IDXX - Earnings call transcript Q2 2018 | IDEXX Laboratories, Inc.

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Operator

Good morning and welcome to the IDEXX Laboratories' Second 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

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

Brian P. McKeon

continued XXXX. in financial our building Thank strong start you QX, delivered high and growth excellent good results and everyone. morning, on to IDEXX

placements constant organic constant was QX exchange basis comparable terms instrument in U.S. net XX% reflect on $XXX related increase growth growth operating favorable by revenues CAG leverage, XX% XXX consistent and in on year-on-year share, a $X.XX Tax In revenue in growth, improvement changes. an grew expense XX% currency operating recurring point premium Diagnostic strong results EPS currency reported basis. from Reform. a and XX% per foreign basis, a of driven revenues, benefits margins, highlights, These drove which million of of

FX the comments. later In midpoint our tax of than our to we're U.S. in midpoint share year a this to year more $X.XXX million $XX upsides to increases hedges. The by to range, to lower projecting to compensation impact including operational strengthening full in commercial $XX as today. basis XXX outlook negative activity. We're related also to $X.XX tax raised related outlook in revenue of benefits operational XX.X% currency our for additional raising more factors per builds million incorporating outlook, at we're in margin revenue a negative growth terms $X.X XX% billion detail to net of constant growth $X.XXX operating At compared outlook year year our $X.XX reported full the guidance updated midpoint on our strong year share more earlier improvement, our our outlook updated to of full our basis. refining guidance related currency to by benefit growth organic investments down a additional half of in guidance effective We'll XXXX stock to EPS comparable points expectations impact detail from our to discuss at rate, in benefit outlook our XX organic to outlook $X.XX my the This recent benefit or review and the to assumptions, related outlook which first in full offset XX.X% million is of revenue dollar. XXXX $X.XX, raising our approximately are also $X.XX advancing performance. XX% new and $X.XX constant offset per we'll in We're These global from capabilities, updated EPS full billion.

continued over a region. including system associated driven CAG unit with recurring our Strong $X and continued instrument and revenues, diagnostic driven by CAG Global strong our $XXX installations. businesses. with business, million CAG growth of radiography results QX accounting services organically, software, platforms momentum XX% a supported XX% in our performance primarily diagnostic Group. system including our imaging system review placements, recurring continued our overall modified services were by practice organically. strength begin XX% or revenues results imaging by by Global These Diagnostic growth services diagnostic increased in revenues in CAG Animal high up Let's solid standard benefit retrospective digital X% recurring solid changes and imaging increase million, segment were in in XX% from X% a premium and high-end organically, diagnostic placements imaging system software, Veterinary gains to management our software, Diagnostic increase in approximately and growth revenues Companion were related in QX rate a reflecting revenue restatement. increased

our flat assay region, Our $XXX Livestock, CAG Diagnostic U.S. organically Latin $XX Dairy in strong QX growth revenue related gains second driven instrument revenues organically, livestock organically. $XX and U.S., sustaining growth consumables in continued U.S. to gains continues price supporting CAG data veterinary QX, and by diagnostic our reflected recurring continued XX% CAG recurring the high overall. Asia growth XX% new in U.S. recurring and globally. volume-driven increasing impact over rapid consumable labs supported strong revenues XX% by gains, soft up offset quarter, primarily solid a quarter, range in Poultry with growth practice high expanding million, in the chemistry instrument increase were levels, from continued recurring in Asia conditions, Water are or metrics customer at recurring sales. adoption. in and was were in very X.X% period. from Catalyst compared CAG test to mid-teen were performance trending recurring results utilization be and organically. up were revenues revenue to revenues by America. the strong revenue business America QX the gains retention X.X% by in end-market base, Diagnostic in Latin million, to including prices X% and in million lower XX% recurring in revenues. lower clinics. U.S. revenue growth in placements. premium milk revenues Diagnostic year-on-year grew growth U.S. single-digit in patient by clinic diagnostic By solid reference XX% reflecting and revenues our Europe X% in CAG Growth increased the were was market million, in profile. visits supported U.S. International International U.S., by approximately outpaced This very the In IDEXX's test continued up $XXX driven gains set the growth X,XXX in organic U.S. quarter and reflected revenues augmented growth prior-year U.S. high

We European also gains revenues QX. in lab saw in continued solid

increase, Globally, placements Diagnostic SediVue results over XX% a XXXX, XX% to the expansion These in driven global and launch installed our continued XX% results of in Catalyst our were our instrument we premium in now of reflecting compared base. segment North placed early CAG quarter. XXX prior-year by XX% with across and gains by performance, placements, up were modalities rapid X,XXX analyzers, we've SediVues testing X,XXX levels, In growth globally. QX and supported year-on-year momentum gains markets. strong in Since in premium X,XXX terms international America

quarter. We XXX in placed also premium instruments the globally hematology

competitive growth strong placed strong these Catalyst competitive and placements instrument Globally, over strategic performance America. instruments with X,XXX American placements to X,XXX significant nearly XXX accounts expanding placements international by we in base new premium we progress in Pro XX% our at were addition installed with or in XX,XXX up accounts. In base North QX up to and was Strong at SNAP XX% accounts. installed our quarter, reflecting VetTest markets, year-on-year, in focus, Consistent Catalyst Pros in placed XX% QX, SNAP our in or results, competitive North installed new at Catalysts or supported XX,XXX the of XXX year-on-year. new upgrading in

in amount from high up from in over $XXX QX, by and year-on-year SediVue organic very innovation traction strong growth consumable direct gains for of in supported gains. our drive with laboratory the markets. SDMA-on-a-slide both services and Catalyst the reflected organically use this of revenue and instrument year-on-year our customers. $XX with timing is customer momentum years premium in our across launch Diagnostic and placement build index primarily continue was revenues XXX recurring mid-teen market, double-digit placement. the The X% outstanding revenues strong, CAG QX standard our revenues in levels, in million continued organically, an multi-modality capability closely including and of in $XXX focus of program of in expanded XX%. instrument organically innovation growth our quarter. lab gains to consulting strong to change, quarter solidly Adoption supporting more XX% first Benefits Reference is U.S. benefiting with Consistent the were revenue EVI attributed that second instrument million the gain record million QX. XXX which reflected in revenue IDEXX which continues now Diagnostic reference to with grew to grew to sharpening of lab EVI in and expanding Our XX% North related placements, results base, quarter. America market recent XX% approximately up million, SediVue continues Results of we with the Catalyst to the recognition revenues each instruments instrument $X retention in now contributing in program, brought U.S. Instrument the revenue quarter. gains U.S. results, accounting the customer greenfield the also volume-driven the gains to the commercial international aligns XX% was IDEXX organic CAG international consumable

organic revenues achieved Europe. organically with similar supported in higher in gains also and X% high by of QX million assay $XX international U.S. in single-digit in lab gains growth grew international markets. markets, We continued Rapid

assay growth of by products. expansion XDx was generation and driven continued specialty rapid Solid Plus, first

including information as and benefits reported Water offset from our related benefits match the impacts on levels, operating was XX as or XX% reported in of from strong our currency constant high our XX basis $XXX related on a growth on reinvestment, up a XX% as million quarter. strong P&L, in lab are our Turning expectations, points instrument OpEx of up about businesses. basis, employee and points systems solid of were margins in Operating from impact constant a as lab margin QX growth points by cost the revenue. basis. productivity our profit of improvement. to reform basis well expense currency XX% basis Gross the XX.X%, in was profit our revenue capacity, year to in net some decreased compared ongoing favorability constant XX.X% operating and benefits supported which QX guidance. results QX, saw basis These margins. investments, increase operating tax investments price business full we growth mix OpEx reflected to in currency leverage timing prior-year or raised CAG profit million, XX% of Relative our strong high Higher currency Gross a in on up service in to by part XXX(k) on basis, as reclassifications margins driven gains to XXX cost aided to $XXX operating levels constant including revenue the

million hedge $X approximately losses, impact profit, QX. exchange gross in were which Foreign

gross investment, sales operating XX% X.X% U.S. stepped-up points leverage expenses Looking marketing QX forward, were XXX second by half relatively margin half the from constant areas we resulting R&D as lap basis, part a lab XXXX. or increases higher currency of expense on route advanced of the second in in Operating leverage. lab in this offset we cost of and anticipate like up and favorable capacity in year benefits more the in investments Constant positive global operating basis reclass. by expense in currency driven were

year-on-year to currency noted capability we're benefits investments the in factored QX $X.XX constant margin half U.S. the including As expenses release, million a Reform. per These improvement in in benefits basis, was increased goals. related net Tax in increase $X in our full of EPS $X.XX in into activity. press per EPS operating increased On from advancing incremental operating or share U.S. compensation share, XX%, tax share-based including comparable and are in our year international the investments XXXX. markets, commercial will growth which second

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

in half per Free operating EPS hedge cash XXXX net by by $XXX and first flow $X.XX and million exchange, increased million of QX of was $X profits XXXX. for XXXX Foreign impacts, share. the

million maintain approximately flow income XXXX, about to investments, our projected XX% for This of million balance and shares Westbrook, million about revenues outlays continue the and capital sheet. now in $XXX XXX,XXX net incremental related to our X instrument combined We million for our We're expecting the yield a supporting These XX% additional on high of instrument in repurchased in net our outlook outlook per we ended of of with capital. $XXX capacity million our includes of million. XX% reflecting average to strong program debt, an to QX. in core to billion $XXX $XXX placements. capital price about We while at invested are related Maine strong or directly free QX German spending related expansion income. full and incremental credit deployment in of cash allocated lab expansion at durable returns cash Diagnostic relocation, headquarters to spending shares facility. Year-to-date, $XX year cash capital these program of repurchase under CAG We $X.XXX maintaining highly share recurring $XXX and revolving

shares multiple of of for EBITDA cash. in stock times about times leverage EBITDA. our outlook, We of full outlook benefits capital structure times X%, a as interest gross at expense $XX earlier XXXX lower project the year from refining net that net at X.X repurchases additional our ratios and reduction now leverage were million, we We're to Our net X.XX adjusted X.XX outstanding maintain assumes annual end which approximately of optimization. from average reflecting

This reported billion outlook XXXX, operational year our we're $X.XXX upsides In to as incorporates guidance to full updated refining billion. higher for XX.X% our terms of our noted, P&L from revenue $X.XXX growing year raised placements. for organic Diagnostic benefits to XX.X% recurring in XX.X% strong full XX% half instrument expectations premium organic flow-through revenues CAG first growth in and including our outlook, to from performance growth

our these of an related in $X.XX reported from dollar. the a X% $X.XX X.X% benefits approximately XXXX. growth now of the full assumptions million share, FX U.S. recent of from by EPS full our year X% for EPS comparable million $XX year at offset a constant rate negative of conversion the per guidance to XXXX noted, FX As impact with the second for growth. to half At assumptions $XX revenue growth to guidance raising revised largely year XX% revenue to reflecting share We're benefit outlook expect revenue XX% headwind press strengthening currency shown to $X.XX in revised to we midpoint the release, per

approximately updated XXX points to our organic year upside margin $X.XX related noted, to revenue outlook constant incorporates basis EPS As in updated currency and in operating growth outlook for our XX full operational improvement. higher expectations

$XX.X rate X% in of tax benefit XX offset upside. point to from earlier to basis share rate or updated At EPS XX% guidance, exercise midpoint $X.XX compensation. improvement guidance of of projected year includes compared million tax XXXX estimates, netting assumes to this a to our an $XX.X stock-based full full million guidance equates of rate full our approximately about estimate year estimate exchange $X.XX with align year. effective about and full approximately impacts $X.XX for in per full the changes on EPS increases of tax a foreign net This Our share hedge FX XX%, EPS the assumptions, a relatively Consistent estimate release rate will gains flat We impact our in benefit. these below estimates. EPS year shown we these rate the be earlier positive will foreign our losses with press guidance. per or that partially $X.XX exchange have year to now

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

margins prior-year to operating levels as constant ramp on a QX points our approximately investments. expect basis commercial XXX we basis We XXXX currency increase QX above

we In FX revenue will QX. modest addition in year-on-year on a negative in reported terms impact operating to have headwind, of changes FX growth margins expect X% projected impacts, a

noted. be So basis will margin points reported operating somewhat I the improvement XXX the below

We QX the compensation from rate to review. be goals effective expect our financial Overall, XX%, That exercise projected our tax for in very XXXX on financial including benefits XX% against to significantly activity. momentum is we're concludes share-based and business original track to strong our performance. over-deliver

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

Jonathan W. Ayers

thanks. Brian,

put in me great Let those context results here.

their Our of of tests XX% in up record successes placements meeting our index, of which medical in our the productivity quarter, IDEXX our a evidenced define enumerated. pets economic The what our productivity for field proprietary QX recurring owners. in diagnostics XXX instrument Companion commercial Brian strategy practice and and our toolkit unique sales growth by grow EVI, keeping and today they software current the and pet, field broadly the the organic and driven IDEXX world of around Diagnostic placements, has diagnostics; to the presence now adopted that is include ever-growing care program Commercial standards drove revenues. could globally IDEXX's results that the Group value use great around to drivers the In XXXX; by in The or instrument teams healthy Animal been force fraction our advancing testing world basis help automation. services make the grow assisted to the be veterinarians with made as needs technologies. second the of by progress strategy, appropriate investments

do advancing day: The every extensive CRM data do into Where questions customers our supporting see? CRM, three adoption professionals advanced empowers Salesforce.com, real-time helps I our and consultants face integrated of highly have proprietary do field our to our IDEXX the what be say? Who relevant practices. to we go? And their in Our their key I they I answer innovations

program XXX] performance and shown Our [IDEXX already North XXX XXX to in (sic) up American IDEXX competitive has year-over-year. new market, placements Catalyst second the SediVue (XX:XX) accounts X of quarter significant evidenced XX% by successes the and placements,

the We six over markets in will be next months. international XXX IDEXX program the major implementing

commitments instrument program diagnostic meet where the IDEXX's reference support they placements We XXX of IDEXX of customer-friendly they advance is customer revenues. expect and will what recurring labs; enduring growth can the testing that diagnostic this further want. A in-house want; key and feature by or growth their

customers' revenue adoption and new further IDEXX's In adoptions growing of test IDEXX, the to unique test addition, these support their innovations. while commitments unique of

fully be from expand success' gives momentum offering market spend and of in estimated with of the in which an U.S., bring our of Our in in QX field-based increasing to of our with further. each customer productivity and more professionals, team the with to yet us expand will deepens relationships by time half territory professionals, and our already opportunity is place the sales combined XXX In IDEXX beginning our presence field, us expect the confidence QX. to marketing expansion customer XXXX. to second we in professional When able are we XX% underway XXX each thus, the presence our This unique commercial up XXXX. our each we field-based and, again with in

have IDEXX. We faster on more with quite grow the simply found we consistently customers, they the call

who not are do and customers their IDEXX use in-house and faster than IDEXX use practices know either. larger reference for for also their grow We labs revenues who

as this Note call we unique level Preventative IDEXX growth menu. of proprietary testing technologies, see a and loyalty the So, reference PLUS, presence of are U.S. and leveraging SDMA we the labs, IDEXX's Dx customer that our preventative an what metric advance urinalysis, at all-time Challenge, of use QX care placements, never grow lab, VetConnect and market expanded and to Care increase IDEXX's the pleased unique most IDEXX basic to usage now of presence. achieved reference SediVue instrument us the in support will deeper such for retention, XXXX, novel over with help assays high, before XX,XXX the strategy including in test customers

the Our IDEXX ROI strong we for same conclusion. our invest the There disciplined successes professional in a market us of U.S. have expansion is presence. outside to a led when field

growth U.S., greatest field-based field markets are the depending And professionals targeted including half not XXX personnel, XXX% to from planning XXXX, to so, presence the the range we see we field-based we second our These increases opportunity. at and increase on on country. of outside in are where supporting embarking in does from expansions marketing the XX% in professionals, targeted in country in XXX to our of end presence up staff. the This phone-based Overall, XX% XXXX. include

already we have Catalyst presence, core North the that within The menu. Catalyst launches is make launched up X.X% follow kit and primarily which to services SDMA with next have we two retention, new CRP growth we have the as great with our assays created field-based the lab products similar to years. place follows coming organic the diagnostics and utilization so XX instrument a growing the highly growth. Companion Catalyst reference and differentiated a TX rapid moving XX% launched we of markets this to the in from strong months. The in innovations. we as further the Catalyst growth portfolio. field XXXX, SDMA have model Catalyst beginning Germany Diagnostic discussed structure who the in and in So, past. and the up year-over-year combo be in major the account in-house market the XX% an Australia, combo customer end revenues, saw move to reference the of SDMA expanded on smaller initiatives brought with within per been and America, our we about test the the of do past will at America tests innovations our one put move customer-centric structure our to Group benefits the contributing Animal where a that and very to in Most markets Key testing gives of This Group in international test grow earlier well we experts further effect. cumulatively strong the placements last the July, IDEXX to XXX new SDMA we've moved such lab last in of organic instruments, can unique estimated Nordics UK IDEXX also in placements kit TX all the second growth XXXX. quarter few from our the benefits We'd These update which four high two new with our international proprietary lab supporting global Animal will products In develop with like launch direct presence we years, that in commercial growth advance years forward. model, this These will sales customers us that Japan, its total, professionals of confidence to QX. have recurring in us acquisition, the ago global within in recurring market will to revenue sustain portfolio smaller revenues will consumable couple This months. help reference TX software high new North to customer of on last achieving are approach, services. to the sales provide innovation contributed Internationally, Germany structures strong with augmented the adoption over an portfolio as momentum, to a and with are have customer in-house as Companion by

able commercial Dx to offering. XXXX in targeted the our of current play growth forward, reference position or that of with the are we XXXX to we Group launch don't with the a and work growth level in development. plans, in Fecal change will our product sensitivity date. either than currently SNAP do not given the Animal to Looking revenue we have reassessing Fecal a field anticipate impact We bring lab this more appreciated large number already time, At currently outstanding deliver fecal initially we're specificity Companion North in We our believe American this SNAP are to operations. drivers provide a to

Our fecal the are in will antigen proprietary reference success commercial tremendous offering, on be the fecal lab testing with we category focus Fecal our Dx. building experiencing

screen Dx Preventative the with using our care just that IDEXX diseases all proprietary for the Our uncover stages for that a addressed with we Fecal a which preventative are chemistry our and underlying sick and and routine plan. health seemingly be patient to animal unique screening comprehensive well-being offering the panels We're an is Care unique with a well both finds for advancing treatment finds the can pet Challenge IDEXX case have of parasite impacting finding key intestinal that testing reference the disease our dog for earlier driver piece alike. defines really of is pet more in traditional testing also in a of cat. it lab Challenge microscopy and what than technology serving infection volumes and and assembled appropriate and customers growth cycle veterinarian all The IDEXX proprietary for and long-term is SDMA life the a panel CBC, reference is aspects the the XDx, in Combined Lab approach. Care the owner labs about: existing lab U.S. in reference the Preventative the pet, in appropriate IDEXX

also can treatment and to capability of core to in with truly up, charges and and in the Cornerstone, diagnostic practice Smart just not field due ended. practice very driving Smart formed business. revenue our system, of has captured. overall revenues We a needs invoice, the using done its Smart growth Companion solutions. of of efficiency enhances their improving market, software Diagnostic revenue Wrapping what profitability. provide strong in support IDEXX's also an enabling paperless to Quite XX% service and from gotten core and revenue, providing veterinary so contribute revenue our the currently Flow recent IDEXX acquisition is a driver. customers workflow impact Flow growth estimated veterinary of as a veterinary continue XX% importantly, the to global the electronically to IDEXX ROI Smart IT to high of hospital software innovative both the to Practices to management leaks with practice after our plugging business execution Flow, VetConnect XX%. organic recurring are the our our Animal recurring ensuring QX enterprise our need paper integration of has quarter similar and, practices Of enterprise market. captured with services who all the enhancement offering overall XX% on consist management the productivity such charges every PLUS, with Flow to is a strategy stronger added software and Group Virtually note, just in These be growth add practice captured the and our in enduring about solutions to

advancing builds are on growth strategy software accelerate strategy and our key loyalty. of We customer to elements a that

is our revenue for long-term building in are growth organic raised Our our XXXX businesses, to position we of and reflective on deliver us goals. continue strong to momentum profit

employees create up livestock. value And by summary, – enhancing at with customers, for pets, that, well-being the long-term in So, Q&A. people it shareholders and dedicated we'll to all to open of of our our and purpose to IDEXX remain us health and exceptional

Operator

America. Derik of Bank come the Thank you. Bruin de Question of will line from with

is line Your open.

Michael Ryskin

Mike Derik. This Thanks. Ryskin on is for

Jonathan W. Ayers

Mike. Hey,

Michael Ryskin

questions. Thanks on One, clarity for Jon, talked of with fecal a more SNAP. you wanted quick call. about, the A just couple taking I just little what

it last the of got on on you workflow. early you workflow was and response just it users previously call, in the XXXX of summer the more expected about some from the earlier and was optimizing said You mentioned the

change and So little get expansion. the sales then want what clarity I And since on has then force the quick follow-up bit additional why fecal. changed on a more to to this a

You that? associated with there for the things each territory the markets highlighted those reshuffling is for force long more example, some sales or going. you're and months to in like how this you any United of But three, international expect to on territory States, speed, six just this up timing get is additional also in

Jonathan W. Ayers

thank Yeah, you.

announced that is of level blood we successful by the fecal fecal outstanding and IDEXX core an antigen-based Applied which it's with lab, the the On the with XXXX. in further the going BioCode, way, offering, sensitivity is offering to SDMA technology And so reference adopt it combining been in with proprietary to and CBC. specificity. advance when the – we've work, technology earlier Chemistry going it's And we

always to – a that in regard testing third is even of actually, the customer this There's be Typically, have territories was and lot so majority of – expansion that field the a have And we the an speed, a and specialists, the so, SNAP. people lab, in-house territories, take to and in as QX. is growth in product service we place the and presence, prospects. the reconfiguration we nature definition that we're this need you because momentum our really veterinary the all of we for much expansion, territories. I are reference don't those in information but adding context, do an hired our a to the when to our With fecal test heard that evaluate going continuing small XXXX the third expansion, that the will investments for we're it our more and up wasn't in expanding or this the either that to we our reference diagnostic And planned they're lab in in and for done. systems we quarter training changes, the outlook focusing takes now, as expansion in everything instrument And field. we That by on that of – actually screening of U.S. the obviously get mentioned professional the requirements the that mentioned, people think change of supporting expansion XXXX XXXX we're side we've you of until XXXX. have specialists, of here part already as veterinarians course, Brian

on really smoothly down we're this learning do So with the how field. to curve the

the to XXXX. going year place that's in obviously be fully So and towards the of preparing end for

Michael Ryskin

Day. it. seeing forward Analyst at the Appreciate Look Thanks. to you

Operator

you. Thank

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

line Your open. is

Ryan S. Daniels

the diagnostics Thanks Or the a seeing Just customer-facing the growing success the comfort? like for that? point about Jon, Is what's that with an Can increased opening Yeah, seems upped their up the of investment uptick? demand it little company's question. market? guys. that a the internationally bit driving you're seems taking data important is organization. EVI you for like more talk that ahead big you or out Is gives investment market? investments maybe what's is the really that in increasing competitors XXX rolling because it driving potential it pretty

Jonathan W. Ayers

instrument achieve in very that new internationally it's talking up benefits call just North And the right, you're to a fact very success And placements had and EVI. and only about very, you that data we've noteworthy is tremendous outside XX% on really quarter. our the much. point we're international the we've started We're expansion. business, about America second that Thank Catalyst the of excited of with the

even together started of automation, productivity days investment. IDEXX XXX. increases And early of haven't the really benefits productivity all which on our sales we're working leveraging with the force We of

the significant. opportunity opportunity the see discussions in a laid be Day we've to in past and Investor out weeks, in given we market And so we'll the of just that reinforce couple

The make Catalyst other point for the what internationally that will the quarter in second take-up it's unbelievable I launched SDMA is. and is we've

couple XX% have take-up SDMA We only slide. the who Catalyst is in in been customers outside It's the market amazing we've U.S. months. the because the This faster a purchased U.S. of

that have or international pick-up strong lot in teams it don't these have some these in job a of seen a we medically-centric, great markets, U.S. and labs reference more I think these than of – they're not, lab a markets the our we've presence. and even reference believe done SDMA or

see customers to into growth around really a and – our we Catalyst customer And so the Catalyst get the XX.X% our markets loyalty the U.S. a world. so is offering, in of opportunity nature on down the double these the we outside once of proprietary

Ryan S. Daniels

customer-facing that it more Any bit you OUS, started a an incremental given Or get the uptick And as and there here. grow metric? XX% some be to of you're helpful. XX% start you helpful. the have with overall of Very just did plans year? little Okay. talking at growth what that want would the Is reference to higher organization is Thanks. about data and color in this just it's novel now a a to the point,

Jonathan W. Ayers

We the performance We what incremental achieved, and and to growth to Yes. that do fashion. the really them things customers that had know We this. done these in an as reflective teams we our We've augmented to plan our XXXX expansions. right. and a It our maturity don't them in of this want organized of of in benefit willy-nilly. but supporting how teams it's management disciplined to do We going to internationally. have take is mentality want our more do we're functions. kind of mentality the organization exceptional U.S., way into our these – do expansions growth These prepared are

this we of going see – the and into new yeah, when that something move but we that's IDEXX. there ROI XXXX, is of really characteristic was fast So, part our plans feel very We it opportunities. not very, we is

Brian P. McKeon

And the our consumable Yeah, we're this as XX% very revenues, and just times putting encouraged resources. growth, and as by durability the for relationship. investments growth is think incremental the customer if place to XX% is us look of momentum The XX% instrument our a able really the have with on I these we're over what at these time it. drive on great retention a well is return you think the growth, that of into we several spending a be point, to rate the long return that inverse we're

Jonathan W. Ayers

aren't Ryan, top There's we're our – VetTests the the than as along, over customers. we okay? less our everything another basically what on I of chemistry U.S. XX% consumable revenue is we've done of think coming on like XX% but coming about, we're Catalyst U.S., consumable in In well Catalyst, from from to XX%, now interesting our Catalyst far way. is upgraded U.S. outside in of customers. is all the chemistry large There talking part, dynamic, we the

there and upgrade. And not And spend harder we the so VetTest, our upgrade to as and much don't they're tests forces actually turning many upgrading while we new vet left, to we're towards frankly, because, they're placements. are that time continue smaller, quite usually have competitive to

them the the take same course, the we new growth, consumable and international so now really in that and the we're accelerates to turn to why over in XX% turned resources and markets consumable because competitive. and, QX getting And is competitive growth new we've which of

augmenting our good So feel organization. it's about another sales reason why we

Operator

Thank you.

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

across the influencing to LLC Securities dynamics - Wilson you better trend Erin that VetLab I quarter factors Credit speak in open. laboratory, rapid Your or some the margin quarter the overall Thanks. the speak Suisse that, line sustainability impacting the second to are and can reference half? guess, you price potentially is potential in the assay more in of as tied the realization and of And consumables? one-time in the that Wright (USA) pricing Thanks. gross to Great. Can trends as general well

Brian P. McKeon

the say, with change of anything, lot start X% would very customer were at just that at we're advancing. well if It's quarter. consistent We a the on net the Erin? with acquisition. new price in margin, really front. strategy price, I increase Not don't a I we doing that noted Why Sure. we've been with

gross investment benefits get will conversion, of net a the And bit causes that moderation over of of we over back course, to so little the them growth come secure that that's time, as a and in growth-oriented those with but time. accounts

that growth of terms lab really a investments number first the flowing route the In given the mid-teen that investments stepped dynamics, up some in Late are margin gross LIMS had there been the seeing in We reclassifications. cost system last flows capacity our our We're through software, and service our services out were half. completing capacity also of our organization some revenue. revenue implementations volume cost of global in to rolling year, we through of have cost of U.S. we added rollout rep that we and labs. field

Jonathan W. Ayers

Yeah, XX basis reclass. points cost of

Brian P. McKeon

talked about. we That

through instrument with it's growth, of the kind strong flowing at along the so all gross margin moment. And

growth. of ahead, those As lab the start investments, information lapping we'll particularly terms we capacity in will moderating systems some and the of look be route their

And terms what also was based the demand think operating in then, as the increased guess, that practice guess, in season or commercial I so of volume? investments. what's these the possibly you Thanks our underlying comment impacted have U.S. Wright and that that track, and LLC step-up flea saw back revenue do margin your Erin you and factors metrics more I of comparison, even you reference potentially delay guidance we'll veterinary visit particular the favorable we're laboratory outlook Securities I that growth And to so that your over there in I Credit embedded quarter? influencing (USA) advancing made Suisse looking in guess, noted consumables half, a on incremental Wilson the that patient - sequential Great. any Okay. tick in course visits and in trends you the in overall the ahead

Jonathan W. Ayers

thank Yeah, you.

the our as performance, other with it that with and maybe think serving year, was the we're the to regard was not a tick as think dependent probably I on slow industry are weather. start but companies season to that I different flea categories,

the of you was think lot June month then good month, love and there's as millennials turns evidence Erin, beyond and April strong. even better out may it be I Generation And know, market said people parse pets, about people most and to but their Z think even love were their is weird And, by pets a May that, anecdotal millennials. I but a this it's hard months.

homes pet. first So and thing is own a moving comes are into millennials their that

but married getting they're getting the later, having later, pet. they're kids So,

the is overall think I So market strong.

are half I Okay. care LLC of is of our Erin working Credit a and Suisse those reference - that who (USA) are Thank you. Wilson who driving Great. this that's preventative think first our one is we're year. particularly IDEXX things and with in Wright Securities big the growth growth driver customer that the base, the IDEXX using regularly lab finding

Operator

And go we from to line Jonathan will of you. Block Stifel. Thank the

Your line is open.

Jonathan David Block

questions. is associated sales change two your see then, cycle factoring most optimal terms level of force? the detailed what's approximate you head the And Jon, actual Maybe it in of and this recent call after Where expansion as after in you and good call Thanks expansion. morning. cycle of recent the with the the count U.S. innovation?

Jonathan W. Ayers

the our call that because IDEXX. be, what adoption adoption the territory topic. the Jon, we see they the of to we're the we all it That is we what and it's team. particular preventative now building could in earliest of real time. a from drop care what Salesforce.com. starting by infrastructure grow question customers pretty with The number really any rep anything map sort are And two really have is metrics, our of at by And the example, still of is entire SDMA-on-a-slide. they more it get really the thing impressive. And quickly to on huge just calls sort it's other of benefit. innovations the and is A their opportunities, on starting the used the top adoptions really been faster is stages. customers, It's basically fraction days sales of and still the pick right see can for got that powerful productivity management – CRM we've it purchased now And can and doing they

in market hard market take? the it mean, we And, international of course, U.S. get of growth XX of U.S. not the take the would U.S. what it look turns to XX% revenue And to mature standard ROI. to the It's and of the for expansion this the advancing good most on us going customers where see we that's we So the we're is this what as to And we're say – and to more the still. years And at outside if me make because standards then end world, U.S., say about expect it the organic care of standards mature would U.S. opportunity. a out allows got calls care, isn't we all and is the care. the all. of standing I

increase So, yeah, front of our customers. call of us we is have to and opportunity this with going in intensity a the lot

Jonathan David Block

Okay.

sales are force terms Just month customers? on frequently U.S. a you to call currently once in on how it, calling a your bit, to they're your try of quantify some,

Jonathan W. Ayers

out there, customers, remember, not. everybody we or us call Well, whether they're using

us not practices most use something, but all. Now, for

us PIMS calling and making reps not. say. a and more to consultant. going those we're field Brian service support We've that or a this big they're more part customers professional apps than and So veterinarians on our using who more margin and we're more faster. once with got It's far we're month diagnostic our have we've investments on gross – the the are is hard as we've some say just them, frequently with Obviously, I'd once and month and we're who now customers than calling larger the to have is the veterinary with of help adopted got and specialists mentioned factor, appreciating growing calling their metrics. software whether And our them field-based, got, highly loyal of we're

there's of the our bringing yeah, with appreciate matter really customers expertise. because presence subject really so, And they working and we're lot a

Jonathan David Block

ask first to I'm me more Okay. to question. one is not of trying be be but difficult, just part let clear, this the still

goes all think at little a to auto highly, is what You I trying a least on made we're out this but month. a I'm growth understand highly what calling time guess, is, get there you pilot been at, trying numbers, point your seems a it on figure where more like has handholding. I rather of are hires. I lot much the once in bit than impressive, than to by more

peak if some North Is then I'll the in promise it move part now number? Is close to it you're Can Is just reps give two. between? it XXX? on Jon, what us context America, I at think I of was crux question, to there? So, the you it somewhere – X,XXX? get XXX try to And in is

Jonathan W. Ayers

growth. question is, keep peak We I our guess, accelerating the growth? what is

time can the spend more Analyst some we this So on Day. on

Jonathan David Block

Okay. Fair enough.

you is questions on of despite a being second robust I talked up But And following SNAP setback in Fecal. very about The the couple pipeline really Fecal. the here. question know SNAP

that cadence supposed market been I wanted derived that Fecal, growth from then I I XXX don't incremental to $XX depending product point? Is knew. revenue SNAP at still likely on this some basis could of really million XXX And the be clear. think one, points to incremental So, have those coming was revenues. of be think to to the I in

So guys. at some, or reference what point make was in have all the the up earlier traction Thanks, call lab? to the find that of the to ways through that you that most, you're going

Jonathan W. Ayers

our is expectation. that Yes,

Jonathan David Block

Okay. That was pretty tight.

been last see to So of may expect a the you the new I'll continual this this seemingly X.X. cadence Should by of Thanks, part to the a replaced big ask hit story in product be And IDEXX a next that unlikely pipeline the have I'll XXXX, With weeks. market couple guys. we else year? has products. in something in you

Jonathan W. Ayers

We're the that really next are everybody are advances proprietary is the many though, of portfolio. products I and the when year. we've we've advancements types more market we'll in all the got have so is more that the comes recurring want out going revenue sizes diagnostic there our other effect the proprietary that benefiting to to XXXX. brought early bring technology and last say loves along of products, get closer while different market we're to do They majority growth and many growth cumulative the we to which products say, over adoption still all core so new from And to cumulative vast new several bring our what and in the the from test years. the to

Operator

Thank you.

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

line open. is Your

Mark Anthony Massaro

Hey, guys. Thank you very much.

to SediVue in added I Brian, X in strongest seen long in consumables that the SDMA XX%. to the appears growth This reported think And for time. be guess, slide both you, You of believe consumable outstanding I a and I've growth indicated quarter. I you points a

Brian P. McKeon

right. That's

Mark Anthony Massaro

Okay.

be then points certainly not are prepared I guide early. as And products about clarified. X Should potentially that's very we think XXXX XXXX. – These we know about year? additive to you're we about into next So as products thinking think as these

Jonathan W. Ayers

clarifications. a couple So

Our cycles. organic adoption was These over It globally are in growth consumables internationally. XX%. long XX% was

will So in consumable XXXX. to continue growth these augment products

Brian P. McKeon

antigen. we've talked to long-term plan growth I way incorporated end of were from other to range was that think long-term think XX% for consistent the X how new believe that – obviously to including we're had SediVue, CAG and at in the point in where and from our potential point I which antigen in is fecal recurring right high labs a fecal X% about highlighted we X.X strategic and to think in it we benefits now total I SDMA, products,

that So to growth go as Jon and combined the these commercial approaches out, they numbers. are strategy our all into things with mix. and build over integrated hitting And time pointed those

talk the signal we're more we well that high end that of think I So with think achieve that at Day, the what that Investor growth about and we future. momentum to to targeting build into trying that We'll but and we're not additional adding are to executing long-term looking to at been on making, we're the potential. quite investments we're and we've sustain

Mark Anthony Massaro

hoping updated around on quarter last Is you have I an base base were maybe you And that had your on track? that? SDMA-on-a-slide. number XX% end the still to somewhere installed your Catalyst XX% at of adopted think And installed Do to Great. you of maybe then of the that year. indicated get then

Jonathan W. Ayers

– because now we was number We're really which thank it question. right for XX% Yeah, XX% you globally, globally. launched that internationally. almost XX% sorry, hadn't – a U.S. XX% The at

XX%. And so XX%. mean, what at with we're like at did. XX% international and the international is That U.S. averages pretty is happy I

with progress point pleased year. So at this the we're in really the

Mark Anthony Massaro

And organic one. that beat maybe our last by That's quick Certainly, great. growth very a revenue highlighted quarter one forecast. strong

growth the the the speak forma ask pro market what you talk Can rapid competitive that piece. just Is a Obviously, in to FLEXX on there? Or have the wanted high-single-digits? you is? that Abaxis-Zoetis. Just can do dynamics to from market your mid-single-digits, about you competitor of on assay rate on any view

Jonathan W. Ayers

– think predominantly a assay X% I as at in QX QX X% X% North our we organic than higher which, little growth business. a business, business, achieved in we know, U.S. were you Yeah, is American rapid and a in

interest. generates So was test test Always price. volume new was new out both a There there. and in that some a

think it's tests the way, these the reason the customers why find, realizing, of lot I run by I off now that's not And so is. customers them bloom disease they that of find and are And they the a is the when disease. sensitivity you right buy pretty obvious, is the the that the think because appreciate don't rose our on test. XDx it's capturing and accuracy

so on way, some was work certainly second And in numbers of impact there every educating so the we customers quarter. that the had to that. in We're our through that, working and step through

Brian P. McKeon

Consistent baked year. with this what we plans had into our

Mark Anthony Massaro

Thanks. the Day. Look forward to Analyst

Brian P. McKeon

Thanks, Mark.

Operator

Thank you. And our David the with King. question Westenberg final come of line from C.L. will

open. Your line is

David Westenberg

for Hey. squeezing me Thanks in.

adoption So SDMA really of clinic. excited about the the in

be now in helpful understanding across they're is on of they it unique know adopting, how can are adopted. your anything that's if you're sense and of going using adopting? us if Or how board no Now, to you I give is right anecdotes just of behaviors. now? percentage us that you chemistry a customer quick going right can't, kind to panels how are can give you Just that? maybe kind the customers us give But Kind see you can about of some probably what

Jonathan W. Ayers

thank great question. Yeah, very you much. a It's

are So understanding the different adds value the to belief immense and that SDMA all to a of panel. journey at clinical stages customers of chemistry

We the that more chemistry and majority they're than of have panels. well we've several large at of that. who running what customers journey including hundred panels large a got in a customers percentage are the core SDMA along But running Catalyst SDMA U.S. their and lot are

So there people journey. are partway there are just that are there, people that that are starting

new data element customers, SDMA in with excitement realize chemistry of reference But the we're bringing show think think they the availability SDMA, it's we've why education about essential over with practice. education, I some We're and things I is It's story menu. And of great interesting. as established medical experience is more SDMA to proprietary a a field I which bring get at lot you'll the medical test made Catalyst a progress change big and expanding doctrine it's what Day, seeing We've data, the And they so we're other this going on an our find impact panel. XX of interesting think and to And has lab. that David, medical resources all is the like and of more to our story. our some really years. of Analyst that got this advances is the adoption SDMA because the expanded

David Westenberg

Great. Thank in you last very international. of much. And terms question just one

can us bit the was or it one in that you expansion, greenfield acquired macro So U.S., has little the outside the and can but by of in a not of of so the you know what remind your there kind that's a an really how word, behavior, international please. company I impact whether competitors a just in not remind terms else is, of there somebody really utilization market reach international the the terms large us about about do miss? dynamics, has greenfield

Jonathan W. Ayers

driver these Greenfield and there think worldwide greenfield which growing. to probably routinely XX,XXX it's that by of and We out medicine outside expanding upgrades, we're way, greenfield. third VetTest we're that. about analyzers, advancing pets small America that is customers. and competitive People Yeah, swapping a advancing of – are love because the the their number yet a markets and North also is XX,XXX remaining the are opportunities either of estimated over to

at embarking really in when between year international why a see of field-based do the field of a this lot which growth the our look we now we're XX% our as whole. is end expansion and So upon professionals globally, opportunity you

David Westenberg

And you. see Thank will I you two weeks. in

Jonathan W. Ayers

Great.

Operator

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

Jonathan W. Ayers

our why and for all the you. us. investors it, way, And, forward livestock health to of pleased the around with weeks. FD Analyst you It's but or look able much of all very our achieve what share people at again, through and pets, It's we and you the thank we're be in propels working we're on to seeing thank much. generating I of couple Thank Reg who we the of just Thank world. results along in those what you purpose have enhancing the call. are to Yeah, ahead a all Day we do to a work do. the IDEXXers return well-being hard want so to us person Presentation and And nice of

Operator

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

disconnect. may You now

IDEXX Laboratories (IDXX) 1 Aug 182018 Q2 Earnings call transcript