IDXX - Earnings call transcript Q4 2017 | IDEXX Laboratories, Inc.

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Operator

Good morning and welcome to the IDEXX Laboratories Fourth Quarter 2017 Earnings Conference Call.

As a reminder, today's conference is being recorded. Participating in the call this morning are Jon Ayers, Chief Executive Officer; Brian McKeon, Chief Financial Officer; and Kerry Bennett, Vice President, Investor Relations. IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.

periodic risks in is this can our well our in these forward-looking under morning idexx.com. be regarding Securities website investor as notice the relations SEC statements press our visiting obtained information from and Commission or available uncertainties the as and the Additional Exchange with by which the filings release of issued section

may so free get if turn the please into Brian additional references appreciate to to or noted. XXXX, Generally compared GAAP GAAP. release, which most constant currency McKeon. questions. growth, financial and call growth reconciliation ask to to one otherwise or and measures discussing relations not reviewing investor Accepted we Accounting Q&A, participant accordance website. organic have in take the time participation comparable directly provided the earnings now this feel non-GAAP the growth, Principles, In queue During growth that referred your to constant these also we'll all like may our our to fourth by We results, certain with A to back visiting permits, of her the additional period each XXXX you we of one, financial measure our would will necessary. prepared to in found limit the questions, in allow growth, follow-up section I to with in be measures his broad unless In quarter call is questions equivalent if order currency comparable be note please over

Brian P. McKeon

XX% results an take and QX everyone. XX% in our organic instrument which another growth I Thank in full quarter Diagnostic changes recurring of on We IDEXX. the for increased had financial reported through year concluded you and in growth you outlook FX revenue provide aided XX% our year excellent revenue year-on-year revenues We CAG quarter rates. fourth placements. XX%, supported Overall XXXX XXXX. and favorable am outstanding financial pleased in and by performance growth in for achieved morning to results by update fourth good premium

Our strong in supported XX.X% goals. year organic markets. by U.S. our gains accelerated international of long-term consistent Results with revenue full to organic growth XXXX were and financial strong of recurring reflecting Diagnostic and achievement growth double-digit driven finish XX% revenues CAG

point to $X.XX, in constant above in year-on-year XX% above Our full was XX.X% year which goal net We're this growth positioned the guidance of the on X.X% long-term the of $X.XX per guidance XX%, expense for points XX our our now million to share. $X.XX well build a a to an operating basis a outlook for operating reform. U.S. upside tax financial to $XX range improvement maintaining XXX includes share XX our line tax later incremental a consistent leveraging currency U.S. of EPS also changes, trends, from tax Adjusted our a outlook Overall to an million revenue currency provide of these per benefit the organic from to achievement performance factor, U.S. currency increase rate per million standard of XXX to revenue EPS to basis. $X.XX while end XXXX non-recurring reform basis related to investing changes. accounting XXXX per on reflected on $XX updated second EPS strong operating share benefits high revenue results of comparable support in revenue margins projected grew in estimated benefits full call. constant million and This from was accounting growth preliminary a margins the from XXXX EPS year. on year midpoint update $X.XX strong consecutive $X.XX FX our $X,XXX for year-on-year basis increase our reform. year for million charge enactment a guidance in favorable full We'll to top We're reflected significant and $X,XXX in XXXX changes, and improvement range. $X.XX operating constant guidance share

imaging in Let's Animal performance results Companion an diagnostic region. recurring of XXX performance gains our up was organic organically begin strong of software segment with led and in overview million our services Group. by our veterinary were quarter full a XX% by XX% and and QX Diagnostic fourth in supported by revenues Global XXXX review year with businesses. continued CAG beginning and momentum CAG revenues

supported by For of our expectations. higher gains. year-end CAG our by year, Results growth driven constrained the full swine billion continued QX and moderated recurring than revenues. gains of dairy XX% of in increased organic on revenues have in XX program accelerated were X.X and organically in increased X% gains These pregnancy in distributor pressure dairy projected and million ahead gains market to government Diagnostic emerging platform. revenue Livestock, markets XX% recurring organically CAG poultry, by revenues reflected which solid and China ordering

the For relatively revenues were full million our flat growth. XXX organic LPD year, reflecting

consistent modest growth to in For underlying growth planning organic LPD recent trends. overall XXXX, with we're for flat [ph]

inventory was these go-direct by organically million favorable for aided water organic to year to water in Adjusted advance growth revenue business in in grew X%. changes, initiative the channel we estimate XX% prior fourth Brazil. QX of XX adjustments about Our revenues comparisons quarter our

For profitable revenues of business continued strong X% our believe gains and with benefit and continued volume. CAG X% labs XXXX. with revenue XX% points in by price revenues, million recurring up In to organic driven year, in continues growth growth patient trend our XXX revenue X% were the this by U.S. region, the to business organic recurring veterinary pleased headwind rapid Gains in period. initiatives. highly days. the driven the by from clinics. high-single go-direct clinic gains double-digit were range supported to performance organically. dataset assay equivalent XX% full CAG digit water reference in solid to outpace about U.S. XX% in U.S. and growth very We're revenues despite By fewer IDEXX's Diagnostic in for X X,XXX the X.X% recurring in market continued water percentage quarter, gains sales. in increased X.X% consumables reflected practice track compared to bulk on visits growth growth QX, increased strong significantly growth from a in high-single-digit diagnostic our business U.S. were revenues momentum and prior-year XXX increased about we're million, from up the organically of including

growth We XXXX, XXX QX For in accelerated X,XXX driven organic U.S. up organic million driven growth CAG represents were full Diagnostic revenue reached U.S. reflecting year revenues supported by CAG XX% total recurring in gains XX% XX% were U.S. organically. business, results of which International the XX% by American International Asia of XX% Pacific, revenues Latin organically or for Europe, revenues total in Diagnostic organic U.S. CAG of recurring reflecting our international increased gains supported up in strong Catalyst revenues. the million primarily organically XX% gains. revenue growth consumable expanding XX% CAG full XX%. gains achieved nearly full continued the revenues, year by revenues organic of reached business. were Overall, million supported International our across Diagnostic international regions. flat revenues and year, by moderated gains instrument IDEXX LPD XXX recurring International CAG our for XX% double-digit organic by by base.

continued levels. SediVue record base expansion the placed In North to and at also analyzers quarter, premium our by included placements over strategic accounts placements. This a of segment North in placements supported in year strong QX globally, and X,XXX placement in XX% and Pro strong compared counts as global international impacts offset performance our American levels up testing Pros our instruments X,XXX XXXX we driven GAAP organically increase competitive prior year-on-year of Diagnostic X% premium revenue new to XXX X,XXX we bringing in in very results. CAG results XX% QX reflected X,XXX placements accelerating performance, year-on-year X,XXX revenues placements Catalyst terms gains Instrument by or America, premium competitive XXXX. XX% placed QX, deferred of million, placements modalities. the year-to-date SediVues in of Consistent focus, SediVue XX% QX markets to a prior increase and and XX XX% a year In instrument quarter. XXX were under Catalyst SNAP with X,XXX were up new accounting nearly gains hematology across to and results were Globally, Catalyst record SNAP year-to-date strong placements standards.

SediVue our EVI in up quarter placements the competitive strategy. with in reflecting and consistent was the in Our U.S. significantly very gains strong metric Catalysts

of and supported U.S. base levels this our strong in our base growing in XX,XXX in seller momentum with grow Instrument in International gains XXX the installed now year gains goals. America. in a track international year-on-year. in XX% X,XXX by Catalysts gains IDEXX install the QX high in reached globally, and by year-on-year and sustained supported XX% progress and utilization X,XXX driven growth organically North continued revenues markets revenues. grew consumer placements XX% substantial robust across made million augmented new increase base. year gains markets. For premium on of XX% Growth reflect expansion in our retention XX% competitive up growth continued placements customer We year-on-year long-term XX% by North installed instrument America consumable have and full accounts, These international global Catalyst to by

continues growth Our consulting net million to base organically in revenue with and expand quarter. equivalent X% X% also the consumable SediVue the contributed quarter laboratory fourth the Reference installed XX% grew and headwind. day of of to services in XXX

organically revenue by Reference U.S. net gains XX% gains services supported which gaining Diagnostic by customers customer in by price additions. products with the Veterinary fewer benefiting recurring driven net offset in XX% changes up Imaging equivalent in up growth with Lab existing driven reflect million were organic our to in gains at due to the high volume solid solid generation double-digit Reference Rapid grew and of continued International progress growth inventory organic solid Continued XX consistent strong very and first quarter by U.S. year-on-year we're quarter Rapid single-digit Europe. digital volume trend gains in specialty favorable Lab augmented high in the growth to gains days. radiography organic rates in well. by System in reflecting realization share were were million double-digit Services the were by X% base assay international about continued revenues quarter. growth revenues in in QX organically of very assay the and and penetration and revenues Software cornerstone XX% test strong increased continued installed distributor placements XX XDx

QX in foreign decreased XX% XX.X% million Turning XXX reported exchange basis. gross of impacts revenues a or Adjusting up gross points. to basis for the P&L profit was on margins XX

strong capacity up net and Continued of offset expense lab LPD X reflecting relatively were by these relatively IT we're gains solid of lower productivity and investments higher quarter international stepped in and continued water cost related costs million to approximately reclassifications operations, margins from price to sold, margin growth. were average the XXXX. and Certainly year-on-year expansion targeting goods solid operating instrument costs, specific in gross impacts

leverage on Foreign reported to profit basis in the reported QX a technology. enabling Operating were $X.XX profit year-on-year loss and QX constant point on the gross a currency revenue up XX% share to results in investments limiting quarter. quarter. improvement the marketing constant related operating strong XX% up gains and of constant $X or the was as in profit resources reflected XX hedge in expense currency information in supporting XX% exchange about basis. million net from or XX% million in in Operating Operating U.S. operating basis currency gains impacts by driven FX in margins QX benefited per a dollar reported expenses as XX a weakening sales

based million XXX of XXX gross XX EPS XXX year U.S. reflects per benefits year gains or currency the related tax foreign estimates the operating share from basis expense was are points in operating an constant of share than per result below and the $X.XX deferred related impacts QX implementation margin current in clarification of related to from basis to charge $X.XX of deemed operating benefit estimates net constant this adjustments. reflecting on adoption, from about profits discrete reform, in This charges foreign related in in margin basis For of $X.XX a points for accelerated specific rates repatriation a or tax less and benefit and to at company's points relates tax XX revenue $XX full per XXXX. non-recurring remeasurement was from benefiting earlier an our the currency tax expected of The million compensation lower the of profit repatriation utilization deemed a factors increase share favorable charge share accounting and tax full million, outstanding credits. other The corporate reform basis tax $X.XX XX% reflects IDEXX. growth. leverage of of came tax including

exclude For XXXX per EPS Adjusted onetime $X.XX share. reform $X.XX. EPS tax the to was impact was

For the per loss full share rate by $X foreign EPS million. reduced by X.X% growth exchange impacts about increased revenue of changes $X.XX hedge including year FX and

this at the was was Adjusting or tax growth that provided investment. these XXX% million For net or basis. Free of flow to for XXX accounting capital benefits the on while U.S. compensation was adoption and in contributed supporting charge required years. comparable delivered million cash share income in flow currency taxes XXXX free year repatriation per XXXX. XX XX factors eight for per guidance adjusting be million also a XX% EPS tax includes $X.XX constant annual reform deemed represents This paid full based Discrete benefit. cash performance a share for $X.XX of over share XXX% XXXX, benefit

average per strong shares Our full towards note share deployed in the IDEXX at more the $XX shares share an XX% million per average in repurchase $XXX billion XX for share. brought and nearly XXX,XXX just for million of of to $X $XX period an price momentum positive supported our to returns at for million. XXX levels the shares continued the five share the the than Of QX last million significantly X.XX This allocation price we years flows for capital of under year or repurchases over repurchase shareholders. of enhancing per of business repurchases XXXX including shares outstanding of cash beginning

a million XX% cash outstanding the X,XXX of had we XXX our in balances including is term sheet year-end strong held debt XXX investment very million million was credit in ended which At position, we and rate XXX balance revolving facility. million fixed outstanding in Our in and year with million under debt $XXX internationally.

at year-end gross multiple of ratios a of times leverage where Our is cash net X.X EBITDA and times X.X investment balances.

well financial momentum projected and XXXX operating XXXX disciplined positions U.S. to strong reform. aided deliver in from outlook towards continued growth performance substantial as benefits Turning our results by tax

XXXX growth organic an X.X% from $XX our growth revenue to raising we're XX.X% to changes. noted As benefit recognition outlook gains estimated incorporating million X.X% accounting or revenue

outlook related through foreign EPS outlook reflects we to reported operating rates in high improvement the of exchange change revenue CAG XXX by of to strong Overall X% currency we reflecting X.X% to constant growth tax outlook our in higher million per new to reflected our additional raising net The flow XXXX our of Our by additional XX expectations continued revenues revenue XXXX from project FX share XX $X.XX an operating outlook of to the projected supported benefit and in and an is about about reform. revenues will by which XXXX for reflects We're goals estimated retroactive reported rate EPS Diagnostics updated of EPS X% instrument to weakening growth of growth and increase FX The recurring Diagnostic million our CAG our $X.XX to standards related release. for in XX updated including levels upside that including placements X,XXX dollar. trends, are XX impacts. At million reported recurring XX% organic to per increase year-on-year $X.XX of to press U.S. increased XX%. from benefit assumptions $X.XX, are consistent This to be in accounting premium XXXX raising at the operating about of share U.S. benefits growth strong margin in related revenue $X.XX basis estimates, year-on-year $X.XX million for points. benefit for midpoint or expected to change accounting performance. of million trends to X,XXX XX% than XX%

while tax including XX% million in of and comparable maintained U.S. have capital estimated We additional expense incremental XXXX constant of benefits of million from reform. currency outlook This EPS of investment outlook this an investment X U.S. in XX% to results about growth XX operating leveraging to reform. tax incorporating EPS growth related net XX% benefit

rate an excuse rate outlook in XXX benefits structure including driven to corporate XX% including outlook Our reflects -- million tax compensation. about XX or for recurring the by certain our new million, projected million tax exercise from XXXX the in This primarily rate rate XX% XX% now to is me, of benefit to the U.S. reduction million offsets. XX or X% to projected XX from effective tax statutory in tax stock the XX% of based newest net U.S. estimated

count for outlook times that from net have X% reform continued X.X maintain X.X% will shares related average stock leverage for and increased assumes of share flexibility EBITDA. to outstanding to at we tax balances. reduction updated which XXXX Our management in debt repurchases U.S. global in is we cash of Under approximately

the was including cash interest of of flow with to reflect over in XX approximately to balances outlook and of incremental about million. flows related cash investment expense these global well and driven income million net XXXX of Westbrook, projected million supported for XXX an capital Free our headquarters of Incorporating Maine interest time expansion cash XXXX tax by relocation optimization reflects reform. XX utilizing expansion spending impact million. free lab Our XX% estimates as U.S. excess outlook additional cash capital of XXXX projections as projected associated capital free our growth to XX million an core incremental XX% for by net spending approximately assumed resulting our $X at net flow cash combined of costs XX% flow our German

a changes by XXXX exchange factor foreign we the outlined that in EPS profit approximately results impacting of million at will estimate hedge Foreign positive our rate these currently exchange rates share losses. exchange rates projected $X per rates reported be increase press release. will updated in $X.XX At net

headwind. release. in first to assumed levels X% revenue are to be reported the approximately rates QX growth the in results as levels XXXX In X.X% XXXX. moderating gains of than impacts in commercial our from outlook to of XX.X% flat our terms press expect quarter X% year-on-year prior FX year to X.X% revenue margins a near-term capacity a operating higher net at QX XX.X% investment QX XX% of operating expense we favorable range of benefit will the from lap investments advance of half Lab reflecting to relatively in organic and Reported by modestly growth we expected to Reference reflecting growth higher second impacts incremental equivalent

rate in Jon We call exercise our benefits expect to That financial effective the the for first focus let projected in our XX.X% higher his to from tax be turn performance into quarter. of on activity share over business is XXXX. me including XX.X% to concludes which our areas typically and QX heading overview, compensation, the based comments

Jonathan W. Ayers

around with of market over year resulting very Brian. for our XXXX financial the I'm to We for animal in XX% software had in finish team's the globe. goals. diagnostics high very the Thank market success growth gains our revenue in businesses you, innovative across pleased EPS the strong the including and solutions a and our long-term end at IDEXX's and organic growing companion

a assay to same revenues Lab revenue the value accelerated American at consumables the North Reference contributor growing team the recurring driver at our commercial and instrument saw both placements, Rapid time profitable North high recurring our Our line. of Diagnostic American key modality, largest instrument to successes while

place investors in expansion In we recall XX% undertook field our in expansion As U.S. gear. this kick in but early we QX saw a still curve. organization the learning into fully in QX

of customer in of in half the per productivity rep placements in the first our grow these in rep the resumed in levels placements. number EVI the and year expansion productivity new world double-digit high XX% combination accounts North results in our of class Catalyst placements that the which growth and achieved and instrument reps We to levels. we sustained and competitive the are growth of XX% the growth with per retention we also in Along SediVue America saw

accounts compares announced intention we XXXX. go retention to fully in to period since XX% favorably in U.S. Our chemistry of in-house our direct any

and X% from Our adopt Reference the saw fecal and sales customer revenue benefit our days. long-term U.S. range well This us deep These customer headwind results Lab technologies a volume unique relationships customers growth unique reaching XX% Lab the and help retention time in fourth led driven continues that that antigen, are growth to levels growth preventive from store as operation. including is over Reference quarter an growth helps we coverage mid equivalent diagnostics, that grow testing sustained assure same customers as Labs to our with teen lab diagnostic combined offerings new increasing margin by strong our North modality. sales strengthening as offering American expansion appreciate care growth in and goals even in related and expanding our molecular Reference SDMA, come protocols. tools with the adopt

Premium and America. a Zealand, of in XX% expansion base. performance Australia, placements placements our in by New Catalyst, of in international strongest operations a growth revenues. instruments XX% with XX% the value exceptional were in full and Animal generation Catalyst recurring geography Catalyst year instrument placements led Europe, Catalyst strong to Companion consumable China, international of virtually placements Latin completed Our high the country growth year XX% almost of every X,XXX of Group our with was Japan, installed instrument in resulting Results platform every

Our veterinarians market adopt lab from regions the in are very continued teams to to entrepreneurial direct waters business. I that time benefit rebound to of advanced that a to and with these this over the each growth world in in most offering in was the the livestock, for and sustained year poultry, go-direct way LPD technology successful initiatives and Catalyst No and needs. local profitability levels. their bringing this QX growth around in has the proven of or from IDEXX and structure the applying inspires pleased sales this stage set countries spirit dairy the our in countries with of highly move to a long-term be also growth water accordance rest

LPD IDEXX While in accomplishment the innovations care. world The to estimate broader of solution testing SDMA. leveraged exceptional benefits key These in-house the professionals new pregnancy Catalyst expanded by offset headwinds purpose. market overall to the expanding gains to availability on-time SDMA pet platform assay around innovation of businesses our In for like of constraining this growth the QX represented adding we XXXX. launch our and are remarkable that access are committed Catalyst greatly providing our was are to

providing do health the Many with others We difference find premise are since this ago. access with on is committed of or that we needs. in-house practice care practices already learning Catalyst. the care to the time. typically our in the highly mentioned how X,XXX which exam animal, running in beginning in preventive of evidenced in just slide and run a availability looking in once and Reference the do call make running are gain instruments important variety immediately reasons they veterinary that weeks by been the the celebrate SDMA facilitated We moment the to they can also chemistry the a market for then as this couple can test these We're XX panel IDEXX disease North practice. clinical this clinical Brian and is a As on these realize faster ago would around customers care setting days their for conclude anxiously to Catalyst at their have protocols. new and shipping the pre-launch our institutions experience Catalysts essential of it over routine and appreciation customers patients, have lab schools Catalyst have and not Catalysts and a that their our bought unique real-time work XX,XXX sick world chemistry real-time in close of and of have is build a Labs where diagnostic to the during awaiting parameter America with in to customers customers the SDMA lab of and for since their become customers testing monitoring, that SDMA adoption critically SDMA the now so more including loyal by SDMA this Catalyst

in-house years it's bring image parameter, come of through the growing machine the essential smart bacteria algorithmic an X.X. to white This enhancements SediVue of in Our that a million equipment. service amazing instruments algorithm. our SediVue and benefit lab uses learning. of images can to urine advance version impact other the also from Every quantification in of to SediVue is placements entire improves achievable having red on The also add things unique from future over our has well for blood to Network imagine is X,XXX next field patients and innovation certain all rolling cells, to or XX which that for pet and run learning total detection systems sample we're service to patients of with the you were results month out experience bacteria as base Neural This X,XXX the this over IDEXX bringing smart XXXX XXXX units. Internet the QX generation software capabilities and means the machine and customer our called

antigen growing of of with success biggest in of our Dx the in SNAP on summer remain launch also Labs. the will our base installed SNAP fecal SNAP for launch Pro track XXXX, our the launch Reference XX customers Fecal We years. ever Fecal and SNAP at

U.S. volume with from went in the SNAP have performance As sets of when the that instruments in placements strength franchise. SNAP a an attractiveness SNAP solid success penetration marketing online continued in world presence, XXXX accelerated business recurring in Rapid with our result volume U.S. SNAP up in in strong were achieved The where technology the comes powerful revenues direct in we our XDx XXXX. demonstrated easily U.S. we from expansion CAG market customers which accuracy SNAP growth combined XX,XXX The in and reflects in XXXX. for significantly of of almost assay Pro practices Pro of XXXX. the organic installed the a field revenue base XX% business alone XDx of XX% of channel momentum early of our exceeds over model clinical XX,XXX continued stage recurring in our around great our Pro we the

where IDEXX growth to resources these in allocating the attractiveness also through owners helps IDEXX's on economically capital U.S. customers tax huge support are will and helps advance be of diagnostic, is and reform more enhanced IDEXX of consistently invest franchise areas our of partnership a All generally acceleration anything customers growth become greater pets. for tax innovations is We education. put focused by investing The practiced businesses who as gives further small for and staff the their with U.S. had of reform. Simply businesses. to our grow in radiography our we utilization benefit And reform in be organically. IDEXX customers that their digital our have they software breakout successful or and tax aggressively QX, the in our it

As related of innovation. are tax a and investment data, software, our accelerating result reform we in

to users, nearly call solutions X,XXX for of customers which PLUS are X,XXX customers for innovative based VetConnect XX,XXX monthly management customers practice value add in XX,XXX and our active software veterinary software. management that leader cloud apps our over the practice accounts, We with we the

customers help needs a approach. have data better use appropriate with data Our meet appreciate based protocols generated already XXXX today's to how our groundbreaking of aim in use to pet owner. their data diagnostics grow to insights in And to using we capabilities medicine evidence the driven of the

of Importantly the tax diagnostic U.S. strategy. to be benefit. estimates this starting tax X% for return Tax employees continue we able is growth after and on further customer This societal sales of in an expansion This salary market in to our this to dollar better or things after pretax two investments colleagues any will tax employees and are force basis. then will expanded being reform grow made provide Prior reform XX% in after to generated planning attractive the same increase XXXX employees dollar in using gives our to incredibly equal. benchmarks grow U.S. and on up provide past XXXX the of fashion. using tax, U.S. we of generated dollar show highly to to confidence also of retirement financial growth save $X.XX investments of salary locations $X.XX return IDEXX all and market. our -- and challenge practice and supporting a for with then their other topline Retirement long-term other U.S. dollar for we fully years expand X% The go IDEXX continue tax supports retirement our plan. utilization. purpose of our federal U.S. this a peers as their us federal our we to company's who how the in a benefits U.S. reconfiguration efficient match that some decision We're relation in particular to our a we math the in to and with help will direct investments make we've towards XXXK

margin reinforced years. in XXXX do in earlier company driven part still goals resulting to the call XXXX that operational by able in are meet from and accomplishments efficiencies that We the wide our and expansion prior Brian

our and employees, enhancing pets, the purpose, of by of long-term livestock. All and to health dedicated create customers, remained well us to for shareholders and being exceptional our value people,

will we to the that with questions. So open call

Operator

We'll Daniels with line Ryan Please ahead. the Blair. of go to William Instructions]. go [Operator

Nick Hiller

thanks a morning, fecal of XDx? if questions. just begin, in compete follow-up Good core that product on was update the on a I give is specifically And potential just there assay you taking any an Daniels, assays, produce base launch interest Nick bit given of prevalent especially my products how against are the when IDEXX wondering offering in thoughts customer the how specifically Ryan would the unique much that could Dx on competitive to Thanks. for a and Rapid for will outside Hiller of Fecal of tests how be? this SNAP and launch

Jonathan W. Ayers

of the SNAP launch the XXXX. expect Fecal in about we excited which very We're summer

majority usually to we for today dogs, run you with done as as those method. fecal so and protocol opportunity manual method and routine using this The think vast are in manual ELISA I or annual in-house is testing care of preventative the referenced an the a methods in-house exam. microscope semiannual see using that replace with biotechnology

America run And driving also house of large the antigen with offering. testing estimate So, a annually. Lab fecal we're that although are XX fecal is our in very majority in fecal tests is in million in successful around our rough Reference North run

And will leveraging so, I remain adoption Lab for pick be is just buying think Fecal believe rapid vector think major on months. couple with the disease of fecal XX% in to noted and like is to announcement up, be really We SDMA major of penetration over a customers any house think with with it will we the -- almost about our but grow record. but turning franchise was model to slide about I anything amazing We grower. Reference we multiplexing that And SNAP beginning this XXXX been business a business XX% has only it of at result, to you that not runs comprehensive captures that placed medical to Pro volume disease on charge, which doing refer Pro the easily point, which is the the over a validates Pro razorblade result running need and replace adding them really we've from over strategy to it automatically continue what SNAP we been customers continue our as is into a first be start us. year. have time, a interprets it takes borne in excited I’ll product the SNAP up excited an the our long-term and will We the a fecal by this a we catalyst U.S. which going adds but the last the ecosystem, screening. screening, strong in connects technology franchise antigen of and

that by party have and our also sensitivity, that I accuracy, specificity validated really unique and platform. is has a ELISA technology third We think SNAP to unique been

excited. protocols This screening business running penetrated on a enough customers and remain not is vector-borne or we part still are though is XDx think their as under I disease that so care of preventative dogs. And

very ago, to that while in continue XXXX XX strong this we growth XXXX launched high growth and regionally that's so we've a and had in to -- single-digit in drive. years disease see we And screening we and expect growth beyond launched market over actually vector-borne continued

Operator

to the go Thank with Please of De you, Derik Merrill Bank of America we Bruin go line will ahead. Lynch.

Michael Ryskin

about reiterated saw follow-up or XQ line for instrument the confirm quick see the that revenue expectations the Hey you Congrats guys. positive thanks, constant the Mike some want but margins, still going to on is with And returned growth there gives it in touch talk quarter, is they on targets the XXXX? margin the the the op on the some the a lines Ryskin just and in also of actually are about you choppiness revenue to then couple pricing is quarter to nice growth Derik. your and this a currency what but that that saw between we on instrument margin for XXXX takes in points, there? Want have it's on previous talked quarters growth can difference we margins for the on of that placements, that the recognition in something have growth, gross gross and quarter, saw of along I there to

Brian P. McKeon

that I dynamic. under new we and don’t had deferred on same noted, rules under of impacts, the new correct. very, that's why and did have take those which deferrals as accounting revenue be will We very Sure, we some strong accounting instruments, current growth set a won't have

will forward, GAAP standards of reflective net-net more through the that's think that. I moving be Moving different current work they pieces but we and forward,

Michael Ryskin

And XQ? that's in starting

Brian P. McKeon

clarify impact break information you. to a actually have new obviously we'll very IDEXX. because will impact the help balance then to prior related gets the about you a estimate so and be will try new more XX growth impact balance modified highlight which that restatement point a It's will growth but going is that's the to basically recurring going It now will well there restatement that us we view CAG prior out that highlighted to rate Yes, on net of and you. that on complicated, slight overall accounting, a will disclosures for of be accounting for you sheet restatement to very, point be of be to year that's for year revenue that instruments again some rate all that aspect, going million upfront from the it -- sheet the we of a recognition, be detailed we more was headwind, restatement and and plus

Jonathan W. Ayers

and a upgrading placement and which of contributes to which these revenue very also to -- is to unit particularly quarters no that just the -- I and remain successful VetTest than These fundamental get course competitive in I These really and to placements. good regard, growth. very are a prior to accounts your the of think new high factor. think back different internationally the are new essence not question, the in competitive numbers U.S. it's both a so economically we're pricing, placements placing your and recurring quality are

Brian P. McKeon

We Reference close lab metric U.S. capacity very moderating in impacts growth themes rolling of margins are has delivered noted of to a that but we of the Lab supporting our markets some with to couple of a also that. momentum XXXX your note, will support up the margins, accelerating and here, measure net to we value was that sure business gross add while decisions routes staffed, growth quickly is in lab international And we out healthy it the add to made that of job a our retention investments, that question growing employees. that. gross and of basically, be to the in and extremely basis on that's make On significantly, we EVI we'll our reinforce doing businesses that business. coming, points better margin actually we're fully into is currency And on quickly XXX here so see the near-term, improvements grow of constant those in we is

Michael Ryskin

also -- million…? was knew fourth was quarter quarter then reclassification this the And the of

Brian P. McKeon

that laboratory management OPEX to cost the in the was our Yeah those in systems. information of moving that costs was included goods previously We're that we're recording too sold. amortization and recorded

profit no net has So a impact from moderating margins. but it impact

we quarter production growth XX for absorption. was of basis to a to had margin favorability water higher and that driven carrying basically gains. year also be That's our levels We have LPD point outlook in accelerated margin we and were the to comparing we related that to operating that gross more improvement businesses. XXX the inventory anticipate number had the another next factor specific forward dynamics, will that QX by We so reinforce year not prior something growth

that I'd So we feel is good stronger highlighted incremental note about bips that really also underlying XX covers and about that than that. of investment that Jon XX the growth so million the

Jonathan W. Ayers

of through was that that things delivery which basis point related, point basis XX as to off our the over higher XX And related, changing But margin revenue on so higher higher accounting margin referenced revenue level. to XXX incremental growth. XXX and improvement is are was FX none was of Brian flow those of the

goodness some are there there. fundamental So

Michael Ryskin

all Got really thanks guys. it, that's helpful,

Operator

to We Please ahead. Suisse. of with will the line Wright Erin Credit go go

Erin Wright

guess be growth how a or thanks. assumption all that you I much [ph], for is notice thanks? think overall price rate Hey, that there your try is nice uplift in I was a it what of sustainable Rapid continues assume there, I competitive market amount do to assay, and guess it let's the is segment growth

Brian P. McKeon

the yeah, global was volume had had world. We that good performance price. than North assay is We you, in it a Thank is business. around America more North good of Rapid it was performance It American. course predominantly a

-- Rapid they talking their family. entire about Pro engaged reps think bringing they're with the our placing combine in is placement are SNAP the so are that with really business Rapid assay SNAP I are value a pretty they Pro, it assay when

Our of XXXX guidance second benefit launch revenue incorporates recurring for the Fecal. the of SNAP growth half year

by the will launch. And new know scope growth reasonable revenues if combined assumptions call overall from I assay of our Rapid would think business what augmented product for so you you Rapid I assay I new think a

partial like launch we to course will that faster that be the be will it talking be adopted will than to take innovation. like be. so new and But we're time Of everything new from about only ramp just revenue a

Jonathan W. Ayers

driven volume price it -- growth. And was

Brian P. McKeon

and in quarter XX… fourth in driven growth Volume the

Jonathan W. Ayers

We always consistent of that to X% have a pretty underlying are year-over-year -- of CAG across… programs timing X% recurring price timing gains is

Brian P. McKeon

we XX the had runways first Yes, just even vector-borne good or long assay. generation Rapid in to volume. the share shows in though We gains, XX years into just and performance we the it have. -- grow And share in franchise growth just saw XXXX gains we continued market that we're just market in of disease continues that

screening growth it's annual we In fact volume get as had that amazing vector-borne many as so in have have for it's that But every we've was the we dogs franchise grown diseases. that still number best year years. that don't in a of

Erin Wright

trends market Great the are at guess of in do confidence give trends some I'm underlying I this demand your segment your and I looking felt in but how that what the the you terms here I guess what practice kind key thoughts we saw data know X% does it run, XXXX now, I as the and you across that set, that guidance since kind stand stand thanks? we where over metrics and revenues demand strong of across I of, overall CAG much seen does on growth in demand, curious tracking for the terms we've in room imply of on recession underlying your just massive have improvements you're to guess overall veterinary of

Jonathan W. Ayers

have practices with that's and our out of That's measured X% veterinary the at we And course a the XXXX as over Brian practice growth which we the it. consistent practices in overall QX number saw of revenue XXXX level. customer or the of comes reported of out Well in really that growth what year. really

are of meet adopt who their faster this they're time XXXX. revenues look today's this They and diagnostic growing amazing them their really it faster more growing because doing X for market. of growing the in measure are is okay, to and owner. themselves this, faster, just interesting portion the What's growth our are averages. their the practice the can we saw in changing in is are practice diagnostics than portfolio reps XXXX practices pet are overall average market runway size they're what's needs runway growing are times every But consistent at for We is what faster. assumptions growing of because we our best above the faster, customers the the Our practices more customers the revenues are interesting with our our helping X-X

them well are may so better. opportunity appreciate to practices customers And because doing see doing the help that other actually doing very be can we much like better while are they they that be

And job so performances meeting to And needs diagnostic of course inspires practice and health. of when utilization want the of the a pet pet of advancing that value unique practices, so best of appreciate some the to this doing and on continue the they focus owners that. doing inspire to -- and great expanded -- practices us value do the to the are IDEXX's tools protocols diversity using to bring menu to

equation. grow as that's we not So care of IDEXX diagnostics we we best adoption coverage why but practices deep and sales of very have of market just account the bring to broad strong can need the so with adoption to part those relationships

Operator

And Stifel go the Jon to we with go please line Nicolaus, Block of ahead.

Jonathan Block

to a be call in X.X launch don't competitor, the I with love XX.X or two questions, Is end sort from the Great, guidance the then just new versus limiting would of factor roads year. the done gating question projects I your a high traction moving you market, look based And on you of what low good the Rapid maybe regulatory and organic from versus that it thoughts versus of it first get morning. standpoint just the the as parts of between end, talk the follow-up? got same at assay know overall September? to can thanks, to part is still first Fecal antigen, a a some and SNAP Maybe that one for two June needs sorry, us is

Jonathan W. Ayers

of question care for quickly that a infectious requires the on point few regulatory first diseases a approval. is test, the one Very tests that of areas

a test, factor lab we need does -- test and does to stamp antigen that our that on instance so exactly be launch for require So little to successful but the that not with, does the technology approval will is a as regulatory that same there We're track confident record in always when month order that adds the to which of or U.S.D.A. a product. uncertainty of the bit approval fecal

Brian P. McKeon

of Yeah, revenue in course accounting the XX% to is XX% under Jon driver key this for so the growth XX%. its the XX% going and outlook finished year to that XX%. that's adjust CAG recurring to of just if number just terms the be change, you of We

very obviously I think it's quickly. growing reasonable We're range. a

growing off principally rates the and execute reflecting just In this to more year. range well high that of that's a growth need we It's innovation the terms base and of need execute need to and execute rate time at well of we're high have year. in we a type projecting very we that's it's reasonable at to this time not launches risks, and new think why against the that well range

Jonathan Block

Okay, got it.

Jonathan W. Ayers

growing over -- the absolute off One same with of nice higher the that revenues rate in in things is they're quarter base. we growth on XXXX deliver are so the fourth the revenue

So, we products, executing coverage need around do reliable great supporting and customers as great and products, to to the said continue job with Brian a great world. sales our

Jonathan Block

deemed most of just maybe but only international it I CAG the on the across the Got and lab. was one sort that of you nitpick second question, were modalities occurring could

for and the consecutive landscape more up just of big we've spot be I is U.S. the think think you second mentioned that's the SDMA. international quarter in delta. mid should I single-digits O.U.S. teens. delta like It that sort seems I fragmented sweet And a know of high or relatively for second that seen quarter, has up the been Arguably competitive third

some of that mid Thanks Jon teen it from any diagnostic that your why areas? lab growth international the lagging some we other of the reason is other with see guys. modalities call rough So

Jonathan W. Ayers

that's Yeah, basis. a from fair my I observation relative think

other business, single-digit relative revenue in prioritizing organizations The are in But Catalysts Catalysts sneeze the placements unique the know matter these the Of an we course those where placements to profitable a grow is of and business fair wouldn't really as in fact success and profitable effect different sure high retention that is business the Lab our that it's you labs XX% XX.XX% internationally we've also have year-over-year a want organic have our in lot of like or you lab in network placements of then businesses just the instrument at not are and place Catalysts reference By business we let's lot a the Reference It's make got growth profitable other Lab highly as of there and is a I of in on current is We any the reference market. -- a business we that have a characterization. something. up international amazing saw and recognize to then fact regions. when the business. different we these internationally a way Reference business U.S. lab the place. network a whereas good taking really lab XXX%

doing business example lab profitable for which German we're very very Our world lab. investing in why it's is class a well, is

of primary being business. These it's placement now. to as be and before with that from the of -- decades a of of profitable placing they the sales be mean not relocation the as need are to we're parts core I again going great Other profitability it's are we're As the there the more analyzer. just analyzers part the growth German so there growth today focused world the lab. on just

Operator

And of Jansen James Associates. we Please will ahead. go to Nicholas with line go Raymond and the

Nicholas Jansen

quarter. on great congrats a and guys Hey

to Just are O.U.S. just we seeing U.S. we mean opportunities on global Certainly I we've the competitive where opportunity bit. last on diminish growth just the O.U.S. through the outstanding as probably Jon, looking that trajectory placement seen think U.S. test the areas you a maybe the that a how still point following up that Catalyst. could about is of about three where at sustainability years? be this number over us upgraded, displacements, Greenfield think that versus as you're of Catalyst like starting walk

Jonathan W. Ayers

Yeah, that don't want new North competitive the want Catalyst I year-over-year gloss in America placements to and growth to counts XX% just number. and do I note to over a

of question fabulous U.S. of shared the result Our line XX,XXX great U.S. who SDMA by growing in the customers essence the runway lot teams of targets opportunity, and international we for number quarter your internationally. of are the wide commercial that’s product as we've course. to customers And number the know extraordinary of the had and on teams now Catalyst it's we you a supported placements but Over there's of a open. think because and ahead an believe turning

half of And those so are we're upgrading that and to placements test roughly competitive but new accounts.

retention very, organic of stays and there in high it So replacing I've of aged fallen install really put accounts, very a they're rates. mentioned behind there then with we're we base have an course Catalyst competitive which analyzers once that really

We have attractive opportunity vet economic Brian already more out and new to Europe the a mean this have was is not it customers Greenfield our to I account so of compensation now instrument loyal upgrade do and previous markets high at value which question and international they're Greenfield because loyal. a it's vet internationally of pretty and account. a test rush them moving their are in like basically have XX's like we Well mentioned What in China competitive. both very and customers. an focus We approach even a terms new are that's put to it's they're to competitive like index where the moving we loyalty markets test pretty then going as we and -- looks is placement. on the turns in

course we the a Of and in so productivity to of placement newer value the but competitive highest we to value placement. efforts will to move jump as same do the towards is a highest to EVI the see sales we expect continue account

and the XXXX to placements and expect XXXX see XXXX -- have in in than yet very put we in had Catalyst phenomenal the bit that productivity jump you -- internationally So placements opportunity. of in little we a the less even would a with success we very, of less than context

the of a veterinarians opportunity of have We runway a for pets. very And out with filling attractive going technology to world long point to care help have for SDMA. provide care they're all

so and the are so the Catalyst of SDMA. rolling international And developed next -- markets have on out we're months running, SDMA for appreciation in we that and market couple internationally the

Catalyst. American as just they're be SDMA of being teams on with So North able to as the excited were our run availability now

Brian P. McKeon

the we're we about, with to reinforce just the the and our strap will achieve trying on markets five right XX,XXX in to years talked that. I and international track five placements growth over next build year

was range and this in we're new the and year that So year placements. percentages competitive out building each of coming right

So feeling we're good about very the international front. the execution on

Nicholas Jansen

the we we associated ago with years very the on you boxes U.S. and the That's relative more and more five off that or as where U.S. early or to the on these Catalysts O.U.S. three these recurring those like can transition? compare map utilization we maybe seeing if very that markets are revenue in as think maybe more and those placements still end about become helpful we of are are to utilization

Jonathan W. Ayers

because and them outside an interesting but We've adding why We already we're that's very market growth great are a a SDMA don't that it to early, same that don't explain we're it they're a line going to we and talk much with it's it globally. it still saw sales We're markets with menu. to to are store question, see the that bottom launched PX inflammatory U.S. value CRP. the we had seeing We CRP. parameter is base. they're adopting now PX Catalyst So okay we install seeing gross and have There CRP about when utilization.

begun analyzer the we base. of we to the add menu Where as North really installed So, preventive we in America utilization outside care. haven't see even of growth the it's story

a which on testing sales XXXX yet kind and just and we are whole expansion of it's that's they're preventative world. intensity story out disease animal working can getting primarily how we animal we from on a the then the the it's sick we coverage grow the in right as growth of care sick out so rule now menu testing helpful sick our market, wave, presentation. early wave, grow as years And utilization really so rule just customers and of it's helping story we're in this appreciate take we around is couple from not amazing next in are the But

Operator

the And am ahead. we I line, sorry go go to

Jonathan W. Ayers

one for we're hour. time question, against up the I know more have We

Operator

Please question with of come from Absolutely, ahead. the line will Alex go Jaffray. the last Nowak Piper

Alexander Nowak

customers have Great, from Jon fair they of rate will had into to is they it see part and customers mentioned analyzers, good the reinvest or signaled the to place just as are just corporations XX%? cash? morning personal comments they the to flat most since that the what everyone. two part I extra any your the of because second that do such that customers this in some filled reform is that And regarding your XX% with then income out of park to beginning believe I say with extra you the prepared a going sort talked year plan is question. but have tax a simply of you plan to tax service rate

Jonathan W. Ayers

a complicated parts all a to expect They're will reform. is very your quickly question the because couple it's benefit bottom Okay, we tax They little answer most benefit. they see line yes, of are a customers moving [indiscernible]. small will see there's our to different businesses, but

this accounting around tax in seeing customers think I I didn't because just our think on veterinary to okay, fully realize. am appreciate don't corner take beginning the they I they're school.

to Okay, still and figure they out. ask their it all their accountants trying accountants are

here So days. would it's say Xst, I still early February are we

technology. business appreciation to attractiveness room their for some incremental I they is investments benefits starts this what the make their IDEXX the with -- them saying course gives to there we're start see be to and So to of as going think them I'm as inspiring of

Alexander Nowak

helpful. web? into that's you are but in then the are Catalyst any of couple reference And launching seeing SDMA the only cannibalization weeks SDMA you Okay,

Jonathan W. Ayers

in is we Lab a grow testing. think of No, the all testing not. fact absolutely the in We actually estimated -- option This Reference the house will because in our begets business appreciation.

in where Lab. we Reference actually this after in-house. We in It issue have our have seen launch Lab and Reference it we helps launch then something launch

can when or Campbell's five happened and laser really absolute sight lab years any are of period differential reference by part that you've over XX a You we back with see you ridiculous go blood lab our cell time. to launched studying what's to sides going with white seen reference

augments because pets. the Lab of growth care appreciation the it over time this think of actually in Reference we accelerates clinical SDMA So

Alexander Nowak

Thank helpful. that's Okay, you.

Operator

And Mr. I'll for Ayers turn remarks. to the closing call over back

Jonathan W. Ayers

on Yes, end year had you because the of much. the at longer comments IDEXX. little going bit very We thank number because and the things exciting of the of

excitement appreciate the So I XXXX evidenced our know for organization be the and as at investors some this want will and we do the American be And into I place questions North we momentum that's all we'll the of and think all conference known the there. I that IDEXX weekend. to show get taking thank will BMX have the to afterwards. previously so veterinary I just really attention. we didn't try appreciate fabulous

our and will XXXX financial reflected business. for there. and the This a that's Our for sales our prospects XXXX. long-term comments excited about very teams be We're in is I think enduring in growth guidance

pets, long-term As we vectors growth the the us. ahead and livestock health of we enhanced and of see wellbeing people,

the we that signing and will call thank much in. with So for very close you

Operator

for Teleconference. Thank you using and your does you our for AT&T and ladies conclude and participation for gentlemen that Thank conference today.

You may disconnect. now

IDEXX Laboratories (IDXX) 1 Feb 182017 Q4 Earnings call transcript