IDXX - Earnings call transcript Q3 2018 | IDEXX Laboratories, Inc.

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Operator

Good morning and welcome to the IDEXX Laboratories third 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.

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

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

Brian P. McKeon

and his of will outlook an I'll for our through for gains our the preliminary call. XXXX. delivered I'll everyone. results keeping on provide in our morning, strong comments. Today, I Jon follow quarter take for revenue with overview towards also us our quarter third earnings profit good IDEXX goals. track full-year updated and QX, us and full-year guidance our third appreciate your you Thanks XXXX. joining

from on results supported and In compensation our slightly revenues revenue impacted that tax hot U.S. profit continued in basis, headwind. terms exercises. above of revenues of our reflecting XX% as for reflecting increase an was X% quarter, U.S. operating the a and XX% benefits million midpoint in XX% pace, XX.X% the revenues reflecting revenue reflecting a benefited for at by a timing reported Overall point Europe. in lab currency the share of CAG of XX% approximately a recurring organic constant the million grew gains basis currency per growth $X.XX improvement constant conditions on margins. gains growth in growth XX% also strong benefits on increased Reform. growth expectations were XX% constant a organic currency for Diagnostic quarter, of comparable $X.XX by net international driven basis, $X.XX per in growth of exchange earlier EPS weather highlights operating EPS Reported Operating profit below by basis, reported a by strong Tax $XXX quarter, in organic third moderated growth was Organic revenue reference part of $XXX projections foreign continued and high XXX from share-based share, approximately

on of gains organic billion an $X.XXX updating updated terms XX% estimates $X.XXX FX impacts. revenue for guidance we're to In XXXX to to our revenue full-year and XX.X% our outlook, for outlook based billion

U.S. growth upside recurring tough trends share for in our recurring XXXX $X.XX near-term QX the high operational higher for with overall comparisons international growth to growth growth, EPS an acceleration on XX% for revenues basis, projections targeted and organic we expect We're projected a of constrain range CAG placements year. of by refining terms CAG related international revenue for as reflect recent strong in $X.XX margin on to our deliver benefits. per and of – share the lab share-based continued $X.XX, by compensation previous down increase $X.XX the for of X.X% tax will increase In outlook, this instrument which supported by expanding guidance trend end reflecting updated second line comparable $X.XX growth supported in at midpoint end our trend our range growth to for year-to-date consumable high expectations revenues, pulling operating for full-year Diagnostic most per of performance, a constant guidance growth at we as the expectations the organic to gains well XX% We're LPD revenues. expectations additional and our our XX.X%, Diagnostic of to to a or currently pressures

$X.XX currency our constant terms $X.XXX organic of revenue by of per XX% XX%, in resulting billion, supported of In to financial with revenue to of to XXXX $X.XXX we're to our EPS outlook, goals. XX%, and EPS projecting comparable preliminary share of billion X.X% aligned growth $X.XX growth long-term

a to with growth CAG adjusted for trends XXXX accounting organic in expectations revenue Diagnostic approximately the XX.X%, the from new revenue recurring standard sustained growth Our change. in benefit growth line for revenue reflects organic rate X% outlook strong non-recurring of XX.X%

in tax projected $X.XX in compensation lower per from Our to share and detail share-based more which EPS review headwinds for FX from $X.XX $X.XX in benefits outlook activity in XXXX, per comments. my we'll incorporates share expectations in

diagnostic with benefit systems software organically, and in up Strong strong momentum a with QX services diagnostic performance organically. revenues associated services review recurring in in Diagnostic reflected $XXX imaging modified X% (sic) results is solid by primarily including a rate U.S. in These China, XX% changes, our by Global largest in our practice Diagnostic our third Out in revenues in recurring by was by were growth accounting including Veterinary Dairy gains poultry related increased export continued fever recurring placements. Water swine market business increase Poultry Quarterly to reflecting business, our Group. Livestock, to standard X% testing. X% gains swine revenue ongoing in management million, in solid XX% and by Gains CAG our unit supported diagnostic double-digit the to screening or was million, related revenues. diagnostic the driven also a CAG regions, platforms new revenues million approximately growth from international impacts and $X QX Companion in our retrospective imaging $XX of very aided results increased prior-year revenues by continued strength CAG imaging low region. revenues of comparisons growth organically, and for begin up and in were quarter organically. XX% herd cattle health] the end health software organically Brazil. into to grew Animal growth to system Global African strong market in in segment growth China. supported offset revenues million, QX were XX% restatement. [herd which outbreaks Let's were in $XX revenue favorable related

to test which also testing We sales. see lower from prices impacts pregnancy markets, continue milk in bovine dairy is and constraining key

U.S. $XXX declines in a revenue in CAG revenue projected the driven By were with price revenues mid revenue X% reference growth expect we U.S. XX.X% recurring rapid to were Diagnostic the recurring and increase Given and with continued these mid-teen for for to high labs diagnostic declines factors, trend U.S. modest assay CAG million region, net the to gains up by in single-digit in quarter, revenues was continuing primarily XXXX consumables in to in organic fourth XX% U.S. supported full-year gains LPD the sales. flat quarter. volume-driven recurring range. growth revenues. solid X% organically, by growth overall

gains in in to sample including SDMA. quarter. volumes of Our from Diagnostic patient set in Catalyst the under U.S. reflected of recurring placements XX% Diagnostic and by labs base In long-term levels, X% by veterinary over International our visits in XX% tests, market to instrument CAG contracts. $XXX placements competitive lab markets, which increasing up IDEXX's were were conditions and customer slower in utilization international driven be to European performance revenue in regions, U.S. or outpace metrics X% which very constrained QX, retention QX. QX, of by key revenue at steadily We're QX solid high up customers adoption organically. revenues and International which revenues. recurring benefiting expansion economic new of compared levels by XX% in the in were weather including our to were recurring prior-year data a practice accounts value growth sustained growth, growth our CAG supported International million, on mid-single-digit continues organic from moderated supported overall to results clinic continue increased about significantly our growth at CAG gains range also XX%, in new the clinics. revenues impacted reflecting These results increased period. sent to high drove X,XXX consumable focus increase low U.S.

term, driving Our contribute to executional will factored is has emphasis growth single-digit near sales we our to growth growth which international high in which shifted into focus from placement lab the revenue driving Catalyst international competitive international executional also high markets some expect on in outlook. refined business, lab mid

growth supported we comparison our of up America, Catalyst premium placed In expansion as field our quarter we relatively to moderated benefited base. from results expansion. Globally, a SediVue terms year's favorable U.S. North segment QX benefited XX%, in global performance, gains and third of X,XXX implemented instrument ongoing our XXXX analyzers, last sales from which XX% in placement by

accounts double-digit America EVI global placements Our Catalyst economic a focus in global on high new both strong competitive XX% gains and increase at and placements international. in and drove North

shifted or in down international XX% our growth represented Catalyst placed chemistry accounts, a at hematology increase, XXX a gains with the on and very placement placements from we Catalyst compared instrument We competitive new which premium economic globally, hematology and focus XX% year. total QX, quarter, XX% achieved X% we to XXX America, on at year-on-year X% XX% constrained total. North competitive In new strong year in of placements prior-year placements expected, in accounts year-on-year Globally, levels. of XX% QX, increase, the or overall in XXX total. high placements or U.S. placed Catalysts emphasis or in instruments As This X,XXX to upgrades premium some

in XX% placements noted, As accounts on international at new year or Catalyst increased QX. competitive year

with XX% in momentum or continued growth strong in driven XXX placements drove global North growth, year-on-year America. reflected SediVue, by also XX% We

the base X,XXX Pros million, in to globally, CAG our million addition we these strong in more This results, $XX in of placement. amount of premium SNAP instrument in installed revenue is recognition Overall with instrument IDEXX were change, $X XX% In revenues related up XXX customer expanding revenues the the SNAP the organically, closely including program instrument the timing aligns placed instrument now standard primarily U.S. QX XX,XXX. Pro accounting to almost launch to which attributed QX to the Diagnostic

Run organic to slide strong, Our expanding volume-driven consumable SediVue consumable year-on-year remains and continues from Reference services quarter. gains by consumable gains contributed organically mid-teen revenue very recurring were XX% instrument revenue and of U.S. innovation Pay revenues drive laboratory combined SDMA growth X% momentum in which $XXX million continued expansion base Diagnostic test volume-driven third revenues double-digit High approximately of in lab million lab of the organically gains. quarter. to in with reflected Instrument new per grew grew and strong accelerated revenues, XX% markets revenue QX. benefits the reflected in international and Results CAG the in supported gains. $XXX reference consulting strong U.S. in gains

Rapid mid-single-digit primarily markets. organically U.S. noted, solid specialty, at in Rapid gains were was $XX across growth of and assay and gains million As products. lab first-generation XDx to QX, volume-driven, by gains assay moderated X% revenues low in reflecting growth markets. continued reflecting overall grew international revenue international Plus,

on VetLab P&L, XXX basis, profit margins business. margins currency as up margin and basis the from reinvestment, consumables, XX% results as instrument continued under high by investments Gross Tax driven points match accounting were Operating lab with reported constant to basis XX.X%, up and on levels growth. costs program a standard. in new capacity XX Gross gains lab profit and was XX% reported part reported XX levels, a related of margin or as currency profit to a gains increase growth and in of Reform our XXX(k) of including in of driven Overall million points gross product in OpEx $XXX by was QX to moderated negative related our revenue. a employee reclassifications basis. were in in basis as by approximately impact basis. up to Turning million, cost basis well CAG high cost from as as was our constant service revenue the lower XX% operating XXX Gross QX points XX% approximately prior-year increased of or the of price mix business impacts benefits, consumable currency net XX% the basis constant unfavorable benefits in compared expansion currency points solid to on on $XXX constant LPD

product Operating in currency X% a exchange X% sales operating related in constant Foreign progress cost favorable the QX, in hedge reclass. recorded higher expense higher gross increased incurred changes costs by operating other on benefit which and quarter, profit of the expenses in a offset accruals. basis which driven impairment the SNAP work QX. quarter the lab assets Fecal increases in were reported million in approximately XXX in was G&A We G&A, and expense in points Constant leverage. was were $X.X resulting marketing by gains investment on a offset to basis, currency which limited part in and of positive global by

related As share-based noted, from QX share $X.XX in noted a compensation approximately above benefits as was activity, expectations. Reform. $X.XX tax share currency constant was benefits $X XX%, to Tax EPS On per million our share, basis, X% about increased or comparable U.S. including per per including in which EPS

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

million. per of Foreign profit Year-to-date flow by million cash XXXX QX hedge and by decreased EPS was exchange free $XXX in $X.XX net $X operating and XXXX impacts share.

of German instrument strong cash a continue free related reflects our about projected million, to Maine million deployment spending flow well spending combined incremental capital expansion including relocation, $XX expect for XX% of of headquarter Westbrook, income placements. lab and as as to XXXX. consistent our core capital to net cash outlook related of additional program to for This full-year XX% approximately We $XXX

the supported We $X.XXX Our repurchased under at while per million repurchase of strong credit ended sheet. XXX,XXX QX facility. billion share, $XXX cash and of X.X price we've flow maintaining in in generation towards of the shares $XX million million million cash, $XXX balance in capacity $XXX shares average allocation our the in strong capital a Year-to-date in revolving quarter. debt, an with

Our leverage a ratios and times adjusted times X.XX as EBITDA cash. were gross of X.XX multiple of net

times benefits in outstanding repurchases expense we average XXXX $XX from X%, outlook leverage a reflecting for which X.X projecting We approximately annual interest capital continue million EBITDA. net structure optimization. to a are full-year maintain that reduction maintain We stock shares additional of to net from now assumes at of $XX million

In terms our organic refining reported of growth reflecting strong growth XX.X% reflects in $X.XXX a implementation New the billion our as include outlook full-year to CAG for the growth Standard. organic This outlook our which we're revenue with X% Revenue line year-to-date about of Diagnostic to to related trends, to P&L revenue XX%. guidance an billion, $X.XXX of of full-year updated XXXX, noted, for outlook benefit

expect For than estimates, slightly dollar half revenue the X.X% benefit the recent earlier growth exchange, a less first the strengthening full reported of favorable year, from we foreign gains. as offsets now

guidance Our our growth end overall XX.X% updated XX.X% of outlook high organic of range by the lowers X.X%. to prior

in additional noted, our we're factors, of As business, to for international We've acceleration and in constrain globally. CAG testing expectations growth LPD XXXX. on the we also near-term moderated which of for targeted half our Diagnostic business had recurring end for testing pressure in will second dairy planning growth swine factored market China, related that revenue lab the impact in

headwind. quarter, we X% in net an X% fourth of FX the reported revenue range, growth estimated For expect X% the and

strong We in QX, CAG U.S. gains to by trends. supported continued Diagnostic revenue high recurring sustain expect

are X% business. a in tough to We in overall to lower range revenues growth global organic year prior XX% comparisons the LPD in to for moderation expectations instrument related and projecting our placements

operating In approximately outlook midpoint range, incorporates EPS to guidance growth. prior EPS XXXX $X.XX XXX to reflect expectations at for full-year share share terms at and $X.XX of full-year we're an higher midpoint. operational of to supports points range our EPS, comparable improvement which currency in the This in $X.XX guidance end outlook per projected our margin constant XX% raising XX% at basis to constant by our per narrowing XXX for $X.XX improvement currency to

assumes estimates. in FX hedge Our to guidance earlier related net line impacts, benefit full-year $X.XX of EPS with changes, in

this EPS EPS of tax assumes midpoint rate of tax the rate upside. earlier XX% of level Our price, expected updated full-year the exercises. share X% updated $X.XX guidance estimate per This in benefit earlier approximately than rate guidance benefit of projected year effective improvement higher this of IDEXX's XXX or At benefit. benefits an estimates, a compensation. appreciation of previously of includes to full-year about to to is XXX XXXX rapid related stock basis we $X.XX a tax increased timing from netting point to our much and realized to exercise equates $XX in for share-based reflects million about have including XX.X%, approximately This of guidance, compared

As that we'll (XX:XX:XX) preliminary into XX% in XXXX, of the we to our (sic) carry discuss EPS over $X.XX] anticipate realized will year share not to this per [$X.XX XX% for guidance benefit XXXX. tax about we've

strong to revenue As stated targeting we with growth ahead long-term and goals. look consistent our profit we're XXXX, continued

that CAG in in of which will $X.XXX Diagnostic recurring to supported outlook rate will for now we X% billion, to preliminary by recur fully growth expectations $X.XXX reflecting benefit gains, that under comparable will Revenue is XX% not Our be in estimate XX.X% Diagnostic X.X% revenues. revenues growth billion to XX.X% XXXX XXXX XXXX. results provide organic the revenue to our about Standard, revenue Note New CAG recurring

revenue reported the to recent estimated overall of foreign strengthening exchange of an growth U.S. dollar. of X.X%, for X.X% net related the expectations reflects guidance to headwind Our X%

margin with incorporates operating guidance of for currency the $X.XX per EPS also XX FX approximately to release, to consistent established revenue long-term share $XX million and of assumed on EPS by rates in positions current points we decrease Our in our preliminary per share, of goals. a constant $X.XX result At rates expectations about at gains. XXX basis which estimate improvement press will of $X.XX hedge basis, X.X% net net our growth by pre-tax would XXXX

U.S. tax assuming effective million to benefits, tax tax outlook projected Our share XX% This policy. in $X no to XX%. and $XX XXXX million rate in compensation change share-based price current assumes our is

$X.XX this benefits for year to of outlook As shares leverage is currency, in and reduction for currency related We're at track the which EPS on growth constant rate, changes a long-term noted, interest net next per equates XXXX. consistent discrete a share share-based Adjusting levels X% in projecting outstanding interest $XX XX% projecting effects, rate tax in contribute and below we're $X.XX floating XX% share relatively accounting to to benefits projections costs to tax about to current XXXX with goals. higher comparable expense million. this our projected repurchases

now as year-end call. forward. detailed over and comments. Jon his of XXXX Our financial would review we'll we and update a preliminary plans in factors financial continue to tariff-related currently We turn I'll in area have conference our of monitor understanding limited IDEXX. our in guidance to our impact relatively to forward That estimate concludes is an look effects guidance This most which XXXX providing more on recent an update the for we discussion our business review. move our

Jonathan W. Ayers

placements our as about Thank Diagnostic globally remains in IDEXX's IDEXX's comprehensive instrument revenue QX. right. recurring including important achieved our This revenue. the revenue, new of instrument organic constitutes increased was primary in Overall always. XX.X% Globally, diagnostic to Companion overall these XX% by which globally consumable Catalyst we and All in which U.S. strong, XX.X% accounts; of of driven organic the strong in Animal placements quarter. XX% are growth growth, globally quality very driver – Brian, because competitive revenue The QX, our recurring growth was XX.X% the placements you, in growth

of placements, the comes North and in is consumable units robust of instrument very in XX% instrument an consumables to with also internationally, and economic our both strong Catalysts at of the index instrument XX% SediVue of plans, value our This the particular XXX that placements competitive IDEXX continued grew focus market placement which value continued types supporting index reflects America different years. at future to the track and is instruments up XX% many XXX growth. in from over a EVI on placements. year-over-year. New that the line

diagnostic allows appropriate agreements As adoption and the under use customer help blood part U.S.-based SediVue field care revenues. of builds placements of standard of IDEXX multiyear organization customer including IDEXX program, instrument our the to of also diagnostics, advancing XXX expand the through on focus work. our care This all preventative retention

markets growth to patient of the introduction sample reference commercial growth instrument over our our program led on international noted, slowed to services. organizations international summer, quality revenues. reduced driving instrument rate our reference in by revenues. XX% testing include we've $X continues our fecal lab this in incentive as mid-teens category blood of drive growth lab sales impacts with with our to international which wave with volumes for of fecal while QX this majority testing, to services. almost reference lab preventative EVI every is some accounts heat that exceptional quarter in our impacting has lab growth proprietary the in entirely lab to to parts a business, the testing reference sent year-to-year, U.S. $XX now placements the up labs. in Continental continue seen of due on in the our the work, in panels focus of which We our driven of of and year-over-year growth out technology same-customer global benefit constitute from Fecal placement unforeseen Europe QX, XXXX testing, year, fecal part of antigen strong reference care prioritized Also growth lab along the European

the internationally, in to beginning assay at Rapid importantly with XXX already modalities, successful with the over coming the of of approach of refining from of with test which superior kits has tell highly this launch research year. SNAP the international all, our in to had XX% ability including year. We XDx SNAP unsurprisingly all our a performance a test execution an the program revenue quarter, are launch IDEXX the particularly line excellent U.S. introduction U.S. had benefit our of us accuracy highest Peer-reviewed product XDx tick-borne the to Accuracy the the whole point after disease head-to-head competitive detect Customers is in compared in detecting test. test of the quarter competitive in Plus' that comparisons earlier significant their product published priority. is, product. with demonstrates the

value innovations, and PLUS, diagnostic VetConnect and the not antigen, Our to value and Catalyst results but commercial we our know practices. professionals customer trends the use great adopt, software getting unique SDMA, their our team peer-reviewed a make customers to XX% they IDEXX visit research differentiated decisions. is doing integrations purchasing SediVue, job SDMA, including as at levels the customers in continue And limited to of who XX%. retention as program, U.S. these our customers XXX including their world-class Overall of fecal the IDEXX

shrinking our in of expansions. the The customers have field-based expansion We're transitioned territories covered number diagnostic U.S. the solid larger we at thus see net gains. QX, in XX.X%, outside a in veterinary result, and market on diagnostics is similar solid Customer price as a realization even X% net to As supporting high range. retention continued to the higher XXXX of the price XX% U.S. number as by X% is we track U.S. with complete the consultant. to

there's redrawn. when a field-based XX% are some result expansion territories in resources, adjustments our always As of

have we're the in XXXX. of process getting better at experience two of placement strong transition compare we expansions with our Although prior under a Regardless, belt, the QX U.S. from the even instrument

of a revenue the we're over gives field These we XXXX while expansion both the and on potential XX.X% international preliminary completed consistent us when the will so, countries, U.S. quarter see Russia, to have impacts and recognize international Asia. as confidence Group the the XXX in plan markets is A transitional for the benefit the whole XX.X% Internationally, the can growth Netherlands, practices Mexico, adjusting all Companion Brazil, innovations the and high placements to recurring show commercial Japan Revenue pets in Standard in Diagnostic U.S. the instrument XXXX. exceptional world. of These in how expansion teams New our in our in XXXX, Nordic year-over-year the growth of we for other U.S., to growth growth the X% global Germany, I our compare. expansions, Group our XXXX placement a expect organic track performance us couple Companion want XXXX to ongoing reflect Animal of tough to in Animal notes. China, teams QX have with QX of the And outlook trends Spain, early in vet strong Southeast QX and momentum continued advance help of in four adoption professionals. over a field-based international IDEXX of

as high-XXs QX, campaign, radiation is digital our radiography strong Dose trends performance begin exceptional also we lap offering growth to Lower some order leveraging rate looking year-over-year percent and very an our QX business on by tougher exposure unique veterinary placements rate reduces digital year-to-date compares. Our radiography the building QX imaging that the with of digital had technicians. in

to in also QX X% revenue to Water due Our innovation business continues growth organic of achieve investments commercial impressive worldwide. and

We the continue revenue contributed which to X% growth make steady in building quarter. the progress business, our in Water in franchise to Legiolert

of runway of levels margins retention the a opportunity investment long capital year-to-date next is truly the and our Water goals Legiolert organic customer and operating XX%, decades. world-class our growth above and limited XX%, our product of growth of the Water's has over Our few trends exceptional. longer-term business performance our in XXXX reflected business strong revenue guidance. is make are XX% Overall, with team which on track

built earning for range guidance call team provides are business delivering delivering predictable the track XX. year the a this record deeply QX above an of are growth returns. and And And has an that earning and for unique year. testament dynamics. Note why We model perhaps next have that innovation we small our in of we guidance year's proud a in XX-year business minority the currency practice on and the enduring companies every a part customer basis, our that and last financial proud subsequently model is have further, I'm on a calendar of quite our profit to for to and or Perhaps, within unbroken this with adjusted been them. constant record; next of focused

So, we'll it now. up open to questions

Operator

will question first our William Blair. And from you. the Daniels Ryan of line Thank with come

Your line is open.

Ryan S. Daniels

focus little there lab comfort more given detail on recurring morning, the My weather, just taking for other then international in much your you But the changes? question. nature regards OUS? Good a to some makes color for one you sense there. margin I you the Yeah. and rates force any clients know that no were mentioned on have you which growth, the thanks was sales what on bit the maybe sales was the weather and can the retention that much instrument how related, first and mentioned to there's high regards how to in placements can competitive force speak of you refocus,

Jonathan W. Ayers

as exceptional for reference Yes, The the international the question, thank a you Ryan. whole. in rates remain retention lab business

say a don't that really we So, factor. was

commercial And to the in in through area good have network; in performance. move obviously, roughly us, consumable this the revenue IDEXX just year we'll profitable competitive equal a aspect has the course, of program build we've XX% and forward year-over-year a and reference our the revenue I all lab wraps a and introducing where end focus, XX% range. that business, the very well bode think core I merit the which of our over adopt. Catalyst placements was something CAG international new growth of parts lot complete out instrument XX% for we impacted XXX started lab the And to and competencies revenue, organization Europe modalities, Continental part, just we drove Diagnostic which it's XXXX we is generally in XX% a as the of probably as at international of for German expansion the which weather think growth international executional and we're really the should recurring market targeted the of which

Brian P. McKeon

to some relative trends in impact saw the of just the point some summer. to we on seen an Jon's weather, early QX being in improvement Ryan, of the And, we've

it's dynamic. rate that mid- So, the think clearly that to high-single-digit for create, QX. was overall the part executional in the shift in to near us of that's they growth I prudent have But term

Ryan S. Daniels

to Okay. $XX makes nuance, million sense. a my Thank basis, as at but appear few down which And surprising that then looking force over marketing last the you. was a Brian, actually about sales maybe investments third follow-up, and the nuance so there That be looks why back anything like bit a you're in to seasonal making, the downtick quarter. and sequential explain took sales given years on somewhat doesn't too actually

Brian P. McKeon

to those in that additions or charges about be talked in Sometimes can quarter. reflected that's the I U.S. the And single that's I impact on had high it just we can that of There we're have some quarter charges in the the for reversal we And think think indicative track We're more growth, noise year-on-year areas. expansion. digit. always there. how managing which was

Jonathan W. Ayers

in third Also, an know quarter. I if basis, strengthened don't the the absolute obviously, dollar on it's

Brian P. McKeon

There some a FX. point, Jon. changes were in the related That's reported good to numbers

Ryan S. Daniels

hop Okay, back queue. I'll thanks. in the

Jonathan W. Ayers

Great, you. thank

Operator

you. Thank

next of the with question Bank Derik comes of Bruin line Our America de Lynch. Merrill from

line open. Your is

Derik de Bruin

morning. good Hello,

Jonathan W. Ayers

Good morning.

Brian P. McKeon

morning. Good

Derik de Bruin

broader about I seeing? could get looking and And what follow-up. you're worried? stuff are a But talk terms Hey, what getting macro on. just economic indicators concerns landscape that a of the across my on seem in in of overall and you're XXXX markets you doesn't going Obviously, I consumer overall have universe. worried you the this about broad And slowing guess your market. imply lot that I'm you coverage guide the to for about There's guess one question. I concern just

Jonathan W. Ayers

very business own a the global We growth. have revenues. in large obviously, the a U.S.; very strong We're creating our part very effective in of IDEXX

I There's thing think grown have basis deep One Derik, personal we just diagnostic last consumption higher care. Investor we expenditures. revenue has to and about, you that's was years, over there. nominal as well gotten recall work in recurring And blood points a interesting. expanding talked XXX Day, as general, people the our of than really in importance preventative the the been care. It's appreciate really many

average. total XX% over Challenge adopted their That's customers. Preventative and our less yet little customers on about X,XXX have of growing our customers XX% revenue are X,XXX program. have who We at than diagnostics Care These a IDEXX customers, over – that's

same-store strong very of driving we're that's that's And the investments making. growth. sales result a So commercial

actually instrument have of U.S. us the growth kinds obviously our these you across I the diverse And it's to – so that And markets. seeing in affect countries I certainly which mentioned. think didn't international XX% year-over-year PCE of our recurring we're placements allowed growth efforts differential the between expand the and noted And economy in set nominal

pretty diversified And there. so we're

completely not the going say economy, confident. very So immune we're we're but to to we're

past, we small year, guidance. the every that along delivered basis years, those, and the earnings enduring have guidance constant I've currency that we've back gave really of earnings the on we've including provides or look give the on guidance above year, we model. before and companies of And yet predictability adjusted XXXX following on year recession Each year the actually XXXX. mentioned the we is that number in which shows XXXX, XXXX, delivered which a guidance you If in within shows October which relatively had we've year, the business really and somewhere in on delivered may our a of XX

Derik de Bruin

and to Great, you and international more going then U.S. the force. curious your international you force one sales and said sales follow-up. you're was incrementally heard I just done correctly, the that expansion I'm how on much push on just spend that If

Jonathan W. Ayers

on build international hard that. over to QX, work at group the and our international into QX, way. its is are So and on going early It's XXXX, so

are reference in the rates, our obviously. saw issues the at in When into all XX% were international with QX we double-digit growing the weather-related, internationally. And grew guidance so I growth lab that that factored even you're numbers

gives really around teams what continue it some a the we country world. are confidence So placements us us world-class the result on as build confidence. really The gives growth new/competitive of adoption of this EVI, to internationally, to really the XX% Catalyst opportunity see in

Derik de Bruin

And feel this just the one people talking. bit follow-up guess just It's because a I've conservative guide point gotten at like hit XXXX by a is couple like stock-based the headwinds year? factored on some estimates are puts and the of compensation the guess little for guide of clients got that just consensus here what in as this. I takes in. just that the estimate. I'm sitting time. are And are Obviously, next I the it, walk through below you've

people for And bit just looking – so I'm a think are color. more little I

Brian P. McKeon

trend. growth think, is on basically That's I our revenue the the Derik, recurring key XX.X%. right XX.X% to place Diagnostic our So CAG to outlook, XXXX start

guide the approximately if the – growth above be benefit growth that full-year to from standard rate number So current our the effectively and have take with line – X%, getting little benefit we revenue that you which change, is about That's rate for bit year-to-date year. next of we're the for in going our a it's adjust is XX%. accounting it's XX.X% midpoint

being So cautious the in think much recurring growth just think exceptional I we're CAG I benefit with on looking is having and the business of a our supportive that international CAG operational and view heavily I in is outlook strong that's markets. our business, our that's given tougher to recurring emerging cautious economics driver some line out and dynamics. weighted think with some of core think And very I making. investments we're in the on had XX% growth more underlying in operational appropriately just of to right we're a It's trend. our end more have trend – financial appropriate point market in But get LPD, and But We're sharing. area. we're We that the did think we're Dx to on tougher a guide placements. against instruments And year from grow organic the there. we've compare up instrument be an revenues compares of going and I that levels line overall higher will

Jonathan W. Ayers

And then been Brian, the going – that see regard made we've all to remarks step-down from along, reinforce addition I've that very, a transparent comments the have from predict options a talked to want not we're I XX%. benefit may to the tax point tax step-down with compensation the regard XXXX, fewer that do prepared Brian – of to rate rate have in earnings, XX% with – to XXXX those benefit in option that. to in stock exercised. the about been going about in we're since very In in to benefits his And

some options forward pull this We into we expiry, year. have fewer had

the guide. when growth, in change. XX%, long-term currency which to So we that's look at XX% accounting is really a non comparable – that's constant But to an get earnings our we factored

Derik de Bruin

you. thank Great,

Operator

you. Thank

from will the next come with Stifel. of Jonathan Our question Block line

line Your is open.

Jonathan David Block

and guys, thanks, good Great, morning.

Jonathan W. Ayers

Good morning.

Jonathan David Block

addressed in to between I'm I calls, address margin if and just shared view OpEx think jumping you've been want XXXX? I I've or gross going between expansion should apologize But Brian, where – this it is guess, I is, And we margin with leverage more a more the this. And relative leverage to to as what some to XH of maybe I'm relative think in the then we cadence, sort XH we've XXXX? of bit recent a lap seen little how that, about bigger is follow-up a you investments? the OpEx quarterly in guessing when

Brian P. McKeon

it, way a to think good that's Jon. Yeah, at look I

margin global improving focused I that the which on, in improvement on and is driven gross including solid have and labs areas us by like think have productivity things in benefits price to our build those growing we we're operations, been that. which and revenues, expecting consumable sustaining for expect we've our gains to

that, And for We'll finalize way you in QX share year. of numbers I we I our another plans and the to just think been years well look us think accelerated in that's to the continue that obviously, see the than leverage, in of have full-year U.S. high-return highlighted very earlier an growth growing that international the we challenge the we call, relatively invest These for it. as at reinforces we've successful we that think the recent the on create think in here to as are expansion later terms that market. on opportunity will the in your I that provide wave we've appropriate expansions around year investments. color OpEx more the to as point very a of more do our investment but compares have in and as

Jonathan David Block

just... then And it. Got

Jonathan W. Ayers

recognize Jon, you're – just in. your we're of always then appreciative And situation the questions, and

expansion, We XXXX long in deliver to over-deliver over are very point continue margin XX we're goals and on – in and long-term committed expect term. to to to expect to the basis on XXX which XXXX of our over-delivering operating

Jonathan David Block

And coming alteration as actually in Got I've update? the the anything closing, Jon, quick follow-up you changes changes Zoetis market on Thanks. it. in to the I competitive the Thanks, acquisition any recent negative any to the mean, is Jon. one field positive Abaxis guys? deal for market are overseas? one or more seeing the I to And you and may. way that. if or maybe then, or pricing And of two got with

Jonathan W. Ayers

the in whole tick-borne obviously, you tell is you have point which in in is the may the XX% U.S. disease decisions, the detecting commented, The XX% The business, globally missed word new to prepared placements I purchasing XXX the all, and SNAP that differential. we number test, heartworm. rapid mostly competitive a we walk strong as launch out against it's job superiority research, of product an answer assay shows competitive comments with professionals of the really And have ride substantial customers to a very one important comment the a Catalyst published of no. accuracy – our in I'll the a over QX, doing on XDx, peer-reviewed field-based for important and And year-over-year face in in along. in and had franchise. close one is we're getting XDx we that's franchise after criterion running quarter our disease. detect great the growth And

a skipped of view. we in so point QX And a haven't here from really competitive beat

the remain and rates – very internationally. very even maybe higher retention consistent, customer even U.S. high improved in slightly very, and Our strong

own This in get preventative and XX% adopting see our continues realization that's price U.S. studies start less I adopted than XX% We course, care. have. good practices can did we is that we're in more in total X,XXX is when disease underlying they customers realization year-over-year internationally. finds in diagnostic because – over We that XX% of we us line same-store being of when our opportunity really diagnostics customers preventative the these you type in sales finds revenue And X% on, when some the price of programs. our unique who on able our Our earlier. growth to care, with to do growth these last overall their get year the X% in And, know create growth. work that they diagnostic similar it opportunity believe range to recurring here and

quality care, unique on XDx, And it differentiated pets hematology, and runway opportunity the and of to our resonating run SDMA, of all ages. the the has all do. and story blood that a so IDEXX evidence-based with is very, fecal long-term work medical additions increases preventative antigen, actually the justification is a medicine very And for to

So, really question. competitive the no your answer changes to environment in

Jonathan David Block

for one actually I'll your my offline. it. take guys. time, Thanks last Got

Operator

Thank you.

come of with Suisse. Wright line will Credit Erin question next Our from the

open. is line Your

Erin Wright

Great, thanks.

competitive some, field? pretty business hearing international or U.S. you're the changes but are lab I'm there Any just particular. the curious in in discussed was the strong in you in landscape, kind Thanks. major You the of terms of growth what seeing what

Jonathan W. Ayers

higher, little Thank bit customer you. U.S. a very performance in edge U.S., a in No the real to continuing changes retention every quarter strong the

that antigen, are this adoption lab innovations think practices so continued of – VetConnect PLUS value unique I molecular and, day. the experienced, fecal on subject diagnostic the is every reference experts diagnostics, the the XXX had across services, that SDMA, U.S. course, I matter of calling

our their and professionals advance standards. them on customers coming to how so in helping value And

And in strong in of business, almost the generates of an global equation. diagnostic our lab the overall offering a I strong U.S. very a U.S. as very component every $XX very, of U.S. remarks, prepared mentioned reference business the so $X element And is so the important reference it's – out of lab

Brian P. McKeon

X% accounts. shared, levels The of record to to price that we net customers assay, was had competitive growth solid is of to contract increases. consumable Catalyst XX.X% rapid well, levels XX% under really Erin, accelerated the in mid-teen growth X% growth at execute volume gains U.S. steadily We it just continuing in record reference range, the continued some in in overall. of retention, Yeah, revenues, reinforce, the metrics continued we labs, growth in new placements had or

and... So, we're the about U.S. think business I feeling great

Jonathan W. Ayers

innovation it's with Yeah, competitive been any want And competing always competitive competitive that's to don't that customers. growth. see with not and – I environment, say in resonating it's just a change our I environment. we're don't

we way capital to combine of which In and and to program, and with customers commitment so... IDEXX more friendly IDEXX to very is partner a a IDEXX with elected addition, our our multiyear add with more have XXX who have

Brian P. McKeon

year-over-year we America. North in SediVue in so And XX% had growth

Jonathan W. Ayers

Yeah.

with many five, under agreement. SediVue the we entire when of an So, that – we XXX, customer placed revenue six-year SediVue diagnostic a get IDEXX times

Erin Wright

on rapid one, rates the or relative Great, Okay. And on any for how in you in particular XDx seeing And bundling surprises improve changes Pro? in just inherently thanks. segment? retention then one thinking drilling what is that Are Thanks. the SNAP your positioning into more Plus? here, competitive of may last assay success overall an to kind be vulnerable

Brian P. McKeon

those assay than had Pro that assay more haven't. grow QX. Yeah. very are to that you. very quarter that's Thank mentioned question. rapid prepared in that course, into a for bit adopted a peer-reviewed quarter and, But We placements, rapid little research I Pro. and We utilization superior my SNAP faster do in had of I accuracy loyal more a we year-over-year strong XDx add want up for remarks. XX% you who've I of in very U.S. why SNAP much their the Thank Pro And customers very on workflow the think, their customers. to SNAP That's color publish solid, test on important

the know customers Erin, place instruments. and IDEXX's model. XX% the an And way of instrument-based integration software SNAP productivity for the get And, along. the management a That staff market you and using charge U.S. we accuracy system, razor-razorblade VetLab Erin, IDEXX face the Pro thus, reasons offerings. think years, this with totally after we're competitive – in in just SNAP XDx the rapid we IDEXX overall SNAP the IDEXX practice, – that's with Station they we're instrument who solid continues This from business SNAP why overall and the you with time connected economic well there're integration. with but turning unique they're because the to rapid strategy of to overall over and from march and XDx assay, into Plus Pro of QX, a assay increasing diagnostic think And upon in on builds lot SNAP VetLab our big I of ecosystem, Pro. evolution Pro, leverages information the our quarter launch through capture is just SNAP not as Pro, SNAP customer are continue XX loyalty of the growing a constitute SmartService practice and QX to integrated revenues and active our had benefits I As base of Still to meaning also integration of they're percentage unique everything

Erin Wright

Great, thank you.

Operator

Thank you.

from of King. C.L. come Westenberg will question line next with Our the David

is line Your open.

David Westenberg

Hey. Thank my taking you for question.

instrument. you mentioned reference European to the of talking customers kind onto say, of them kind of more an So, bit have focus EVI migrate lab you're these dynamic, you would maybe that that revenue the as up on more customers other that getting one a catch to, and imply about little will

reference of going lab do for the how do the quarters So, our you going next in just over to play about they're and reconcile just can out what might is of sake instruments kind models, versus what few this to Europe? just talk

Jonathan W. Ayers

momentum the help lab will in the think which as growing We XXX with lab help strong into growth good the the instrument new and, year-over-year reference program And build of internationally quarter placement reference placements So, be was placements QX the in instrument IDEXX really which us we're doing with out business multiyear to Europe. along with strong and instrument with growth of business I feel well was outside growth. XX% partnership and to as in a Certainly, focus. going EVI the we starting U.S., think very roll course, Catalyst going is also XXXX us continue a in-house consumable wraps competitive what a this course in placements.

So...

Brian P. McKeon

a helpful Dave, value. compensation placing think important EVI thinking our they're placements overall we where It's about that place to growing our it's in is customer – reflected the or type when and I attention to for drive that recurring to understand, is the from most is the as of sales how teams not what something majority And, instruments, very approach trying intended compensation be have we growth. towards oriented relationship shifts in of metric

drive growth. – what the reference terms don't EVI I of issue should think think lab an metric I in so

instrument what we're that think we we've that something Catalyst over acknowledging is our been for placements the in shift in can focus. that's somewhat towards a And got we sales are opportunity of back internationally that we've execution balance and I huge is anticipating – move had and time. we from that a

think in being to the reference see is something kind just be term. don't growth our I think, of be to something near-term for so But negatively dynamics clear, impact that the And I about as not EVI long labs. concerned should

David Westenberg

the term. near Even in

area, maybe the maybe in are dynamics there challenges bit European some are. And the Europe? much. is that deconsolidation you the on to And a opportunities and offer be of what different customer what very there of little Northern then just any maybe Okay, the fact fairly go kind there would with thank of further there some

Jonathan W. Ayers

corporatization have except with the who with happens of or shape competitive lab. place are in in Northern most consolidators consolidation taking Europe, to a we that's for one So the reference excellent

very also organizations very sales. they has while, of we our happening like they're innovation which that good think the level to they'd can and, unique the growth. resources Because appreciative we with opportunity can on are drop-through, fact diagnostics. we're revenue, drive one to in help so help through four-wall and interested commercial of of shape, them hand, particularly course, And bear at current in through bring grow And to many our to grow what's is acquisitions, very grow these same-store nice

a also We software have offering. fabulous

a well really practice and QX, leading Animana. base – value about, a Smart adds global the which we Europe, it the all with way customers in in excited Animana, U.S. Australia. PIMS, have strong because is customers. We Flow But it's And different of And to management platform. these actually it Cornerstone, acquisition, we really of in software. already we're value the on software early and brings customers integrate information with we're have doing closed then Neo, more even to it when cloud-based we unique with It's our workflow which and systems Europe,

think U.S. the And anyone for a help ecosystem, including the ecosystem, us with ecosystem really enterprise I and approach. these is will can software customers. can are product our this corporate Europe something partner customers so both partner there competencies else a And isn't with that with in sophisticated that software cloud-based who and looking bring software

benefit the think well software the side as as both on so diagnostics side. And us I this will

David Westenberg

can And guidance just answer Does late I yes realize factor time, we're you or of this the any low on so no. maybe sort XXXX product launch?

Jonathan W. Ayers

place. It in factors all of plans our

component. adoption seven core of five not if have product speaking, the been over growth any look a at generally you the major It's really the most launched we've year, really growth, so particular last years. to launches IDEXX in products And

any not And in this factors so announcements for but product XXXX. plans in time, point our all we're it making of launch at

David Westenberg

Thanks so much.

Operator

the will we Mark And to with line go Massaro Genuity. you. Thank of Canaccord

Your line is open.

Mark Anthony Massaro

Hey guys. Thanks.

Jonathan W. Ayers

we're still Yes, here.

Mark Anthony Massaro

You Europe had some weather QX. in in hot

potentially we near of might labs. mid lab can term think and think XXXX, growth? Brian, reference half As to to made the comments single-digit high in growth you international from about about speak first QX the I you have into just reference

Brian P. McKeon

That's right.

Mark Anthony Massaro

rate XX% Historically, in the in reference growth to you've XX% been labs.

to excluding reason So growth decelerate? think might is level that there any weather, of I guess that

Jonathan W. Ayers

to, global referring would the were be You're that talking XX%? to growth – you about XX% that

Mark Anthony Massaro

Correct. Correct.

Jonathan W. Ayers

Yeah.

Brian P. McKeon

and U.S. get can't in that nothing the think we've that been, to think I growing than We're we certainly those got say better great... to is and there back I have levels.

Jonathan W. Ayers

$X is of U.S. $XX volume, lab contributor of the out And whole. every to an reference global so important

Brian P. McKeon

a So is question, impact. this more of near-term to your

We haven't some focus. XXXX, aspect gotten think that executional shifted I but of granular Mark, heading that we've there is into an this

of... So kind this will

Jonathan W. Ayers

going lower really customers the the lab is sending the there foot it's thing, hot get weather along really is out. The concerned spoiled interesting. to to going about two They're on. thing One samples but are when they're obviously facts other It's worried get traffic, way.

very weeks that It wave, wasn't clear are which was the And two so those that it or and but – only revenue. slowdown, impacted heat the during that was... the six factors can so in our it summer

Brian P. McKeon

And, XXXX our in Mark, I'd foreign reinforce, recurring for with year-to-date exchange. overall just for CAG line our guidance basically adjusted growth is right trends,

Jonathan W. Ayers

the Right. XX.X%. Adjusted X%, XX.X% for to

we as we're XX% total of IDEXX recurring So and in the fundamentals the XXXX the CAG see revenues. Diagnostic that of continue XXXX of seeing balance year-to-date business which, through total revenues the you know, is for really

Mark Anthony Massaro

X% in quarter. of been X% revenue strong range. Terrific. somewhere Historically, was And in X% practice the then, to you've the

end you changes there? of do demand, terms see In any user

Brian P. McKeon

course, growth. vet It's pointed out, the of you and of solid, And very range as the growth in clinics believe... we similar overall in remained that's a

Jonathan W. Ayers

Our customers are faster. growing

Brian P. McKeon

Our faster, that customers we and grow growth. faster, influence grow diagnostics

So I particularly think feel trends, U.S. we good in the about the market

Mark Anthony Massaro

any Analyst indicated to new Catalyst intention? what that Is last in I at XXXX. think a around one quick just and And you onto slide your your intend provide might launch that you look like? Great, Day can still sometime that color you one,

Jonathan W. Ayers

The has expanded launched will a Catalyst value They appreciate We success. SDMA the think to great in base. the U.S. time. XX% in And global the by kit XXXX, in adopted our which ProCyte And SDMA slide, slide, the just expand launched on the the Catalyst parameter. launched great combo of outside CRP doesn't hemoglobin, almost fully and continue has I U.S. with We the success of the will to another It's June-July timeframe. we review retic the we also had CRP. we been menu. menu that history TX

talking about time. So, this further expansions in specific We're a of this really diet the at But they're any expansion. is not menu pipeline, steady course. of

Brian P. McKeon

innovation. ongoing Expect

Mark Anthony Massaro

guys. Thanks Okay.

Brian P. McKeon

you. Thank

Operator

turn back Mr. for Thank I'd it like Ayers, any you. And, to you over comments. closing to

Jonathan W. Ayers

it's a employees. really care is. to the guidance earnings again day. XXXX we range subsequent against more great that I too appreciate that forward proud all to for and alike, attention we've earnings which just for. terms years. we of do. year the to in We everybody or proud we bringing that guidance, above then, delivered is owners drives even And this during And thank many the what And – be the purpose year I it's we're want the to last basis something XX in and busy us, also, of able adjusted we've your guidance currency continue on look within finishing to not advanced done the constant provide companies just and an terms pets pet veterinarians, guidance provided we've what want And thank to and a that have are performance our in very to

a to of this the enduring and is a testament revenue. characteristics really growth the business, high it and very So, of team driven recurring predictability by degree

call. with very you the much. that, So, we'll Thank close

Operator

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

You may now disconnect.

IDEXX Laboratories (IDXX) 1 Nov 182018 Q3 Earnings call transcript