Q4 2024 IDEXX Laboratories Inc Earnings Call
Speaker Change: Good morning and welcome to the IDEX Laboratories fourth quarter 2024 earnings conference call.
As a reminder, today's conference is being recorded.
John Ravis: Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer, Brian McKeon, Chief Financial Officer, Andrew Emerson, Senior Vice President, Corporate and Companion Animal Group Finance, and John Ravis, Vice President, Investor Relations.
John Ravis: I'd also like to preface the discussion today with a caution regarding forward-looking statements.
John Ravis: 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 Ravis: Additional information regarding these risks and uncertainties is available under the forward-looking statements notice in our press release issued this morning, as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the investor relations section of our website, IDEX.com.
John Ravis: 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.
John Ravis: To allow broad participation in the Q&A, we ask that each participant limit their questions to one, with one follow-up as necessary. We appreciate you may have additional questions, so please feel free to get back in the queue, and if time permits, we'll take your additional questions.
John Ravis: 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, everyone, and welcome to our fourth quarter earnings call. Today, I'm pleased to review our Q4 and full year 2024 financial results.
Speaker Change: Andrew Emerson, who will be assuming responsibility as IDEX's CFO on March 1st, will take you through the details of the company's outlook for 2025.
Speaker Change: Revenue increased 6% organically supported by 7% organic gains and CAG diagnostic recurring revenues.
Speaker Change: Operating profits increased 7% as reported and 8% on a comparable basis, benefiting from solid gross margin gains which supported operating margin performance at the high end of our guidance range.
Speaker Change: We also saw positive impacts from increased stock-based compensation activity, which benefited our effective tax rate.
Speaker Change: These factors supported delivery of $2.62 in EPS and Q4 of 10% on a comparable basis.
Speaker Change: IDEX execution drove solid expansion of our business for the full year 2024.
Speaker Change: This is reflected in 7% four-year organic growth and CAG diagnostic recurring revenues.
Speaker Change: 9% growth in our global premium instrument install base, 11% organic gains in recurring software and digital imaging revenues, and 11% organic growth in our water business.
Speaker Change: We delivered excellent full-year financial performance in 2024, supported by comparable operating margin gains at the high end of our long-term annual improvement goals.
Speaker Change: Foyer EPS of $10.67 per share, which includes $0.56 per share of negative impact related to a discrete litigation expense accrual, increased 12% on a comparable basis, including 2% of negative growth impact from the lapping of a 2023 customer contract resolution payment.
Speaker Change: These results were achieved as we successfully advanced our innovation-driven growth strategy and worked through greater-than-expected sector and macro headwinds.
Speaker Change: As Andrew will discuss, this performance sets a solid foundation for our business to build upon as we enter 2025.
Let's begin with a review of our 2024 results.
Speaker Change: Fourth quarter organic revenue growth of 6% reflected solid gains across IDEX's major business segments, including 6% organic growth in CAG, 7% organic gains in LPD, and 9% organic growth in water.
Speaker Change: Worldwide CAG diagnostic recurring revenue increased 7% organically in Q4, including benefits from improved volume growth trends.
Speaker Change: Results were supported by average global net price improvement of 4% to 4.5%, with US net price realization of approximately 3.5%.
Speaker Change: As noted in our last earnings call, U.S. net price realization includes impacts from the successful extension and expansion of three major customer agreements in 2024, which will provide long-term incremental volume growth benefits for IDEX.
Speaker Change: U.S. CAG diagnostic recurring revenue increased 4% organically in Q4, net of a 1% negative growth impact from fewer equivalent selling days.
Speaker Change: IDEX execution drove approximately 2% U.S. volume growth in the quarter, normalized for equivalent days.
Speaker Change: These results were supported by sustained solid new business gains, high customer retention levels, and relatively higher gains in diagnostic frequency and volume utilization per clinical visit.
Speaker Change: IDEX achieved a solid 800 basis point normalized growth premium compared to US clinical visit growth levels in the fourth quarter.
Speaker Change: We continue to work through pressure on U.S. same-store clinical visit levels, which declined nearly 3% in Q4 and 2% for the full year in 2024.
Speaker Change: This has been the primary constraint on IDEX's recent growth, reflecting transitional sector and macro impacts following the accelerated expansion of pet healthcare during the pandemic.
Speaker Change: IDEX fourth quarter performance was supported by strong global growth and consumable revenues. IDEX vet lab consumable revenues increased 12% organically reflecting double-digit gains in US and international regions normalized for equivalent days effects.
Speaker Change: Consumable gains were supported by a 9% increase in our global premium instrument install base in 2024, reflecting solid gains across our Catalyst premium hematology and CETiV platforms.
Speaker Change: For the full year 2024, we achieved approximately 18,500 premium instrument placements with excellent quality, reflected in sustained high new and competitive catalyst placements.
Speaker Change: In the fourth quarter, we placed 4,625 premium instruments down 12% from high prior year levels.
Overall CAG instrument revenues also declined 12% organically in Q4.
Speaker Change: Quarterly placement results were supported by strong gains in Centerview and continued expansion of ProSight 1.
Speaker Change: We also initiated shipments of IDEX InView DX in the quarter, supporting strong comparable EVI gains, including the projected value of InView pre-orders.
Speaker Change: Rapid assay revenue was flat on an organic basis in Q4. Rapid assay results were constrained by pressure on U.S. wellness visits as well as by the addition of the pancreatic lipase slide to our catalyst menu, which we estimated to be a 4% headwind to Q4 revenue growth.
Speaker Change: Global lab revenues expanded 4% organically in Q4. Reference lab results in the quarter are supported by solid normalized volume growth in U.S. and international regions and net price gains.
Speaker Change: Reference Lab price gains were moderated in Q4 by near-term impacts from major new customer agreements, which will benefit long-term Reference Lab growth.
Speaker Change: CAG veterinary software services and diagnostic imaging revenues increased 7% organically in Q4 compared to strong prior year levels.
Speaker Change: Results continue to be supported by solid growth and recurring revenues and ongoing momentum in cloud-based software placements.
Speaker Change: In other business segments, water revenues increased 9% organically in Q4 compared to strong prior levels, driven by continued solid gains in the U.S. and Europe.
Speaker Change: Livestock poultry and dairy revenues increased 7% organically Q4, supported by solid gains in our US, Europe, and Latin America regions.
Speaker Change: Turning to the P&L, Q4 operating profits increased 7% as reported and 8% on a comparable basis, supported by gross margin gains.
Speaker Change: Gross profit increased to 8% as reported and 9% on a comparable basis.
Speaker Change: Gross margins were 59.8% of 130 basis points on a comparable basis, adjusting for approximately 10 basis points of positive FX impact.
Speaker Change: Operating expenses were up 10% as reported and 9% on a comparable basis in the quarter, reflecting increases in R&D spending aligned with advancing our innovation initiatives, including our new instrument platforms.
Speaker Change: For the full year 2024, operating margins were 29%, an increase of 60 basis points on a comparable basis, including an approximately 40 basis point negative impact from lapping a customer contract resolution payment in 2023.
Speaker Change: Foyer operating margins included 160 basis points of negative impact related to a discrete litigation expense accrual recorded in the second quarter.
Speaker Change: Q4 EPS was $2.62 per share, up 10% on a comparable basis.
Speaker Change: In Q4, EPS benefited from a lower effective tax rate, including $0.13 per share in tax benefits from share-based compensation activity and $0.06 per share benefit from a non-recurring tax reserve release related to lapping of an applicable statute of limitations.
Speaker Change: Foreign exchange had limited impact on Q4 and four-year revenue growth. For the four-year foreign exchange reduced operating profits by five million dollars and EPS by five cents per share net of six million dollars in hedge gains.
Speaker Change: Free cash flow was $808 million for 2024, or 91% of net income, aligned with our guidance and long-term goals.
Speaker Change: Capital spending was $121 million for the full year, or approximately 3% of revenue.
Speaker Change: We allocated $249 million to repurchase 564,000 shares in the fourth quarter. For the full year, we allocated $859 million to repurchase 1,760,000 shares.
Speaker Change: Our balance sheet is in a strong position. We ended 2024 with leverage ratios of 0.7 times gross and 0.4 times net of cash.
Speaker Change: That concludes our financial review. Andrew will now walk you through our initial 2025 financial outlook.
Andrew Emerson: Thank you, Brian. Turning to our 2025 full-year outlook, IDEX is planning to deliver solid organic revenue growth and profit gains led by strong execution and benefits from new innovation.
Andrew Emerson: On an organic basis, this reflects a growth range of 6% to 9% overall, supported by 5% to 8% organic growth in CAG diagnostic recurring revenues.
Andrew Emerson: At current exchange rates, we expect foreign exchange to have a 2% negative impact on full year revenue growth.
Andrew Emerson: The outlook includes assumptions for declines in U.S. same-store clinical visit growth levels with the midpoint reflecting a similar rate of a decline seen in 2024.
Andrew Emerson: These targets incorporate continued solid global growth benefits from IDEX execution drivers, including new customer gains and increases in testing utilization supported by IDEX innovations.
Andrew Emerson: The higher end of our CAG Diagnostic Reoccurring Revenue Growth Outlook captures the potential for improved sector visit and same-store growth trends, while the lower end of the range calibrates for further potential effects of macroeconomic conditions.
Andrew Emerson: Our revenue growth outlook includes approximately $50 million of projected IDEX InViewDX instrument revenue aligned with 4500 placements.
Andrew Emerson: Jay will discuss progress against our InView DX launch in his comments.
Andrew Emerson: Our reported operating margin outlook for the full year 2025 is 31% to 31.5%.
Andrew Emerson: On a comparable basis, this reflects an outlook of 30 to 80 basis points of improvement year-over-year net of 160 basis point operating margin benefit related to the lapping of the discrete litigation expense recorded in the second quarter of 2024.
Andrew Emerson: We're planning for solid gross margin gains on a comparable basis in 2025, supported by growth in CAG diagnostic recurring revenues, benefits from lab productivity initiatives, and expansion of our high-margin, cloud-based software business.
Andrew Emerson: Net of a 6% EPS growth benefit from the lapping of the Q2 2024 Discrete Litigation Expense.
Andrew Emerson: and includes a six cents per share headwind from higher taxes related to a non-recurring tax reserve release during the fourth quarter of 2024.
Andrew Emerson: Our EPS Outlooks also includes $42 million of net interest expense at prevailing rates.
Andrew Emerson: Foreign exchange is expected to have a negative impact of 21 cents year over year at the rates disclosed in our press release net of established hedge positions.
Andrew Emerson: In terms of sensitivities to changes in foreign exchange rates, we project a 1% change in the value of the U.S. dollar would impact the full-year reported revenue by $15 million and operating income by $5 million net of hedged positions.
Andrew Emerson: Our 2025 free cash flow outlook is for net income to free cash flow conversion ratio of 85 to 90% aligned with our long-term goals.
Andrew Emerson: This reflects estimated capital spending of approximately $160 million, or about 4% of revenues.
Andrew Emerson: The outlook incorporates increased capital deployment aligned with 1.5 billion dollars towards share repurchases or approximately 4% of our current equity market capitalization.
Andrew Emerson: This reflects our high confidence in IDEC's growth potential, including continued strong execution and advancement of our innovation agenda.
Andrew Emerson: Regarding our Q1 outlook, we're planning for overall organic revenue growth of 4% to 6% with similar gains in CAG diagnostic reoccurring revenue net of a one to one and a half percent days headwind.
Speaker Change: This factors in U.S. clinic visit trends more aligned with Q4 2024 and pricing benefits at the low end of our full year price realization range as we work through the major customer agreements noted by Brian.
Speaker Change: Reported revenue growth of 2% to 4% includes approximately 2% negative impact from foreign exchange at current rates.
Speaker Change: Our Q1 reported operating margins are planned for 30.2% to 30.6%.
Speaker Change: This reflects moderate compression and comparable margins in the quarter compared to high prior year levels and reflects investments to support recent and upcoming product launches.
Speaker Change: Overall, we're well positioned to build on our solid 2024 financial performance with continued strong execution and robust set of new product launches during 2025.
Speaker Change: This concludes our guidance update and I will now turn the call over to Jay for his comments.
Good morning, and thank you, Andrew.
Speaker Change: IDEX delivered another strong quarter to close out 2024, capped with the additional placements of IDEX in VUDX.
Speaker Change: Our results this quarter exemplify the resilience of our business model, built on the foundation of customer-centric innovation, high-touch commercial execution, and a steadfast commitment to growth by advancing the standard of care in veterinary medicine.
Speaker Change: This year, we celebrated significant milestones, including the highly anticipated launch of IDEX and VUE DX, a groundbreaking cellular analyzer redefining slide-free point-of-care testing.
Speaker Change: We recently announced the launch of IDEX CancerDX with canine lymphoma, a transformative oncology screening, and an aiding diagnosis panel that will expand over time to address the most common canine cancer.
Speaker Change: We're also concurrently commercializing three new products and services as part of our Catalyst Technology for Life platform and test menu and enabling software. Introductions include pancreatic lipase testing, a single slide solution already embraced by thousands of clinics.
Speaker Change: SmartQC, which enables very easy monthly calibration on our chemistry platform, and an updated IDEX stat lab station with a more modern, intuitive interface supporting workflow efficiencies.
Speaker Change: present Customer Retention Levels Across Major Testing Modalities and Sustained Adoption Levels of Diagnostic Testing Utilization Near Post-Pandemic Highs.
Speaker Change: High placement levels across our core premium instrument platforms drove a 9% growth in our premium instrument install base.
Speaker Change: The team also delivered very strong year-on-year EBI gains when incorporating benefits from nearly 1,600 global pre-orders for IDEX InViewDX, which will benefit our business over the coming year.
Speaker Change: 2024 also saw the extension and expansion of three major customer agreements, which will provide solid volume gains for our reference lab business.
Speaker Change: These important contractual renewals highlight the value IDEC solutions bring to our customers, supporting their practice revenue growth through highly important diagnostic testing categories.
2024 was also a pivotal year for our software business.
Speaker Change: With double-digit growth in our cloud-native PIMS placements and the launch of our pet-owner engagement solution, Velo, we are helping clinics bridge the gap between patient care and operational efficiency.
Vowel, now adopted by nearly 600 practices.
Speaker Change: has enhanced pet owner engagement by streamlining communication and driving increased clinical visits and diagnostic frequency.
Speaker Change: These advancements highlight the expanding role of software and unlocking the full potential of diagnostics, while delivering a seamless experience for veterinarians and pet owners alike. This strong execution was delivered in a dynamic, macro, economic, and sector environment.
with continued pressure and clinical visits.
Speaker Change: For pets visiting U.S. clinics, pet owners continue to demonstrate interest in a higher standard of care, reflecting the strength of the pet owner bond and the prioritization of pet health.
Speaker Change: Diagnostics play a key central role in enabling better medical outcomes, as nearly half of clinical visits include some form of diagnostic testing.
Speaker Change: The growth and the use of blood work in preventive screening highlights the value pet parents place on proactive care, driven by advancements in technology and awareness of health benefits.
Speaker Change: Our commercial strategy is to support this positive trend through the use of preventive care marketing programs like Simple Start and testing innovations such as IDEX Cancer DX, which will be included at attractive prices to inspire pull-through.
Speaker Change: IDEX's commercial execution continues to be a cornerstone of our success.
Speaker Change: reflecting the deep expertise, commitment, and customer focus of our teams around the globe.
Speaker Change: Our partnership approach has yielded exceptional customer retention rates of over 97%, ensuring that practices continue to see IDEX as an indispensable partner in their growth and efficiency goals.
Speaker Change: Customers trust IDEX to help them navigate challenges of staffing and visit trends.
Speaker Change: Our nearly double-digit premium instrument in cell-based growth is driven by robust new placements across chemistry, hematology, and CytoView platforms.
Speaker Change: as well as the first placements of IDEX in VUE-DX. We also continue to make strong progress in placing our IDEX VetLab suites in competitive and greenfield accounts.
Speaker Change: a focus area since we get the full growth benefit of consumables usage.
Speaker Change: Customers are hungry for point-of-care technology that supports their medical mission with fast, real-time results, while minimizing workflow bottlenecks with innovations such as Load & Go capability, a common, easy-to-use interface, and instrument uptime measured in years.
Speaker Change: An additional benefit is that our large, rapidly growing installed base of over 74,000 chemistry analyzers, for example, allow for rapid global adoption of new testing innovations such as pancreatic lipase, the 10th such menu extension in a bit over 12 years.
Speaker Change: Menu extensions such as pancreatic lipase help support healthy volume premium to the clinic visit baseline.
Speaker Change: Our international region showcased strong performance in 2024, contributing significantly to our growth story. Double-digit expansion of our premium installed base outside the U.S. underscored the benefits of our targeted global commercial investments over the past three years.
but also driven consistent diagnostic utilization gains.
Speaker Change: particularly in the Europe and Asia-Pacific regions, where we continue to see on-tap potential. Spotlighting our European regions' very strong performance, we saw the seventh consecutive quarter of double-digit CAG diagnostics recurring revenue growth with IDEX-VETLAC consumables growth in the high teens.
Customer satisfaction remains at the heart of our commercial strategy.
Supported by sustained sector-leading levels of engagement and trust.
Speaker Change: I'd access investment in areas such as VetConnect plus feature expansion that now gives the customer the ability to access reference lab sample turnaround time and order status information.
Speaker Change: This focus on customer success not only drives loyalty, but also ensures that IDEX remains the go-to partner for diagnostic solutions.
Speaker Change: The launch of IDEX in VUE-DX has been one of the most exciting developments of 2024, marking a new era in point-of-care diagnostics. Designed as a technology-for-life platform, in VUE-DX combines advanced optics, artificial intelligence and a slide-free workflow.
Speaker Change: to deliver transformative diagnostic insights without parallel to easy use. The initial menu focuses on ear cytology and blood morphology, taps into two clinically well understood high volume use cases that benefit from automation and a step up in testing consistency and performance.
Speaker Change: International interest has been similarly robust as we begin taking orders in select geographies in Q4.
Speaker Change: As I mentioned previously, we initiated a controlled launch of IDEX and VUDX in Q4.
Speaker Change: and to ensure a best-in-class customer experience, we will gradually ramp up placements through 2025. Early feedback from customers, both in the customer experience trials and for the initial placements, have been exceptionally positive.
Speaker Change: Customers are simply amazed with how easy the analyzer is to use, eliminating the need for complex slide preparation or interpretation, with results in minutes.
Andrew Emerson: Underpinning the financial guidance, Andrews Shared is a placement target for 4,500-plus in-view placements over the course of the year, as we march towards our 20,000 placement goal over five years.
Andrew Emerson: IDEX operations and supply chain teams have made outstanding progress ramping manufacturing to support this level of placements.
Andrew Emerson: while our field service representative team has been expanded and trained to provide critical installation capacity to support both the interview ramp and continued growth of our core instrument platforms. The moment is upon us to bring this transformative analyzer to our global customer base.
Andrew Emerson: Looking ahead, we remain on track to expand IDEX-CWDX's capabilities further with the addition of fine needle aspirate or FNA testing for lumps and bumps later in 2025, unlocking significant opportunity in oncology diagnostics.
Andrew Emerson: We're excited to have announced that VMX, the March launch of IDEX Cancer DX panel with lymphoma.
Andrew Emerson: A pioneering advancement in veterinary oncology, this innovative screening solution represents a significant step forward in companion animal health care, addressing a critical need for early cancer detection and as an aid in diagnosis in canine patients.
Andrew Emerson: The ADDxCancerDx panel has breakthrough cost, performance, and turnaround time attributes for early stage cancer diagnostic screening and as an aid in diagnosis tests. Priced for as little as $15 per test when included as part of select diagnostic panels.
Andrew Emerson: This will change how and when canine cancer is detected and its early diagnosis will likely change how cancer care is managed with positive patient implications for the support of longer, healthier lives.
Andrew Emerson: Given the performance, cost, and turnaround time attributes of the Cancer DX panel, the opportunity is to inspire a much broader inclusion of cancer screening as an essential part of the preventive care blood work.
Andrew Emerson: The Cancer DX panel will initially launch with lymphoma detection, one of the most common and treatable cancers in dogs.
Andrew Emerson: Over the next three years, the panel will expand to include the six most prevalent canine cancers, which collectively account for over 50% of cancer cases in dogs. This expanded menu will tap into an estimated $1.1 billion addressable opportunity, underscoring the potential of this diagnostic innovation.
Andrew Emerson: Our software ecosystem plays a pivotal role in supporting veterinarians by enhancing clinic efficiency, optimizing workflows, and fostering deeper connections with practices and pet owners.
Andrew Emerson: With double-digit growth in cloud-native placements, software remains a critical enabler of diagnostic adoption and practice success, reinforcing our position as a leader in vertical SAS offerings tailored to veterinary needs.
Andrew Emerson: One of the year's standout achievements was the expansion of Vell, our pet owner engagement application.
Andrew Emerson: Designed to address the growing demand for seamless communication and approved visit outcomes
Andrew Emerson: Vowel has been embraced by nearly 600 practices at IARET, doubling its user base since Q3.
Andrew Emerson: Early results from the app's deployment have been highly encouraging, with participating clinics reporting increased clinical visits, higher diagnostic usage, and improved revenue. This underscores Velo's ability to address critical workflow pain points while fostering stronger relationships between veterinarians and pet owners.
Andrew Emerson: We have meaningfully increased development resources and investment in Velo through 2024 and now in 2025. Looking ahead, Velo's development roadmap promises even greater value with upcoming enhancements focused on streamlining communications,
Andrew Emerson: expanding engagement tools, including the ability to personalize messaging and integrating advanced analytics. Customers appreciate our commitment to an integrated diagnostics and software suite and the way it unlocks new opportunities for growth.
Andrew Emerson: Beyond Velo, we continue to expand our broader software portfolio. We've placed a record number of cloud-native PIMs, expanding that installed base by 20% year-over-year, as our offerings remain a top choice for clinics seeking modern, scalable solutions.
Andrew Emerson: We finish the year with 60% of our PIMs installed based in the cloud.
ahead of our estimates shared at Investor Day in August.
Andrew Emerson: IDEX Webpacks, a cloud-native imaging workflow engine, also experienced double-digit subscriber growth.
Andrew Emerson: Demonstrating its relevance in addressing key pain points such as dental imaging workloads. These advancements not only simplify complex processes, but also allow clinicians to spend more time focusing on patient care.
Andrew Emerson: The integration of diagnostics and software remains a cornerstone of IDEX's value proposition.
by providing intuitive, efficient, and comprehensive tools.
Andrew Emerson: We empower clinics to unlock new levels of performance while delivering superior care to their patients. As we move into 2025, our focus on software innovation will continue to drive recurring revenue growth and deepen our partnerships with veterinary practices worldwide.
Andrew Emerson: As we turn the page on 2024, IDEX remains steadfast in its purpose to create exceptional, long-term value for our customers, employees, and shareholders.
Speaker Change: by enhancing the health and well-being of pets, people, and livestock. I extend my deepest gratitude to our nearly 11,000 employees whose dedication and hard work have made these accomplishments possible.
Andrew Emerson: Together, we have delivered robust financial results while setting the stage for a promising 2025 and beyond, supported by a new wave of IDEX innovations.
Speaker Change: I'd like to thank Brian McKeon for the exceptional contributions he has made over a 20-year IDEX career.
Speaker Change: Spanning, both as a member of our board and over the last 11 years as IDEXA CFO.
Speaker Change: As previously announced, Brian will be stepping down from the role as CFO as of March 1st.
Speaker Change: One of Bryan's many contributions has been to build a world-class finance team.
Speaker Change: and develop future leadership talent. It's my great pleasure to welcome Andrew Emerson, who will become our new CFO as of March 1st.
Speaker Change: Andrew brings more than 20 years of finance experience to the health care industry in roles of increasing responsibility, including over nine years at IDEX working side-by-side with Brian throughout this time. He is well-versed in our business, our sector, and our strategy, and he is set to contribute on day one.
Speaker Change: Brian will remain with IDEX in a senior advisory capacity until his retirement date of June 1st in order to help ensure a smooth and seamless transition for Andrew.
Speaker Change: With that, I'll turn it back over for Q&A. Thank you.
Speaker Change: 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 the signal to reach our equipment. Again, press star 1 to ask a question.
The first question is from Erin Wright with Morgan Stanley.
Speaker Change: Great, thanks. And Brian, it's been great working with you over the years and congrats on your retirement and looking forward to working with you too, Andrew, as we kind of move forward.
Speaker Change: and what his guidance is to them on that front. Thanks.
Dx platform.
Speaker Change: Yeah, so I'll take it take it from there. Good morning
Aaron Sass is closed. We began shipping.
Speaker Change: in Q4, I'd say that customer interest has been very high.
Speaker Change: Pre-orders that that I indicated, you know for about customer lens what customers are responding to
Speaker Change: some of the things that we've been talking about, the key attributes of the system, starting with the menu.
Speaker Change: Well integrated into the workflow of how they practice they also
Speaker Change: launch and approach. We follow a very tried-and-true controlled launch process for all our analyzers.
In fact, this is my fourth.
Speaker Change: Premium Instrument launch since being at IDEX and it starts with the aim of delivering an exceptional customer experience It's what they expect of us. They know we have a world-class
Speaker Change: Product development organization. You know, there's always tweaks that come up as part of any launch. What I would say is we're making excellent progress. We plan to deliver the 4,500-plus.
in 2025, as I indicated, and that'll wrap.
Speaker Change: over the year. You know, manufacturing and installation capacity are ahead of plan, and that puts us in a strong position to achieve the plan, and customers aren't waiting to answer.
Speaker Change: Your specific question around, are they waiting for FNA to take delivery? They're not.
Speaker Change: Okay. Okay, great. That's helpful. And then, does your guidance assume any sort of notable changes from a customer account standpoint at Point of Care or RefLab?
Speaker Change: Presumably, you're still lapping through some of that repricing action taken, I guess, in 2024. Can you remind us when you fully lapped that and can you help us quantify how that headwind lingers into 2025? Is it an incremental headwind that net or less of a headwind in 2025?
Speaker Change: We have strong momentum in terms of our ability to continue to work with our customers and expand our install base both internationally, where we saw double-digit growth, as well as globally, where we had a 9% install base expansion for 2024.
Okay, great. Thank you.
The next question is from Chris Schott with J.P. Morgan.
Speaker Change: Great, thanks so much for the questions. Just two on the 2025 guidance. First, can you just elaborate on the vet visit trajectory you expect from here? It sounds like from the prepared remarks down three percent or so in one cue, but can you just talk about the recovery and confidence and recovery from there?
Speaker Change: And the second question was just on U.S. versus ex-U.S. growth this year. Any notable kind of differences or trends that you're expecting as we think about the regions? Thank you.
Jonathan Mazelsky
Speaker Change: Good morning, Chris. Maybe just to spotlight our international performance. We've, as you know, invested
Speaker Change: fairly heavily in expanding our international commercial footprint over the last three plus years.
Speaker Change: A really strong execution, longer tenure, you know, in seat, and customer response that the innovations like ProSciOne and other solutions that help them practice good medicine.
Thanks so much.
Michael Riskin: The next question is from Michael Riskin with Bank of America.
Speaker Change: in the fourth quarter, you really saw wellness drop off pretty sharply.
of 2024.
impact from the consumer and the overall.
Speaker Change: Macro environment. But the interesting thing about the wellness is the inclusion of diagnostics actually went up.
So we saw a really nice premium growth.
Speaker Change: Very high quality and we benefited from that and we think you know with our IDEX cancer diagnostics panel included in wellness visits, you know, we'll continue to inspire potentially Pulse World on that end, too.
Speaker Change: Okay. All right. And then for my follow-up question, I don't think you really called this out in the prepared remarks, but I noticed that for the guide for 2025, Brian or Andrew, you guys are assuming a little bit more share buyback. I think you said 2% to 3% reduction in shares. I think most years you've sort of been in that 1% reduction. Just any additional color there in terms of the rationale for that? Thanks.
Jonathan Mazelsky
All right, thanks.
Speaker Change: As a reminder, if you would like to ask a question, please press star one. The next question is from John Block with Stiefel.
John Block: Thanks, guys. Good morning. It looks like the IDEX premium for the quarter, so, you know, in other words, 4224.
Speaker Change: was the Strongest of the Year. That was before the rollout of CancerDX and I mean essentially before InView for the most part. So can you just talk about what led to the uptick?
Speaker Change: for the premium in the quarter, you know, allowed you to arguably offset the down whatever was 2.9 in clinical and still put up some pretty good CAG DX recurring. That's specific to the to the fourth quarter 24 question, then I'll ask the follow-up.
Speaker Change: Hey John, it's Brian. As you pointed out, it was a very good quarter. Our best
Brian: Volume growth quarter of the year when you normalize for days. We saw very strong consumable growth
Brian: reflective of the the strong execution that we've seen throughout the year that that's enabled us to grow at a faster rate than the sector and as the team's pointed out I think the company's really well positioned to build on that heading into 2025 with it with the new innovations that will be coming.
Speaker Change: Jay, can you talk about your comfort in these pricing levels?
Speaker Change: that the consumer can absorb the likely increases. I think you're going to say we don't dictate price to the consumer, but you sort of do because the vet's not going to take it all on the margin, on their margin. And, you know, to Mike's previous question, do you think this higher pricing environment while providing a temporary fix
Speaker Change: is acting as a headwind as we continue to see this wellness slide and hence the pet owner avoid wanting to come in.
Speaker Change: for that wellness sticker shock. And then, you know, part B of a very disparate question is the 42 million in interest expense, can you just reconcile that? It just looks pretty high considering where we were in 24. Thanks guys.
Speaker Change: Yeah, let me talk about pricing and I'll turn it over to Andrew to talk about the interest expense.
and sector.
Speaker Change: Keep in mind wellness versus non-wellness pricing are different things. Typically, for a wellness visit, the veterinarian doesn't spend
Speaker Change: more than 5, 7, 10 minutes with the pattern. So they price that differently. And we offer a number of programs like compliance-based pricing, which I think positions it.
Speaker Change: through innovations. A lot of what we offer, for example, is complementary to the customer, whether it's VetConnect Plus, whether we add in, you know, tapes and systolic soft spur for fecal antigen. I think Cancer DX is a great example.
We're keeping that price very moderate at $15 plus.
Thank you.
where we've priced, we've seen it increase.
Speaker Change: as I just indicated, in the inclusion of diagnostics and wellness panels.
Speaker Change: very strong, you know, increase in Q4. So the quality of the visits and the quality of diagnostics inclusion, you know, has been growing fairly strongly. Andrew, do you want to address the...
Andrew Emerson: Yeah, Jon, just in terms of the $42 million on interest...
Brian Mckeon: That does align with the step up in terms of our planned buybacks of $1.5 billion. So, again, we've calibrated that based off of current rates. As Brian noted, we did just about $850 million in 2024. So there's an increased level there, and we've captured that in our interest expense cost.
Speaker Change: The next question is from Daniel Clark with LearRing Partners. Yes, thank you. I just had a quick clarification on InView. Are you still limiting preorders or are you fully allowing those now?
Speaker Change: Yeah, so we generally, we've opened the funnel in terms of what our field organizations can take in North America. I would say internationally, it's more limited and we'll continue to just offer it in select countries and throughout the year we'll revisit that.
Speaker Change: Okay, got it. Thank you. And then just a separate question. Was there any impact from weather that's worth calling out in terms of visit trends for 4Q or how you're thinking about 1Q? Thanks.
Speaker Change: Good morning, Dan. So, just in the fourth quarter, I think we had signaled on the last call that we anticipated about 50 basis points of weather associated with what we saw in early October. Yeah, as we head into Q1, you know, certainly we've seen some weather types of impacts, but at the end of the day, we've captured those in our outlook and, again, feel good about the guide that we presented today.
Speaker Change: The next question is from the Van P with B&B Paribas Exsang.
and you expect potential improvement in 2026.
Speaker Change: In terms of margin, should we still expect 2025 margin expansion to be still both margin-led? And can you discuss the SGMA and R&D this year with the in-view and cancer diagnostic launches and expansions? Thank you.
Speaker Change: Just to provide some, I'll cover the clinical visit, you know, trends.
Speaker Change: just to provide some additional color on that. We still think, you know, capacity constraints.
number of the corporate or enterprise.
speak to the desire to hide more.
Speaker Change: Yeah, Navon, just on the gross margin and breakout of OPEX, we didn't provide any explicit detail here, but overall what we're planning for is an operating margin improvement of 30 to 80 basis points on a comparable basis year-over-year, you know, the midpoint being about 50 basis points.
Speaker Change: I think, you know, you'll expect most of that to be gross margin led as we reinvest back into the business. Certainly, again, we feel good about the innovation cycle we have here and the potential for growth over time. We want to make sure we're making investments in the right areas in order to support that ultimately.
Speaker Change: Okay. I'd like to thank everybody for their questions this morning. We're now going to conclude our Q&A portion of this morning's call. It's been a pleasure to review another quarter and full year of strong IDEX results. So thank you again for your participation this morning, and we'll conclude the call.
Speaker Change: Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.