Q1 2024 IDEXX Laboratories Inc Earnings Call
Operator: Good morning, and welcome to the IDEXX Laboratories' first quarter 2024 earnings conference call. As a reminder, today's conference is being recorded.
Good morning, and welcome to the IDEXX Laboratories first quarter 2024 earnings Conference call. As a reminder, today's conference is being recorded participating in the call. This morning are Jamie Zelle ski President and Chief Executive Officer, Brian Mckeon, Chief Financial Officer.
Operator: 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 statement 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
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 discussed today.
John: 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.
Operator: During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the investor relations section of our website. In reviewing our first quarter 2024 results and updated 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.
John: During this call we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP.
John: 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.
John: In reviewing our first quarter 2024 results and updated 2024 guidance. Please note all references to growth organic growth in comparable growth refer to growth compared to the equivalent prior year period, unless otherwise noted.
John: To allow broad participation in the Q&A, we ask that each participant limit their questions to one with one follow up if necessary. We appreciate you may have additional questions. Please feel free to get back into the queue and if time permits we'll take your additional questions todays.
John: Today's prepared remarks will be posted to IDEXX dot com investors. After the earnings conference call concludes I would like to turn the call over to Brian Mckeon.
Operator: To allow broad participation in the Q&A, we ask that each participant limit their questions to one with one follow-up as necessary. We appreciate you may have additional questions. 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 like to turn the call over to Brian McKeon.
Brian P. McKeon: Good morning, and welcome to our first quarter earnings call. Today, I'll take you through our Q1 results and review our updated financial outlook for 2024. In terms of highlights, IDEXX achieved solid organic revenue growth and strong profit gains in the first quarter. Overall revenues increased 7% organically, supported by 7% organic growth and CAG diagnostic recurring revenues. Solid revenue gains were net of negative growth effects from severe U.S. weather in January, which we estimate lowered overall IDEXX organic revenue growth by 0.5 percent to 1 percent and added pressure to U.S. same-store clinical visit growth levels.
Brian P. McKeon: Good morning, and welcome to our first quarter earnings call today I'll take you through our Q1 results and review our updated financial outlook for 2024.
Brian P. McKeon: In terms of highlights IDEXX achieved solid organic revenue growth and strong profit gains in the first quarter.
Brian P. McKeon: Overall revenues increased 7% organically supported by 7% organic growth in CAG diagnostic recurring revenues.
Brian P. McKeon: Solid revenue gains were net of negative growth effects from severe U S weather in January which.
Brian P. McKeon: Which we estimate lowered overall IDEXX organic revenue growth by <unk>, 5% to 1%.
Brian P. McKeon: It added pressure to U S same store clinical visit growth levels.
Brian P. McKeon: IDEXX execution trends remain strong, reflected in a continued high IDEXX CAG diagnostic recurring revenue growth premium, 8% global gains, and premium instrument placements, and 11% Organic Gains in Recurring Veterinary Software and Diagnostic Imaging Remnants. Profit delivery was excellent in the quarter, supported by gross margin gains.
Brian P. McKeon: IDEXX execution trends remains strong reflected in our continued high IDEXX CAG diagnostic recurring revenue growth premium.
Brian P. McKeon: 8% global gains in premium instrument placements and 11% organic gains in recurring veterinary software and diagnostic imaging revenues.
Brian P. McKeon: Profit delivery was excellent in the quarter supported by gross margin gains.
Brian P. McKeon: Strong operating margin performance enabled EPS delivery of $2.81 per share. EPS was 10% as reported and 9% on a comparable basis net of a 7% negative EPS growth impact for the lapping of a prior year customer contract resolution payment. Overall, we're pleased with our continued progress in expanding our business and delivering strong financial performance as we continue to work through sector and macro factors that have constrained visit growth at veterinary clinics.
Brian P. McKeon: Strong operating margin performance enabled EPS delivery of $2 81 per share.
Brian P. McKeon: EPS was up 10% as reported and 9% on a comparable basis net of a 7% negative EPS growth impact from the lapping of a prior year customer contract resolution.
Brian P. McKeon: Overall, we're pleased with our continued progress in expanding our business and delivering strong financial performance as we continue to work through sector of macro factors that have constrained visit growth at veterinary clinics.
Brian P. McKeon: We've updated our 2024 financial outlook to incorporate recent sector trends, which we estimate will constrain the high end of our full-year organic growth outlook this year. We've also incorporated updated estimates for foreign exchange effects to reflect the recent strengthening of the U.S. dollar.
Brian P. McKeon: We've updated our 2024 financial outlook to incorporate recent sector trends, which we estimate will constrain the high end of our full year organic growth outlook. This year.
Brian P. McKeon: We've also incorporated updated estimates for foreign exchange effects to reflect the recent strengthening of the U S. Dollar.
Brian P. McKeon: Building on our strong first quarter performance, we're reinforcing our operational EPS outlook at midpoint. This reflects consistent goals for solid comparable operating margin improvement this year and favorable adjustments to estimates for net interest expense benefiting from our strong cash flow generation. We'll review our updated guidance detail later in my comments.
Brian P. McKeon: Building on our strong first quarter performance, we're reinforcing our operational EPS outlook at midpoint.
Brian P. McKeon: This reflects consistent goals for solid comparable operating margin improvement this year and favorable adjustments to estimates for net interest expense benefiting from our strong cash flow generation.
Brian P. McKeon: Let's begin with a review of our first quarter results. First quarter organic revenue growth of 7% was driven by 7% organic CAG gains and 11% organic growth in our water business, with overall gains moderated by a 3% organic growth decline in LPD. CAG organic revenue growth was supported by 8% organic growth in veterinary software and diagnostic imaging revenues, driven by 11% organic gains in recurring revenue. TAG Instrument revenue increased 3% organically, building on a high prior year placement level.
We'll review our updated guidance details later in my comments, let's begin with a review of our first quarter results.
Brian P. McKeon: First quarter organic revenue growth of 7% was driven by 7% organic CAG gains and 11% organic growth in our water business with overall gains moderated by a 3% organic growth decline in LPG.
Brian P. McKeon: CAGR organic revenue growth was supported by 8% organic growth in veterinary software and diagnostic imaging revenues.
Brian P. McKeon: And by 11% organic gains in recurring revenues.
Brian P. McKeon: Instrument revenue increased 3% organically building on a high prior year placement levels.
Brian P. McKeon: Tag Diagnostic Recurring Revenue increased 7% organically in Q1, supported by average global net price improvement of 5% to 6%, with US net price realization at the lower end of this range. This diagnostic recurring revenue growth in Q1 reflected solid gains across our major regions. International CAG diagnostic recurring revenue organic growth was 9%, reflecting benefits from net price realization and solid volume gains, building on 2023 second half momentum. International results continue to be driven by IDEXX execution, reflected in strong business gains and high premium instrument placement, which supported a double-digit year-on-year expansion of our Global Premium Instrument Installment Base.
Brian P. McKeon: CAG diagnostic recurring revenue increased 7% organically in Q1 supported by average global net price improvement of 5% to 6%.
Brian P. McKeon: With the U S net price realization at the lower end of this range.
Brian P. McKeon: Diagnostic recurring revenue growth in Q1 reflected solid gains across our major regions.
International CAG diagnostic recurring revenue organic growth was 9%, reflecting benefits from net price realization and solid volume gains building on 2023 second half momentum.
Brian P. McKeon: International results continue to be driven by IDEXX execution reflected in strong business gains and high premium instrument placements.
Brian P. McKeon: Supportive of double digit year on year expansion of our global premium instrument installed base.
Brian P. McKeon: U.S. CAG diagnostic recurring revenue organic growth was 6.5% in Q1. This reflects a continued significant growth premium compared to same-store U.S. clinical visit growth levels, which declined an estimated 2.3% overall in the quarter, including negative impacts from severe January weather. IDEXX's solid growth results reflect sustained levels of diagnostic frequency and increased diagnostic utilization per clinical visit at the practice level. It also reflects benefits from IDEXX Execution Drivers, including solid new business gains, sustained high customer retention levels, and net price realization.
Brian P. McKeon: U S CAG diagnostic recurring revenue organic growth was six 5% in Q1.
Brian P. McKeon: It reflects the continued significant growth premium comparing compared to the same store U S clinical visit growth levels, which declined an estimated 2.3% overall in the quarter, including negative impacts from severe January weather.
Brian P. McKeon: IDEXX is solid growth results reflect sustained levels of diagnostic frequency and increase diagnostic utilization per clinical visit at the practice level.
Brian P. McKeon: It also reflects benefits from IDEXX execution drivers, including solid new business gains sustained high customer retention levels and net price realization.
Brian P. McKeon: Excluding estimated weather impacts, U.S. clinical visit growth levels in the first quarter were relatively softer than targeted in our midpoint outlook. These trends reflect ongoing staffing challenges at veterinary clinics and potentially pressure on U.S. consumers from broader cumulative macro impacts.
Brian P. McKeon: Excluding estimated weather impacts U S clinical visit growth levels in the first quarter were relatively softer than targeted in our outlook.
Brian P. McKeon: These trends reflect the ongoing staffing challenges of veterinary clinics and potentially pressure on U S consumers from water accumulative macro impacts.
Brian P. McKeon: While pet owner demand for health care services remains durable and resilient, and we're confident in IDEXX's ability to execute and drive continued solid organic revenue growth, we believe it's prudent to factor these near-term sector trends into our outlook. This is reflected in adjustments to the high end of our 2024 Full Year Organic Revenue Growth Guidance. IDEXX achieved solid organic revenue growth across our modalities in Q1. IDEXX VETLAB consumable revenues increased 9% organically, reflecting high single-digit gains in the U.S. and double-digit organic growth internationally.
Brian P. McKeon: Well pet owner demand for health care services remains durable and resilient and we're confident in <unk> ability to execute and drive continued solid organic revenue growth we.
Brian P. McKeon: We believe it's prudent to factor these near term sector trends into our outlook.
Brian P. McKeon: This is reflected in the adjustments to the high end of our 2020 for full year organic revenue growth guidance.
Brian P. McKeon: I would actually achieve solid organic revenue growth across our modalities in Q1.
Brian P. McKeon: <unk> vet lab consumable revenues increased 9% organically, reflecting high single digit gains in the U S and double digit organic growth in international regions.
Brian P. McKeon: Consumable gains were supported by 11% year-on-year growth in our Global Premium Instrument Insole Base, reflecting gains across our Catalyst, Premium Hematology, and Setup Uflap. We placed 4,791 CAG premium instrument replacements in Q1, an increase of 8% year-on-year compared to high-priority levels. This was supported by strong growth in ProSiteOne placements, with the global ProSiteOne install base increasing to over 15,000 entries. However, global catalyst placement decreased year-on-year in the quarter, reflecting comparisons to high prior year placement levels and shifts in placement mix in the international region.
Brian P. McKeon: Consumable gains were supported by 11% year on year growth in our global premium instrument installed base, reflecting gains across our catalyst premium hematology and set of your platforms.
Brian P. McKeon: We placed 4791 cat premium instrument placements in Q1, an increase of 8% year on year compared to high prior year levels.
Brian P. McKeon: This was supported by strong growth in Procyte, one placements with the global Procyte, one installed base increasing to over 15000 instruments.
Brian P. McKeon: Global catalyst placements decreased year on year in the quarter.
Brian P. McKeon: Checking comparisons to high prior year placement levels and shifts the placement mix in the international regions.
Brian P. McKeon: Global Rapid Assay revenues expanded 5% organically in Q1, driven by high single-digit gains in the U.S., including benefits from higher net price rolls. Global Lab revenues increased 6% organically, reflecting similar solid gains in the U.S. and international. Veterinary software and diagnostic imaging revenues increased 12% as reported, including benefits from a recent software and data platform acquisition, which adds to our software ecosystem. 8% overall organic gains were driven by 11% organic growth in recurring revenues, reflecting benefits from ongoing momentum and cloud-based self-replacement. Order revenues increased 11% organically in Q1, driven by double-digit gains in the U.S. and Europe, including benefits from higher shipment order times. Livestock, poultry, and dairy revenues decreased by 3% organically.
Brian P. McKeon: Global rapid assay revenues expanded 5% organically in Q1, driven by high single digit gains in the U S, including benefits from higher net price realization.
Brian P. McKeon: Global lab revenues increased 6% organically, reflecting similar solid gains in the U S and international regions.
Brian P. McKeon: Veterinary software and diagnostic imaging revenues increased 12% as reported including benefits from our recent software and data platform acquisition, which adds to our software ecosystem.
Brian P. McKeon: 8% overall organic gains were driven by 11% organic growth in recurring revenues, reflecting benefits from ongoing momentum in cloud based software placements.
Brian P. McKeon: Water revenues increased 11% organically in Q1, driven by double digit gains in the U S and Europe, including benefits from higher shipment order timing.
Brian P. McKeon: Livestock, poultry and dairy revenues decreased 3% organically.
Brian P. McKeon: Solid gains in the U.S. and Europe were moderated by lower Asia-Pacific revenues, including impacts from lower herd health screening revenues related to reduced China import testing and comparisons to higher prior year swine testing levels in China. We expect these negative growth impacts to moderate in the second half of 2024. Turning to the P&L, Q1 profit results were supported by solid gross margin gains; gross profit increased 9% in the quarter as reported and on a comparable basis.
Brian P. McKeon: Solid gains in the U S and Europe were moderated by lower Asia Pacific revenues, including the impact from lower herd health screening revenues related to reduced China import testing.
Brian P. McKeon: And comparisons to higher prior year swine testing levels in China.
Brian P. McKeon: We expect these negative growth impacts to moderate in the second half of 2024.
Brian P. McKeon: Turning to the P&L Q1 profit results were supported by solid gross margin gains.
Brian P. McKeon: Gross profit increased 9% in the quarter as reported and on a comparable basis.
Brian P. McKeon: Gross margins were 61.5%, up 110 basis points on a comparable basis. Course margin gains reflected benefits from business mix, lower instrument costs, and software service margin expansion. On a reported basis, operating expenses increased 12% year-on-year, including approximately 6.5% of overall growth impact related to the lapping of a prior $16 million customer contract resolution payment.
Brian P. McKeon: Gross margins were 61, 5% up 110 basis points on a comparable basis.
Brian P. McKeon: Gross margin gains reflected benefits from business mix lower instrument cost and software service margin expansion.
Brian P. McKeon: On a reported basis operating expenses increased 12% year on year, including approximately six 5% of overall growth impact related to the lapping of the prior $16 million customer contract resolution payback.
Brian P. McKeon: Q1 OPEX growth was driven by increases in R&D spending aligned with advancing our innovation agenda, including new platform development. EPS was $2.81 per share in Q1, an increase of 10% as reported and 9% on a comparable basis. Net of a 7% negative EPS growth rate impact related to the lapping of the prior year customer contract resolution payment, foreign exchange had a limited impact on gross margin operating profits and EPS in the quarter, net of a $1 million hedged. Pre-cash flow was $168 million in Q1, reporting normal seasonality.
Brian P. McKeon: Q1, Opex growth was driven by increases in R&D spending aligned with advancing our innovation agenda, including new platform development.
Brian P. McKeon: EPS was $2 81 per share in Q1, an increase of 10% as reported and 9% on a comparable basis net of a 7% negative EPS growth rate impact related to the lapping of the prior year customer contract resolution panel.
Brian P. McKeon: Foreign exchange had a limited impact on gross margin operating profit and EPS in the quarter net of a $1 million hedge gain.
Brian P. McKeon: Free cash flow was $168 million in Q1, reflecting normal seasonality.
Brian P. McKeon: On a trailing 12-month basis, our net income-to-free cash flow conversion ratio was 92%. For the full year, we're maintaining our outlook for pre-cash flow conversion of 90% to 95%, reflecting estimated capital spending of approximately $180 million. Our balance sheet remains in a strong position. We entered the quarter with leverage ratios of 0.7 times gross and 0.4 times net of cash, as we continue to manage our balance sheet conservatively in the current interest rate environment. We allocated $155 million in capital to share with purchases in the first quarter.
Brian P. McKeon: On a trailing 12 month basis, our net income to free cash flow conversion ratio was 92%.
Brian P. McKeon: For the full year, we're maintaining our outlook for free cash flow conversion of 90% to 95%.
Brian P. McKeon: Reflecting estimated capital spending of approximately $180 million.
Our balance sheet remains in a strong position we ended the quarter with leverage ratios of 0.7 times gross and 0.4 times net of cash as we continue to manage our balance sheet conservatively in the current interest rate environment.
Brian P. McKeon: We allocated $155 million in capital to share repurchases in the first quarter.
Brian P. McKeon: Diluted share is outstanding. We're relatively flat compared to prior year levels. Turning to 2024 guidance, we've updated our four-year P&O Outlook to reflect adjustments to the high end of our four-year organic growth goals. Our outlook reinforces our four-year goals for solid, comparable operating margin improvement and incorporates favorable adjustments to estimates for net interest expense. We've also revised estimates for foreign exchange impacts reflecting the recent strengthening of the U.
Brian P. McKeon: Diluted shares outstanding were relatively flat compared to prior year levels.
Brian P. McKeon: Turning to 2024 guidance, we've updated our full year P&L outlook to reflect adjustments to the high end of our full year organic growth goals.
Brian P. McKeon: Our outlook reinforces our full year goals for solid comparable operating margin improvement and the corporates favorable adjustments to estimates for net interest expense.
Brian P. McKeon: We've also revised estimates for foreign exchange impacts, reflecting the recent strengthening of the U S dollar.
Brian P. McKeon: In terms of our revenue outlook, we've updated our four-year guidance for reported revenues to $3,895,000,000 to $3,965,000,000, a reduction of $55 million at mid- Compared to earlier estimates, our updated reported revenue outlook includes a $35 million or approximately 1% negative growth rate impact related to the recent strengthening of the U.S. dollar. We've also lowered the high end of our four-year Organic Growth Outlook by one percent to capture more recent trends for U.S. clinical visits, which have constrained the Organic Revenue Growth Outlook for the first half of 2024.
Brian P. McKeon: In terms of our revenue outlook, we've updated our full year guidance for reported revenues to $3 billion $895 million to $3.965 billion.
Reduction of 55 million at midpoint.
Brian P. McKeon: Compared to earlier estimates are updated reported revenue outlook includes a $35 million or approximately 1% negative growth rate impact related to the recent strengthening of the U S. Dollar.
Brian P. McKeon: We've also lowered the high end of our full year organic growth outlook by 1% to capture more recent trends for U S clinical visits which have constrained the organic revenue growth outlook for the first half of 'twenty 'twenty four.
Brian P. McKeon: Our updated full-year guidance for overall organic growth is now 7% to 9%, supported by 7.5% to 9.5% gains in CAG-diagnostic recurring revenue. For the full year, our outlook for overall organic growth continues to reflect expectations for solid CAG diagnostic recurring revenue gains supported by IDEXX execution. Our midpoint outlook aligns with expectations for approximately 1.5% declines in U.S. clinic visits in Q2, similar to late Q1 trends. For the second half of 2024, our midpoint outlook continues to assume a relative flattening of U.S. clinical visit trends.
Brian P. McKeon: Our updated full year guidance for overall organic growth is now 7% to 9% supported by seven 5% to nine 5% gains in CAG diagnostic recurring revenues.
Brian P. McKeon: For the full year, our outlook for overall organic growth continues to reflect expectations for solid CAG diagnostic recurring revenue gains supported by IDEXX execution.
Our midpoint outlook aligns with expectations of approximately one 5% declines in U S clinic visits in Q2.
Similar to late Q1 trends.
In the second half of 2024, our midpoint outlook continues to assume a relative flattening of U S clinical visit trends.
Brian P. McKeon: We expect our H2 organic revenue growth results to benefit by approximately 0.5% overall from the equivalent days effect, reflecting approximately 1% organic growth rate benefits in Q3 with limited overall effects on four-year growth. Our full year CAG diagnostic recurring revenue outlook reflects consistent expectations for global net price improvement of approximately 5%. In terms of our profit guidance, we're maintaining our outlook for reported operating margins of 30.2% to 30.7% for the full year 2024, supported by continued high levels of operating execution.
Brian P. McKeon: We expect our H two organic revenue growth results to benefit by approximately 0.5% overall from equivalent days effects, reflecting approximately 1% organic growth rate benefits in Q3 with limited overall effects to full year growth.
Brian P. McKeon: Our full year CAG diagnostic recurring revenue outlook reflects consistent expectations for global net price improvement of approximately 5%.
Brian P. McKeon: In terms of our profit guidance, we're maintaining our outlook for reported operating margins of 32% to 37% for the full year 2024.
Brian P. McKeon: Supported by continued high levels of operating execution.
Brian P. McKeon: This outlook aligns with 20 to 70 basis points in the full year comparable operating margin expansion, net of a negative 40 basis point impact related to the lapping of the Q1 2023 customer contract resolution. Our updated full year EPS outlook of $10.82 to $11.20 per share is down $0.08 per share at midpoint, driven by our updated foreign exchange estimates. We now estimate that foreign exchange will have a negative $0.09 per share full year EPS impact, $0.11 per share unfavorable to prior estimates.
Brian P. McKeon: This outlook aligns with 20 to 70 basis points in full year comparable operating margin expansion net of a negative 40 basis point impact related to the lapping of the Q1 2023 customer contract resolution panel.
Brian P. McKeon: Our updated full year EPS outlook of $10 82 to $11 27 per share is down <unk> <unk> per share at midpoint, driven by our updated foreign exchange estimates.
Brian P. McKeon: We now estimate foreign exchange will have a negative <unk> <unk> per share full year EPS impact.
Brian P. McKeon: 11, <unk> per share unfavorable to prior estimates.
Brian P. McKeon: Operationally, reductions to the high end of our organic revenue growth guidance are mitigated by our sustained operating margin improvement outlook, by approximately six cents per share of net favorability from the updated net interest expense projection. In terms of our outlook for Q2, we're planning for reported revenue growth of 5% to 7.5% net of an estimated 1.5% growth headwind from FX. This outlook aligns with an organic revenue growth range of 6% to 8.5% and incorporates growth benefits from our recent software acquisition.
Brian P. McKeon: Operationally reductions to the high end of our organic revenue growth guidance are mitigated by our sustained operating margin improvement outlook.
Brian P. McKeon: By approximately <unk> <unk> per share of net favorability from updated net interest expense projections.
Brian P. McKeon: In terms of our outlook for Q2, we're planning for reported revenue growth of 5% to seven 5%.
Brian P. McKeon: Net of an estimated one 5% growth headwind from FX.
Brian P. McKeon: This outlook aligns with an organic revenue growth range of 6% to eight 5%.
Brian P. McKeon: And the Corporate's growth benefits from our recent software acquisition.
Brian P. McKeon: As noted, at midpoint, the Q2 Organic Revenue Growth Outlook aligns with the relatively softer U.S. clinical visit growth trends seen at the end of the first quarter. We're planning for reported operating margins of 31.0% to 31.4% in Q2. Plots it down moderately on a comparable basis, factoring in projections for relatively higher quarterly R&D spending in support of new platform advances. That concludes our financial review. I'll now turn the call over to Jay for his comment.
Brian P. McKeon: As noted at midpoint for Q2 organic revenue growth outlook aligns with the relatively softer U S clinical visit growth trends seen at the end of the first quarter.
Brian P. McKeon: We're planning for reported operating margins of 31.0% to 31, 4% in Q2.
Brian P. McKeon: Flat to down moderately on a comparable basis factoring in projections for relatively higher quarterly R&D spending in support of new platform advancement.
Brian P. McKeon: That concludes our financial review I will now turn the call over to Jay for his comments.
Jonathan J. Mazelsky: Thank you, Brian, and good morning. IDEXX had a solid start to the year as we continue to advance our strategy to drive the development of the companion animal diagnostic sector through innovation and customer engagement. Our ongoing progress benefits from the durable, secular growth drivers that have supported the multi-decade expansion of companion animal medical services. These drivers include growth in the pet population and the strengthened human-pet bond, as well as the ongoing expansion of pet health care services. Medical services, in turn, are enabled by diagnosis.
Jay: Thank you, Brian and good morning.
Jay: <unk> had a solid start to the year as we continue to advance our strategy to drive the development of a companion animal diagnostics sector through innovation and customer engagement.
Jay: Our ongoing progress benefits from the durable secular growth drivers that supported the multi decade expansion of companion animal medical services.
Jay: Rivers' include growth in the pet population and the strengthen human pet bond as well as the ongoing expansion of pet health care services.
Jay: Medical services has in turn enabled by diagnostics. It is a key element of that clinic growth and profitability.
Jonathan J. Mazelsky: It is a key element of veterinary clinic growth and profitability. IDEXX's business strategy is focused on enabling long-term sector growth by providing unparalleled diagnostic insight through our leading testing and software solutions. This is supported by a robust innovation agenda and a high-touch customer-centered commercial model that helps clinicians test with confidence in an intuitive and efficient way, supporting their mission of delivering high levels of care. Our strategy is brought to life by teams across IDEXX, who collectively executed at a high level in the quarter, reflected in continued global expansion of our diagnostics and software solutions and solid growth and recurring revenue.
Jay: IDEXX is business strategy is focused on enabling long term sector growth by providing unparalleled diagnostic insight through our leading testing and software solutions. This is supported by a robust innovation agenda and a high touch customer centric commercial model that helps clinicians test with confidence in an intuitive and efficient way.
Jay: Supporting their mission of delivering high levels of care.
Jay: Our strategy has brought to life by teams across IDEXX, who collectively executed at a high level in the quarter reflected in continued global expansion of our diagnostics and software solutions and solid growth in recurring revenues.
Jonathan J. Mazelsky: CAG Diagnostics recurring revenues once again grew at a healthy premium to the sector, supported by solid contribution from new business gains, sustained high customer retention rates, and net price realization that reflects the increased value that our products and services deliver to our customers.
Jay: <unk> diagnostics recurring revenues once again grew at a healthy premium to the sector supported by solid contribution from new business gains sustained high customer retention rates and net price realization that were.
Jay: Reflects the increased value that our products and services delivered to our customers IDEXX commercial teams delivered strong growth in global premium instrument placements, reflecting high interest in adopting IDEXX is point of care innovations.
Jonathan J. Mazelsky: IDEXX commercial teams delivered strong growth in global premium instrument placements, reflecting high interest in adopting IDEXX's point-of-care innovations, including expansion of our newest platform solution, PROSITE-1. Cloud-based software placements once again expanded in the quarter, reflecting VET, clinic interest, and cloud-native solutions in the IDEXX full-stack software suite that continues to advance in scope and functionality. These gains supported double-digit organic growth and recurring software revenues as veterinarians turned to IDEXX to help them grow their practices and drive productivity. As Brian noted, we continue to work through dynamics in terms of staffing challenges and broader pressure on consumers that have impacted clinic visit growth levels.
Jay: Expansion of our newest platform solution Procyte one.
Jay: Cloud based software placements once again expanded in the quarter, reflecting vet clinic interest in cloud native solutions and the IDEXX full stack software suite that continues to advance in scope and functionality. These gains supported double digit organic growth in recurring software revenues.
Jay: Veterinarians turn to IDEXX to help them grow their practices and drive productivity.
Jay: As Brian noted, we continue to work through dynamics in terms of staffing challenges and broader pressure on consumers that have impacted clinic visit growth levels. Our strong business performance demonstrates our ability to work through these near term challenges, while continuing to expand our business globally to deliver strong financial performance at <unk>.
Jonathan J. Mazelsky: Our strong business performance demonstrates our ability to work through these near-term challenges while continuing to expand our business globally, deliver strong financial performance, and advance key drivers of our long-term growth strategy and potential. Today, I'll provide an overview of IDEXX's progress against its strategic initiatives during the first quarter. Let's start with an update on our commercial efforts, which are key to driving the adoption and utilization of IDEXX's testing and software solutions. IDEXX commercial teams continue to execute at a high level, bringing a customer-first mindset to their work, helping IDEXX customers to grow faster. Intuitive point-of-care testing platforms are foundational to this approach.
Jay: Key drivers of our long term growth strategy and potential.
Speaker Change: Today, I'll provide an overview of IDEXX as progress against our strategic initiatives during the first quarter, let's start with an update on our commercial efforts, which are key to driving the adoption and utilization of IDEXX is testing and software solutions.
Speaker Change: IDEXX commercial teams continued to execute at a high level, bringing a customer first mindset to their work, helping IDEXX customers to grow faster.
Speaker Change: Sort of point of care testing platforms are foundational to this approach customer adoption of IDEXX solutions remains high globally reflected in record first quarter global premium instrument placements for the third consecutive year.
Jonathan J. Mazelsky: Customer adoption of IDEXX solutions remains high globally, reflected in record first quarter global premium instrument placements for the third consecutive year. This performance, combined with the ability to retain our customers at consistently high levels by delivering an excellent user experience, resulted in double-digit growth in our global premium instrument installed base in total and individually for InClinic chemistry, premium hematology, and urinalysis platform. This progress is aligned with the approximately 220,000 global placement opportunities we see today for our business. A key area of commercial focus is international regions that are at earlier stages of development than the U.S. and provide a relatively more greenfield growth opportunity.
Speaker Change: This performance combined with the ability to retain our customers at consistently high levels by delivering an excellent user experience resulted in double digit growth in our global premium instrument installed base in total and individually for in clinic chemistry premium hematology and urinalysis platforms. This progress is aligned with the <unk>.
Speaker Change: <unk> 220000 global placement opportunity, we see today for our business.
Speaker Change: A key area of commercial focus is international regions that are at earlier stages of development in the U S and provide a relatively more greenfield growth opportunity leveraging the successful commercial playbook, we have developed from our decades of experience in the U S. Our international sales teams continue to deliver high internationally.
Jonathan J. Mazelsky: Leveraging the successful commercial playbook we've developed from our decades of experience in the US, our international sales teams continue to deliver high international and salt-based growth. Progress on this front is reflected in strong international premium instrument placement gains. Supported by continued global expansion of our new platform innovations such as ProSciOne, ProCy1 provides significant benefits compared to our legacy hematology analyzers, from a more intuitive workflow with load-and-go reagents to a smaller benchtop footprint, and even back-office productivity benefits due to its paper-run model, all of which combine to drive greater utilization for customers who upgrade. A recent analysis revealed a 20 plus percent uplift in runs per day for customers who upgraded from LaserSight to ProSciOne, with consistent benefits noted across major regions.
Speaker Change: Stock based growth progress on this front is reflected in strong international premium instrument placement gains supported by continued global expansion of our new platform innovations such as Procyte one.
Speaker Change: Chris I want to provide significant benefits compared to our legacy hematology analyzers from a more intuitive workflow with load and go reagents to a smaller bench top footprint and even back office productivity benefits due to its pay per run model.
Speaker Change: All of which combine.
Speaker Change: To drive greater utilization for customers, who upgrade our recent analysis revealed a 20 plus percent uplift in runs per day for customers, who upgraded from laser sight to proceed with.
Speaker Change: With consistent benefits noted across major regions.
Jonathan J. Mazelsky: Upgrades and adoption of new platforms also delivers multiplier benefits to our business to increase customer loyalty and retention and adoption of other IDEXX in-clinic analyzers. Our continued installed base expansion in our international sector results in another quarter of strong CAG diagnostics recurring revenue. Our integrated platform solutions, including benefits from our software ecosystem, are well-aligned to also support the formation of new practices in regions like the U.S., which continues to contribute a net 0.5% to 1% to sector growth.
Speaker Change: Grades and adoption of new platforms also delivers multiplier benefits to our business through increased customer loyalty and retention and adoption of other IDEXX in clinic analyzers are continued installed base expansion and our international sector results and another quarter of strong CAG diagnostics recurring revenues.
Speaker Change: Our integrated platform solutions, including benefits from our software ecosystem are well aligned to also support the formation of new practices in regions like the U S, which continues to contribute a net 5% to 1% to sector growth.
Jonathan J. Mazelsky: High interest in IDEXX solutions among new practices in the U.S. has become an increasingly important driver of new and competitive places. Our flexible and customer-friendly marketing programs like IDEXX 360, modified to appeal to new practice growth dynamics, have attracted strong interest in full point-of-care suites with high attached rates of catalysts and increased testing across modalities. Building on our progress advancing adoption and leverage of IDEXX solutions, we continue to make solid progress advancing our ongoing innovation agenda, including the development of new platforms for diagnostic testing.
Speaker Change: The interest in IDEXX solutions, among new practices in the U S has become an increasingly important driver of new and competitive placements are flexible and customer friendly marketing programs like IDEXX 360 modified to appeal to new practice growth dynamics have attracted strong interest and full point of care suites with high attach rates of cat.
Speaker Change: And increased testing across modalities.
Speaker Change: Building on our progress advancing adoption and leverage of IDEXX solutions, we continue to make solid progress advancing our ongoing innovation agenda, including the development of new platforms for diagnostics testing.
Jonathan J. Mazelsky: The first of two such new testing platforms currently under development was announced recently at VMX. The IDEXX InViewDX Cellular Analyzer, a first-of-its-kind, slide-free cellular analyzer platform, is powered by advanced optics and enabled by AI that has been trained by IDEXX's Global Pathology Network.
Speaker Change: The first of two such new testing platforms. Currently under development was announced recently at Amex. The IDEXX <unk> cellular analyzer, a first of its kind slide three cellular analyzer platform is powered by advanced topics and enabled by AI that has been trained by IDEXX as global pathology network.
Jonathan J. Mazelsky: Development of this platform is proceeding on schedule, and it's in its final stages as we plan to begin shipping to customers in the fourth quarter of this year. Our commercial teams have begun educating busy customers on this new piece of technology, while also using it to engage with customers on other IDEXX solutions that may be relevant to their practices now. This is another multiplier of new IDEXX innovation, which helps support high-reach-to-revenue metrics in a quarter that reflect the efficacy of our commercial playbook.
Speaker Change: <unk> of this platform is proceeding to schedule.
Speaker Change: <unk> is in its final stages as we plan to begin shipping to customers in the fourth quarter of this year. Our commercial teams have begun educating busy customers on this new piece of technology, while also using it to engage with customers on other IDEXX solutions that may be relevant to their practices now.
Speaker Change: This is another multiplier of new IDEXX innovation, which helps support high reached our revenue metrics in the quarter, which reflect the efficacy of our commercial playbook.
Jonathan J. Mazelsky: Early feedback from customers across the globe remains highly positive, building up the enthusiasm experienced at both domestic and international veterinary conferences. Customers have resonated with both the medical and the workflow productivity benefits. Clinicians are wowed, for example, by the powerful technological innovations that address the clinical need for solutions for ear cytology, a daily practice, and blood morphology, a critical element of a complete hematology exam.
Speaker Change: Early feedback from customers across the globe remains highly positive building up the enthusiasm experienced at both domestic and international veterinary conferences customers have resonated with both the medical and workflow productivity benefits.
Speaker Change: <unk> our wild for example by the powerful technological innovations that appreciate the clinical need for solutions to ear cytology, a daily practice and blood morphology, a critical element of a complete hematology exam.
Jonathan J. Mazelsky: The feedback is consistent across general practices, specialists, and corporate accounts who seek cutting-edge tools from IDEXX. We look forward to building on this highly innovative menu by delivering fine needle ASPR testing that reflects IDEXX's high performance standards. At IDEXX, innovation goes beyond new platforms. Our technology-for-life approach means that we're constantly assessing our on-market portfolio for opportunities to add value to our products, new insights, greater efficiency, or improved ease of use. Similar to how blood morphology insights on the IDEXX InView DX complement our premium hematology analyzer.
Speaker Change: The feedback is consistent across general practices specialist in corporate accounts, who see cutting edge tools from IDEXX. We look forward to building on this highly innovative menu by delivering fine needle aspirate testing that reflect IDEXX is high performance standards.
Speaker Change: At IDEXX innovation goes beyond new platforms, our technology for life approach means that we're constantly assessing our on market portfolio for opportunities to add value to our products with new insights greater efficiency or pre improved ease of use similar to how blood morphology insights on the IDEXX <unk> Dx complement our pre.
Speaker Change: <unk> Hematology analyzers, we recently launched a new generation of our IDEXX that lab UA platform, which complement set of <unk>. The new UA analyzer brings a highly attractive modernized form factor is easier to use and features enhanced integrations with IDEXX IDEXX <unk> station and better connect plus saving.
Jonathan J. Mazelsky: We recently launched a new generation of our IDEXX VetLab UA platform, which complements that of UDS. The new UA analyzer brings a highly attractive, modernized form factor, is easier to use, and features enhanced integrations with IDEXX VetLab Station and VetConnect Plus, saving practice teams time on commonly run urine diagnosis. And the eight essential urine parameters provided on IDEXX at LabUA, including pH and protein, merge with results from CetiVue DX.
Speaker Change: Practice teams time uncommonly run urine diagnostics.
Speaker Change: The eight essential urine parameters provided in IDEXX lab, including ph and protein merge with results from city view Dx.
Jonathan J. Mazelsky: IDEXX Reference Labs are also benefiting from recent innovation, where we see momentum building with the recently launched IDEXX STATIN-B, a differentiated kidney injury detection test that further bolsters our best-in-class renal health offering for our customers. We've now launched in North America, the UK, and Australia and plan to launch in Europe later this year.
Speaker Change: Driving actionable interpretive guidance on next steps that support positions to make informed medical decisions.
Speaker Change: IDEXX reference labs are also benefiting from recent innovations, where we see momentum building with our recently launched IDEXX staffing be our differentiated kidney injury detection tests that further bolsters, our best in class renal health offering for our customers.
Speaker Change: We've now launched in North America, U K, and Australia and plan to launch in Europe. Later this year experience is growing with its important innovation with almost 500000 tests ordered by over 13000 customers since the December launch awareness as a test of solid estimated at just over <unk>.
Jonathan J. Mazelsky: Experience is growing with this important innovation, with almost 500,000 tests ordered by over 13,000 customers since the December launch. Awareness of the test is solid, estimated at just over 50% of U.S. veterinarians based on recent survey work. A significant runway exists to increase awareness and deepen understanding of the clinical utility of this test.
Speaker Change: 50% of U S fat areas based on recent survey work.
Speaker Change: Inefficient runaway exists to increase awareness and deepen understanding of the clinical utility of this test.
Jonathan J. Mazelsky: IDEXX, a software and imaging business, continues to perform well and is addressing significant unmet customer needs. Our cloud-first strategy to building a seamlessly integrated software ecosystem delivers workflow and communication advantages across a clinic that drive productivity while supporting double-digit growth of a profitable SaaS recurring revenue stream for IDEXX. Strong software placement growth is now virtually all via cloud-based products.
Speaker Change: IDEXX of software in the imaging business continues to perform well and is addressing significant unmet customer needs. Our cloud first strategy to building a seamlessly integrated software ecosystem delivers workflow and communication advantages across a clinic that drive productivity.
Speaker Change: Supporting double digit growth of our profitable SaaS recurring revenue stream for IDEXX strong software placement growth is now virtually all via cloud based products. It is supported by customers looking for modern tools to assess diagnostic insights create and streamlined practice workflows and communicate with an increasingly.
Jonathan J. Mazelsky: It is supported by customers looking for modern tools to assess diagnostic insights, create and streamline practice work, and Communicate with an increasingly digitally native and customer. By partnering with IDEXX on these solutions, customers are increasingly freed from unrewarded administrative tasks to pursue their care mission for patients. Like our diagnostic platforms and menu, we're also focused on enhancing the IDEXX software ecosystem. Our recent announcement at the Western Veterinary Conference is an example of this; we were thrilled to announce Zello, our newest pet owner engagement platform, which officially went live in late March.
Speaker Change: Digitally native and customer by partnering with IDEXX <unk> solutions customers are increasingly afraid from Ottawa awarded administrative tasks to pursue their care mission for patients.
Speaker Change: Like our diagnostic platforms and menu. We're also focused on enhancing the IDEXX software ecosystem. A recent announcement at the Western Veterinary conference. As an example of this where we were thrilled to announce that fellow our newest pet owner engagement platform, which officially went live in late March veterinarians increasingly tell us that their client.
Jonathan J. Mazelsky: Veterinarians increasingly tell us that their client communication processes and tools are disjointed, with high friction and time-consuming. Beall provides veterinarians with a powerful tool that is directly embedded within our IDEXX practice management software, supporting streamlined interactions and more efficient work.
Speaker Change: Communication processes and tools are destroyed it high friction and time consuming.
Speaker Change: Now I'll provide veterinarians with a powerful tool that is directly embedded within their IDEXX practice management software supporting streamline interactions and more efficient workflows the benefits of expanding IDEXX as vertical software suite are many including deeper customer relationships and improved compliance that helps drive better health outcomes.
Jonathan J. Mazelsky: The benefits of expanding IDEXX's vertical software suite are many, including deeper customer relationships and improved compliance that helps drive better health outcomes. Velo supports the growth of our profitable recurring software revenues, while also delivering multiplier benefits to our diagnostics business, as early Velo adopters are benefiting from fewer customer no-shows and increasing their diagnostics utilization with IDEXX. Another addition to the software ecosystem was the acquisition of GreenLine PET, the leading digital platform that provides easy practice workflow solutions for coupon and rebate redemptions, which was completed in the first quarter.
Speaker Change: That all supports the growth of our profitable recurring software revenues, while also delivering multiplier benefits to our diagnostics business as early <unk> adopters are benefiting from fewer customer no shows and increasing their diagnostics utilization with IDEXX.
Speaker Change: Another addition to the software ecosystem was the acquisition of Green line Pet a leading digital platform that provides easy practice workflow solutions for coupons and rebate redemptions, which was completed in the first quarter. The Greenlight digital platform enhances IDEXX partnerships with leading manufacturers in the animal health pharmaceutical and <unk>.
Jonathan J. Mazelsky: The GreenLine digital platform enhances IDEXX partnerships with leading manufacturers in the animal health, pharmaceutical, and nutrition space, supporting sector development through targeted rebates to customers, made possible through deep integrations with IDEXX and third-party practice management systems. By delivering additional relevant solutions to our software customers, like GreenLine and Velo, we're able to drive strong adoption of our deeply integrated vertical SaaS applications inside of our cloud practice management system, providing our customers with a single unified platform for payments, workflow, and client communications, to name a few applications. This helps drive efficiency and removes the need to toggle between multiple applications and manual reconciliation.
Speaker Change: Attrition space supporting sector development through targeted rebating to customers made possible through deep integrations with IDEXX and third party practice management systems by.
Speaker Change: By delivering additional relevant solutions to our software customers like Greenland and Bell, we're able to drive strong adoption of our deeply integrated vertical SaaS applications inside of our cloud practice management systems, providing our customers with a single unified platform for payments workflow and client communications to name a few applications.
Speaker Change: Helps drive efficiency and removes the need to toggle between multiple applications had manual reconciliations.
Jonathan J. Mazelsky: Not only does this accelerated adoption drive practice productivity, but it also supports greater diagnostics, revenue growth, and very high retention, thereby helping drive our key recurring revenue annuity. Overall, we're very proud of how we have advanced our strategic initiatives across multiple business areas in the first quarter, while also delivering an excellent customer experience and strong financial results. I'll now conclude our prepared remarks by thanking the 11,000 IDEXX employees for your ongoing commitment and incredible passion for our purpose-driven work.
Speaker Change: Well the only this is accelerated adoption drive practice productivity, but it also supports greater diagnostics revenue growth and very high retention rates, thereby helping drive our key recurring revenue annuity.
Speaker Change: Overall, we're very proud of how we have advanced our strategic initiatives across multiple business areas in the first quarter, while also delivering an excellent customer experience and strong financial results I will now conclude our prepared remarks by thanking the 11000 IDEXX employees for your ongoing commitment and incredible passion for.
Speaker Change: We're a purpose driven work.
Jonathan J. Mazelsky: Your contribution to IDEXX not only helps deliver against our goal of providing a better future for animals, people, and our planet, but it also helps deliver a strong start against our financial objectives in 2024. The companion animal diagnostic sector, including supporting software solutions, remains highly attractive, and IDEXX teams play a critical role in providing excellent care based on diagnostic insights. As a result, we are very well positioned to deliver solid growth and financial results over the long-term. So, on behalf of the management team, thank you for your continued focus on enhancing the health and well-being of pets, people, and livestock. Now, let's open the line for Q&A.
Speaker Change: Contribution to IDEXX, not only helps deliver against our goal of providing a better future for animals people and our planet, but also helped deliver strong start against our financial objectives 2020 for the companion animal diagnostics sector, including supporting software solutions remains highly attractive.
Speaker Change: IDEXX teams play a critical role in providing excellent care based on diagnostic insights.
Speaker Change: As a result, we are very well positioned to deliver solid growth and financial results over the long term horizon.
Speaker Change: So on behalf of the management team. Thank you for your continued focus on enhancing the health and wellbeing.
Speaker Change: Lets people and lifestyle.
Speaker Change: Now, let's open the line for Q&A.
Operator: Thank you. If you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you are 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. Again, please press Star 1 to ask a question. We'll go first to Chris Schott with J.P. Morgan.
Speaker Change: Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned out to allow your signal to reach our equipment.
Speaker Change: I'd like to comment on the phone later and you can't run your line is open.
Speaker Change: Darren Please press star one to ask a question.
Speaker Change: Okay.
Speaker Change: Well go first to Chris Schott with J P. Morgan.
Christopher Thomas Schott: Great, thanks so much for the question. I'm just interested in the comments you made earlier that it seems like you're seeing both maybe some capacity challenges and macro impacting that visit trends. Can you just maybe elaborate a little bit on the latter? It seems like your initial guidance for the year was a bit more optimistic on stabilization of visits, and I'm just wondering if there's any particular regions or trends in corporate versus private practice where you're seeing this macro piece more acutely than others?
Christopher Thomas Schott: Great. Thanks, so much for the question I'm just interested in the comments you made earlier that it seems like Youre seeing both maybe some capacity challenges and macro impacting vet visit trends can you just maybe elaborate a little bit on the ladder. It seemed like your initial guidance for the year was a bit more optimistic.
Speaker Change: On stabilization of visits and I'm, just wondering if there's any particular either regions or trends in corporate versus private practice, where you're seeing this macro piece more acutely than others.
Christopher Thomas Schott: And maybe just linked to that, I know it'd be a guess, but as we think about visit erosion right now, what's your best guess in terms of how much of this is just ongoing capacity dynamics at the vet versus what is actually consumer demand at this point? Thanks so much.
Speaker Change: And maybe just linked to that I know it would be a guess, but as we think about visit erosion right now what's your best guess in terms of how much of this is just ongoing capacity dynamics at the vet versus what is actually consumer demand at this point. Thanks, so much.
Brian P. McKeon: Thanks for your question, Chris. Maybe I can provide a little clarity on the numbers up front and then turn it over to Jay to talk about the dynamics. We mentioned that clinical visits were relatively softer than we expected in the U.S. In the first quarter, on our last call, we did anticipate some weather impacts, but I think we were expecting the flattening trends that we've been planning for to emerge, and the trends coming out of the quarter were down about 1.5 percent versus the prior year, and so that was relatively softer.
Speaker Change: Thanks for your question, Chris maybe I can provide a little clarity on the the numbers upfront and then turn it over to Jay to talk about the dynamics.
Speaker Change: The.
Speaker Change: We mentioned that clinical visits were relatively softer than we expected in the U S.
Speaker Change: <unk>.
Speaker Change: The first quarter.
Jay: On our last call we had talked to we did anticipate some weather impacts, but I think we were expecting the flattening trends.
Speaker Change: So that we we've been planning for to emerge and the the trends coming out of the quarter were down about one 5% versus prior year and so that was was relatively softer I would highlight internationally, we had a very good quarter.
Brian P. McKeon: I would highlight that internationally, we had a very good quarter. The underlying volume growth continues to make progress, building on what we saw in H2, so this is relatively more of a U.S.-specific issue. We did highlight I think there are ongoing staffing challenges and capacity challenges that the practices are working through, but there may also be some impact here in the margin related to broader consumer impacts that could be impacting demand, but I'll let Jay talk about those dynamics. Sure. Good morning, Chris.
Speaker Change: The underlying volume growth was can you continues to make progress built.
Speaker Change: Building on what we saw on H. Two so this is relatively more of a U.
Speaker Change: U S specific issue and.
Speaker Change: We did highlight I think.
Speaker Change: There are ongoing staffing challenges capacity challenges that the practices are working through but there may be also be some impact here in the margin related to broader broader consumer impacts that could be impacting impacting demand, but I'll, let Jay talk to those dynamics sure. Good morning, Chris The way I think about it is both from a.
Jonathan J. Mazelsky: Good morning, Chris. The way I think about it is both from a customer standpoint, meaning the veterinarian, and then from a consumer or pet owner standpoint. And we know that pet owners continue to prioritize spend on healthcare services and, in general, spend on their pets vis-a-vis other priorities, be they going out to dinner, entertainment, travel, that sort of thing. The conversation we're having with customers is largely very positive. They're very positive about the outlook.
Jay: Customer standpoint, meaning the veterinarian and then the consumer or the pet owner standpoint.
Jay: We know that pet owners continue to prioritize.
Jay: <unk> for health care services in general spend on their pets vis-a-vis.
Jay: Either other priorities be day.
Jay: At the dinner entertainment travel that that sort of thing what do we that the conversation we're having with customers is largely very positive very positive.
Jonathan J. Mazelsky: They continue to invest in their practices. We see that from a technology standpoint, a very significant increase we saw in placements of 8%. We're seeing it in software, new practice, and formation. I think customers continue to be optimistic about the outlook for the animal health industry as a whole, and this continues to remain both a durable and resilient sector. To Brian's point, we... We do see some ongoing staffing challenges that practices have been working through.
Jay: The outlook they continue to invest in their practices, we see that from a technology standpoint, a very significant increase we saw in placement of 8%. We're seeing it in software practice formation. So I think customers continue to be optimistic.
Jay: You know on the outlook for the animal health industry as a whole and this continues to remain.
Jay: How about the durable and resilient in our sector.
Jay: To Brian's point we.
Jay: We do see some ongoing staffing challenges that the practices have been working through they say IDEXX as a partner from both the technology and solution standpoint, and being able to help them and we also.
Jonathan J. Mazelsky: They see IDEXX as a partner from both a technology and solution standpoint in being able to help them. And we also, you know, potentially recognize the cumulative macro impacts which may be affecting, you know, visit trends at the margin. We have a lot from our approach and standpoint and orientation; we really focus on those things that we can control. We have a lot of confidence in the operational execution of our commercial teams and the product development teams from an innovation standpoint. And I think on those dimensions, we're really very positive about hitting on all cylinders.
Jay: Potentially recognized the cumulative.
Jay: Macro impacts, which may be which may be affecting.
Jay: Visit trends at the margin we have a lot from our approach had standpoint, an orientation, we really focus on those things that we can control we have a lot of confidence in the operational execution of our commercial teams and our product development teams from an innovation standpoint, and I think on those dimensions.
Jay: Where we're really very positive and hitting on all cylinders.
Speaker Change: Thank you.
Operator: We'll go next to Nathan Rich with Goldman Sachs.
Speaker Change: Well go next to Nathan Rich with Goldman Sachs.
Speaker Change: Yeah.
Unknown Attendee: Uh, great. Can you hear me okay?
Nathan Allen Rich: Great can you hear me okay.
Operator: We do. Yep. We can. Okay.
Nathan Allen Rich: Yep Okay.
Unknown Attendee: Great. Good morning.
Nathan Allen Rich: Great good.
Nathan Allen Rich: Good morning.
Speaker Change: I wanted to follow up on Chris's questions I guess, you talked about you.
Speaker Change: You know the kind of end of first quarter traffic running a bit below the prior expectations. I guess would you be able to comment on you know it was April kind of in line with that 1.5% decline and I guess more importantly, as we think about over the balance of the year. It sounds like you expect some improvement in traffic levels I guess.
Nathan Allen Rich: I wanted to follow up on Chris's questions. I guess, you know, you talked about the kind of end of first quarter traffic running a bit below prior expectations. I guess, would you be able to comment on, you know, is April kind of in line with that one and a half percent decline? And, I guess, more importantly, as we think about the balance of the year, it sounds like you expect some improvement in traffic levels.
Speaker Change: You know just kind of relative degree of confidence in getting back to that I know you mentioned theres, maybe a days effect in there to the slight benefit.
Speaker Change: But just curious about.
Speaker Change: You know where you maybe you know within your different lines of business see that improvement playing out over the balance of the year.
Speaker Change: Thanks for your question when I take a moment to just try to help with some of the first half to second half bridging. So you obviously have or our Q1 results and in my comments I highlighted our expectations around Q2 the organic.
Speaker Change: Organic growth of six to eight 5%.
Speaker Change: What we're assuming in the Q2.
Speaker Change: Outlook midpoint is that we we've assumed clinical visit trends similar to what we saw exiting in March. So that's the the minus one 5% we don't comment on in quarter trends, just highlighting what we're planning in Q2.
Speaker Change: And if you take.
Speaker Change: Take the midpoint outlook with our Q1 results that would apply approximately 7%.
Speaker Change: Organic growth in the first half.
Speaker Change: The second half would imply approximately 9% organic growth.
Speaker Change: We have some positive factors that we highlighted one is we will have a.
Nathan Allen Rich: I guess, you know, just kind of the relative degree of confidence in getting back to that. I know you mentioned there's maybe a days effect in there, too, that's a slight benefit. But just curious about where you might be, within your different lines of business, seeing that improvement playing out over the balance of the year.
Speaker Change: A half days overall.
Speaker Change: Equivalent days benefit largely floating shrimp through in Q3.
Speaker Change: We noted that we will have some select other favorable factors that are that are favorable to us we should see.
Speaker Change: Better lapping dynamics in areas like L. P. D. We're targeting higher growth in our software business. So those will be positive as well.
Brian P. McKeon: Thanks for your question. I'll take a moment to just try to help with some of the first half to second half bridging, so you obviously have our Q1 results. And in my comments, I highlighted our expectations around Q2, the organic growth of 6 to 8.5%. What we're assuming in the Q2 outlook at midpoint is that we've assumed clinical visit trends similar to what we saw exiting in March. So that's the minus 1.5%.
Speaker Change: We do have an assumption in mid point for relatively flattening U S clinical visit trends and we see a number of factors.
Speaker Change: That support that assumption that I know J J can touch on.
J J: Yeah, Great I mean from our perspective there is.
J J: Things that I would highlight one is that you know the clinical diagnostics revenue growth rates have continued to remain strong we saw that in Q1 at 5% actually higher than total practice revenue growth, which is a little bit over over 3% up we continue to see healthy diagnostics frequency and Ed.
J J: Utilization so those metrics continue to remain strong and it gets back to my my earlier message, we see practices continuing to invest there investing in technology theyre investing in their staff.
J J: Now they are becoming more productive we think tools like velo, which is R.
J J: Client engagement software application will be a big help it integrates very tightly with tax payment systems and enables a reduction it does shows which we do as a productivity drag on practices and we think there'll be benefits over time in terms of uplift that the diagnostic so we're doing you know.
J J: Our part and in partnering with clinics and we think over time that will play out positively.
Speaker Change: Great if I could maybe just ask a quick follow up on the gross margin strength you know, Brian you talked about the factors that were driving this.
Speaker Change: It sounds like you know some of those should be sustainable, but I'd be curious to just kind of get your view on that over the balance of the year and you know you didn't change the operating margin Guy.
Speaker Change: Guidance I guess the slide the strength that you saw in the first quarter so any.
Speaker Change: Any dynamics that we should be thinking about as you.
Speaker Change: If we think about the cadence over the balance of the year would be helpful.
Brian P. McKeon: We don't comment on in-quarter trends, just highlighting what we're planning for Q2. And if you take the midpoint outlook with our Q1 results, that would apply approximately 7% organic growth in the first half. The second half would imply approximately 9% organic growth. We have some positive factors that we highlighted. And we do have an assumption at midpoint for relatively flattening U.S. clinical visit trends, and we see a number of factors that support that assumption that I know Jay can touch on.
Speaker Change: Sure to your point, we feel very good about the start that we had and in terms of their profit performance on the gross margin performance.
Speaker Change: We sustained our outlook despite taking down the high end organic growth outlook. So I think that just reflects some of the.
Speaker Change: The underlying operational execution benefits that we're getting in our confidence and ability to deliver solid operating margin gains this year.
Speaker Change: There are some select dynamics, we noted instrument cost being lower in Q1, some of that is sort of an outflow of the Panther.
Speaker Change: The pandemic supply chain impacts that are.
Speaker Change: Our have been alleviating so we saw relatively more benefit in Q1, then we will expect to see over time, but through the year, but I think for the most part were.
Speaker Change: The performance is reinforcing the outlook that we had this year for for solid comparable operating margin gains and I I think reinforces that we can deliver strong financial performance as we work through some of the near term macro dynamics that we've been highlighting.
Speaker Change: Great. Thanks very much.
Speaker Change: Well go next to Michael Ruskin with Bank of America.
Michael Erickson: Great. Thanks for taking the question guys.
Michael Erickson: I wanted to get at the vet visit dynamic in the underlying macro but I'll try to ask it in a different way.
Michael Erickson: If we take a step back. This this really started in 2022 and it was initially seen as a temporary effect of comps and working through that we're now almost two and a half years into this and it could you just sort of a lag behind expectations.
Michael Erickson: We're still waiting for this recovery in the vet visits.
Speaker Change: This if current trends persist I hear what youre guiding to for second half and I hear what youre talking about in terms of the improvement, but what's the trends persist and we still continue to see declines can you talk about other levers you could.
Speaker Change: I know you could pull to sort of continue to hit the numbers.
Michael Erickson: In prior years. For example, you took price and you took a second price increase once I know you've got the interview commenting you've got operating leverage just talk us through sort of how would you would think.
Michael Erickson: If visits.
Michael Erickson: Visits remained under pressure or how you would address that.
Speaker Change: Oh, yes, good morning, I would point to a couple of things. One is as you highlighted you know are at.
Jonathan J. Mazelsky: Yeah, great. I mean, from our perspective, there are a couple things that I would highlight. One is that, you know, the clinical diagnostics revenue growth rates have continued to remain strong. We saw that in Q1 at 5%, actually higher than total practice revenue growth, which is a little bit over 3%. We continue to see healthy diagnostics frequency and utilization, so those metrics continue to remain, you know, strong.
Speaker Change: Innovation agenda. The innovation portfolio, we have I think is very strong it gets us really across the portfolio from a point of care standpoint, you know obviously, we plan to begin shipping in view. It in Q4, we think that that has both the direct and indirect leverage.
Speaker Change: Impact on the overall business I think are our menu offering for the reference lab has never been stronger and growing we expanded fecal antigen, we know that that's an important.
Speaker Change: Preventative care screening tests that that really set a builds out.
Speaker Change: Romania step in Bay, which is acute kidney injury and our overall supporting our overall.
Michael Erickson: Riedl franchise menu has been very well received in the overall sector and then software which has the twofer of not only being a great individual vertical business, but also the leverage and impact positive impact it has.
Michael Erickson: Diagnostics as a whole I think our commercial execution continues to really be at a very high level, we see some benefits internationally where.
Michael Erickson: Quarter on quarter on quarter, we've really seen some nice growth I think that the investments we've made have been paying off and individual country and in region. So we saw a nice nice performance.
Michael Erickson: EMEA for example, and I think it's just continuing to support our customers as they work through the dynamics, we've highlighted and we have confidence in the really in the attractiveness of the underlying demand that pet owners are generating and what the practices are doing around <unk>.
Jonathan J. Mazelsky: And it gets back to my earlier message about practices continuing to invest. They're investing in technology. They're investing in their staff. We know they're becoming more productive. We think tools like Velo, which is our client engagement software application, will be a big help. It integrates very tightly with IDEXX PIM systems. It enables a reduction in no-shows, which we know is a productivity drag on practices.
Michael Erickson: Retaining staff and training them and seeking productivity.
Michael Erickson: Debt.
Michael Erickson: We think over time.
Michael Erickson: Those trends just political visit trends will improve.
Unknown Attendee: Great. If I could maybe just ask a quick follow-up on the gross margin strength? You know, Brian, you talked about the factors that were driving this. It sounds like, you know, some of those should be sustainable, but I'd be curious to just kind of get your view on that over the balance of the year. And, you know, you didn't change the operating margin guidance, I guess, despite the strength that you saw in the first quarter. So, any dynamics that we should be thinking about as we think about the cadence over the balance of the year would be helpful. Sure, to your point, we feel very good about it
Speaker Change: Yeah, Mike I'd, just reinforce I think where we've consistently demonstrated an ability to.
Speaker Change: To grow continue to grow solidly and deliver strong financial performance and so even as we work through kind of the the growth off of the the higher base that was established post the pandemic and through some of the more recent macro dynamics that we've been highlighting I think were.
Speaker Change: Continue to to find a way to.
Speaker Change: Advance our growth agenda invest behind those things are important while continuing to deliver strong financial results are where we remain committed to that and then we built a strong track record to support that outlook.
Speaker Change: Okay, but would you would you consider taking another price increase again or essentially.
Speaker Change: Some cost controls in the second half is that on the table.
Brian P. McKeon: Sure. To your point, we feel very good about the start that we had in terms of performance and gross margin performance. We sustained our outlook despite taking down the high-end organic growth outlook, so I think that just reflects some of the underlying operational execution benefits that we're getting and our confidence in the ability to deliver solid operating margin gains this year. I think there are some select dynamics.
Speaker Change: Well, we I think we've laid out our outlook for this year and our assumptions to reinforce we expect approximately 5% price improvement this year and that supports the.
Brian P. McKeon: We noted instrument costs being lower in Q1. Some of that is sort of an outflow of the pandemic supply chain impacts that have been alleviating, so we saw relatively more benefit in Q1 than we will expect to see over time through the year. But I think, for the most part, the performance is reinforcing the outlook that we had this year for solid comparable operating margin gains and, I think, reinforces that we can deliver strong financial performance as we work through some of the near-term macro dynamics that we've been highlighting.
Michael Leonidovich Ryskin: We'll go next to Michael Ryskin with Bank of America.
Speaker Change: The operating margin outlook that we shared today and they are the strong comparable EPS growth.
Michael Leonidovich Ryskin: Great. Thanks for taking the question, guys.
Speaker Change: As we invest in advancing our R&D agenda, we highlighted where we're investing more there and are excited about what's going to come. So we're we're.
Michael Leonidovich Ryskin: I want to get at the vet visit dynamic and the underlying macro, but I'll try to ask it in a different way. If we take a step back, this really started in 2022, and it was initially seen as a temporary effect of comps and working through that. We're now almost two and a half years into this, and it continues to sort of lag behind expectations. We're still waiting for recovery at the vet visits.
Michael Leonidovich Ryskin: If current,
Speaker Change: We're confident in our financial outlook that we shared today.
Speaker Change: Okay.
Speaker Change: Just really quick one if I, if I could squeeze in a follow up.
Speaker Change: Jay I think you said in your prepared remarks that the interview continues to interview remains on track you talked about it would be a Max obviously.
Speaker Change: What's been some of that early feedback from the vast I realize you're still maybe five six bonds from actually releasing it but you're three months further along than when you first sort of unveiled it.
Speaker Change: Any learnings in terms of the.
Speaker Change: The capabilities ramp you know I'll talk about some of the offerings will be available to launch versus later on sort of what's been the reception to that.
Speaker Change: Yeah, they've been you know customers in general have been very enthusiastic Campbell.
Speaker Change: About the product itself they like the fact that it addresses very high volume.
Speaker Change: Hi, I'm consuming.
Speaker Change: Critical use cases within the practice here cytology and blood morphology.
Speaker Change: The things that customers continue to tell US is they know they should be doing more blood morphology than they're doing just as part of a complete CVC, our hematology workout, but now they feel like they've got to be able to do it and it just makes a lot of sense and so there they're looking forward to it.
Speaker Change: We think the awareness level is increasing and that they see this as a really worthy extension of our overall point of care of that lab Suede. We're also just I would just remind folks that as part of the overall slate we have a next generation EVAR.
Speaker Change: That lab station the IV L. S station that provides workflow optimization and benefits and we've shown that the customers too and they're very enthusiastic about that asset as a whole. So really excited I think at that.
Speaker Change: That description as I've laid it out fits across both generalists within practices specialists corporate accounts are also enthusiastic about it I think it gets to some of the <unk>.
Speaker Change: Questions. The discussion we've had this morning around how do we continue to support the productivity of the practice, which at least the dresses the dimensions of.
Speaker Change: Stat staff retention and optimization and I think this fits the bill on both the productivity and capacity front as well as our clinical medical front.
Speaker Change: Great. Thanks, a lot guys.
Speaker Change: Well go next to Aaron right with Morgan Stanley.
Aaron: Great. Thanks.
Aaron: Can you talk a little bit about the competitive landscape do you think that there is more of an opportunity.
Aaron: You could see some more meaningful market share gains with aircraft and the smaller practices are our corporate accounts as well and clear.
Aaron: Clearly been some disruption in terms of ownership structure in terms of distribution changes and I'm just thinking about how you can kind of take advantage of that and if you had seen any notable kind of share gain.
Speaker Change: Good day.
Jonathan J. Mazelsky: Yeah, good morning.
Speaker Change: Yeah, good morning Erinn.
Speaker Change: You know, we've always said and I think it's it's still true now that it's a very competitive landscape I would say that on a global basis, not just in our largest market.
Erinn: The U S and the what what we focus on obviously is being able to support our customers be they independent practices or corporate with a full end to end suite.
Erinn: At the point of care patient.
Erinn: The reference labs, and increasingly software, where we're pleased with the progress we've made commercially in terms of advancing the overall solutions, what what customers tell us is they like the integrated nature of what we provide they see that as a differentiator set of differentiators relative to.
Jonathan J. Mazelsky: I would point to a couple things. One is, as you highlighted, our innovation agenda. The innovation portfolio we have is, I think, very strong. It consists really across the portfolio. From a point of care standpoint, you know, obviously, we plan to begin shipping in view and in Q4.
Jonathan J. Mazelsky: We think that that has both a direct and indirect leverage impact on the overall business. I think our menu offering for the reference lab has never been stronger and growing. We expanded the fecal antigen because we know that's an important preventive care screening test that really sort of builds out the overall menu. SysTab and B, which is acute kidney injury, and our overall, supporting our overall And we have confidence really in the attractiveness of the underlying demand that pet owners are generating and what the practices are doing around retaining staff and training them and seeking productivity. And that we think, over time, those trends, those clinical visit trends will improve.
Brian P. McKeon: And Mike, I just want to reiterate that I think we've consistently demonstrated the ability to grow, continue to grow solidly, and deliver strong financial performance. And so even as we work through kind of the growth off of the higher base that was established post-pandemic and through some of the more recent kind of macro dynamics that we've been highlighting, I think we're continuing to find a way to advance our growth agenda and invest in those things that are important while continuing to deliver strong financial results. So we remain committed to that, and we will build a strong track record to support that outlook.
Erinn: You know our competitors and that includes being able to take software and tie. It all together that supports the workflow is they want a practice within the within the environment, We think that velo, which is our client engagement application picks at really to the next level in terms of being able to help them.
Erinn: Digitally communicate and interact with pet owners.
Erinn: As a whole. We also you know are enthusiastic about new practice formation as I indicated in my remarks, where we continue to do well there new practices see.
Erinn: IDEXX as a partner to be able to help them get those practices off to a strong start.
Erinn: It's been an area of focus for us. So overall I think our commercial agenda continues to advance nicely. Obviously, we were pretty transparent in terms of placements to new and competitive and how we're doing on that front, both within the U S and internationally and we're.
Erinn: So we're doing well.
Speaker Change: Okay and then.
Speaker Change: And then how you in these kind of fits into that strategy as well I guess initially the focus on existing customers or swapping out competitor a quick need where you have exclusive contracts or can you remind us kind of on the hanging to the fine needle aspiration.
Erinn: And that seems to be where we're getting some of it that the earlier feedback I in any factor in 2025 or how do we think about the timeline there.
Brian P. McKeon: Well, I think we've laid out our outlook for this year, and our assumptions are reinforced. We expect approximately 5% price improvement this year, and that supports the operating margin outlook that we shared today and the strong comparable EPS growth. As we invest in advancing our R&D agenda, we highlighted that we're investing more there and excited about what's going to come. So we're excited. We're confident in our financial outlook that we shared today.
Michael Leonidovich Ryskin: Would you consider taking another price increase again or potentially some cost controls in the second half? Is that on the table?
Speaker Change: Yes, so a couple of questions there.
Speaker Change: They are if you were from a focus standpoint, obviously the.
Michael Leonidovich Ryskin: Okay, and then just a really quick one if I could squeeze in a follow-up. Jay, I think you said in your prepared remarks that InView continues to, you know, InView remains on track. You talked about it at VMX, obviously. What's been some of the early feedback from vets? I realize you're still, you know, maybe five, six months from actually releasing it, but, you know, you're three months further along than when you first sort of unveiled it. Any learnings in terms of The Capabilities Ramp, I'll talk about some of the offerings that will be available to launch versus later on, sort of what's been the reception to that.
Speaker Change: IDEXX customers, who already enjoy our vet lab suite are obvious are the obvious customers from a targeting our focus standpoint, we know it'll fit right in with their workflow and already partnership they have with with IDEXX. We saw that by the way we saw that with Sadieville word.
Jonathan J. Mazelsky: Yeah, they've been, you know, customers in general have been very enthusiastic about the product itself. They like the fact that it addresses very high volume, time-consuming, clinical use cases within the practice, such as cytology and blood morphology. You know, one of the things that customers continue to tell us is that they know they should be doing more blood morphologies than they're doing just as part of a complete CBC or hematology, you know, workup.
Jonathan J. Mazelsky: And now they feel like they're going to be able to do it, that it just makes a lot of sense, and so they're looking forward to it. We think the awareness level is increasing, and they see this as really a worthy extension of our overall point-of-care vet lab suite. So, we're really excited. I think that description, as I've laid it out, fits across both generalists within practices, specialists, and corporate accounts are also enthusiastic about it.
Jonathan J. Mazelsky: I think it gets to some of the questions and the discussion we had this morning around how do we continue to support the productivity of the practice, which at least addresses the dimension of staff retention and optimization. And I think this fits a bill on both the productivity and capacity front as well as the clinical medical front.
Speaker Change: The the VIX upsetting via sales at least initially or more focused on existing IDEXX customers, though.
Michael Leonidovich Ryskin: Great. Thanks a lot, guys.
Speaker Change: It was a great entre into competitive accounts and Dan.
Speaker Change: Opportunity to give us a fresh look which then we leverage down the road with the chemists.
Speaker Change: Chemistry, and hematology and other solutions in terms of fine needle aspirate. All we've said at this point is it snacks, we're working hard at it we know customers are.
Speaker Change: They're enthusiastic about finally, the last Brett and the ability to really expand I set of cancer diagnostic which is important to.
Speaker Change: To their clients and great practice of medicine, and we'll talk more about that as we get closer.
Speaker Change: Yeah.
Erin Elizabeth Wilson Wright: We'll go next to Erin Wright with Morgan Stanley.
Jonathan David Block: Well go next to Jon block with Stifel.
Speaker Change: Yeah.
Erin Elizabeth Wilson Wright: Great, thanks. Can you talk a little bit about the competitive landscape? Do you think that there's more of an opportunity to see some more meaningful market share gains either across the smaller practices or corporate accounts as well? And there's clearly been some disruption in terms of ownership structure and distribution changes. And I'm just thinking about how you can kind of take advantage of that, and if you have seen, you know, any notable kind of share gains to date. Thanks.
Jonathan David Block: Thanks, guys good morning.
Jonathan David Block: I don't think really a shocker that I'm also going to try to hit on visits and just sort of need to because your stock is largely tethered to seemingly the data.
Jonathan David Block: For visits you mentioned macro capacity constrains weighing.
Jonathan David Block: On the overall vet visits in some of our checks seem to tease out.
Jonathan David Block: Like a higher sensitivity from the pet owner.
Jonathan David Block: You're taking price and in many cases, the debt by marking up 234 <unk> somewhere in there. So I'm just curious anecdotally are you identifying more sensitivity on the pet owner sticker shock.
Jonathan David Block: Sort of a broader question this industry overstep, our bid on price over the past couple of years.
Jonathan David Block: So Brian do we think about your price is getting back to that I think it's 3% on your <unk> call it sooner rather than later.
Jonathan J. Mazelsky: Yeah, good morning, Erin. We've always said, and I think it's still true now, that there is a very competitive landscape, I would say, on a global basis, not just in our largest market, the U.S. And what we focus on, obviously, is being able to support our customers, be they independent practices or corporate, with a full end-to-end suite, be it at the point of care, near the We're pleased with the progress we've made commercially in terms of advancing the overall solutions.
Jonathan David Block: Yes.
Brian P. McKeon: John I'll take that good morning.
Brian P. McKeon: We we obviously don't control and pricing.
Brian P. McKeon: The pet on it that has helped our practices and veterinarians. So a lot of things factor into that they're investing in their staff. We think that's a good thing when they retain their staff and Dan really upscale the follow ups, who are supporting pet on her so that's a long term driver yeah and.
Brian P. McKeon: You know a point of stability within practices and I think coming out of the pandemic that was a real challenge.
Brian P. McKeon: For them.
Brian P. McKeon: We continue to get back to when we have conversations with.
Brian P. McKeon: Practices and customers that they are optimistic that they they see some of the challenges around capacity alleviating you know over time third that they continue to invest heavily in the business with technology, we think pricing their pricing helps them.
Brian P. McKeon: Do that you know from.
Brian P. McKeon: From our standpoint, we always from a pricing standpoint book to maintain.
Brian P. McKeon: Hey, good equilibrium of value for what we deliver we continue to provide parameters.
Brian P. McKeon: Parameters and Biomarkers like Us just Isospora staffing Bay at no additional charge. So that those are included in existing panels that obviously.
Brian P. McKeon: Helps.
Brian P. McKeon: You know help help them on the value end.
Brian P. McKeon: The equation, but we acknowledge that the cumulative macro impacts at the at the margin may be affecting some pet owners.
Speaker Change: Yeah, and John just to reinforce <unk> point, I think we we align our pricing with the value we're delivering on the the underlying inflationary dynamics that were seeing and well.
Speaker Change: We will continue to factor that in and you know our our outlook is consistent with what we shared or for 2024, which is approximately 5%.
Brian P. McKeon: Personalization globally.
Brian P. McKeon: Okay.
Speaker Change: Okay, sorry about that.
Speaker Change: Then let me just maybe try to.
Speaker Change: There are a bunch of small ones and the second question, Brian you talked about the vet visit data embedded at the midpoint I'd just gotten some questions isn't as simple as extrapolating.
Brian P. McKeon: Our the negative one five you know call it for the lower end just when we think about your guidance and then you know you still have this other box coming.
Brian P. McKeon:
Speaker Change: I think that's really what can really separate almost the stock from the visit data as people are getting more excited about the premium rate. So just taking a step back do we think about you guys like handling it in a similar manner. Just you know if I recall last year I think it was great out in the Investor presentation in August.
Brian P. McKeon: Officially introduced at <unk> in January and then hitting the market.
Brian P. McKeon: Nine or 10 months after that you know in <unk> 'twenty for maybe just at a high level. If you can just talk about from a timing perspective, when we think about that second still TBD box that you've alluded to in the past thanks guys John.
Speaker Change: John could you just clarify your first question I just wanted to follow what you were trying to get at when he said the was it a full year question, you're asking I am just trying to clarify.
Brian P. McKeon: Sure.
Brian P. McKeon: Sorry, Brian is it just as simple as I think I, maybe hopefully I have this right that the midpoint of your guide has visits down one and a half into <unk> and then essentially flat in two age is it as simple for the lower end call. It just take that one five but like extrapolated out for <unk> and Thats sort of whats call it embedded in.
Brian P. McKeon: The lower band of your CAG Dx recurring that's where I was going with the first part.
Brian P. McKeon: He is obviously broader set of considerations, but I think directionally your point is valid which is.
Brian P. McKeon: If trends continue to be so out here that would be a factor that could be a leading us towards the lower end.
Brian P. McKeon: And then on the new box.
Speaker Change: Well look forward to sharing more as we get closer to launch we're well maintain the approach that we've used in the past that we'll share that when we were closer to commercial launch we're very excited about the.
Speaker Change: And view advancing end of that's on track.
Speaker Change: As you know will contribute directly and we will have a lot of multiplier benefits to our business and.
Brian P. McKeon: Our sales force is very excited about that and we are too.
Brian P. McKeon: And we continue to advance our second platform and we'll share more of that overtime and we see that as also being an additive a driver for our business overtime.
Speaker Change: Thank you.
Brian P. McKeon: Yeah.
Brian P. McKeon: Yeah.
Nevada T: Well go next to Nevada T with BNP Paribas.
Nevada T: Hi, good morning, Thanks for taking my question.
Nevada T: Before I left on that.
Nevada T: Could comment.
Nevada T: That industry progress on addressing shortages and mental health beds and using more of the technicians to assist events has discontinued and can you discuss progress to date.
Nevada T: And another follow up on the macro headwinds on the pet owner side and what are your assumptions for the full year vet visits wellness and.
Nevada T: In nominal dollars.
Speaker Change: Thank you.
Jonathan J. Mazelsky: What customers tell us is that they like the integrated nature of what we provide. They see that as a differentiator, a set of differentiators, relative to our competitors, and that includes being able to take software and tie it all together to support the workflow as they want to practice within the environment. We think that Velo, which is our client engagement application, takes that really to the next level in terms of being able to help them digitally communicate and interact with pet owners as a whole.
Speaker Change: Yes from a from an industry profession side.
Nevada T: What what customers tell us that they have what we say is that the staffing Sharon has largely stabilized.
Nevada T: You know coming out of the pandemic and I think there was a lot of challenges in the end.
Brian P. McKeon: Veterinarian pet owners responded by I think increasing salary and benefits and cutting back some hours. So that's what those impacts I think have largely stabilized I think practices to the extent that they were able to hire more have hired more in some cases, they've instituted training more.
Jonathan J. Mazelsky: We also are enthusiastic about new practice formation, as I've indicated in my remarks, where we continue to do well. New practices see IDEX as a partner to be able to help them get those practices off to a strong start, and it's been an area of focus for us. Overall, I think our commercial agenda continues to advance nicely. Obviously, we're pretty transparent in terms of placements, new and competitive, and how we're doing on that front, both within the U.S. and internationally, and we're doing well.
Nevada T: Internal training programs and you don't have taken those sort of stats they've also as I've mentioned earlier invested more in technology I think they've just far more receptive around technology software equipment use of our reference labs that helps them.
Nevada T: Safe time, sometimes it may be 10, 10 minutes 15 minutes per per.
Nevada T: Procedure, but on the other hand cumulatively that matters that that I think can be.
Nevada T: Haile.
Jonathan J. Mazelsky: Highly worthwhile.
Jonathan J. Mazelsky: Yeah.
Jonathan J. Mazelsky: So, it was a great entry into competitive accounts and the opportunity to give us a fresh look, which then we leveraged down the road with, you know, chemistry and hematology and other solutions. In terms of fine needle aspirin, all we've said at this point is that it's next. We're working hard at it. We know customers are very enthusiastic about fine needle aspirin and the ability to really expand a set of cancer diagnostics, which is important to their clients and the great practice of medicine. And we'll talk more about that as we get closer.
Erin Elizabeth Wilson Wright: Okay, and then how, you know, InView kind of fits into that strategy as well, I guess, initially, is the focus on existing customers or swapping out competitor equipment where you have exclusive contracts? Or can you remind us kind of when to have the fine needle aspiration? And that seems to be where we're getting some of the earlier feedback. Is that sort of 2025? Or how do we think about the timeline there? Thanks. Yeah, so I have a couple questions there.
Nevada T: We'll go next to Ryan Daniels with William Blair.
Jonathan J. Mazelsky: Yeah, so a couple questions there. You know, the E-View, from a focus standpoint, obviously, the IDEXX customers who already enjoy our VetLab suite are obvious customers from a targeting or focus standpoint. We know it will fit right in with their workflow and the already partnership they have with IDEXX. We saw that, by the way, with CetiView, where, you know, the mix of CetiView sales, at least initially, were more focused on existing IDEXX customers.
Ryan Scott Daniels: Yeah, guys. Thanks for taking the question maybe just one quick one in the interest of time, you've talked about the longer term dynamics of higher diagnostic utilization is pet's age through their lifecycle and I know you also have some data about kind of larger than normal pet population growth post dependent.
Speaker Change: So I'm curious if you could give us your thoughts on when we might start seeing the benefits of that flowing through in the industry in regards to diagnostic use thanks.
Jonathan David Block: We'll go next to John Block with Stiefel.
Jonathan J. Mazelsky: Good morning, Ryan the well what we see is it really increases over time, even with young adult dogs. So there's obviously a lot of a lot of visits puppies and kittens and then as they become.
Jonathan David Block: Young adults cats, and dogs that to both health care services.
Operator: It's a very modest depth, but generally health care services and diagnostics as both an absolute dollar amount and proportion expands and then there's a it grows or accelerates even more quickly as they get into the adult and geriatric stage. So aren't you know our focus has been to able Todd.
Jonathan David Block: Really on accelerating after all life stages, including young adults, so things like wellness testing and exams, but if it does go up over time, it's just not linear.
Jonathan David Block: Through that through the different stages.
Jonathan David Block: Okay, and then with that we'll now conclude the Q&A portion of the call. Thank you for all your questions and for participating this morning.
Jonathan David Block: Thanks, guys. Good morning.
Jonathan David Block: I don't think it's really a shocker that I'm also going to try to hit on visits and just sort of need to because your stock is largely tethered to data. For visits, you mentioned macro and capacity constraints, weighing on the overall vet visits, and some of our checks seem to tease out what looks like a higher sensitivity from the pet owner. You're taking price, and in many cases, that might be marking up, you know, two, three, four X, somewhere in there.
Jonathan David Block: I'll finish today's call by reiterating that IDEXX is committed to the significant multi decade opportunity to increase the standard of care for companion animal health care diagnostics utilization I'd access organic where our strategy is helping lead the development of our sector and we look forward to continued high execution against our growth initiatives supported.
Jonathan David Block: So I'm just curious, you know, anecdotally, are you identifying more sensitivity to pet owner sticker shock? Just a sort of a broader question, you know, did this industry overstep a bit on price over the past couple years? And if so, Brian, do we think about your price getting back to that? I think it's 3% on your LRP.
Jonathan David Block: Call it sooner rather than later.
Jonathan J. Mazelsky: Yeah, let me, John. I'll take that. Good morning.
Jonathan J. Mazelsky: The, you know, we obviously don't control pricing for the pet owner, that's up to practices and veterinarians. A lot of things factor into that. They're investing in their staff; we think that's a good thing when they retain their staff and really upskill the folks who are supporting pet owners. That's a long-term driver. And, you know, a point of stability within practices. And I think coming out of the pandemic, that was a real challenge for them. We continue to get back to when we have conversations with, you know, practices and customers. They're optimistic.
Jonathan J. Mazelsky: They see some of the challenges around capacity alleviating over time; they continue to invest heavily in the business with technology. We think their pricing helps them do that. From our standpoint, we always, from a pricing standpoint, look to maintain a good equilibrium of value for what we deliver. We continue to provide parameters and biomarkers like Cystoisospora, and Cystatin B at no additional charge. Those are included in existing panels. That obviously helps them on the value end of the equation, but we acknowledge that the cumulative macro impacts at the margin may be affecting some patenters.
Brian P. McKeon: Yeah, and John, just to reinforce Jay's point, I think we, you know, we align our pricing with the value we're delivering and the underlying inflationary dynamics that we're seeing, and we'll continue to factor that in, and our outlook is consistent with what we shared earlier for...
Jonathan David Block: Okay, sorry about that. And then, let me just maybe try to There are a bunch of small ones in the second question. Brian, you talked about the vet visit data embedded at the midpoint. I've just got some questions. Is it as simple as extrapolating?
Jonathan David Block: Out of the negative one five, you know, call it for the lower end, just, you know, when we think about your guidance and then, you know, you still have this other box coming. I think that's really what can really separate the stock from the visit date, with people getting more excited about the premium, right? So just taking a step back, do we think about you guys like handling it in a similar manner?
Jonathan David Block: Just you know, if I recall last year, I think it was great in the investor presentation in August. Officially introduced at VMX in January and then hitting the market, 9 or 10 months after that, you know, in 4Q24. Maybe, just at a high level, if you could just talk about, from a timing perspective, when we think about that second still TBD box that you've alluded to in the past.
Brian P. McKeon: John, can I just clarify your first question? I just wanted to follow what you're trying to get at when you said the "Is it a full year question you're asking?" I'm just trying to clarify. No, I'm sorry. It's a full year question. Yeah, sorry, Brian.
Brian P. McKeon: Is it just as simple as I think, maybe, hopefully, I have this right, that the midpoint of your guide has this down one and a half and two Q and then essentially flat and two H. Is it as simple for the lower end to call it, just take that one five and like extrapolate it out for two H. And that's sort of what's called embedded in the lower band of your CAGDX recurring. That's where I was sort of going with the first part.
Brian P. McKeon: It's obviously a broader set of considerations, but I think directionally, your point is valid, which is that, you know, if trends continue to be softer, that could be a factor that could be leading us towards the low. And then I'm in a new box.
Jonathan David Block: Teams from across the organization our growth outlook for 2024 built on decades of investments in business capabilities that we have made it reflects ongoing sector development and financial results aligned to our long term framework and that we will end the call. Thank you.
Brian P. McKeon: Look, we'll look forward to sharing more as we get closer to launch. We'll maintain the approach that we've used in the past that, you know, we'll share that when we... We're closer to commercial launch. We're very excited about InView advancing, and that's on track. As you know, we'll contribute directly, and we'll have a lot of multiplier benefits for our business, and I know our sales force is very excited about that, and we are too.
Operator: Our growth outlook for 2024 builds off decades of investments and business capabilities that we have made and reflects ongoing sector development and financial results aligned to our long-term framework. And now, we'll end the call. Thank you.
Brian P. McKeon: And we continue to advance our second platform. We'll share more on that over time, and we see that as also being an additive driver for our business over time. We'll go next to Navanti with BNP Paribas. Hi, good morning. Thanks for taking my questions. A few followers on that visit if you could comment.
Navanti: We'll go next to Navanti with BNP Paribas.
Jonathan J. Mazelsky: Yeah, from an industry and profession side, what customers tell us, and what we see is that staffing churn has largely stabilized. You know, coming out of the pandemic, I think there were a lot of challenges, and veterinarians, vet owners responded by, I think, increasing salaries and benefits and, you know, cutting back some hours. So those, those impacts, I think, have largely stabilized.
Ryan Scott Daniels: I think practices, to the extent that they were able to hire more, have hired more. In some cases, they've instituted training, more internal training programs, and, you know, have taken those sort of steps. They've also, as I've mentioned earlier, invested more in technology. I think they're just far more receptive to technology, software, equipment, and the use of our reference labs that help them save time. Sometimes it may be, you know, 10 minutes, 15 minutes, you know, per procedure, but on the other hand, cumulatively, that matters, and I think it can be, you know, highly beneficial. Highly worthwhile. We'll go next to Ryan Daniels with William Blair. Yeah, guys, thanks for taking the question. Maybe just
Ryan Scott Daniels: We'll go next to Ryan Daniels with William Blair.
Jonathan J. Mazelsky: Good morning, Ryan. What we see is that it really increases over time, even with young adult dogs. So, there's obviously a lot of visits, puppies and kittens, and then as they become, you know, young adults, cats and dogs, both healthcare services, there's a very modest dip, but generally, healthcare services and diagnostics have both an absolute dollar amount in proportion, expands, and then it grows or accelerates even more quickly as they get into the adult and geriatric stage.
Jonathan J. Mazelsky: So, our focus has been able to is really on accelerating that through all life stages, including young adults, so things like wellness testing and exams, but it does go up over time; it's just not linear through the different stages.
Operator: Okay, and with that, we'll now conclude the Q&A portion of the call. Thank you for all your questions and for participating this morning. I'll finish today's call by reiterating that IDEXX is committed to the significant multi-decade opportunity to increase the standard of care for companion animal healthcare through diagnostics utilization. IDEXX's organic growth strategy is helping lead the development of our sector, and we look forward to continued high execution against our growth initiatives supported by teams from across the organization.
Operator: This does conclude today's conference call. You may now disconnect.
Speaker Change: This does conclude today's conference call you may now disconnect.
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