Q3 2025 IDEXX Laboratories Inc Earnings Call

Speaker #2: Good morning and welcome to the IDEXX LABORATORIES third quarter 2025 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, Andrew Emerson, Chief Financial Officer, and John Ravis, Vice President, Investor Relations.

Speaker #2: IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.

Speaker #2: 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.

Speaker #2: Which can be obtained from the SEC or by visiting the Investor Relations section of our website, IDEXX.com. During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP.

Speaker #2: 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.

Speaker #2: In reviewing our third quarter 2025 results and updated 2025 guidance, please note all references to growth, organic growth, and comparable growth refer to growth compared to the equivalent prior year period, unless otherwise noted.

Speaker #2: To allow broad participation in the Q&A, we ask that each participant limit their questions to one, with one follow-up as necessary. We appreciate you may have additional questions, so please feel free to get back into the queue, and if time permits, we'll take your additional questions.

Speaker #2: 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 Andrew Emerson.

Speaker #3: Good morning. I'm pleased to take you through our third quarter results and provide an updated outlook for our full year 2025 financial expectations. In terms of highlights in the quarter, IDEXX delivered strong financial results supported by outstanding commercial execution in our companion animal business, with benefits from recently launched IDEXX Innovations.

Speaker #3: Revenue increased 13% as reported and 12% organically, supported by over 10% organic growth in CAG diagnostics for recurring revenues, reflecting over 8% gains in the US and double-digit growth in international regions.

Speaker #3: We achieved another quarter of strong premium instrument placements, including over 1,750 IDEXX in-view DX analyzers, resulting in 71% organic growth of CAG instrument revenues.

Speaker #3: CAG diagnostics recurring revenue growth in Q3 was negatively impacted by declines in US same-store clinical visits of 1.2%, driven by ongoing macro and sector pressures.

Speaker #3: IDEXX's operating performance was excellent in the quarter, with comparable operating margin gains of 120 basis points, supported by gross margin expansion, which benefited from strong recurring revenue growth.

Speaker #3: High operating profit gains enabled earnings per share of $3.40 in the quarter, resulting in EPS growth of 15% on a comparable basis. We're increasing our full year revenue outlook by 43 million dollars at midpoint, with an updated range of 4,270,000,000 to 4,300,000,000.

Speaker #3: An outlook for overall reported revenue growth of 9.6% to 10.3%. Our updated full year overall organic revenue growth outlook is for 8.8% to 9.5%, with organic CAG diagnostics recurring revenue growth of 7.5% to 8.2%.

Speaker #3: These organic growth ranges represent approximately a 1% increase at midpoint to our previous guidance, supported by strong global execution in our CAG business. We're increasing our full year EPS outlook to $12.81 to 13.01 per share.

Speaker #3: Up $0.33 per share at midpoint, reflecting 12 to 14% comparable EPS growth. We'll discuss our updated 2025 financial expectations later in my comments.

Speaker #3: Let's begin with a review of the third quarter results. Third quarter organic revenue growth of 12% was driven by 12% CAG revenue gains, 7% growth in our water business, and 14% gains in LPD.

Speaker #3: Strong CAG results were supported by CAG diagnostics recurring revenue growth of 10% organically including average global net price improvement of 4 to 4.5% and benefits from CAG diagnostic instrument revenues increasing 71% organically aided by global placements of in-view DX.

Speaker #3: US organic CAG diagnostics recurring revenues grew 8% in Q3, supported by solid volume gains and a 4% benefit from net price realization. US same-store clinical visits declined 1.2% in the quarter, reflecting an IDEXX US CAG diagnostics recurring revenue growth premium to US clinical visits of approximately 950 basis points.

Speaker #3: Highlighting outstanding performance by the IDEXX teams. Q3 benefited from aging pets, with non-wellness visits declining only 30 basis points year over year, while wellness visits declined 2.5%.

Speaker #3: Health services continued to expand in the quarter, including increased diagnostic frequency, and utilization per clinical visit. For both well and non-wellness visits, as customers expand the use of diagnostics in their care protocols.

Speaker #3: International CAG diagnostics recurring revenue grew 14% organically in Q3, including approximately a 1% benefit, related to equivalent days. Revenue performance was driven by volume gains, including benefits of net new customers and same-store sales utilization.

Speaker #3: International regions have sustained strong growth on a day's adjusted basis for the past 10 quarters, highlighting the significant global opportunity as we invest in global commercial capabilities and expansions.

Speaker #3: IDEXX Innovation and Commercial Execution also delivered strong organic revenue gains across testing modalities globally in the third quarter. IDEXX VETLAB consumable revenues increased 16% on an organic basis in the third quarter, reflecting double-digit growth in both the US and international regions.

Speaker #3: Consumable revenue growth was supported by expansion of our premium instrument install base and expanded testing utilization, including benefits from recent product launches. In-view DX utilization is tracking well to our recurring revenue estimates previously provided of 3,500 to 5,500 dollars per analyzer, and we're excited for the upcoming launch of F&A, starting with mass cell tumor detection.

Speaker #3: CAG instrument placements increased significantly in Q3 compared to prior year levels. Total premium placements reached 5,665 units, an increase of 37% year-over-year.

Speaker #3: The quality of placements remains excellent, reflected in 1,203 global new and competitive catalyst placements, including 347 in North America. Globally, we placed 1,753 IDEXX in-view DX instruments, as we continue to meet customer demand for this highly innovative analyzer.

Speaker #3: Ongoing progress of placing instruments combined with high customer retention levels, supported a 10% year over year growth in our premium instrument install base in the quarter.

Speaker #3: IDEXX global reference lab revenues increased 9% organically in Q3. Up approximately 4% growth from the second quarter, driven by solid volume growth across regions, including expanded same-store volume benefits and net new customer gains.

Speaker #3: IDEXX cancer DX continues to gain further traction in North America, reaching nearly 5,000 customers through October. Global rapid assay revenues declined 5% organically in Q3.

Speaker #3: Rapid assay results continue to be impacted by customers shifting pancreatic lipase testing to our catalyst instrument platform, which we estimate to be a 6% headwind in Q3 revenue growth.

Speaker #3: Veterinary software and diagnostic imaging organic revenues increased 11%, driven by recurring revenues, which grew 10% during the quarter. Solid growth in veterinary software was supported by strong double-digit growth of cloud-based PIMS installations and the adoption of related recurring services.

Speaker #3: We also saw continued strong double-digit year over year growth of diagnostic imaging system placements in the quarter. Water revenues increased 7% organically in Q3, with strong growth in international regions and solid mid-single-digit growth in the US.

Speaker #3: Livestock poultry and dairy revenues increased 14% organically in the quarter, with double-digit gains across most regions. Turning to the P&L, strong revenue growth enabled 16% comparable operating profit gains.

Speaker #3: Gross profit increased 15% in the quarter, as reported, and 13% on a comparable basis. Gross margins were 61.8%, up approximately 80 basis points on a comparable basis.

Speaker #3: These gains reflect benefits from strong recurring revenue growth and IDEXX VETLAB consumables in reference lab volumes, along with operational productivity and pricing benefits, which offset inflationary cost pressures.

Speaker #3: Reported gross margin gains were moderated by 10 basis points of foreign exchange impacts net of hedge positions. On a reported basis, operating expenses increased 12% year-over-year as we advance investments in our global commercial and innovation capabilities.

Speaker #3: Q3 earnings per share was $3.40 per share, including benefit of $14 million or 17 cents per share related to share-based compensation activity. Income tax includes a 9 cent negative impact related to accelerating tax deductions for previously incurred research expenses allowed under the new US tax legislation, which benefits cash taxes while increasing our effective tax rate in the period.

Speaker #3: Foreign exchange added 1.9 million to operating profit and 2 cents to EPS in Q3, net of hedge effects. Reflecting a comparable EPS increase of 15%.

Speaker #3: Free cash flow was $371 million in Q3 and $964 million on a trailing 12-month basis, with net income to free cash flow conversion rate of 94%.

Speaker #3: For the full year, we're updating our outlook for free cash flow conversion to 95 to 100 percent of net income. This increase includes a 10% cash tax benefit, primarily related to $105 million of acceleration of tax deductions for previously incurred research expenses allowed under recent US tax legislation, and a refined outlook for our full year capital spending of approximately $140 million.

Speaker #3: Our balance sheet remains in a strong position. We've finished the period with leverage ratios of 0.7 times gross and 0.5 times net of cash.

Speaker #3: We continue to deploy capital towards share repurchases. Allocating $242 million during the third quarter and contributing to $985 million on a year-to-date basis. Supporting a 2.7% year-over-year reduction in diluted shares outstanding through Q3.

Speaker #3: Turning to our full year 2025, as noted, we're increasing our outlook for overall revenue to $4,270 million to $4,300 million. At midpoint, this reflects approximately $43 million of operational improvement, building on strong third quarter performance, including CAG diagnostics recurring revenue expansion and increased in-view DX revenue expectations.

Speaker #3: Our updated revenue growth outlook is for 9.6% to 10.3% growth, as reported, including a 0.8% full-year growth benefit and a 2% growth benefit in Q4 from foreign exchange at the rates outlined in our press release.

Speaker #3: As a sensitivity, a 1% strengthening of the US dollar would reduce revenue by approximately $4 million and EPS by 1 cent for the remainder of the year.

Speaker #3: The updated overall organic revenue growth outlook of 8.8% to 9.5% reflects an estimated organic growth range of 7.5% to 8.2% for CAG diagnostics recurring revenue, including a consistent 4% to 4.5% benefit from global net price realization.

Speaker #3: At midpoint during Q4, we're assuming US clinical visits continue to decline at levels moderately better than the year-to-date average. We are again increasing our expectations for in-view DX placements, which we now expect to be approximately 6,000 during 2025, with instrument revenues of over $65 million as we continue to see strong demand for this exciting new platform.

Speaker #3: In terms of key financial metrics, we're increasing our reported operating margin outlook to 31.6% to 31.8% in 2025, reflecting an increased expectation for 80 to 100 basis points of full year comparable operating margin improvement net of $180 basis point operating margin benefit related to the discrete litigation expense impacts and updated foreign exchange effects.

Speaker #3: As noted previously, IDEXX remains well positioned to navigate the ongoing changes in the trade landscape, with a largely U.S.-based manufacturing footprint. We remain focused on continuous supply to customers while actively managing cost impacts, which will continue to play out into 2026.

Speaker #3: Our updated full-year earnings per share outlook is $12.81 to $13.01 per share, an increase of $0.33 per share at midpoint. Our EPS outlook incorporates increased projections of operational improvement of $0.22 at midpoint compared to our prior guidance.

Speaker #3: We've also incorporated lower effective tax rate benefits, including $0.09 of share-based compensation activity compared to the prior outlook, partially offset by other tax impacts, including the noted acceleration of research expense deductions under the new U.S. tax legislation.

Speaker #3: Updated estimates for interest expense, average share count reduction, and foreign exchange impacts have also been incorporated with additional details available in the tables in our press release and earnings snapshot.

Speaker #3: That concludes our financial review. I'll now turn the call over to Jay for his comments.

Speaker #2: Thank you, Andrew. And good morning. IDEXX delivered very strong financial performance in the third quarter, while advancing our strategic priorities globally. Our proven model of high-touch commercial engagement, combined with differentiated testing and workflow innovations, continues to drive adoption of IDEXX's world-class diagnostic and software solutions.

Speaker #2: These capabilities directly support our customers' mission to deliver the highest standards of care, enabled through greater diagnostics frequency and utilization in everyday practice. Diagnostics remains the fastest-growing revenue stream within veterinary clinics.

Speaker #2: Adorable trend reflecting the central role testing plays in determining patient health status and guiding treatment decisions. Our financial results in the quarter were underpinned by accelerating gains in CAG diagnostics recurring revenues across major regions.

Speaker #2: Growth in recurring revenues reflects multiple execution drivers, including double-digit growth of our premium installed base, instrument installed base, sustained strong new customer gains, solid net price realization, and continued momentum in cloud-based software adoption.

Speaker #2: Importantly, these results were supported by continued momentum in our innovation playbook, highlighted by strong placements of in-view DX, growing adoption of cancer DX, and benefits from the expanding catalyst menu, including early uptake of catalyst cortisol.

Speaker #2: IDEXX solutions, anchored by our integrated software-enabled multimodality approach, are well positioned to help clinics enhance efficiency, expand diagnostics reach, and deliver exceptional patient care.

Speaker #2: Building on the groundbreaking innovations we launched in 2025 and as highlighted at our August investor day, we will further expand our cancer DX franchise in 2026 with the addition of mass cell tumor, and another high-impact cancer biomarker to the panel.

Speaker #2: We also plan to bring the cancer DX panel to international markets starting in Q1 2026, extending its reach and accelerating our global leadership in veterinary cancer diagnostics.

Speaker #2: Our commercial organization again delivered outstanding performance in Q3. Across geographies, our teams drove very strong instrument placements, with the high quality of placements supporting outstanding year-on-year growth of economic value of placements, a key measure of future recurring revenue gains.

Speaker #2: Retention of our CAG diagnostics recurring revenue remained in the high 90s, reflecting the enduring loyalty and trust that veterinarians place in IDEXX. This loyalty is not simply the result of world-class products.

Speaker #2: It reflects the strength of our customer engagement and support model, where IDEXX representatives serve as true partners in helping practices improve medical outcomes and business performance.

Speaker #2: In the US, growth was fueled by strong volume gains. Including benefits from adoption of new innovations, alongside sustained strong new and competitive catalyst placement.

Speaker #2: Our teams are effectively engaging practices, whether startups outfitting their practice for the first time or established clinics seeking to upgrade and expand capabilities. Accelerated growth in the important diagnostics frequency metric, as well as utilization per clinical visit, is a critical driver of success.

Speaker #2: Enhancing patient care while creating durable growth for both clinics and IDEXX. We are also benefiting from corporate account relationship extensions and expansions. These relationships represent significant multi-year growth opportunities as practices transition volume into IDEXX's ecosystem of diagnostic software and services.

Speaker #2: Importantly, these partnerships are increasingly structured to elevate care at the practice level. The greater diagnostics frequency, utilization, workflow optimization, and expanded menu adoption. Internationally, we delivered double-digit installed base growth for the 11th consecutive quarter, with a step up in the growth of CAG diagnostics recurring revenue growth across major regions.

Speaker #2: Our commercial strategies are globally tailored to regional dynamics, supported by strong reference laboratory networks and backed by an innovation approach that ensures high product-market fit, such as with Procyte One and Snaplush Media.

Speaker #2: Expanding diagnostics frequency in international regions continues to be a key growth lever, elevating the standard of care and expanding the sector opportunity. We remain committed to investing in our commercial footprint, where the customer readiness and growth potential are strongest.

Speaker #2: We are on track with plans to expand in three international countries by the start of 2026, while also enhancing our U.S. commercial footprint. These are high-return investments, reducing the number of customers per account manager, supporting more frequent engagement, strengthening loyalty, and driving the adoption of IDEXX solutions.

Speaker #2: The commercial organization's ability to consistently deliver growth across varying geographies and macroeconomic conditions demonstrates the durability of our model. Practices continue to prioritize diagnostics and software because they are foundational to their mission.

Speaker #2: And IDEXX is their partner of choice. Turning to our innovation update, let me begin with Catalyst Cortisol, the newest addition to our Catalyst platform.

Speaker #2: Launched in North America in late July, and at the end of the third quarter internationally, Catalyst Cortisol is already seeing strong momentum, with over a quarter of Catalyst customers in North America adopting the test within the first three months of launch.

Speaker #2: This is among the fastest adoptions for Catalyst menu expansion, underscoring both the clinical need and the level of customer anticipation. Catalyst Cortisol enables veterinarians to rapidly measure cortisone levels at the point of care, supporting diagnosis and monitoring of adrenal conditions such as Cushing's syndrome and Addison's disease.

Speaker #2: These conditions are often complex and require real-time insights to guide treatment decisions. The catalyst cortisol veterinarians can deliver highly accurate results during the patient visit.

Speaker #2: Avoiding delays, reducing callbacks, and increasing confidence in treatment planning: the addition of cortisol was the most frequently requested catalyst menu expansion from customers. This is a clear signal of its importance to clinical practice.

Speaker #2: The rapid uptake we've seen validates the power of listening closely to our customers and then delivering innovation that directly addresses their highest priority needs from both the testing accuracy standpoint and workflow-friendly way.

Speaker #2: This is also a great example of our technology-for-life strategy. By continually expanding the catalyst menu, we increase both the medical and economic value of the installed base.

Speaker #2: With nearly 77,000 catalyst instruments and practices globally, each new menu expansion represents a lever for increased utilization, improved care, and long-term recurring revenue. Alongside catalyst pancreatic lipase, which is already achieved adoption across over 50% of the available installed base, and catalyst smart QC, which is simplifying quality control workflows, catalyst cortisol is strengthening catalyst position as the most versatile, value-creating, chemistry, amino acid, and electrolyte platform in veterinary medicine.

Speaker #2: Moving to InView DX, by the end of Q3, we had placed over 4,400 InView DX analyzers globally year to date. Exceeding our expectations and reinforcing the momentum that began with pre-orders last year.

Speaker #2: This represents one of the most successful product rollouts in IDEXX's history. The strong start gives us confidence to once again raise our full-year outlook to approximately 6,000 placements.

Speaker #2: Customer feedback has been overwhelmingly positive, with veterinarians consistently highlighting workflow transformation, diagnostic confidence, and powerful clinical insight as the most meaningful benefits. The slide-free cytology workflow reduces technicians' time, improves consistency, and delivers results while the patient is still in the practice.

Speaker #2: At the same time, AI models now trained on more than 60 million cellular images provide reliable, high-quality insights that elevate standards of care. Frequent software updates, as often as every other week, continuously expand these capabilities.

Speaker #2: Enhancing accuracy and ensuring clinicians always benefit from the latest advancements. A great example of this is a recent update that reduced time to result of an ear cytology to approximately eight minutes.

Speaker #2: Utilization for ear cytology in blood morphology has been robust and well-aligned with our expectations. Both of these broad use categories have great use cases in everyday practice.

Speaker #2: Serving as high-frequency diagnostics to support patient care across a wide range of conditions. Their adoption underscores the value of InView DX in addressing routine, repeatable testing needs that drive workflow efficiency and strengthen clinical confidence.

Speaker #2: Importantly, success in these initial categories provides a strong foundation for the platform. Creating natural momentum as we expand the menu into additional high-value areas such as oncology with the addition of fine needle aspirate, which remains on track for rollout later this year.

Speaker #2: Importantly, InView DX is not only driving placements in consumables, but also strengthening customer loyalty and long-term contractual relationships. Many practices adopting InView are expanding their broader IDEXX commitments, with some extending agreements ahead of schedule to secure access to this transformative platform.

Speaker #2: Turning to cancer DX, momentum remains strong, with nearly 5,000 practices to date adopting the test. Within just a few quarters of launch. Utilization is tracking well with expectations, and we continue to be encouraged by competitive customer adoption.

Speaker #2: Now over 17% of customers. This reflects growing awareness and underscores cancer DX's importance as a new standard in veterinary oncology. While the majority of samples are still being used to aid in the diagnosis of canine lymphoma, the number of practices incorporating the test into wellness protocols is nearing parity.

Speaker #2: Enabling early detection and improved patient outcomes. The clinical need for oncology screening is clear. Cancer remains one of the leading causes of death among dogs.

Speaker #2: Early detection is critical to improving outcomes. CancerDX provides veterinarians with a cost-effective, highly sensitive tool that integrates seamlessly into a standard wellness visit.

Speaker #2: Looking ahead, our cancer DX roadmap is ambitious as we expand internationally and amass our tumor detection and one additional cancer next year. With canine lymphoma and mass cell tumor detection, cancer DX platform will address over one-third of all canine cancer cases.

Speaker #2: Mass cell tumors are top of mind with pet parents because they can often feel these thumbs and bumps while pathing or cuddling with their dog.

Speaker #2: Early detection can significantly improve the clinical outcome for an affected dog. The upcoming availability of FNA for lumps and bumps on an InView DX will allow for cytology results during the patient visit, helping to provide clarity to a concerned pet parent.

Speaker #2: We have a couple of important highlights in our software business, specifically related to the broad-based adoption of our cloud-based products, reflecting the strength of IDEXX's vertical SaaS model, purpose-built for animal health.

Speaker #2: Veterinarians across all stages of their careers recognize the workflow efficiencies and easy use that our solutions provide. Enabling them to spend more time delivering care and less time at administrative tasks.

Speaker #2: Our cloud-native PIMS platforms delivered double-digit installed base growth again this quarter, surpassing a milestone of over 10,000 locations. There is strong adoption among both independent practices and enterprise customers with multi-location groups.

Speaker #2: Customers are choosing IDEXX for a growing vertical SaaS platform. Where integrated modules create seamless workflows for clinicians and connectivity with diagnostics. And increasingly for pet parents through VAWA.

Speaker #2: VAWA, our client engagement platform, continues to expand in Q3. With active clinics growing over 20% sequentially and over half of PIMS bookings in a quarter included a VAWA subscription.

Speaker #2: Clinics using VAWA report higher appointment adherence, increased diagnostics compliance, and greater client satisfaction. All of which translate into higher visit volumes and revenue growth.

Speaker #2: The integration of VAWA with our diagnostics and PIMS ecosystem further amplifies its value, making it an increasingly important part of IDEXX's long-term growth engine.

Speaker #2: As we conclude, I want to extend my deep gratitude to our 11,000 IDEXX employees worldwide. Your commitment to innovation, customer partnership, and operational excellence is what enables us to deliver results like these.

Speaker #2: Q3, with another quarter, where innovation and commercial execution came together to drive strong financial performance and advance veterinary care. As diagnostics sit at the center of the veterinary system of care, IDEXX will remain at the forefront of advancing standards on locked-in practice productivity and driving sustainable growth.

Speaker #2: Now, let's please open the line for Q&A. Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad.

Speaker #2: If you are using a speakerphone, please make sure your mute function is turned off to allow the signal to reach our equipment. We ask that you please limit yourself to one question and one follow-up question.

Speaker #2: Again, press star one to ask a question. We'll pause for just a moment to assemble the queue. Our first question comes from Aaron Wright with Morgan Stanley.

Speaker #3: Great. Thanks. I want to unpack a little bit the strength of consumables in the quarter and what sustainable or what sustainable here. For instance, how much of the strength is actually InView consumables, lipase, or just the new contracting terms when you do place an InView?

Speaker #3: For instance, you used to give us this metric back when you launched Catalyst DX, but you used to say with every DX upgrade, it translated into a considerable amount of consumables uplift.

Speaker #3: I guess, do you have that metric when you're placing kind of InViews? You're establishing and re-contracting with new IDEXX 360 relationships, and presumably this isn't all InView consumables contribution.

Speaker #3: I just want to unpack that. Thanks.

Speaker #1: Sure. Good morning, Aaron. Yeah, the growth in the vet lab consumables piece is very broad-based. So there's obviously the large installed base growth of 10%, and you can go back.

Speaker #1: Many quarters, and we continue to grow that very aggressively. The quality of these placements is very high. We track economic value, and across the board, what we're seeing is high-quality placements. Competitive and greenfield is something we disclose both for chemistry and hematology, so you get a sense of that.

Speaker #1: Also, the technology for life-to-specialty tests has now seen three introductions within a period of a year. Those tests contribute includes pancreatic lipase, SMART QC, and now cortisol.

Speaker #1: So these are tests that veterinarians prefer to do at the point of care, and that's clearly benefiting us. And I'd say, by the way, it's at an enterprise level.

Speaker #1: We're doing more testing. In those areas. So this isn't a case of substituting from the reference lab to point of care. With respect to the InView, I'd say that it's early stages.

Speaker #1: Obviously, it's all dropped through because it didn't exist before. At the point of care, it's proceeding well to plan. And so that's an add-in as our installed base grows.

Speaker #1: We expect that this will contribute greater amounts on a go-forward basis. But just to summarize, it's very broad-based growth across our point-of-care business.

Speaker #3: Okay. Thanks. And then are we still on track with FNA and the launch and what are you seeing from some of the pilot programs with this backlog of customers kind of waiting for FNA that should support another leg of growth here for InView?

Speaker #1: Yeah, we are on track. What the InView customers tell us is that there are very few customers that are just looking at one of the testing use cases: ear cytology, blood morphology, or FNA testing for mast cell.

Speaker #1: They really are looking at it as a broad portfolio of tests that they would use in, obviously, different mixes depending upon the practice and their preferences.

Speaker #1: So we expect that most of the customers, I can't say 100%, but the vast, vast majority of customers who have purchased InView for ear cytology and blood morphology will also use it for FNA testing.

Speaker #1: So we're very excited by that.

Speaker #3: Okay. Thank you.

Speaker #2: The next question is from Michael Riskin with Bank of America. Mr. Riskin, your line is unmuted. If you could please check your mute button.

Speaker #4: Hey, can you guys hear me?

Speaker #1: We got you again. Yep.

Speaker #4: Yep. Thanks for taking the question. I want to follow up on some of your comments on end-market visits trending a little bit better. You guys continue to put up really impressive numbers. Can you hear me?

Speaker #1: We got you, Mike.

Speaker #4: Okay. Okay. Sorry, I just had some audio problems. You can put up really good numbers despite the end-market weakness. I was just wondering if you could parse out a little bit. You talked a lot about InView and the strength of that rollout there.

Speaker #4: Whether you're seeing sort of the ability to leverage that for the rest of the business, the uplift you're seeing in consumables that will have consumables in the reference lab.

Speaker #4: Just sort of, I don't know if I would call it the cross-selling opportunity, but just the ability to bring that into the vet clinic's office if that's leading to a stronger IDEXX premium and just the ability to really drive the performance despite the continued softer macro.

Speaker #4: And I got to follow up. Thanks.

Speaker #1: Yeah. Thanks, Mike. This is Andrew. Maybe I'll just touch on your initial question on the sector, and then Jay may have a point of view on the portfolio side here.

Speaker #1: But ultimately, I think what we did see was that the non-wellness visits were closer to flat in Q3. We did see some benefits from the pet population that was five years and older related to the clinical visits themselves.

Speaker #1: And then, as we've been highlighting, I think with those adult dogs and cats transitioning to more seniors, we also see higher quality of the visits, where we see expanded diagnostic frequency and utilization benefits with that as well.

Speaker #1: So, that was one of the key drivers. What I would say is, on the wellness side, we continue to see pressures from a macro perspective.

Yeah, I'll I'll cover the investment piece and if Andrew would like to cover how we're thinking about the mix within the the panel, I'll hand it to him from an investment standpoint. You know, the way the way we think about it this uh commercial opportunity and and sector development. We know that that takes investments in in reach and frequency of our sales organization. And so we're on track for the, uh, first of the year, they have 3 International in a modest increment in in the US. We know these are good Investments. These tend to be

More of a short return type thing with a high confidence level because we have a Playbook and, you know, a template in terms of how we think about it. And they fit well into our territories and, and within 3 or 4 quarters are, are trained, and onboarded and, and really productive as sales professionals, the ongoing R&D Investments, these tend to be multi-year in Horizon, you know, across across the board. There's biomarker investment, obviously, that can be leveraged both reference labs and point of Care, New instruments in View and and multi DX, those are, those are ongoing and tend to be, you know, 4 4 or 5 years. And then obviously the, the software piece is a critical part of our strategy and we're investing heavily both in in cloud-based, Pim systems and develop in the the other software applications.

Yeah, maybe just uh Mike in in Q3, in particular we highlighted 12% year-over-year growth in our operating expenses. So, you know, 1 of the things that we do. Always look at is, you know, how we're performing, you know, from an overall company per P perspective and, you know, making the right Investments to continue to drive future growth. Um, again, if I take a step back and you think about our longer term growth algorithm, you know, we constantly want to reinvest back into the business uh while still continuing to deliver solid operating margin, uh, gains, you know, over time here and I think

Uh, good morning, um, maybe I'll just also start with inview, you know, the 25 placement guidance. I think I've got my math, right implies, roughly 1500 systems for 4, q 25, so still solid, and I know you raised the full year, but that would be down sequentially. You know, you flip from an order number to a placement number. So, I guess the question here is, um, are you caught up with the orders? Um, you know, when we think about where you are within View and then just even any high level thoughts on, I believe I've got it right? The initial 20,000 over 5 years, you're running well ahead in year 1 in totality. Um, any thoughts on the longer term goals that you guys had put out and then I'll ask a follow-up.

Yeah. Thanks, John. This is Andrew. Um, so from an Envy of perspective on the logger, uh term goal, you know, we certainly are still focused on the 20,000 over 5 years, we have an updated that we're off to a strong start uh here when we're targeting 6,000 placements, by the end of 2025 which is you know, really our first year of launch. Uh, ultimately. So um, we we feel good about that 6,000, uh, placement trajectory uh, here and that's well above our initial guide of 4500 where we started the year. Um, we've seen really strong demand for the, uh, platform itself. And I think we're going to continue to build on the impact that that can have with FNA, uh, starting with a mass cell tumor detection. As a great example of the extensibility of the platform overall, so, um, nothing. I would call out specifically, you know, to your point. I think the

The math or the implied. Um, you know, placement math does suggest you know 15 to 1,600 placements in Q4. And that's you know, certainly is still a very solid trajectory here and we feel good about uh the trajectory that we're on for the uh platform overall.

Fair enough! You know, maybe I'll go to a different topic. I actually thought one of the most impressive metrics for the quarter was the international CAG diagnostic recurring revenue growth of almost 14%. I think it's the highest growth rate.

Since coming out of our emerging out of Co and arguably, it doesn't really reflect much of in view. No cancer DX. You know, I think it's before the additional, um, sales reps. Really take hold in the field. So it's always more limited visibility in the international markets. Yeah, I know you've spoken to the increased double digit in the install base for 11 consecutive quarters. But there's got to be more than that, you know, even as uh, as traction. So any color, you can provide their and is this sort of the right run rate in the international markets, especially because you'll have those incoming Tailwind of innovation and sales reps going forward. Thanks for the time.

Yeah, so we're you know the there's a couple of Dimensions. I think that think about from just an international opportunity standpoint 1 is it's just more embryonic in terms of the use of of Diagnostics and you know we have a tried and true approach from the standpoint of just developing the sector and and what we have found is it's very translatable to the international market.

Markets. Obviously, the the quantity of your sales professionals has a quality, all its own. So, being able to increase, you know, the, the sales organizations is important and we've been doing that now for 4 or 5 years. But the other thing that I would just point out, is the maturity of working within the system, take some time. So, it's not just about, you know, the account manager or the VDC. It's about the, the full commercial ecosystem of the Professional Service that in the field, service representative and the inside sales Channel and all those working in a synchronized fashion. The, the other piece is that we've invested in internationally as the Reference Lab Network and really building at a network that enables, you know, next day, uh, performance we've invested in in software, in software localization like vetconnect plus, you know, all of those pieces, you know, come come together. Uh, you know in terms of we just think there's an outstanding opportunity.

Opportunity in the international uh geographies. We, we the guided from a an investor date that the, the international opportunities, couple hundred, basis points, I think faster that than the us, we feel we feel good about that. We think that, that offers a pretty long-term Horizon opportunity. You know, you're on on year that that we can, we can develop

And really great results in in Q3 I would highlight that we did call out. There was about a 100 basis points of benefit, you know, related to equivalent days on the international business. So very significant, uh, results overall regardless. But, uh, you know, we did see some modest days benefit in the quarter.

Fair enough. Thanks guys.

All right, great, thanks so much. Um, just a couple from me. Um, maybe it's coming back on the the Aging pet commentary. Sounds like you're starting to see this supporting visits in the US. I guess it's fair to think about this point. This now, being a Tailwind for the business as we look out to 2026 and Beyond and start thinking about deposit at least clinical visit growth or or for this remain kind of bumpy in, in the near term and just, my follow-up was just on on the international business and the discussion. Can you also elaborate on visit Trends there? I guess we are seeing a similar Dynamic to the us where the clinical visits are starting to pick up and wellness is still under some pressure. Or is it is it more balanced in the international markets? Thank you.

Yeah, I'll I'll cover your second second question. First, we, you know, we don't have as good visibility into the in the clinical visits internationally just because we don't have the installed base of, of pin systems which allows us to to assess what is otherwise. You know, very fragmented uh to install based software, you know, the art our perspective that our market research suggests that it's it's largely stabilized from some of the choppiness we've we've seen, you know, over the last couple years. So I think it's a stable in the environment and and we're, you know, clearly being able to execute you know against uh the environment that we think over time will will improve from the standpoint of you know the standpoint of the Aging pets, you know, the non Wellness.

Visit, you know, essentially essentially flat, uh, we did see that adult dogs uh, come in for more, non Wellness visits. You know some of that is is likely, you know, pandemic, pandemic dogs. Uh, designer breeds that are more heavily medicalized, larger, larger breeds larger, you know, dogs that, uh, get sicker earlier in in their lifespans, you know, in terms of how that sustains, you know, a quarter to quarter remains to be seen. This is just a data point, you know, I think what we could say with a, a good degree of of of confidence is that these pets as they age from the pandemic and the large step up that we've seen will come into the practice more, you know, for sick care and that from a clinical visit Trend standpoint, it'll be, it'll be very positive.

The next question is.

Partners.

Oh, great. Thanks morning, everyone. Um, also wanted to ask on International, um, maybe a little bit of a, a different way, um, you know, on the days adjusted basis, uh, keg recurring grew at least 13% in the quarter, as, as you mentioned on the call. You're you're kind of growth. Potential is 13 to 16%. So like what gets us up to the 1516 percent range? Is it, is it just continued sales, roll out or

Or what else should we be thinking about here?

Yep, it it's really all the pieces that that I mentioned, you know, we're going to continue to invest in Salesforce expansions over time. That's really a function of time and distance and majority of the sales organization. We're very disciplined about that. We want to make sure the Market's ready, there's a product Market, fit Dimension that we evaluate expansions, and and growth, uh, for example Pros. I want that, that was a hematology analyzer, really designed at the inception for our International hematology first markets in terms of cost and and footprint it super important is the Reference Lab Network. So we continue to build out our reference labs and on a global basis, uh, both, uh, from a European geography. But also within various markets in Asia Pacific. We know that that's super important and, and then making sure that the customer support or customer experience.

Proceeds is ahead of the investment in in commercial. We want to make sure that you know, customers, uh, who may not know idexx and the first exposure to to idexx, they get not just solutions that perform at a very high level. But the support organization is there in country, uh, supporting them. When they, when they have all challenges, we think all those things combined.

Uh, you know, give us a lot of confidence that that 13% to 16% growth rate is achievable.

Um, as you've lapped that launched, thanks.

Yeah. Yeah. Dan. I, I think, uh, just in terms of the, um, metric that you're quoting, I think that was from the prior year. We had highlighted that we had seen some effect on clinical visits and the inverse impact on diagnostic frequency really. What we were just trying to call out is the change in the metrics themselves and not necessarily an impact on uh, our ex business directly. And so, you know, there's nothing nothing I would call out or highlight as part of the, the change, or impact that we saw here in Q3 related to that, uh, at this point. And, you know, again, I think we're we're in, at least a clean view from both the sector metrics and what we've highlighted for our, the internal performance that we've had in idexx.

The next question is from Brandon Vasquez with William Blair.

Hey everyone. Thanks for taking the question, and congrats on a nice quarter. I'll just ask 1 here because we're coming up on time. But you have highlighted, uh, the ability to get into some competitive accounts with cancer DX, just curious. Keep it on the reference lab side given, there's a lot of contracts there. What's your ability to maybe? Use that as a foot in the door and start taking share even more share within that market. Um you know so just talk a little bit about what that commercial process can look like and and how long that might take uh given your kind of opening new doors there. Thank you.

Yeah. Uh, Good Morning Britain. The, you know, our reference, uh, portfolio is very Broad and, and differentiated clearly that's a point that cancer DX test is a point of differentiation. And having, you know, approximately 17% of uh, test submissions coming from competitive reference of customers. I think it's something that, uh, you know, it's gratifying both from the, uh, these pets, getting better, standards of of care. And also that gives us an opportunity to put our best foot forward and, you know, reintroduce in some cases, the, you know, idexx and the idexx reference of, you know, to to these customers. So, you know,

A piece, but I think it's just a piece.

The next question is from Andrea Alfonso with UBS.

Hi everyone. Good morning. Um, I just have a question on cancer DX, um, and you noted the 5,000 um ordering practice, I guess. Just with respect to, you know, adoption, um, in terms of the screening panel, are you able to frame adult sort of child debts or thinking? Um, in terms of just general cutoff points, um, as far as age and frequency where they're sort of agreeing on the sweet spot? And, you know, obviously, wellness visits you continue to relax.

So, how is the company engaging that as far as initiating those talking points?

Sure that there's 2 separate use cases for cancer DX. 1 is an 8 in diagnosis. So these are typically, you know, dogs that come in they have clinical symptoms consistent with lymphoma and uhh veterinarians are using this as a test. At this point, they represent the majority but just bare majority of of tests and then the the screening test that is, you know, more Wellness, screening and that, you know, we think it makes sense for for dogs that are 7 years or older as well as you know, breeds that may have a higher incidence of cancer. So we believe that over time, what we're going to see is we're going to see the test used. Uh, it'll flip it'll be more as a screening test uh but also Aid in diagnosis uh, for sick patients. But that'll that'll be the minority of cases. The other thing that I would point out is as the panel expands. So if you think about

Lymphoma Plus Mesa tumor, you know, detection, that that represents over a third of cancer cases in dogs, that becomes a much more compelling value proposition as part of a wellness screening. And we've also indicated that there will be, you know, a third cancer screen in in 2026. So, at that point, you know, we think

This, it's sufficient in terms of menu comprehensiveness to really be seen by customers as an attractive screening test.

The next question is from Keith DeVos with Jefferies.

Hey, thanks, guys. Good morning. Thanks for the question. Um,

how do you guys know you're not doing too much uh too soon or you know too much that the market can can or can absorb it, you know, macro environments only slightly improving maybe from your standpoint um and maybe the second follow-up is do you think

The planned reinvestment plans that you have for this year and into next year are sufficient, and how you might, you know, course correct if things are a little bit better than anticipated. Thanks.

Yeah, we're you know, we think the The Innovation agenda portfolio is aggressive but the aggressive from an intentional standpoint that it represents a, a set of portfolio Solutions. But whether it's essays or new instruments or, or software that our customers are hungry for, you know, clearly the October organization has a very large footprint, and they're subject matter experts and they're able to, you know, digest, uh, these these testing Solutions and bring them to the customers and in ways that allow, you know, testing testing growth. So the, you know, the opportunities abound or is this a sector development, you know, business model, and Innovation is a key driver behind being able to develop the sector.

And so with that, we'll now conclude the Q&A portion of the call. Thank you for your participation and engagement this morning. It's once again my pleasure to share wide execution against our organic growth strategy while delivering strong financial results in the third quarter. And so with that, thank you.

This concludes today's call.

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