, were very excited to learn more about that, as was our commercial organization. You know, talking to the customers you're looking for, for help with those very high-volume, relevant... Tests that they do today, I think, with ear psychology and blood morphology, certainly fit into that profile. It helps address what I think is a gap from a care standpoint, especially on blood morphology, where they'd like to do more blood morphologies, but due to the complexities and variability and time constraints for slides, they don't always do as many as they would like to do. So we're very excited about that, and I think it fits the marketplace and fits that need. And importantly, it doesn't add any work.

Paul: Single weight that to talk about it we obviously have.

Paul: Corporate customers, who maybe under longer term contracts as well as different program effects. So we think that you know.

Paul: The 5% you know.

Paul: Debt that we'd provided as a guide both reflects is commensurate with the value that we're delivering and very much in line with you know.

Paul: Hum.

Paul: Customers see from IDEXX contribution standpoint, keep in mind, we don't set the end and pet owner right that's up to the.

Paul: The veterinarian to decide how they decide.

That that market up in and.

Paul: Typically there's an uplift that they factor into their practice management systems and they obviously price.

Jonathan Mazelsky: It's not moving work around. It eliminates work that would otherwise, you know, practices are left with. So I think it hits on both the cylinders of delivering excellent medical care but also, you know, workflow productivity improvement. We will now take a question from... Sorry, Michael, you had also asked about the pricing piece, and, you know, keep in mind that, you know, pricing is. There's a mix or combination of different customer types, and so there's not a single way to talk about it. We obviously have.

Paul: Through differentiation and different much differentiation in terms of the test itself, but also the medical services piece of it.

Speaker Change: Thanks, so much for coming back to me I appreciate that Jay.

Speaker Change: Our next question will come from <unk> of Pnp pardon me back.

Speaker Change: Hey, good morning, Thanks for taking my questions.

Speaker Change: Just a follow up on in view.

Speaker Change: You could provide maybe the early kols feedback regarding the slightly and note and go technology or any other eye real feedback and whether you're able to provide more information for modeling purposes, including the timing of additional indication and I just have a second question.

Jonathan Mazelsky: Corporate customers who may be under longer-term contracts, as well as different program effects. We think that the 5% net that we provided as a guide both reflects and is commensurate with the value that we're delivering and very much in line with what's..., www.idexx.org, You know, through differentiation and not just differentiation in terms of the test itself, but also the medical service. Thanks so much for coming back to me.

Speaker Change: Whether we could expect further innovation to be an album assays in 2024 and would you consider M&A play. Thank you.

Speaker Change: Yeah. So let me talk a little bit about <unk> and some of the key opinion leader.

Speaker Change: We've had a number of key opinion leaders involved yes as part of the upfront definition and development of India. So there is that we typically do involve them one water, bringing something.

Michael Ryskin: Appreciate that, Jay. Our next question comes from Nevin T. of PNP Paribas. Hi, good morning.

Jonathan David Block: Thanks for taking my questions. Just a follow-up on InView, if you could provide maybe the early KOL feedback regarding the slide-free and load-and-go technology or any other area of feedback, and whether you're able to provide more information for modeling purposes, including the timing of additional indications. And I also have a second question, whether we could expect further innovation to be announced in assays in 2024, and would you consider further M&A in software? Thank you.

Speaker Change: Due to the market.

Speaker Change: To the world like this I think the exciting thing from their perspective is that youre looking at Sally cellular structures, including intra cellular structures within their natural state.

Speaker Change: You prepare a slide if it's a two D.

Speaker Change: I don't want to use the word squished, but I'll use the word question again, so you're getting.

Speaker Change: Natural he had a look at it when you have a three dimensional view and can interrogate it isn't that natural state do you see things that you don't otherwise you wouldn't otherwise see and are able to provide differential diagnosis from that side of it.

Jonathan Mazelsky: So let me talk a little bit about InView and some of the key opinion leader, you know, feedback. We've had a number of key opinion leaders involved as part of the upfront definition and development of InView. So there's We typically do involve them when we're bringing something new to the market, new to the world like this. I think the exciting thing from their perspective is that you're looking at cellular structures, including intercellular structures, within their natural state. You know, when you prepare a slide, it's 2D. I don't want to use the word squish, but I'll use the word squirm. You know, you're sort of squishing it.

Speaker Change: Very excited by that I think.

Speaker Change: Veterinarians in general are very excited by the fact that you don't get the various slide they know they spent 10 to 20 minutes on that its technique sensitive it's highly variable therefore, the output and interpretation is variable so having having a solution like that that's that's relevant and that's something that they.

Speaker Change: Well understood.

Speaker Change: I think they're very enthusiastic about that you know with respect.

Jonathan Mazelsky: So you're getting a non-natural look at it when you have a three-dimensional view and can interrogate it in that natural state. You see things that you wouldn't otherwise see and are able to provide differential diagnosis from that. So they're very excited by that. I think veterinarians, in general, are very excited by the fact that you don't have to prepare a slide. They know they spend 10 to 20 minutes on that. It's technique sensitive, it's highly variable, and therefore the output and interpretation is variable.

Speaker Change: Innovation, if he had announcing innovation.

Speaker Change: Kind of talk about that at this point, we're constantly innovating our product development pipeline and funnel.

Speaker Change: <unk> held with with very interesting activities that as we get closer.

Speaker Change: Lunch.

Speaker Change: Particular assay or software or instrument, then we talk about it in Baltimore.

Speaker Change: Our next question today comes from Erin Wright of Morgan Stanley.

Erin Wilson Wright: Hi, Thanks for taking my question. So just another follow up on India, and then I have another follow up after that but.

Jonathan Mazelsky: So having a solution like that, that's relevant, it's something that they, you know, are well understood. You know, I think they're very enthusiastic about that. With respect to innovation this year, and announcing innovation, I'm not gonna talk about that. At this point, we're constantly innovating our product development. Pipeline and Funnel is filled with very interesting activities.

Erin Wilson Wright: And you could the launch be expedited at all or could you do like an earlier soft lines with that.

That instrument and do you still have that other diagnostic platform and the pipeline is that more of a 'twenty 'twenty five has been our ore or later thanks.

Erin Wilson Wright: And as we get closer to the launch of a particular assay or software or instrument, we talk about it, and then we'll disclose it. Our next question today comes from Erin Wright of Morgan Stanley. Hi, thanks for taking my question. So just another follow up on InView. And then I have another follow-up after that. But on InView, could the launch be expedited at all? Or could you do, like, an earlier soft launch with that, that instrument?

Speaker Change: Yeah, So with respect that the point of care platform launch is we have a very well defined tried and true method.

Speaker Change: Method of developing platforms, putting it in the hands of customers getting feedback in terms of how it how it works within our real operating environment, We know that there's a difference between bedrock development and what you see within the clinic when we launch something and began shipping it we want to make sure of that.

Jonathan Mazelsky: And do you still have that other diagnostic platform in the pipeline? Is that more of a 2025 event or, or, or later? Thanks. Yeah, so with respect to, you know, the point of care platform launches, we have a very well-defined, tried and true, method of developing platforms, putting them in the hands of customers, and getting feedback in terms of how it works within a real operating environment. We know that there's a difference between benchtop development and what you see within the clinic.

Speaker Change: You know the average time between support events or four five.

Speaker Change: Six years these are world class levels of.

Speaker Change: Our performance and our customers expect that of US we don't want that.

Speaker Change: Premature to launch it maybe.

Speaker Change: Have issues that are disruptive to the practice environment, we're comfortable with what we've guided to in terms of.

Speaker Change: The timing of that and making sure that it fits within the software ecosystem and the overall operating environment of the practice itself.

Jonathan Mazelsky: When we launch something and begin shipping it, we want to make sure that, you know, the average time between support events is four or five, you know, six years. These are world-class levels of performance, and our customers expect that of us. We don't want to, you know, prematurely launch and maybe have issues that are disruptive to the practice environment.

Speaker Change: Put up further disclosing.

Speaker Change: Next point of care platform, rather than what we've talked in the past that we have won its outside of the existing testing categories at all.

Speaker Change: We get closer.

Speaker Change: The launch will talk about it.

Speaker Change: Okay. Thanks, and then a bigger picture question just has there been any sort of changes are evolving opportunities as it relates to the competitive landscape I guess, particularly in the U S and cause disruptions in in sort of new ownership of one of your competitors or changes in distribution for the other one of your competitors.

Jonathan Mazelsky: So we're comfortable with what we've guided to in terms of, you know, the timing of that and making sure that it fits within the software ecosystem and the overall operating environment of the practice. We're not disclosing any further details about our next point of care platform, other than what we've discussed in the past. We have one that's outside of the existing testing categories, and when we get closer to launch, we'll talk about it.

Speaker Change: Is that presenting opportunities for you to take share at this point that you may not have seen previously in either across individual accounts or our corporate accounts.

Jonathan Mazelsky: Okay, thanks. And then, a bigger picture question, just have there been any sort of changes or evolving opportunities as it relates to the competitive landscape, I guess, particularly in the U.S.? Could disruptions in sort of new ownership of one of your competitors or changes in distribution for the other one of your competitors be presenting opportunities for you to take share at this point that you may not have seen previously across individual accounts or corporate accounts, too? Thanks. Yeah, our markets have been very competitive for a long time. I think new ownership hasn't really changed that dynamic.

Speaker Change: Yes.

Speaker Change: Yeah, you know our markets are markets. They have been very competitive for a long time, but I think the new ownership hasn't really changed that dynamic you know some of our some of our competitors. We're also partners with them.

Speaker Change: Clinical services and equipment side.

Speaker Change: Customers have a choice our focus is on continuing to innovate to help address the challenging problems. They have in their practice whether capacity constraints, whether it's introducing new testing solutions to give them better.

Jonathan Mazelsky: Some of our competitors are also partners with on the clinical services and equipment side. Customers have a choice. Our focus is on continuing to innovate, help address, http://firaservice.icf.udacio.gov webcast The ability to generate in a seamless, user-friendly, customer-friendly way these clinical insights that inform great medical decisions that help outcomes, and do it productively. That's where our focus is, and that's where our focus is going to remain. We will now take a question from Jon Block of Stiefel Financial. Thanks, guys. Good morning.

Medical results well you know what we find at the end of the day as customers. Appreciate the integrated nature of our offering is the ability to generate in a seamless user friendly customer friendly way. These critical insights that inform great medical decisions that helped produce outcomes and do it productively.

Speaker Change: Where our focus is and that's where our focus is going to remain.

Speaker Change: We will now take a question from Jon block.

Jon Block: Stifel financial.

Yeah.

Thanks, guys good morning.

Jon Block: Brian, maybe just from a modeling perspective, you know, any ways to think about the gross margin versus operating margin expansion this year? Do we get GM expansion because of another decent year with price? And then, you know, if you look at OPEX, R&D was up for the fourth quarter in a row. I actually think R&D was up 20 percent year over year, and G&A was down two quarters in a row. So just anything on the GM or, you know, OPEX to details, we sort of sharpen our pencils on 24. Okay.

Jon Block: Brian maybe just from a modeling perspective any ways to think about the gross margin versus op margin expansion. This year.

Jon Block: Can we get GM expansion, because another decent year with price and then.

If you look at Opex R&D was up for the fourth quarter in a row actually argue was up 20% year over year G&A down two quarters in a row. So just anything on the GM or opex to details we try to sharpen our pencils on 24.

Brian Patrick McKeon: Thanks for the question, Jon. Just to revisit what we shared was we're targeting 20 to 70 basis points. This is a presentation on the FEDRAC's Comparable Improvement Net of the 40 BIPs from the Customer Contract Resolution Payment. So normalize for that, that's 60 to 110 basis points.

Speaker Change: Sure. Thanks for the question John.

Speaker Change: Just to revisit what we shared was we were targeting 20 to 70 basis points of comparable improvement net of the 40 bps from a headwind from the customer contract resolution payment. So.

24: Normalized for that that 60 to 110 basis points, we think that will primarily be driven by gross margin gains consistent with the the progress that we are supported our 110 basis point improvement in 2023.

Brian Patrick McKeon: We think that will primarily be driven by gross margin gains, with the progress that we have made with our 110 bases, https://www.idexx.org, helping our customers grow faster and catagnostic recurring revenues grow. That includes price benefits that help us to offset inflationary impact. We're also continuing to benefit as we grow our cloud-based software business. It's an excellent business for us, and we're doing a great job. We're expanding that business and improving our profitability on the software front and also have an ongoing focus on improving, or Lab Operations. Transcripts provided by Transcription Outsourcing, LLC, to build on our gross profit gains.

24: We benefit as we help our customers grow faster in CAG diagnostic recurring revenues grow that includes various benefits that help.

24: Us to offset inflationary impacts.

24: We're also continuing to benefit as we grow our cloud based software businesses.

24: Excellent business worse, and we're doing a great job.

Expanding that business and improving our profitability on the software front and also our ongoing focus on improving.

24: Our lab operations, including even if it benefits from expanding our business. So we think we have a number of drivers that will help us to build on our gross profit gains in terms of our investment profile I think I think you'll highlight where our priorities are we want to we want to support our innovation agenda. That's.

Brian Patrick McKeon: In terms of our investment profile, I think you highlight where our priorities are. We want to support our innovation agenda, an area that's been very highly profitable for us over time. We obviously have.

24: You know an area that's been very high return for us over time, we obviously have.

Brian Patrick McKeon: You know, the platform that we're launching this year, an ongoing innovation that we're supporting, and we're continuing to invest in our commercial operations. Expansion. Recently, we invested in and will continue to look at opportunities to enhance our commercial capability globally. And be efficient overall and try to manage our OPEX, you know, largely in line with revenue growth, www. IDEXX.org, Sustain OPEX investment in line with revenue and prior. Okay, great.

24: The platform that we're launching this year and ongoing innovation that we're supporting were continuing to invest in our commercial operations.

24: U S expansion.

24: Certainly that we invested in and will continue to look at opportunities to enhance our commercial capability globally.

24: And be efficient overall in and try to manage our opex largely in line with revenue growth I think that's a reasonable assumption I think if we do a better job of growing grow faster that always always opportunity to get some some leverage on that front, but I think our plans are to sustain sustained opex investment in line with revenue and <unk>.

24: Prioritizing innovation and commercial agenda.

Jon Block: That was very helpful. Thank you for that. And then just sort of a long second question, more clarification. So it seems that the 2024 vet visit growth expectation is zero, if I have that right, at the midpoint of your 7.5 to 10.5 CAGDX recurring. I just want to make sure I've got that right. And then what's the expectation for 1Q24 visits? Was that the negative 1% for full quarter?

Speaker Change: Okay, Great that was very helpful. Thank you for that and then just sort of a long second question more clarification. So.

Speaker Change: It seems like the 2024 visit growth expectation zero, if I have that right at the midpoint of your seven and a half to tended to have.

Speaker Change: <unk> Dx recurring I'd want to make sure I've got that right and then what's your expectation for 124 visits was that the negative 1% for full quarter I'm, just trying to sort of get at the implied Q4, Q vet visit assumption and then just sort of a quick miscellaneous tack on anything for price to call out U S versus international when we.

Jon Block: I'm just trying to sort of get at the implied 2Q to 4Q vet visit assumption. And then just sort of a quick miscellaneous tack on, you know, anything for price to call out U.S. versus international when we think about the 5% global? And then what about days? Do you get an extra day this year?

Speaker Change: About the 5% global and then what about <unk> do you get an extra day. This year does that have any tailwind to the growth rates. Thanks guys.

Brian Patrick McKeon: And does that have any tailwind for the growth rates? Thanks, guys. Okay, so just on the first one, maybe a simple way to understand this is post-Q1, we're, and I think I said this in my comments, you know, the midpoint assumes largely flat clinical, so we're trying to capture that there. About 10 million headwinds that we saw from January weather that's principally going to impact... The U.S. business, it is U.S. risk, and that will..., which I hope we see in the So we're not trying to estimate that for Q1, but that's obviously a headwind that we're trying to factor in. But I think the bigger picture, Jon, is the midpoint. The midpoint assumptions are largely flat.

Speaker Change: Okay. So just on the first one maybe a simple way to understand this is post Q1, where we are.

Speaker Change: There's some great comments, you know the midpoint assumes largely flat clinical visits in the U S. So we were trying to capture that there's.

Speaker Change: About $10 million of headwind that we saw from January whether that's principally going to impact.

Speaker Change: The U S business it is U S risk and that that will.

Speaker Change: We think will be seen in the clinical visit numbers. So we're not trying to estimate that for Q1, but that's obviously a headwind that we're trying to factor them, but I think the bigger picture John is midpoint, because you know the the midpoint assumptions are largely flat U S clinical visits.

Brian Patrick McKeon: I think you had a question on price, U.S. versus international. We're not guiding regionally, but, you know, the 5 percent, we're expecting solid net price utilization globally. We're able to execute this year, and so... Again, without being specific. Specifics: Price Realization in the U.S. and International Regions, and Dave, we don't have a material kind of full year dynamic.

Speaker Change: Q2 to Q4 timeframe I think you had a question on price U S versus international where we're not.

Speaker Change: Guiding regionally, but you know the 5% we're expecting solid.

Speaker Change: Personalization globally consistent with what.

Speaker Change: We were able to execute this year and so.

Speaker Change: I think.

Speaker Change: Again without being specific you should expect solid.

Speaker Change: Price realization in U S and international regions and.

Speaker Change: Days, we don't have a material kind of full year dynamic will sure clarity as we go through quarter by quarter.

Brian Patrick McKeon: We'll share clarity as we go through quarter by quarter on that, but we're not highlighting that as an issue. Q1, and it's, or. Okay, thank you.

Speaker Change: On that but we're not highlighting that as an issue in the <unk>.

Speaker Change: One in its or for the full year.

Speaker Change: Alright. Thanks, guys. So we don't have further questions. So with that I'll. Thank you for your questions I will now conclude our Q&A portion of this morning's call.

Operator: We don't have any further questions, so with that, thank you for your questions. We'll now conclude our Q&A portion of this morning's call. It's been a pleasure to review another quarter of strong IDEXX results. In summary, IDEXX is well-positioned to sustain the momentum we've built into 2024 and continue to help us address a significant decades-long opportunity to raise the standard of care for companion animal health. Our consistent strategy focused on supporting increased utilization of diagnostics is a key factor in elevating these standards of care and has helped us navigate the highly dynamic external environment in our sector.

Speaker Change: Pleasure to review another quarter of strong IDEXX resolved in summary, IDEXX is well position to sustain the momentum we built into 2024, which will continue to help us address a significant decades long opportunity to raise the standard of care for companion animal health care, our consistent strategy focused on supporting increased utilization in fact.

Speaker Change: <unk> is a key factor in elevating the standards of care and has helped us navigate the highly dynamic external environment in our sector. We look forward to continued strong execution against our strategic priorities by teams across IDEXX as we move forward through 2024 and beyond so thank you for your participation. This morning.

Operator: We look forward to continued strong execution against our strategic priorities by teams across IDEXX as we move forward through 2024 and beyond. So, thank you for your participation this morning, and we'll now conclude the call. This concludes today's call. Thank you for your participation. You may now disconnect. Thank you for watching!

Speaker Change: And we'll now conclude the call.

Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Yeah.

Speaker Change: [music].