IDXX - Earnings call transcript Q1 2018 | IDEXX Laboratories, Inc.

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Operator

Good morning and welcome to the IDEXX Laboratories First Quarter 2018 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 statements 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 refer your to constant these also we'll all like may our our to first by We results, certain with A to back visiting permits, of her the additional period each XXXX you we of one financial measures 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% growth reflected reported in business quarter premium placements momentum Good results. excellent favorable by in recurring organic another and instrument morning, in growth revenue XX% We revenues, changes. Diagnostic of achieved CAG everyone. continued FX in growth financial strong QX XX% driven IDEXX's

the to strong aligns of instrument was instrument a reflecting the placements XX% the solid New an $X.XX In accounting revenue on XXX, per timing the which revenue results of strong implementation closely of premium overall called $XX to basis, reflect successful IDEXX quarter. of gains, net of revenue and program from recognition new customer multi-modality instrument organic increase standard, Reform. revenue drove of related U.S. growth, implementation EPS million introduction currency now attributed U.S. of in significant reported which comparable very the the was A a more with amount growth Tax revenue operating margin share, and placement. portion Our this Standard. the Revenue QX, benefits constant XX%

of in full terms or expectations $X.XX full billion, full outlook currency in to currency XXX operational increasing resulting basis year in our basis per our we incorporates XXXX for improvement, guidance growth year strengthened a year per by constant revenue revenue to full our of margin comparable revenue $X.XXX the as updated constant growth XX points a points on XX.X% U.S. outlook, dollar. In outlook, million to to EPS of operational maintaining upsides $XX our offset organic impacts $X.XXX are for billion from XX.X% reflected are projection to year higher our $X.XX share This and XX% $X.XX share basis. upside. to consistent operating $X.XX XX% We're

from a compensation share $X.XX These impact activity. updated Our stock assumptions. FX negative outlook projected from per additional are also incorporates $X.XX an benefits by upsides in offset

XXXX updated my outlook our review comments. will We in later

revenues was Veterinary continued high Standard. about we revenues Please segment, system Animal standard impacts X% primarily increased organically a XX% organic high the platforms Let's digital were by results solid premium retrospective software New our from Group. review QX growth X% recurring XX% growth included driven review Diagnostic from the benefit revenue organically XX% results by placements that, our XX% in services attributable momentum our to referenced in supported CAG were and organically. These by system the in or by $XXX begin our revenues, services strong business. recurring increase segment These and and to increased gains by as changes, practice imaging diagnostic in despite management up Global Companion over growth our with performance continued rates related in a Global CAG equivalent note led accounting software CAG CAG digital million QX placements. headwind. recurring modified with restatement. and include $X million, our day Revenue results of revenues performance region. associated benefits instrument year-on-year

Our in in the premium revenues recurring initiative. million million, product driven growth in growth including in organically gains higher XX% CAG growth solid from in about Diagnostic levels in revenues by X.X% and the results offset the up grew Water to by first moderation U.S. patient program $XX QX a continued clinic $XXX strong revenues. were reflected European by part were gains pregnancy X% our the health X% CAG diagnostic reflecting our This test year-on-year from up strong increasing International were strong recurring were European gains franchise. driven go-direct rules to placements. markets, through to from revenues. organically. about and gains business base year. range. market assay high by in growth favorable XX% revenues in QX IDEXX demand herd and performance These and trend recurring we in million, and moderate recurring and visits recurring X% were declines by in in digit in increased price supported organically recent strong also solid rapid in benefit quarter, international sales, in and recurring later U.S. growth disease XX% to will consumables, Catalyst supported Dairy organic revenues dairy cutting Brazil continues continued eradication gains continued diagnostic work XDx By X% benefits solid and in were business on In X.X% screening gains reflected U.S. growth reference labs continued revenue the growth instrument high-single accelerated CAG slight veterinary U.S. growth Diagnostic consumable weather revenues growth Water gains Diagnostic double-digit Strong dataset our in growth supported growth instrument in testing volume compared continued impacts utilization and $XX prior-year reflected growth by livestock less clinics. under customer up the outpace organically. comparisons. U.S. trends retention our Poultry growth lab Livestock, Revenue to revenues region, in U.S. our recurring our New revenue X% moderate the to as CAG supporting period, revenues. Standard. significantly X,XXX ship-off U.S. revenue in metrics million, benefit practice CAG attributed market impacted in QX, XX% to up expanding was QX quarter improve about sales by and XX% in profile. International $XXX

Globally, These SediVue levels. globally. placements, year-on-year our up prior premium of a terms analyzers, up year record XXX strong by In across gains hematology XX%, QX premium XX% placements, segment compared were supported XXX instrument testing X,XXX results increase, to XX% driven and of Catalyst were Diagnostic results CAG global by X,XXX placed modalities. a we've premium performance, and base QX expansion instruments

to the X,XXX Pro Pros addition strong base we expanding our the in SNAP quarter, XX,XXX. placed results, In instrument to installed over SNAP premium

to with at America. our performance international instrument markets. strong in accounts XX% America, Consistent XX% placements new reflecting competitive to by QX CAG Continued in accounts XX% in gains North Globally, $XX and competitive up the North X,XXX accounting XX% or change. million Catalyst was new revenues year-on-year, standard markets, up were in driven in in organically, of base growth American focus, our installed quarter. placements increased in and international the including Diagnostic in QX, placements instrument Catalyst North year-on-year Catalyst were XXX million, year-on-year XX% $X XX% and year-on-year revenues attributed strategic

customer from to across quarter. customers lines, doing IDEXX launch in Catalyst our this the supported placements and product As SediVue business of primarily in U.S., IDEXX's the in was amount related provides driving the benefits noted, success with which XXX and program the

double-digit test enhanced double-digit modalities. approach CAG well, instrument major expanding aligning index in base, continue placement strong and recurring international as strategy Consumable recurring revenues CAG across drive increased markets. an strong grew pace and a this gains XX% Benefits innovation capability, And U.S. million with markets North organic across commercial gains our America. Our QX. our now we're to maximizing globally Diagnostic from reflected Diagnostic Results in our $XXX revenues. using organically in at EVI international annuity of revenue

consumable year-on-year and and with Our combined slide, by gains in in high of focus reference customer Reference customer continued real-time $XXX growth XX% quarter. contributing organic the driven nearly lab U.S. the SDMA rates. acquisition be Strong in of care organically growth on SediVue consulting innovation a million X% first to reflecting quarter. to mid-teen were Gains continues with existing grew in services improving gains revenues on volume and new laboratory the with continue and levels gains primarily to steadily customers retention U.S. driven drive

to X% higher gains digit assay single revenues Europe. lab organically markets, international in $XX QX. million in achieved supported also in strong year We grew growth compared growth of high by levels, Rapid prior

net in margins gains basis quarter. on currency or constant profit XX% was million continued by supported profit XX impact of lab reference growth gains as growth seasonal products, supported of in basis, U.S. goods, stocking solid basis as from business. cost assay $XXX volume currency was rapid a leverage expense businesses, points and first-generation in in growth businesses. by as price solid revenue our and continued of XX or Water basis constant VetLab solid gross of reform XXX a and from up reported a profit million, on Continued QX, to programs, Gross by margin were OpEx driven basis. points basis. by These XX% leverage and reported, price constant effects increased in constant from gains. about our net XX% and basis offset XX% as Operating in driven margin the which CAG volume cost up on well benefits lab gains QX a Gross currency currency tax in our $XXX reclassifications strong by were gains XDx on (XX:XX) points reinvestment results our supported and gross operating high

Foreign in share U.S. from R&D levels from share-based in technology were our investment, share, profit, QX. up constant per per a year-on-year growth benefits. increases $X XX% exchange U.S. U.S. of capability, gross reflected XX% basis approximately including or expense XX which highest margin impacts benefit in impacts EPS from in resulting commercial to points basis, impact including capability, higher positive compensation Operating reform. to EPS on were be operating of million currency tax reinvestment currency QX. XX% related Operating or in basis, leverage. hedge expanded and losses, which tends $X.X in benefits constant tax QX comparable net activity, enabling expenses On million $X.XX was reform QX in increased information $X.XX a of

rate QX, tax was rate impacts. of from benefit effective in Our XX.X% compensation share-based X.X% including tax

exchange, operating flow hedge XXXX, in quarterly profit QX million $X.XX million by cash $X reflecting seasonality. QX, of Free per increased and Foreign normal net impacts by in XXXX was $XX EPS share. and

headquarter to XX% maintain including $X growth free core full-year million. $XX We to impact our our combined remains our in flow cash XX% flow allocated million of investment approximately with cash and capital spending of Maine free investments, incremental XXX,XXX to well U.S. flows reform. capital capital cash flow XX% related by We supported by outlook continued at $XX in as associated relocation, additional XXXX, million free shares net million lab Westbrook, for cash for these outlook Incorporating income $XXX our incremental of XXXX QX. driven of German capital of as tax to expansion spending repurchase for projected

$XXX used debt QX also our and a U.S. facility. increased in and $X.XXX ended under $XXX in debt billion reform revolving outstanding. with cash, reduction We million our our credit revolving cash tax in optimize balances, our capacity flexibility to million under We in in global debt, resulting

outlook of to a approximately which X.X were in gross full-year as from repurchases balances. of EBITDA. EBITDA at multiple reduction leverage of times X.XX that maintain outstanding We're assumes for we investment adjusted times stock ratios XXXX X% times shares net and maintaining net cash X.X%, average leverage and Our X.XX our

project continue of net to We million. million expense interest $XX annual $XX to

projected our FX XXX as $X.XX, outlook at at million full-year X% XXXX, in press There's rate share, growing in $X.XX XX% XX.X%. $X improvement. per currency for upsides of dollar. in our a related for reported increased rates a outlook our basis instrument points below P&L losses. U.S. This dollar impacts operational consistent including and of recurring now EPS rates our exchange a in We our operating release, in net approximately assumptions, U.S. recent million for This a our to $XX.X We're exercise rate resulting growth X% significant amount the instrument growth updated This strengthening We outlook $X.XXX approximately upsides guidance our per reflecting additional higher and constant in million or of terms we levels. by $X Offsetting the updated of to reflecting from guidance now to an to Based would performance balance an and movement our currency hedge expectations EPS sensitivities EPS XX% strengthening to XX.X%, reported our for to tax year in maintaining placements. In exchange rate to changes full-year the income outlook strengthening an our the currency outlook reflects XX% XX.X% consistent revenue of organic estimates. on of revenue by in recent strong currently million year revenue highlight $X.XX XX-Q, a are we're million XX.X% tax of per approximately growth billion, is from for expectations X% currency adjustment revenue billion FX $X.XXX margin net rate the year projected by X% approximately to incorporating expectations currently points constant effective XX% outlook noted, million XXXX rates. to including approximately and projections press full and growth share benefit projected foreign In in to QX change refining expectations operating $X.XX to revenue incorporates EPS $XX to of of foreign recent estimates. benefit in for the XXXX benefits projections X.X% our updated Diagnostic increase of to to share revenues, these reported from dollar $X.XX organic $XX.X estimate are by earlier exchange our $X.X We're for earlier provides compensation. XXXX year benefits estimate XX%. revenues XX our the U.S. Operational release. that CAG on shown reduce offset of basis in in also revenue related revenue at $X.XX to will to benefit foreign of increase growth. share stock-based compared comparable $XX related our shown per full-year to full upside million in rate rates XX% year-on-year This incorporates of days been full in raising estimate hedges. premium for

second XX.X% we organic supported growth gains to of XX.X%. range expect reported In terms outlook, XX.X% by in the quarter revenue XX% to of revenue our

expect of levels, in be relatively In our cost we as the well impacts to system related and reflecting gross flat compared information prior terms P&L in lab as tougher margins comparisons outlook, from year-on-year reclassifications. QX reinvestment reform tax year relatively to quarter

R&D by expect XXXX relatively investments. year QX factors prior expect compared higher also lead margins in these to will flat year-on-year QX Combined, XX%. expenses of part operating levels driven growth with timing in of We we operating

XX% from our including in That compensation We review. to activity. exercise financial effective tax the benefits XX% QX share to rate expect be concludes based projected

Jon call comments. Let for his me the to over turn

Jonathan W. Ayers

you, Brian. Okay. Thank

for productivity with this revenue growing our along year. world theme quarter Animal the Diagnostic quarter. by is up purring is the was professional first in care strategy advanced of business globally. of shared our wrap customers and standout of growth And Companion XX% by for Our as Sales results we the the the evidenced new pets Great Group around standard nicely the to Brian. force recurring

know, beginning impact measures value EVI instrument Prioritizing IDEXX. efforts of field an we EVI and placements As recurring revenues. we to the to value placements profitable their reps XXXX. building transition maximize in instrument and quarterly mix to a or and QX, EVI our programs moved placements for placements international the EVI our for professionals of value. moved efforts measurement of North commissions economic have measure to our long-term in time of success both the to of EVI empowers index that allocate with on the field American In by and compensation building operations, quarterly and shareholder investors this of to the system

the grew QX supported EVI by mentioned, placements SediVue. American in our XXXX Brian exceptional of As of growth North of double-digits

rest instrument Catalyst placement and For new of accounts. greater EVI in the supported year-over-year placements strong of Catalyst world, North XX% in growth of new of both and percentage the competitive outside QX. placements was was far America, the year-over-year to up note, by placements unit competitive from stronger and Of

IDEXX we sales commercial efforts successfully advancements We and single have our across this focused a a past model care. to roles two separately model, for also instrument and QX, In align different the continue In to offerings. the German on advances and reference several respectively force our customer diagnostic labs used our single years. of offering transitioned our modalities and U.S. growth to support supports the standards organization lab of in team instruments commercial in from the coverage full in-house account that

our as change just continues organic with to placements. executed set CRP, growth platforms that TX, in be important most accelerated globally. on the revenue Our another the we now came for to as from growth as around instrument in marker, Innovation markets revenue recurring recurring being very have recurring instrument in of Germany a well achieved transition from to are made the consumable grow Along U.S. this was contributed we world, Expanded key sales contributor, the we customer-centric revenues as country menu growth SDMA including an a since we're XX% up new course, driver and this customer German inflammatory same SediVue instrument and our model. – brilliantly. growth in team fully direct instrument

growth adoption a continue and to be by come the a Catalyst value increase Catalyst of years for to of will menu our New placement. customers driver course new

of with in-house SDMA in IDEXX the In our our these America Catalyst SDMA North quarter Catalyst consumable new have function clinic kidney short majority general North – in customer in SDMA already period, of American for test QX. vast customers a platform remarkable our Having Catalyst IDEXX. instrument, had strategic a in XX% chemistry its it growth first Our proprietary using test in-house this regular adopted availability of instrument advances several on generates recurring revenues. the for on objectives stream Test Obviously, basis. of

Second, loyalty secures customers unique further the IDEXX. is Catalyst it the long-term to of as test

customers at irrefutable put upon SDMA clinical that involved impact as their in common To as a veterinary point have profiles, provide wellness of the routine testing term a reference indicator detection panel Canada essential informed routine IDEXX existing study, we of sick journey exam important XX medicine increases testing. add panel. Third, with that routine accelerating have looking the have the fact the at lab in believe in in value not just studies, on tests in-house hidden as element SDMA's the how another In and work-up. what of problems. kidney uncovered full January needed XX% mention function. this cats an journey The in of further just test, already the to this, the chemistry experience blood even variety is in of SDMA they that of baseline chemistry seemingly complement their SDMA one early the been to animal and as an with the UK evidence diseases of wellness patients to in having of of adding was which to independent a profound of build completed KOLs of they pinnacle dogs statistics XX versus is patients, profiles dramatically diagnostic March. importance additional shows and and other innovation launched tests, and Catalyst SDMA a the that of words, SDMA to healthy in one SDMA The of wellness,

will of kit America. addition Catalyst, QX. international The other countries TX of care in a in The combo month the in a major point launch follow in another with SDMA North advancement QX about for testing will in few

Speaking is with disciplined any as part changes of concluded And and and product, launch trials We our to on will is hands that approval SNAP We've launch. technicians expected exceptional The development parasite formal there process timing. to on use a insights of deliver that the validate. new to with products months new schedule. but field products, and are all is in customer be our in be assay IDEXX. The the regulatory get well we anticipate improvements currently detecting prototypes performing experience from of straightforward, extra these made customers, update new products product our product before market workflow many practice timeline typical relatively expected few development. to to intestinal Fecal new an of the we take with need are certain in

very busy a New launch the formal at Year. into on launch the pushes the QX, planning we're beginning this Given of the

of labs, in-house have new to menu. want our I also and be in comment we currency guidance we've the the a that have to has continue might field revenues, reflects software customers customers in practice we're on Our than this which or franchise, experience revenue year shortage who advanced new investments XXXX, customers, multi-location our our our that lines. no overall four DVMAX bringing of reference to include of assumption. a are grow instruments, for new to I software we software the All Fecal field double-digit currency growth on QX. million product basis support for Cornerstone platforms use our growing in with reflects And PIMS veterinary SNAP to the the constant software In products segment it the and X,XXX more undergoing by management which QX, PIMS all accounts, information test tremendous the our $XX leading and business capabilities of and increased momentum guidance cloud-based new corporate and major sell, in and PIMS. improved innovations today. The with offerings in had fully market market. constant note we services we timing the user that

software results in at And the other diagnostic customers, market PLUS that than IDEXX are veterinary customers We order estimate their a Our subscribe adoption X views that to to engaged number global value all results the footprint every add the management, we VetConnect are IDEXX on is software to are accounts in and XXX capabilities. Between active VetConnect the U.S. daddy VetConnect also grand cloud-based applications rate in these market. are digital to, in million third-party, which franchise, PIMS, for revenues specialty PIMS radiography referral month, that is QX. our diagnostic We grow which why basis. of their in relationships underlying These globally. of world a for apps half applications in positioned plans, VetConnect customers software in veterinarians. uniquely practice PLUS the and average of referral has an the communications, mentioned, rate we're U.S. of diagnostic advancing VetConnect over our VetConnect alone include accelerated pleased as a account with XX,XXX specialty XX,XXX X whether with clients the global CRM investments broke utilization even each veterinary Brian grew platforms no numbers And client of non-engaged software in practices of support U.S. more IDEXX is the our That QX, million or packs, three and to PLUS. terms R&D faster views The times PLUS PIMS With highly in use million X.X active customer of contemplates, in referring enterprise XXXX. and multi in twice who the our PLUS the managing PLUS PLUS with wellness and cloud-based volumes veterinary apps that guidance VetConnect in globally. than

diagnostics can labor usage several Our in while environment. IDEXX. strategic grow advantages and a software upon our profitable profitably, recurring veterinary radiography loyalty. and customer customers key We to of the of loyalty, and our drives faster, accelerate and software and current innovations, and these to practices software In strategy that innovation and the so of help conclusion, diagnostics diagnostic supporting staff We which elements clicking digital growth for important grow our execution are both and businesses. commercial strategy and adoption services, IDEXX builds confirms productivity, our the revenues strategy offering engagement grow accelerate

the pets, value All livestock. employees and customers, dedicated of of wellbeing us people shareholders for long-term at enhancing and exceptional by IDEXX health remain to create our to our purpose and

we'll to with call So up Q&A. open the Cindy, that

Operator

we Credit Erin go Thank Wright with you. of And Suisse. will to line

Your line is open.

Erin Wilson Wright

was anyone in in the Just And maybe nature originally? of Can a competitive how I embedded also test what much we to of in XXXX? Fecal are in truly SNAP SNAP goes? ramp Thanks change? Fecal you guess speak field And think seeing in as assumptions the you initial landscape, the so the the XXXX you much. SNAP far the Fecal should as seeing timing Thanks. bigger testing? wings are

Jonathan W. Ayers

Yes, great.

has this guidance. really impact on we As our mentioned, XXXX no

SediVue SNAP us Preventative combo winning just tremendous is and runway we're for growing what with utilization new Our SDMA has tremendous growth driver still to customers. TX highly product, and growth a differentiated sell. in ahead field offerings care a reference hematology, SDMA labs, great organic of placements. and Pro kit, now driver, Catalyst number both a us, big the which of team hematology, the the industry's

advancement. with the major the saw software, PLUS VetConnect You radiography, the digital

in see confidence the in had areas, that small and for year. really being really, revenues the by other our supplanted gives original we plan is So us we of really amount growth all these

beginning And on the three us is the – the anything and the of front. intestinal time parks. the QX offer when at was into ten the we by This worms, competitive testing dog a is lot fact, dogs do are most focus the around new at which in of point assay, quite lab. logical season performing going It or well. develop the minds we a assay not took reagents people's expect reference the for of to on way to years We're see products. find In we're in launch summer the care for which frankly very the key new the most year with SNAP parasites

fecal We have of And all reference antigen, one drivers reagent. growth. lab the big a proprietary a that's of

So, we a time a our if this will proprietary the you certainly of at look patents. long think product length be for

Brian P. McKeon

a And obviously for all it being compared this incremental nice will growth terms to of year. uplift our Erin, in provide

think you competitively. on is this, a had competitive to question I going related this anything on not to

Erin Wilson Wright

I And activity traction Okay. any what your could, would think of or better overall elaborate the were force you guess better I sort Great. mean there? Thanks. competitive for was sales just promotional on I great. Anything placements that? strong. guess, then pretty be drivers instruments and of of maturity some key I

Jonathan W. Ayers

course supporting would to our just belief to I of care innovative force importance the sales mostly sales but and of and continuing of diagnostics the we're how innovate think customer's it the pet. marketing. force, not we in I advance the journey the in put on productivity

they professionals of and in are professional the support the importance the reps. service whether have We the field our veterinarians field other

a Our had growth. tremendous international

the areas, stronger they a we international, of study hidden the I stronger importance when journey disease yet the category innovations by six the in exam, the fresh care. upon in one of the that in mean evidence senior done of run drive to wrong and unique. EVI are veterinarian and wrong is believe course in chemistry, for preventative absolutely the extraordinary in And getting I all addition one the amount still And discovering wellness which in our importance of nothing a such to adoption in unique mean, whether are SDMA to geriatric well, you nothing two hematology testing profitable to numbers age, disease. the urinalysis It's remain to of these of assay cats was the yet, our the the owner, hematology and proprietary obviously advance underlying dogs how bringing as have we're the SDMA. growth. EVI the We've can in are amazing advancements nothing for pet really to way understanding eight and and numbers. think adult basic are the field. wrong, five the customer's area, and U.S. in they both I and these of

a is that the It's which probably huge clinical base, visits mix in growth. this animal include where the of wellness. are for panel And are our the visits generally chemistry XX% is half shocking advanced a opportunity basic well sick roughly only so, customer customer in and more

need for relate So, growth to address there growth is tremendous opportunity practice when them. find to going overall things, and in the category, ahead that's us they of to diagnostic then of course they because

Erin Wilson Wright

much. so you Thank Great.

Operator

you. Thank

from William come Blair. will with question next the line Daniels of Our Ryan

line Your open. is

Ryan S. Daniels

Thanks or base? in regards IDEXX if to Yes. new morning, customer around that's at positioned new what across a detail And color could Jon, I'm placements or customers guys. encompasses? and entire primarily provide taking the Good curious was targeted XXX when if that's or that hoping question. bit launched was more I you more broadly for it the

Jonathan W. Ayers

it the Well, XXXX, really us, in for It's a been it question, our way to for it's America. certainly It's friendly adopt question. in more adopt instruments. in of because all is It's encompassing IDEXX And We what question. thank XXX Ryan. first our of our menu it's the also a very a more the program of call successful quarter customers boring portfolio launch is of interesting not to and really the complete. XXX North or again you

are reference so, lab and grow complete in-house rapid the diagnostic offering to And why business. complete called that portfolio the we a leverages of full the in-house reason have or And and XXX, reason also assay with the it's and second really urinalysis a the and it's an fact – it's the all-encompassing that very or to the XXX-degree in-house available might patient's you IDEXX. options might VetConnect run health. the reflex in is, a you PLUS testing test all combine what and that lab gives run reference have advanced can with with on you unique it both on on view Because you what to an

the that to all a adopt, and a whether or the come in with interesting program same-store while to which picked on new been can and is modalities success. programs which this for you and it new So in quarter see, very fact any basis, we're they one because relatively a over systems the growing it great – makes customers sometimes as leverages successful, easier is little quickly customers takes to new it's the lab reference been our field sales, modality it's winning first learn up it's

Ryan S. Daniels

as then international one specific on the more operations. the to And sales color. my helpful That's Great. force follow-up,

discussed EVI particular business if your model And team And single inning look with is what Germany you that have the see launched. for that moving be do the Thank longer kind How growth uplift could to moved at like combined broad international I internationally term? big United in that you far EVI? You sales because the of you. along in now, towards sales States. you how the non-U.S. U.S. kind a team a of I know in or know

Brian P. McKeon

us pets depending the out people love over in turns basically opportunity Yeah. market world and every size. for its It their on the is all

XX% behind a of building of lab There gives couple a a that our core an are. European course, And the us. new are as customers do are there be have lab are and network country just will most of have we're essentially us Because with tremendous And grow the in for remaining for U.S. opportunity to and EVI model. process. – we customer-centric know markets Group protocols of expansion of small with we with adopted XXX%, although so the markets. to diagnostic which still for essentially, in utilization augmenting as for opportunity presence is in-house we're very strong sold direct variety And a the are out the full about where that Veterinary of is a a markets all well and, Consultant adoption Germany. you very work Germany course, direct U.S. of is the not Companion in as Diagnostic our Germany utilization. outside revenues countries us Animal of important which, it's

has of very country we're its but each our so not sales to unique kind easy model, It's pleased. And translate. aspects in terms of

U.S. As roles. very you move to for and showing when just done. it the it told several in I'm of easy is proud German team can doing sales this And our that did ago all years us not market, we it be

Canada. that leveraged a think I much we Australia. model of We're learnings lot in in a in pretty U.S. from the doing common

So a more as not and it's becoming yet. here, see We're process. adopted you it's can step-by-step but fully more,

Ryan S. Daniels

Okay, you great. much. so Thank

Operator

Thank you.

America Michael go line to will We of Lynch. with Merrill Ryskin Bank of

open. Your line is

Michael Ryskin

Congrats Thanks. couple on for on quarter. guys. I the quarter. Hi, a questions pieces the of the some moving had

then the our Europe. Easter by also March one and in notes, northeast the had, there selling others. day, is you You weather And also in in the as fewer in talked about timing U.S. impact have

to good issues? effects? of the despite if So you out a these from that, but I you sense a one-off you sort if put still of normalize I'm print headwinds was performance sort mean underlying of trying just those I parse get wondering could the up for

Brian P. McKeon

which to X% Yeah. is a a The basically It recurring on we noted. was parse. headwind revenues weather thing hard

our a great didn't impact it business. had think We I quarter.

of But a but the it market. estimate. just I Overall had the in little think tougher it's I think somewhat one... headwind, likely to

Jonathan W. Ayers

was mild last a year normal and a winter. It was winter

Brian P. McKeon

Yeah.

Michael Ryskin

Okay.

Brian P. McKeon

had there it a just in markets very tough as great reinforces quarter business, out lab against we so a And point really nice in had compare strong I'd performance, had like the Europe, we up performance. we well.

in the some of how we year with that. So particularly very of context started pleased

Michael Ryskin

helps. change, the clarify And Got point. recognition, revenue The accounting then other XXXX-XX. one it. ASU That to

year. raised the that guide million. by for $XX recognized, like called quarter change. XQ year about that XX in this out the bps that That you an you XX On accounting called right to the And bps, out the due it's you you incremental call the when was for looks then

incremental accounting that the So right change? is not expecting revenue you're from the more rest it of year the any for

Brian P. McKeon

take... you don't why Yeah,

Jonathan W. Ayers

are different Those things. two

QX, talked So obviously the we for right? So QX, about wasn't – the much of what it incremental have aligns this now was in And instrument with we anticipated revenues. that QX. in

Brian P. McKeon

this we and the that minute don't a performance on takes to I a XXXX give outlook kind the our and as that which of minute understand digest understand. look, about new QX all Why little by reflected updated new track background the it's to And with placements million and standard, Jon program as accounting just Yeah. But, context, raised as you important standard. placements. talked projections our impacts are for recognition aligned a take the for are as more going it $XX instrument because to now mix think revenue well revenues closely I under

accounting, changes the So programs what's that if programs mix with how at look in basically to at place. programs the programs rebate different and aligned what's are upfront you by of of are that When independent under you which and can be all recognition, attributed have, you commitment time placement. the of impacted think volume attributed revenues program impact, the accounting the revenue many calculations we in across now

from this volume XXX And program. revenue revenue under standard. is XXX% basically to reason GAAP, the example, been like revenues for related would as is of new being guidance, is So, new IDEXX implementation program a that treated the of the why previous accounting Those under this have new deferred. a commitment the

standards. basically being attributed what So mix placements, is are are which – our which the accounting have to view you program impact on revenue drive don't shifts,

What attributed the our standard, is what's we based that took revenue as And year, I metric through the on You updating start. if quarter new It's to we'll standard up with just wouldn't all we're multiply first but We numbers new how it outlook, to did strong the take effect as that reporting the full-year four. our placement go on can't the recognition. view. you and at revenue by to work get will. that we upfront has do focus aligned

Michael Ryskin

in If it. squeeze I I one Got quick that, Okay. really one. appreciate Brian. could

the on CAG. gains year You talked about pricing for

going But XDx. on assays volume in for on specifically strong assay, talk XDx, rapid then organic, in about rapid was there you X.X% can for in that, the the quarter? pricing the Specifically anything and

Brian P. McKeon

mentioned up. Our I was that. pricing

Michael Ryskin

Yeah.

Brian P. McKeon

net those of to kind our year range we're consistent X% outlook in of do. typically we across We programs. the sets that had that trending was the increase modality. seasonal of X% stocking the that's programs and And And for is

to momentum excellent continuing solid we're on volume by get So driven we've being gains, net our that front. is of and but got more growth, growth price

Michael Ryskin

Got much, guys. it, great. Thanks so

Jonathan W. Ayers

you, Thank Mike.

Operator

line of Block you. next from Stifel. comes Jon with Thank question the The

Your line is open.

Jonathan David Block

small Great. Maybe Thanks, guys. Good X.X clarification. one just morning. questions,

one, well. lighter growth was a in actually XQ XXXX with growth market of is, metrics, your some was the So per first checks line little lighter, that our as little market a just

that at the think anything or That's can So what weather asking you remain specific, and you trends do level Jon, is share just that higher was this I'm overall for April, I solid? the a industry guess first all question.

Jonathan W. Ayers

be can the bit say, industry a think I quite solid. I'd little overall summary, QX remain in trends bumpy.

Jonathan David Block

Yes.

Jonathan W. Ayers

different solid. been was what at has they X.X%. level historically to than quite not. growth that are the I But see that we no trends at really not mentioned overall it are that reason practice revenue believe is There the would have And that

Jonathan David Block

it. Got

the And on IDEXX, innovator least have per you're just increase impressive the certainly Fecal always considering guide, at I then especially one the SNAP timing product new year. to antigen. about That new said, Okay. maybe should thought

antigen I'll the think XXXX? And we should SNAP clarification I that now have then guess product Or for other in can final allude any so that bag is just And my you question. tricks Fecal that to?

Jonathan W. Ayers

is product interesting. the pleased product. Catalyst This about enormous really SDMA. right mean I Yeah. now the It's we're is an

we've underlying rate the U.S. really You've from shows for period adoption saw reference demand the of time short built in the which – very that lab. SDMA just XX% you market, the a seen the in

customers even those use reference of some lab. don't Now our

the they see will so SDMA. of use value now And reference maybe they our lab that

– Obviously got we've got differentiated then is we've got guns. and we've so hematology offering. just great great And completely SediVue a – going

should of not And several of growth XXXX. to products in expect, QX years, this launch I'm years continuous you will many you. so launch Clearly of you Fecal of other a be ready big products. improvement but you've at product, in ahead when our like course, focus got existing any point SNAP a in about time, talk

So annual we a SediVue, of we been advance Network new comes just over improvements the algorithm run use image that that from on the for X cadence have example, point algorithm. have fact that algorithm million X.X. we have and And Neural to SediVue, expect the this patients for we machine to at launched, that with learning

that fact it's to unique Smart those the every all course, Of come Service, our images day. back

going the And we the good have SNAP with we're the have of Fecal. will be products But product incremental so continue XXXX – to advancements. for launch beginning to now scheduled

Jonathan David Block

Okay, accounting CAG asked sort Was quarter? for last I change, of accounting board to remember hopefully I a that XX.X% you was I this of XXXX. for in perfect. growth makes this and sense. put change, Hopefully that think organic don't bp were XX.X%. tailwind throughout up for And a going and that essentially for this if clarification, bad, at Brian you quarter, come correctly differently, guys. maybe is normalized ratably Or XXXX? XX Thanks, on you butcher The too but

Brian P. McKeon

trends in kind is accounting accounting just accounting go growth change It's XXX mix gave, change. help this adjust take change responses new IDEXX don't the attribute earlier is the program. to if which a change. the obviously way that going I And like rates, you're will I business. disclosure the I'm when to as that it's related successful of back a program to work a Yes. benefit XXX% and And you new to to is, I attributed the accounting the for to you think what's trying think understand the an

placements with revenue you mix outlook, be. our estimates good all basically up will So the is much we we what the see now because the be the I'd look instruments. growth flowed we through, and instrument it much are place as say programs, and more when thought on we And – that we've more where updated of to we were the instrument the that full-year we under going took we is with program underlying really were the And aligned the based Jon, what above at momentum more have placements. aligned

feel And I But comfortable we'll et of recognition with you cetera. So we new that. and momentum the business rate is the to impacts, under underlying the standards. help strong growth the sustainable understand think very try

Jonathan David Block

Okay, perfect. Thanks for your time, guys.

Brian P. McKeon

Thanks.

Operator

you. Thank

question line comes next Genuity. Mark with the Massaro of Our from Canaccord

Your open. line is

Mark Anthony Massaro

business some really great news question is health for its seems on Thanks a Vets to and by guys. First the congrats Choice first pet to quarter. Vets merge spin engaging the Henry questions Schein's be your Choice. of out with Hey, inroads decision animal First on neighbor, making and My owners.

overlap I'm you directly can the guess, of of the in software the that with I your with pet working so, you And if on initiatives comment initiative? owners, any any does potentially strategy have have wondering

Jonathan W. Ayers

merger. first Well, their the to Henry Schein like First on of we and would congratulate all, Vets Choice

more and of fully that profession from the As say on anything it's the us. But anything that we've and have you it's know, good away compliance model good distribution which moved successful on in for years would preventatives and thing. case ago a for think therapeutics this engages very, very has been pet direct for profession number that First we owners, of and compliance I a with more is kind Choice, which and IDEXX. I is grows Vets

is – to believe practices or it's anything pet do can better underserved, can owners, a And if serve for it's help thing. this the a good we a be if underserved. we to pet engage better so pet others that us positive and good, pet with positive practices and going care is practices And off for for can pulled dramatically as but is demand underlying – do owners firmly owners

that's view. So, so of point our yes,

Mark Anthony Massaro

launched contemplating a Can is then Neo update couple guys software I us platform in that that perhaps know And product strategy you what traction the Choice your years an of of a that Vets going? context ago. doing of the is you First how on is give in Great. market? you just Are

Jonathan W. Ayers

and between ours cloud we them, other the software. pleased of and which variety And have We're practice based Neo for based. progress, course, the apps a our cloud with X,XXX of we with value third-party Animana softwares that also integrate also have who pleased management customers two customer. of add very with the which use is We're

is that We've in you and of area. U.S. the it's or of in And and back and PIMS an VetConnect footprint exciting have all to our helping customers I this or really apps and unparalleled with of made their point are XXXX practices a thus PLUS think up the XXXX. advancing more investments which prior an global some profession. And dynamic growth accelerating presence, add more when area, engage so owners pet run better, efficiently we better

diagnostics really it software part we continue unparalleled be very to a our and for of have think we important it's we'll us. and sort strategy. offering growing So as And of

Mark Anthony Massaro

And Great. one if I quick last one. can

about in of launch. VMX at that your year indicated XX% slide think you first TX I ordering total its hit

that Do have you confidence XX%. slide or You meet launch can the are you at on well on your on way with a SDMA? exceed TX SDMA

Jonathan W. Ayers

And I'm going veterinary. an on months – of the been And adoption to the tell slide amazing slow. fast within amazing, the exceptional. nothing in XX% rates of in accomplishment. is launch is context, SDMA typically adoption very that you, happens are has Everything

took so fourth months. some four January. And ramping we're market We've been in very we're up with had. the last the very, we've just fully We but in really preorders the really U.S the quarter, in in pleased for success the

SDMA I nice on to And placement a increases a then an it's to that's it's goes of about a the I course customers which SDMA purchase. those drop Catalyst you are a and chem Catalyst in-house the And and going kit, then think parameter it mentioned, cats add can our number. and the a great really And of I actually a with that for of both to So appreciated they that we thing strong combo consumable additional be mentioned, kind of think like panel value as SDMA a very to just slide, together with also testing. the have by TX because have another economic is dogs the as older just with TX but very to I stream placement you add case – up customers subtle, from want TX. thus going because in and

very with we're So pleased that strategy.

Mark Anthony Massaro

Great. Thank you.

Operator

come from Cooper of final Andrew our And you. will with Raymond question the Thank James. line

line open. Your is

Andrew Cooper

for Thanks me Hi, guys. in sneaking here.

one from me. quick a Just

of is new there will As is Catalyst and then there? the relative to SediVue, if bit customers then give of going what us through placement you you of what we new update per think there are be us those into top on of Thanks. that, of rate lastly, the And attachment a there. give Can a changes can percentage seeing a you on bit been versus of kind an if any to the little placement have great? sort to that base the pull back day little of trajectory color

Jonathan W. Ayers

question your Yeah, change I to the material there's that a would in say not last pull-through.

change adds yet and point, would You don't that think to to really fast. analysis value that that's you my clinical exceptional that prior would your things think with insight,

it's instrument And the to so selling selling to our base. they We're X,XXX placement to differentiators. sophisticated of full very SediVue. customers X,XXX, where I don't per buy very of going all think selling suite now suite suite. but above. the earlier with they're buy to huge buy And into your installed the We're consumables full later. It's we've said really – customers in We're when maybe the full who mature,

love got it's customers can don't year we've very We Run. just do to very, course, consumable because which a per Run, second in successful Pay because UA we per advance. buy had the which they Pay Free have Of inventory Day,

we're a always one that finding chemistry is there a XXX And lot is hidden one of clinical When expect. that differential. in urine, tremendous insight urine. that urinalysis you getting and lot you That's a lot And better when run customer disease amount run you run clinical panel, you of We just day. a find you're wouldn't was a of like what a insight. have of

of standard on you're today of part think basic will with they have wave second a next with veterinary a gotten even over numbers, component we're runway reach analyzer I Catalyst in as in sediment the we'll following yet radiography. is which haven't do in-house So then as we urine so that started have you the the form chemistry, on decade to – hematology, in sediment in This international, from a saw the incomplete on be the able practice large we to U.S. in because whole a Catalysts but and medicine course much very find really of time feel core the having analyzer, going sophisticated to with just the SediVue. care placing success urine without

Andrew Cooper

for it guys. Thanks, That's Great. me.

Operator

gentleman, any for comments. closing like Thank you. that And with to to back over it I'd turn you

Jonathan W. Ayers

mid-XXs high-single-digit comparable our by strong the then, and margins business team EPS growth currency and exceptional and organic did and fundamentals business. congratulate by there. job exceptional the you. pleased just very of of operating constitutes It capital. of too. certainly further a I XX% grower growth invested expansion is revenue, CAG constant Diagnostics revenue. Yeah, of it doing an total want go-directs component our growth of And was Brazil. but XX%. well reform. that although organic a company of part XX% to great It's Water tax had benefits great with a in company's really recurring revenue the We're real little thank very margin recurring is aided XX% in an our with driven That our of a revenue net are parts our the It's driven large revenue other of the with job by CAG the quarter, They driver, XX% Diagnostics

momentum congratulate QX and the the around in their to successes want business. the world teams I in So just for we IDEXX have the

call. very, excited is veterinary People take back conclude of love healthy we their very can we we'll care pets, pets, long, to what can everybody about the that, think more, bring I help With those medicine. love and lives. Thank you. pets even Millennials their live veterinarians

Operator

your ladies And service. AT&T participation your for Thank that today. Thank call for using Teleconference and and does Executive conference you you. conclude gentlemen, for

disconnect. now may You

IDEXX Laboratories (IDXX) 4 May 182018 Q1 Earnings call transcript