Q3 2024 IDEXX Laboratories Inc Earnings Call
Speaker Change: The End
Speaker Change: Good morning and welcome to the I-DX Laboratories 3rd Quarter 2020 4 earnings conference call. As a reminder today's conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer, Brian McKeon, Chief Financial Officer, and John Raybis Vice President Investor Relations.
Speaker Change: I'd like to preface the discussion today with a caution regarding forward-looking statements.
Speaker Change: with FNAs already minded that our discussion during the call will include forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ materially from those discussed today.
Speaker Change: The additional information regarding these recent 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, idics.com.
Speaker Change: During this call-over we'll be discussing certain financial measures not prepared in a court accordance with generally accepted accounting principles or gap.
Speaker Change: A reconciliation of these non-gap-pringential measures to the most directly comparable gap measures is provided in our earnings release, which may also be found by visiting the Reversed to our relation section of our website.
Speaker Change: In reviewing our third quarter, 2024 results in updated 2024 guidance. Please note all references to growth or gain of growth and comparable growth, refer to growth compared to the equivalent prior year period, almost otherwise noted.
Speaker Change: To allow participation in the Q&A, we ask each participant, limit their questions to one with one follow-up business as a theory. We appreciate you may have additional questions, so please feel free to get back into the queue, and if time permits we'll take your additional questions.
Speaker Change: Today's prepared remarks will be posted to the Investor Relations section of our website after the earnings conference call concludes. I would now like to turn the call over to Brian McKeon.
Brian Mckeon: Good morning and welcome to our third quarter earnings call. Today I'll take you through our future results and review our updated financial outlook for 2024.
Brian Mckeon: I'd excellivered solid organic revenue growth and strong comparable profit gains in the third quarter.
Brian Mckeon: In terms of highlights, overall revenues increased 6% organically, supported by 7% organic growth and cag diagnostic recurring revenues, and 13% organic growth in our water business.
Brian Mckeon: Organic Revenue Gaines were supported by benefits from eye-to-eye execution drivers, reflected in consistent solid new business gains, sustained high customer attention rates, and double digit growth in our premium instrument in sole base.
Brian Mckeon: Well, not reported in our quarterly results, I'd execute nearly 700 orders for our new in-view analyzer, which supported strong growth and EVI metrics that will position the company to build on this momentum.
Brian Mckeon: Partly off-setting these benefits, Cag Diagnostic Record and Revenue Growth in Q3 was constrained by impacts from near-term US macro and sector headlands.
Brian Mckeon: As we'll discuss for updating our four-year organic revenue-growth guidance to reflect expectations for continued near-term macro and sector-fershire in the U.S. and to incorporate estimated negative impacts from recent severe weather events.
Brian Mckeon: I just continued some deliver strong proper performance as we work through these dynamics. Reflected and solid comparable operating margin gains in Q3, keeping us on track to achieve our full year operating margin goals.
Brian Mckeon: Solid Revenue Growth and Operating Margigains supporting EPS of $2.80 per share and key trade of 11% as reported and 12% on a comparable basis.
Brian Mckeon: will review our updated guide to detail later in my comments. Let's begin with a review of our third quarter results.
Brian Mckeon: Her quarter organic revenue growth of 6% was driven by 6% organic revenue gains in our ag business and 13% organic growth in water.
Brian Mckeon: Firstly, I've said by 2% organic declines in LP days.
Brian Mckeon: Kagorganic Revenue Growth was supported by 6% organic gains in veterinary software, services and diagnostic imaging revenues driven by 11% organic growth in recurring revenues.
Brian Mckeon: Cag instrument revenue decreased 9% organically reflecting comparisons to record prior to your placement levels and near-term impacts from our commercial focus on the I-DX-NV order generation, which will primarily benefit 2025 reported instrument revenues.
Speaker Change: Well, why Cag Diagnostic Recrearing Revenue Increase 7% Organic Lane Q3?
Speaker Change: This includes approximately 1% of global equivalent day growth benefit in the quarter related to increased shipping days in our in clinic business.
Speaker Change: 2.3 CAD diagnostic-licorn revenue growth was supported by average global net price improvement of approximately 5% with US net price realization of approximately 4%.
Speaker Change: U.S. net price realization includes impacts from the successful extension and expansion of three major customer agreements in 2024.
Speaker Change: These agreements will provide long-term incremental volume growth benefits for the child acts as we expand our business relationships with these customers.
Speaker Change: Tag Dog now six recurring revenue growth in the third quarter was supported by 10% international organic ads.
Speaker Change: International Growth Reflected Benefits from NetPyre Surilization, Continuing Solid Volume Games, approximately 0.5% of positive equivalent days of effects.
Speaker Change: International Growth was driven by I-X execution, reflected in continued strong new business gains and high premium instrument placements, which supported a double digit year on your expansion of a global premium instrument install base.
Speaker Change: U.S. Cag diagnostic of current revenue, again, close to 5% in Q3, including approximately 1.5% of growth benefit from equivalent days of tax.
Speaker Change: US growth was supported by continued solid positive growth contribution from new business gains, sustained high customer retention levels, and benefits from net-carage rollization.
Speaker Change: [inaudible]
Speaker Change: In the US, we continue to work through macro and sector dynamics which contributed to a 2.1% decline in same-store clinical physical and key trade.
Speaker Change: including a relatively higher 3.4% same store decline and more discretionary wellness visits.
Speaker Change: Overall US-kind of a visit growth levels included estimated 1% to 1.5% growth on a fit. From the ramping of pain medication visits over the last year, we typically do not include diagnostics.
Speaker Change: This is added to the near term clinical visit headwind effect for I-X's U.S. Cag Business.
Speaker Change: Professor Visiting U.S. quenix, Head Owners continued to demonstrate interest in a higher standard of care, despite McLean pressures.
Speaker Change: If we adjust you as sector metrics for the estimated pain medication impact on clinical visits and diagnostic frequency, we continue to see an increase in the percentage of visits that include at least one diagnostic.
Speaker Change: Over the last 12 months, the percentage of clinical visits with poor blood work inclusion has also sustained at elevated levels, following the accelerated expansion seen during the pandemic.
Speaker Change: These trends reinforce that the primary headwind to Alex's growth in the near-term remains pressure on clinical visit growth.
Speaker Change: Given recent trends and are updated four-year organic growth outlook, we factor at an expectations for continued near-term constraints on cag diagnostic recurring revenue growth from U.S. macro and sector impacts.
Speaker Change: I'd ask continues to achieve solid organic growth and strong financial performance as it worked through these near-term headlines.
Speaker Change: We're highly confident in the positive, long-term drivers of demand for diagnostics, including the future benefits that will flow from idics innovation. As we continue to execute towards our business strategy, aligned with raising standards of pet healthcare global.
Speaker Change: In terms of growth by modality, third quarter results were supported by strong global gains and consumable revenues.
Speaker Change: I'd expect love a consumable revenue is increased 11% organically reflecting double digit gains in the US and international regions, including benefits from increased equivalent shipping days of folks.
Speaker Change: In Super Bowl games were supported by 10% year and year growth in our global premium instrument in Soulbase. Reflected strong gains across our Calis, premium hematology and set of platforms.
Speaker Change: We achieved 4,128 Cag Global Premium Instrument placements in Q3, a D-3-443 units or approximately 10% compared to record prior to your levels. While securing 691 orders for a new I-DX in view analyzer in North America.
Speaker Change: Ron Track, Rehnitiation of Shipments of NVU-Incure with expectations for approximately 50 to 100 shipments this year with the bulk of the advanced orders targeted for delivery in 2025.
Speaker Change: Bobo Rapid Acid, Revenue's expanded 6% organically in the third quarter, reflecting solid global gains, including benefits from that price realization and positive equivalent shipping days effects.
Speaker Change: Global Lab revenues increased 2% organically in Keith Ray, native of modest equivalent day's headwind.
Speaker Change: Reflecting low single digit gains in the U.S., and solid growth in international regions.
Speaker Change: Reference Lab results adjusted for days effects were supported by modest volume row, aided by new business gains, which offset pressures related to macro and macro condition at sector conditions, constraining same store sales almost.
Speaker Change: and that praise canes in our reference lab line of business in Q3 were moderated by impacts from major new customer agreements, which will benefit long-term reference lab growth.
Speaker Change: Veterinary Software Services and Diagnostic Imaging Revitors increased 11% of the reported, including benefits from our recent Greenline Software and Data Platform acquisition.
Speaker Change: 6% overall organic revenue gains will driven by 11% organic growth of recurring revenues, reflecting benefits from angled momentum and cloud based software solutions.
Speaker Change: Water Revenue is increased 13% organically in key 3, supported by double digit gains in the U.S. and continues solid growth in Europe.
Speaker Change: Lysac Coltrine, dairy revenues decreased 2% organically. As strong gains in the U.S. will offset by lower, ages, wine testing and herd health screening revenues.
Speaker Change: Turning to the TNL, Q3 profit results were supported by solid-gross margin gains.
Speaker Change: was profit increase 9% in the quarter is reported and 9% on a comparable basis.
Speaker Change: Joe Smartians were 61.1% of 140 basis points on a comparable basis.
Speaker Change: Boris Martin Gansler, Flex Fable, will business mix, including benefits from high-growth and consumable revenues, lower instrument costs, and favorable impacts from growth and veterinary software, services, and diagnostic imaging with current revenues.
Speaker Change: operating expenses increase 7% in the quarter on a reported basis and 8% on a comparable basis.
Speaker Change: OPEX growth was driven by increases and sales and marketing expense in R&D spending, aligned with advancing our growth and innovation agenda.
Speaker Change: operating margins were 31.2% in the quarter of 110 basis points in your near as recorded and 100 basis points on a comparable basis.
Speaker Change: EPS was $2.80 per share in Q3 and increase of 11% is reported in 12% on a comparable basis.
Speaker Change: For an exchange increased revenue and went operating profit by approximately $1 million and EPS by approximately 1 cents per share on the quarter, a $1 million edge game.
Speaker Change: Frecastle was $192 million in Q3. On a thrilling 12 month basis, our net income to Frecastle conversion ratio was 91%.
Speaker Change: For the full year, we're maintaining our outlook for free-costal conversion of 90 to 95 percent. Well, updating our full year outlook for capital spending to approximately 160 million, reflecting lower projected spend and product time.
Speaker Change: Our balance sheet remains in a strong position. We enter the quarter of leverage ratios of 0.7 times gross and 0.4 times net of cash.
Speaker Change: and the third quarter we allocated 225 million and capital to share with the purchases supporting a 1.1% year in your reduction in diluted shares outstanding.
Speaker Change: Turn into our 2024 guidance. We've updated our four year overall organic revenue growth outlook to 5.3% to 6%.
Speaker Change: and our Outlaw for Cag Dog, Nostick LeCarn Revenue Growth to 5.8% to 6.4%.
Speaker Change: At midpoint this reflects a reduction of 1% to 1.5% compared to our prior, full-year organic revenue growth outlook.
Speaker Change: Our Maryland driven by recent US macro and sector trends, constraining visits and demand at the clinic level.
Speaker Change: This outlook incorporates two-three results and reflects expectations for continued pressure on U.S. Cag diagnostic, recurring revenue growth in Q4 related to macro and sector trends and recent severe weather impacts.
Speaker Change: In Q4, at midpoint, the updated outlook reflects expectations for overall organic revenue growth of approximately 3%.
Speaker Change: This alliance with a Q4 midpoint expectation for global CAD diagnostic recurring revenue growth of 3.5% to 4% met of an estimated 0.5% of negative effect from severe weather impacts in the US.
Speaker Change: We expect global net price improvement and cag diagnostic of occurring revenues of approximately 4% to 4.5% in Q4, including effects from new business agreements.
Speaker Change: with a consistent outlook for approximately 5% full-year global net price realization.
Speaker Change: The update in four-year guidance reported revenues is $3,865 million to $3,890 million. The reduction of $38 million at midpoint.
Speaker Change: are updated. Reported revenue outlook includes a favorable $15 million adjustment related to more recent effect sales demands.
Speaker Change: In terms of our profit guidance, our outlook for 28.7% to 29% and reported operating margins reinforces our four year goals for solid comparable operating margin improvement.
Speaker Change: are fully reported margin outlook incorporates effects from the discrete litigation expensive pool recorded in Q2 which will reduce full year reported operating margins by approximately 160 basis points and EPS by 56 cents per share.
Speaker Change: Excluding this impact and FX effects at midpoint, our operating margin outlook reflects the consistent 40 to 50 basis point improvement in comparable operating margins.
Speaker Change: and the second one is the second one. The second one is the second one.
Speaker Change: We're updated for your EPS Outlook of $10.37 to $10.50 for share. It's consistent with our prior EPS guidance at midpoint.
Speaker Change: At midpoint, we've incorporated approximately 14 cents and negative EPS impact from the reduction to our organic revenue growth outlook.
Speaker Change: Offset by two cents in favorable-borne exchange adjustments, one cent in favorable billetary related to updated intersex mental estimates, and a positive 11 cents per share of benefit from improvement in our outlook for our effective tax rate.
Speaker Change: The updated effective tax rate estimate includes approximately 0.5% of full-year rate benefit, or approximately 6 cents per share, from a non-recurring tax reserve release we expect to queue for as a result of a lapsing of an applicable statute of limitation.
Speaker Change: That concludes our financial review. I'll now turn the call over to Jay for his comments.
Jay Mazelsky: Good morning. I'd like to deliver to get some strategic priorities in the third quarter, including strong profit growth as we advance the robust innovation agenda supported by a high-tech commercial model.
Jay Mazelsky: These pillars of our organic growth strategy positionite acts to continue to lead the development of the companion animal diagnostic sector over the long term, while supporting solid or organic revenue growth in the near term.
Jay Mazelsky: 3rd quarter, Cag Bagnastics recurring revenue growth was supported by sustained IDX execution growth records.
Jay Mazelsky: McClubding Solid Net New Business Games, customer retention rates, staining at over 97% and a net price realization aligned with their expectations, including impacts from extensions and expansions and corporate accounts.
Jay Mazelsky: Performance was also supported by double digit growth in our premium instrument and felt base, reflecting high interest by practices around the world in adopting iDX technology to obtain differential clinical insights.
Jay Mazelsky: These consistent growth drivers reflect the benefits from our decades long strategic commitment to focusing and integrating on companion animal diagnostic assays, instrumentation, software.
Jay Mazelsky: Supported by a highly capable and tenured commercial organization.
Speaker Change: has Brian noted U.S. sector, an I-DX U.S. growth has been moderated by cumulative macro pressures on pedauners, which has pressured visit and demand trends of U.S. clinics. The results that are providing this morning reflect excellent execution from pain across LIDX and a more balanced macro environment.
Speaker Change: We remain confident in the enduring, positive, secular growths, hallowed, that create an attractive growth opportunity for our sector over time.
Speaker Change: from a growing global pet population to longer pet life spans that increased opportunities to improve the quality of our pet lives. The future growth opportunity and the value of competing in animal medical services means highly compelling.
Speaker Change: Further enabled by IITX innovations that a commercial focus, the secular trans-position containing animal diagnostics is the fastest growing area in the vet cook and a key driver of medical services and practice profits.
Speaker Change: Today I'll review I-Dexas progress against our strategic objectives and how strong, commercial and operational execution help deliver excellent financial performance in the quarter.
Speaker Change: Customers seek insights on both new and existing diagnostic tests of support disease detection, interpretation, and care management.
Speaker Change: and Ways the Optimize Clinic Workflow to increase staff productivity. They rely on I-DX commercial professionals who bring subject matter expertise and best practice benchmarks to help them achieve their practice objectives.
Speaker Change: The result is a sustained trend of diagnostics revenue growth, the outpacing overall clinic revenues, as well as high levels of retention and sector leading levels of customer satisfaction.
Speaker Change: I'd ex-commercial teams delivered solid third-quarter global premium instrument placements across regions and platforms.
Speaker Change: Building on high prior year levels. These placements supported the ninth consecutive quarter of double digit premium instrument installed base growth on a worldwide basis, as well as for international regions.
Speaker Change: In the US, the continued strong pace of competitive catalyst placements.
Speaker Change: Coupled with overall placements and including I-DX-InduDX pre-orders resulted in very strong year-on-year EVI games, highlighting the high quality of placements in the period and the expected future consumable revenues.
Speaker Change: and Europe continued to draw net customer gains in premium installed base growth supported a six consecutive quarter of double digit cag, diagnostic for repairing revenue growth, highlighting the benefits from armature European sales organization.
Speaker Change: These are just a few examples of the growth and value our teams are delivery, aided by a new wave of light ex-innovation.
Speaker Change: Customer Interest in Partnering with I-DX was also reflected in the three-bager corporate account relationship expansion secured this year. These extensions position I-DX, the benefit from volume gains, as new businesses brought into the extended agreements.
Speaker Change: These expanded relationships will benefit growth across our modalities over time.
Speaker Change: The extension and expansion of these key account agreements demonstrate idexability to deliver value to customers of all types and sizes. As these partnership models are increasingly centered on organically driven growth versus through clinic acquisition.
Speaker Change: In addition to serving strong demand for our current on market products.
Speaker Change: from our for-execution also includes supporting demand for upcoming iDX innovations.
Speaker Change: which is especially relevant now given the early stages of our new wave of innovation. As we sit here today, Idex is on a cusp of delivering the newest significant piece of innovation. The Idex in view DX cellular analyzer.
Speaker Change: which remains on target for a Q4 launch. Our commercial team has been engaging with customers, highlighting the benefits of this transformative new, in clinic testing platform, and the response has been overwhelmingly positive.
Speaker Change: Since beginning to take orders in North America at the end of July, the ATX commercial team has taken close to 700 to invuked the X-Crew orders in two-three.
Speaker Change: This demonstrates the high values that clinicians place on the new diagnostic insights they will receive as part of the launch menu with air psychology and blood morphology in the easy use say attached to slide free workflow.
Speaker Change: Early customer enthusiasm for NVDX is very high as they see in view as a transformative point of care platform. Additionally, we started to take pre-orders and select international geographies in Q4 as we build global demand.
Speaker Change: and keep in mind the value of the IDX EVUDX analyzer will expand beyond your psychology and blood more over time.
Speaker Change: Designed as a technology for life platform, the INVU DX menu will expand in 2025, as we add FNA Lumps and Bums capabilities.
Speaker Change: This menu at Spansion will help address the approximately 25 million dogs around the world. That we estimate would benefit from an ecology diagnostics as part of a clinical visit.
Speaker Change: This opportunity highlights the reason that we focus on purpose-built platforms as an expanded menu over time. Grow as both medical and economic value similar to our catalyst platform.
Speaker Change: Beyond Inview DX, I'd access Inclinic Business, also continues the benefit for innovation. And it's September, we began shipping catalyst, pancreatic light paced lights, customers in North America.
Speaker Change: with the Global Raw beginning with European Q4 and extending to other regions over 2025.
Speaker Change: The Catalyst Pancreatic Light Taste Test, a single slide solution for came on and feel on patients suspected of pancreatitis.
Speaker Change: represents the 10th Mayniew edition to the Catalyst platform since 2012. This most recent example of our technology for life innovation strategy delivers improved functionality and diagnostic insights to our customers.
Speaker Change: All-wall using I-DX analyzers that have already been purchased in built political workflows around. The strategy not only increases the medical value of a I-DX analyzer to our customers.
Speaker Change: and Aboi NEM that are a lover of proofs that are as a care, but also helps drive utilization and increases the economic value to I-DX of a premium instrument placement.
Speaker Change: Early feedback from customers in North America has been extremely positive at this quantitative test. With over 3,000 customers already utilizing the slide for dogs and cats. This important diagnostic test will soon be available to our tires 72,000 plus, Catalyst and Tall Bayes globally.
Speaker Change: Also, at the point of care, I-DX catalysts, mark UC launch recently in North America. It will be shortly followed by global rollup. Smart QC greatly simplifies and streamlines the monthly catalyst quality control process.
Speaker Change: Early indications estimates smart QC is 90% faster than the existing process. This is yet another example of our focus on bringing innovations to our customers that enhance work flows and on-lock medical capacity.
Speaker Change: I'd like to continue to advance work towards the 2025 launch of the I'd-X Cancer Diagnostic Screening Panel at I'd-X Reference Labs.
Speaker Change: Launching initially with the foam detection in 2025. The IX cancer DX panel will expand over three years to cover the six most common cancers, which represent greater than 50% of the K9 cancer cases.
Speaker Change: and 1.1 billion addressable revenue opportunity.
Speaker Change: Extensive research has shown that both veterinarians and pet owners see value in the medical insights that come from oncology screening and are highly likely to adopt this new technology. We look forward to sharing more updates on these critical pieces of innovation as we get closer to watch.
Speaker Change: Complementary to our diagnostic solutions, I'd ex-offware solutions provide customers with robust intuitive products that support greater diagnostic utilization.
Speaker Change: Well, simplifying workflows at each stage of the pet on a visit. They're by helping customers unlock capacity for more value-added work. Ben Erick clinics, he tangible benefits from cloud-based software technologies, and I'd excuse these needs with our broad portfolio of pollinated products.
Speaker Change: and practice management systems that are tailored to the practice size and needs to work flow management tools. The result of this fit between I-DX software products and customer needs resulted in high double digit growth in cloud-based product placements.
Speaker Change: which once again comprised over 95% of total software placements.
Speaker Change: Momentum for software business remains very strong. With quarterly placement scrolling sequentially through Q3, while future placement are supported by strong bookings and pipeline, aided by increased commercial productivity and corporate account interest.
Speaker Change: These trans are leading indicator for future deathsoff and diagnostic imaging recurring revenue growth. As a growing pins and stall based is the gateway for customers to benefit from our expanding vertical SaaS offerings.
Speaker Change: and the other product Pileadea Inemlers. We are pleased by the early interest in Vellon. Our modern PAP owner engagement application with deep integration and diet experience.
Speaker Change: As a quarter-end, we had over 300 enrolled in active practices.
Speaker Change: and excellent pay-the-owner engagement is measured by higher clinical visits, clinical revenue, and diagnostics usage post-implantation.
Speaker Change: Based on a robust pipeline, we look forward to growing Velos Clinic user-based by more than double by year-end. As we shared at Invest today, we have an exciting development roadmap for Velos, the further address practice pain points with Pino-Norview Communications.
Speaker Change: Well, helping to further drive visit growth and diagnostic civilization. We look forward to providing updates as we advance our software strategy and grow the related high-margin reparing revenues.
Speaker Change: Yes, we conclude our prepared remarks. I'd like to recognize the biodex employees who are working hard to serve veterinarians and pets in areas impacted by hurricane, saline and melt our live operations.
Speaker Change: Pean to proactive measures to protect employees, mitigate service disruptions, and provide critical, diagnostic services to advance care for pets and needs. We stand ready to support our customers impacted by these hurricanes as they look to rebuild their practices and resume operations.
Speaker Change: Now, let's place up an online for Q&A.
Speaker Change: Thank you.
Jonathan Mazelsky: [inaudible] I'm Jonathan Mazelsky.
Speaker Change: The first question is from Chris Shot with JP Morgan.
Speaker Change: Hey, thank you so much. This is a Tadarina on for Chris. Thank you for taking your question. So for each of you upon this earlier in the prepared remarks, can you maybe just elaborate a bit on the drivers of the reduction outlook and the step down and for Q, I guess let's sort of split between the weather things you mentioned and the underlying US macro versus anything else you want to call out?
Speaker Change: and then I guess second question is just on that this is more broadly. Can you just elaborate a bit and what's the biggest delta I guess between the underlying outlook you gave in two few verses the ones you're giving now. I guess what's different in the market and what's driving this kind of worsening macro environment and where are you expecting to see the most impact.
Speaker Change: and I hope you enjoyed this video.
Speaker Change: Thanks for your questions on Q4 just to clarify the commentary.
Speaker Change: We highlighted an outlook for organic growth overall of about 3%.
Speaker Change: and Caggy extra current revenue growth of 3.5 to 4%. The 3.5 to 4% is net of a...
Speaker Change: estimated 0.5% of growth rate impact from the hurricanes. So if you normalize for that, it is 4 to 4.5%. And that is actually aligned with our outlook for price benefit.
Speaker Change: So in Q4 we're basically looking at normalized for weather, relatively flat volume.
Speaker Change: It is similar to the trends that we saw coming out of Q3. It incorporates the similar outlook for clinical visits that we saw in Q3, the weather impact, there is some impact from weather.
Speaker Change: and so it really is more reflecting the...
Speaker Change: The trends that we saw in the third quarter that was somewhat different than we anticipated. We saw relatively more kind of pressure on.
Speaker Change: and Clinic Demand in terms of just independent of clinics, some compression on that. We tried to highlight in our comments that the...
Speaker Change: for pets coming into the clinic. Frequency is sustaining, it's actually up and wellness. It's when you adjust for the pain, matter of fact, it's...
Speaker Change: is actually up in non-womeness as well. And so I take that as very encouraging that there's still a lot of interest in diagnostics for the pets coming in. It's not expanding, like it had historically, I think that's probably our...
Speaker Change: and now Elmett that we're still working through. Again, we think that's more near-term macro impacts that we'll both on the visits for Antannin in terms of some of these demand impacts we think we'll be able to work through over time, but in the near-term we're just incorporating these trends in our balance of your outlook.
Speaker Change: Let me address the, you know, your question about the clinical visit, basis of Brian indicated this really. We continue to attribute that to the your term macro and sector.
Speaker Change: Pressure's, clearly from a macro standpoint, there's a cumulative pressure, you know, inflation and not just affecting animal health, but across the economy as a whole. We continue to see, you know, it...
Speaker Change: that every year.
Speaker Change: with Pep Honor level. It is a great deal of resilience. I think Pep Honor is getting it to prioritize the care for their pets.
Speaker Change: at the, you know, I think that's a, of a discretionary category.
Speaker Change: but that's not to say that they're immune to the food broader macro pressures, especially at the margin. You know, we think that from an overall critical visits standpoint, it will normalize over time, you know, all that.
Speaker Change: I think sector drivers are on pet population growth, pet longevity, human pet bond, aging pets.
Speaker Change: which will consume more care, our important.
Speaker Change: It's an important support to the overall clinical visit trends and then our own innovation and the contribution that our innovation will play both from a direct leverage standpoint as we add capabilities to practices that support these long-term trends will drive the increase in idealization.
Speaker Change: Thank you.
Speaker Change: The next question is from Michael Riskin with Bank of America.
Michael Riskin: Great thanks for taking the question guys first to start
Michael Riskin: The reference lab number came in particularly weak in the quarter. I think we were a little bit surprised about that. That was the biggest Delta. During your preferred remarks, she made some comments about how.
Michael Riskin: There was some impact to price in reference lab from those three major customer agreements.
Speaker Change: Could you expand on that a little bit? I think we can read this email in a little bit of price when the contract is that standard operating procedure? Were these a little bit more outsized than normal? Just in general, that's something you're seeing a little bit more push back on in terms of price. Or if there's anything else on the reference, I'd have to call out.
Speaker Change: Thanks, Mike. Maybe I could just set context on the numbers in the quarter and then, uh, allow Jada talk about the dynamics and reference labs. Um, we had 2.4% growth organically. We highlighted there was actually a day's head one effect in labs. Um, the benefit that we saw in the quarter is all related to shipping days. So,
Speaker Change: Normalized roughly 3% growth and we highlighted that volume growth was actually positive. So, to your point, there is a...
Speaker Change: A level of effect on lab price realization, which is a good news item, and that we this year had three major customer extensions and expansions.
Speaker Change: that will have long-term bond growth benefits for right X and that's captured and kind of robust in that pricing effect.
Speaker Change: You see some of that in the key three numbers in labs but the underlying.
Speaker Change: Health of the business is quite solid particularly with some of the pressures we've seen on things like wellness testing so Jake and expand on that. Yeah, couple, I think there's a couple ways of looking at the execution drivers at the reference lab business.
Speaker Change: It'll continue to be really strong, it's brand-indicated. We have seen modest volume growth, there's new business gains.
Speaker Change: and very high customer retention.
Speaker Change: Lolls. The price gains were moderated by these major new customer agreements and expansions and extensions.
Speaker Change: and they will benefit the company in the business.
Speaker Change: for the longer term through volume grants. Keep in mind that the reference labs is relatively more indexed to wellness testing.
Speaker Change: We know that well-assessed things have been more pressure. We saw the decline of 3.4%.
Speaker Change: in the US. There hasn't been change in any of the competitive dynamics that we've described.
Speaker Change: and we're very optimistic about the innovation agenda for the reference labs. We think people in the gym and the staff and be for kidney health. Any items, cancer, diagnostics, in 2025.
Speaker Change: really continued a position that mobility in a highly differentiated way and just getting back to my prior comment that a critical visit will normalize over time.
Speaker Change: Okay, and then if I can squeeze in the follow-up, just want to expand more on price in general. You're talking about five for the quarter, I think you're kind of sticking with five for the year. Five percent price.
Speaker Change: Ford, who's going to be a little bit lighter than that, four or four and a half. I know some of that have probably tried to timing over the price increases. You took a last year. Again, correct me from wrong. If you're for a price assumption did get lowered.
Speaker Change: But just in general, how do you think about prices that will ever go on forward? You know, Jay, you just talked about thinking that business will come back, you know, we talked about execution and
Speaker Change: and the new product launch is the sort of the I-Experiment, the third.
Speaker Change: Killer of the Model is Price.
Speaker Change: It's been obviously very elevator over the last three years in 22, 23, 24.
Speaker Change: It looks like it's starting to normalize a lot of it. Should we expect that to continue to continue the normalization of price over time back to that to a 3% historical level. Is that the
Speaker Change: Yes, Mike, I just acquired some of the numbers that we shared. As you noted, we were reinforced the 5% full year.
Speaker Change: Outlook, some moderation in Q4, that's principle. We just the new business effects that we highlighted. So I think this is a...
Speaker Change: and consistent kind of trends we are.
Speaker Change: is a position to communicate our pricing to our customers. It's not a lapping effect, it's kind of the, I think that was part of your question. It's more the new business effect.
Speaker Change: and we're positioned to communicate our price increases for next year, later this year with our customers continue to feel very good about the value that we're delivering with the focus on innovation.
Speaker Change: that we have in the long-term as a company and we have a new wave of innovation that we're really excited about. So I think it will be a just a bit of a positive driver for us in the near-term and the longer.
Speaker Change: Keep in mind that the way we think about pricing is to really maintain. We want to maintain. We want to be on the right side of the whole.
Speaker Change: Value Equation.
Speaker Change: and so there's obviously new products, new animation, but then theirs.
Speaker Change: products and we continued to really expand from a future and keep the ability to stay on points. So you think about the Fico Energy and Sistoisospera and PAPES and the Statement B in the Veknack Blossom.
Speaker Change: These were all added to the menu and panels at no additional cost. So what we strive for is to really make sure that we're adding value and, you know, price obviously reflects that and as Brian indicated, we'll provide more guidance.
Speaker Change: What do we provide 2025 games?
Speaker Change: Thanks guys and I'll fall off my mind.
Speaker Change: As a reminder, if you would like to ask a question, please press star 1. The next question is from John Block with Steveville.
Speaker Change: Thanks guys and morning. I'm running the first one I think there's a step down in the 24 guidance.
Speaker Change: of about 150 bips for total organic revenue versus the 100 bips that down for Cag, the extra curring of the midpoint. So maybe you can speak with that's attributable to in regards to the Delta.
Speaker Change: I'm guessing it might be...
Speaker Change: You know fewer end-views going out this year than maybe initially expected maybe a little bit of LPD as well.
Speaker Change: and I would love your thoughts there and then just attack on it at any color on the realized ASP for in view as we start sort of scrubbing the model and the contribution into 25 and then that's why follow up.
Speaker Change: Great thanks for your question, John. I think you hit on the themes.
Speaker Change: The update includes incorporating Q3. So I think we did see.
Speaker Change: You know, somewhat softer results in areas like LPD, then anticipated so we're carrying that through.
Speaker Change: I think we are capturing also the instrument revenue effects. It's principally just a strength of the in-view advanced orders. I think that does have some impact in the overall, you know, origin, but order generations.
Speaker Change: and in terms of our other premium instruments, it's a good new story overall, the EVI normalizes up very strongly and so we're...
Speaker Change: really encouraged by that. Those are kind of the...
Speaker Change: The fact is some tweaking on the software numbers as well, just based on trends. Those are kind of the themes. The bigger driver of course is just the calibration on the...
Speaker Change: [inaudible]
Speaker Change: Okay, you got it helpful and maybe I'll have to follow him there but you know, they're not coming up.
Speaker Change: was a plan always to take 700 orders and only ship 50 out. You know, obviously you're beta testing this in the field.
Speaker Change: We're already telling you that you incurred throughout that process in terms of why most of those shipments were occurring.
Speaker Change: Call it in 2025-24. That's short of the follow-up. But then the second question, just on the corporate renewal, saying, you guys don't typically talk a lot about that, but admittedly, corporate sur a big part of market. I don't know, 30 or 40 percent, so just...
Speaker Change: Anymore color that you can provide with that just specific to
Speaker Change: The Lab number not the Inclinic and then for the Lab, we think about it.
Speaker Change: like the pricing will be ahead when for the next.
Speaker Change: 3.3.4.24. It's a headwind for the next 3.4-0.5 year and then essentially you start the pricing benefit book in 10 YouTube.
Speaker Change: I'm sorry you're not the pricing height limit but it can continue to benefit from the volume tailwind for what I'm assuming is a multi-year contract and hopefully that came across okay. Thanks guys.
Speaker Change: Yeah, let me start with the corporate and I'll address the the in-view launch in and I'll turn for the Brian
Speaker Change: for some additional power on it. You know, for a couple of standpoint, we've been very successful in these represented matches.
Speaker Change: Extension's but expansions. I think the corporates from a maturity standpoint are focusing more on organic growth. If you go back, they grew through a credit acquisition and there was a lot of...
Speaker Change: and the solidation in arbitrage. And so I think that the focus on...
Speaker Change: Organic growth not just within the reference labs but using technology whether it's point of care and software and integrating.
Speaker Change: those pieces have positioned us really well.
Speaker Change: and has given us an opportunity to really partner with them and help them.
Speaker Change: and Chief of Objectives. And you guys, as I indicated in my remarks, there are certainly volume benefits that we see over time that will develop as a result of.
Speaker Change: Expanded Business with us folks.
Speaker Change: Yeah, very excited by that. Please also, I would say for a corporate standpoint.
Speaker Change: you know more of an emphasis on how to implement wellness campaigns and programs.
Speaker Change: and a much more harmonized way versus...
Speaker Change: is one of the independent clinics as one of us.
Speaker Change: from an interview launch standpoint. We have a very tried, improved approach in terms of how we launch.
Speaker Change: and I'm a consumer patient. If you look at Catalys, St. V. and more recently, Proci1, we started a control fashion. We're very careful that we deliver the right customer experience, customer's expect that from us and the way we do that is.
Speaker Change: We start with a small group of implementations and onboard those customers and tweak as necessary. So it's really not driven.
Speaker Change: by a certain number in Q4. It's really more from overall readiness so that we deliver the right experience and build over time.
Speaker Change: The receptivity to the product itself has just been outstanding. We look forward to being able to build global demand based on the very compelling menu for customers.
Speaker Change: and John to your specific question, I hope I could follow it, but the new business effects in pricing are relatively more in labs, US labs, so that's where some of the...
Speaker Change: The business opportunity that we were excited about in terms of expanding the relationships is flowing from. And I think your point was about lapping and I think you're correct. There is a...
Speaker Change: is kind of a gross-to-net kind of effect in the near term, but you work through that. Keep in mind it was three agreements that kind of built through the year or so. It will get more clarity as we get into 2025, but basically there will be some favorable lap and dynamics that go on the latter half and next year to your point.
Speaker Change: You nailed it, thanks Ryan
Speaker Change: The next question is from an Aventy with BMP Perry-Baw?
Speaker Change: Hi, good morning. Thanks for taking my question. Can you discuss how industry innovation in the affordability space with that practices offering payment plans?
Speaker Change: and I'm an Executive Director at Ex-CreditCard in the View and the Valeau could help.
Speaker Change: and the committee-vading lower visits in the near and longer term. And also can you discuss the, as you are monitoring the divergence between wellness and non- Wellness visits, what are you updated on the sector conditions? Thank you.
Speaker Change: Yep, just that maybe addressed those.
Speaker Change: The Payment Question First. There are most of our instruments, whether it's in view or broader bed-lapse weights, are placed in various programs and what that typically involves.
Speaker Change: is not cash upfront and the customers make a volume, you know, commitment over a period of time. So from a, it's, it's built in financing if you will, so there's not really, you know, practice cash constraints.
Speaker Change: and being able to...
Speaker Change: you know, purchase new technology or our instrumentation. Our focus is really being able to provide.
Speaker Change: Technology and tools that help with capacity, challenges, is the exist. The flip side of capacity is obviously productivity.
Speaker Change: and practices are looking for ways that optimize, you know, workflow within the practice, support staff productivity, enable them to communicate with clients or pan owners and develop helps us do that.
And just your question on visit transit interesting we we try to highlight this pain medication pain mid visit effect in the numbers and as we noted that overall the minus 2.1 visits are actually supported by about 1 to 1 and a half.
percent of benefit from these payment visits which show up and the non-wallness visit, you know, the data analysis that we've done.
Speaker Change: and when you adjust for that,
Speaker Change: You know, roughly the wellness visits would be down about 4% and non-welness would be down about 3%. And so it's relatively more pressure on...
on non-womeness, actually, it's pain-med visits, but I would say it's indicative of a broader kind of challenge that we've had, related to the macro dynamics, which is...
is a certain overall. So I think, you know, again, somewhat more and while most, which is logical given that's relatively more discretionary, but it's a broader theme.
Speaker Change: Thank you.
The next question is from Erin Wright with Morgan Stanley.
Great, thanks. Good morning. Could you give us an update on TN30X, which is the timeline magnitude that you're thinking there in terms of the rollout and then, and just where should we think about in terms of, or what you think about in terms of price?
As this is sort of a premium cancer screening wellness type of platform and any sort of early feedback on your kind of pilot testing or as you kind of talk to customers about the opportunity particularly in the initial offering and came in and so much thanks.
Speaker Change: Yeah, thank you. It's good morning, Aaron. We could get you to work on really making nice progress.
and I'd ex-cats are diagnostics with lymphoma. We're still targeting at 20-25 launch from both of us.
Speaker Change: Price as well as Tartarun, time standpoint we see it as a...
is an appropriate wellness screening, really being able to target young group at Adrest Dogs as well as older dogs, the feedback from keeping leaders and oncologists. It has been Ex-Lud, so we're...
Speaker Change: and we continue to fully develop the product.
Speaker Change: Validate the testing.
Platforms Collect Data.
and I really look forward to being able to.
Speaker Change: built a market. We know that.
Speaker Change: is a major pain point today in terms of being able to detect cancer earlier than what's currently done. When you can detect cancer earlier, obviously the therapeutic options you have are more numerous and more effective.
Okay, thanks and then just on the reference lab of general I know you touched on a little bit on it before but in terms of kind of the performance and the quarter how we should think about the quarterly progression any sort of changes from a competitive landscape standpoint at all and then also just kind of your strategy whether it's turn around times and service levels and overnight testing and that kind of stuff is anything you know change in terms of how you're kind of contracting or working with your customers on the reference laboratory side. Particularly and just kind of inherently lower volume and environment. Thanks.
Speaker Change: We, you know, Aaron, we don't see any change in the competitive dynamic. We track that very closely. You know, we look at net new business gains, which have been positive.
for the quarter and for the year we look at retention levels which remain very high in the reference labs as Brian indicated earlier. We do see volume growth.
Speaker Change: and the Reference Lab, the differentiation around the overall menu, the Co-Anagin and the whole Reedle Health Panels
and Beckinac Ploss, the coming-itics, cancer, diagnostics. We think it is the position us really well. I think the corporate contract extensions and expansions I talked to.
I spoke about really speak to the differentiation of our reference lab business corporates as well as independent practices, water partner with us and putting together win-win partnerships is part of our strategy.
Speaker Change: Thank you.
Speaker Change: The next question is from Brandon Vazquez with William Blair.
Thanks for taking the question. I had to, they're both kind of related to kind of and market volumes and so I'll maybe just ask them both of them.
The first one is part of your snapshot. You guys also disclose the frequency and utilization metrics. Maybe X-Price if you look at that.
Still a little depressed. I always tend to think of those as things that you have a little bit more control over versus the bad visit volumes.
and maybe just talk about within frequency and utilization what levers do you guys have that you could pull on as we go into 25 to help offset some of the weaker bet as it grows. And then the second follow up on bet is it's just around this team medication had when you guys are talking about can you clarify this is simply.
The headwind that you're talking about is simply looking at the visible yums are actually worse than they are. Or is the impact that less NSAIDs could now switch into injectables means that less diagnostic tests are being done for paid medication. Thank you.
Speaker Change: So, maybe I can clarify the last point and it provides a little bit of data inside on your frequency and utilization question that Jake can expand on.
What we're seeing in the data is that there are a number of visits, particularly older pets.
that are related to pain medication more recently, particularly follow-up visits where the pets are being brought in.
They're typically isn't a diagnostic, there's an administration of the pain medication. And that is with the ramp of these pain meds, particularly over the last few quarters, that's been a pretty meaningful positive contributor to visit growth, but obviously doesn't.
Speaker Change: Benefit Arbusus in terms of you know, driving diagnostics. So we're trying to highlight is that...
That minus 2% on clinical visits is really for our business, you know, minus 3 to 3.5% in terms of a business that drive diagnostics.
Speaker Change: When you turn to the frequency and the utilization side, what's interesting is adjusting for those dynamics.
Frequency is actually up, so for visitors, for pets that are coming into the clinic we think it's
and the 50 basis points might run as much as the minus 50 basis points we show. And it actually, we see increases in utilization as well, for visit. I'll be at a moderated basis from what we've seen historically, but it's continuing to be positive.
You know, that's kind of the backdrop, I think there is a, you know, a specific dynamic as it relates to some of the metrics that that our investors focus in on and we focus in on. We think the underlying dynamics within the clinic are very healthy. It's really a visit challenge for us, but you're Jake and talk more about this.
Yeah, so the way we, from a strategic standpoint, influence both frequency and utilization is really through innovation and our commercial model. The innovation has both direct and leveraged impacts.
Speaker Change: You know in terms of being able to drive casting, obviously with in view and we begin shipping in view that they'll use cartridges and concealables and that drives.
Utilization but also our programs, our marketing programs that place instruments through IDX 360, really inspired use of the reference labs in RAP and ASA and our software businesses.
So we think that over time and we've shown this over time that historically, where you bring innovations that solve the most challenging, but critical in business problems.
Speaker Change: that customers end up fan earrings end up using diagnostics because it's really foundational in terms of driving the medical services and care management approaches within their clinics.
The New Year's Day.
The next question is from David Westenberg, with...
Speaker Change: Piper Chandler.
Speaker Change: and the other one.
Hi, thanks for taking the question. So I'm going to unpack a couple of that on the reference lab and then on the pain drug visit and ultimately what I'm trying to get to is potential utilization of acceleration probably next year maybe year after but.
The differential between consumables and Reffen Flab, we haven't seen that big of a gap since 2018.
is there a way maybe veterinary groups are thinking about changing the way they're thinking about diagnostics perhaps using inside lab more is a strategy to generate more diagnostics and again I'm only saying that because we're seeing the biggest gap that we've seen you say explain some of that stuff including days and then also on the the pain drug impact
We've seen side-up point, it's been around since 2007.
is been about.
About half is much of an impact on business, but still been an impact on visits. Now, elderly patients are more likely to be sold to diagnostic, so you would think that, you know, maybe there's a, as you see this captive audience.
and we talked about it in our customers. They love this captive audience.
So is there maybe a longer tail impact to increase diagnostics because now you have the elderly patient? Again, I would like, I'm trying to focus this question on utilization of diagnostics maybe next year as we build on some of these trends. Thank you.
Good morning, David. Let me just talk about the Econ Clinic versus the reference lab.
Model Week, we don't see actually a modality.
Speaker Change: Chef, I think a number of things influenced that obviously wellness visits as I called out is primarily a reference lab sandout modality, but just in terms of overall use it's based on
is a situational conditions with the pet. If the pet comes in and is non-well or a cute condition, then there is a pan to do the inclinic testing so that it gets to a...
You know, interpretation quickly. In other cases, if it's a specialty test, they'll send that out. But we haven't seen, we haven't seen a mixed shift above and beyond.
Speaker Change: You know the wellness visit trend that may be impacted by
and the overall macro considerations. In terms of the pain medication, the point that I would highlight is, we haven't seen it for those patients coming in.
The practice that are getting, let's say, pain medication primarily, let's focus on dogs, primarily older dogs and we haven't seen any impact on the use of diagnostics so we don't think there's...
is a substitution, you know, effect or potentially even driving more diagnostics in those cases if that's what you were getting at.
And Dave, just here your question on utilization and utilization drivers over time. I know you're familiar with this, but we've highlighted.
Frequently in our long term strategic discussions, the metric of blood work inclusion in diagnostics.
Dad for a very long period of time has accelerated of 50 basis points. We saw that.
I'm going into the pandemic to actually accelerate it through the pandemic and what we seem more recently in this transition post-pandemic period with some of the macro headwinds is it's sustaining, it's just not growing at the 50 basis points.
Speaker Change: That's a 200 basis point
Speaker Change: wrote up side if we can get back to the 50 basis point expansion for our US business and
Speaker Change: 150 basis points globally. That was highlighted in our investor-day discussion.
You know, we're encouraged that it's just painting so well with some of the macro dynamics going on and building off of the accelerated road that we saw there in brand pandemic and we feel very confident in our ability to influence that over time as we've done for decades and see that a central tour of one from research.
So, we'll now conclude the Q&A portion of the call thank you for your participation this morning. Once again my pleasure to share how I'd executed against our organic growth strategy while delivering excellent financial results in the third quarter.
Speaker Change: The companion animal diagnostic sector remains in attractive space supported by long-term, global sector that growth drivers.
and a significant opportunity to enhance the others' care. I'd like to encourage the current innovation cycle and effective customer engagement playbook that position us well to lead the penetration of this opportunity. I look forward to sharing more updates with you on our solid progress. So at that, we'll conclude the call. Thank you.
This concludes today's call. Thank you for your participation. You may now disconnect.