IDXX - Earnings call transcript Q4 2018 | IDEXX Laboratories, Inc.

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Operator

Good morning, and welcome to the IDEXX Laboratories Fourth 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 John Ravis, Senior Director, 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

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

Brian McKeon

provide financial update for our fourth we long-term again pleased I’m XXXX on everyone. our where and achieved gains take This revenue year quarter results strong goals. XXXX. another morning, performance continued IDEXX through EPS year outlook good financial in concluded you and you, delivered Thank our financial and above full an QX. and to

driven of our XX% on aligned our diagnostic growth organic international by recurring growth gains fourth revenue We both of in with of highlights organic revenue growth supported financial the CAG goals in in long-term revenues annual diagnostic and with organic terms year U.S. track recurring XX.X%, growth markets. In by in XX% expectations, quarter revenues. XX% CAG organic consistent full we plus achieved achieved XX%

Our from year $X.XX, XX% in EPS on a XXX-basis comparable strong constant-currency of growth, This was currency U.S. a performance full Reform. basis. operating increase an Tax a and margins top-line benefits improvement basis point on constant reflected

results to build XXXX. in We’re on well-positioned these

reflected our maintaining of for in We’re outlook our XX% range million annual in consistent $X,XXX million, guidance X.X% to revenue growth $X,XXX organic to revenues.

We’re by tax is share-based stock estimate constant EPS a expect share from approximately in in benefits which in XXXX. offset gains are will related in excluded price, points changes XX compensation our which favorability These raising sustain XXXX to of with upsides, the our supported on by off high-end at at $X.XX share flow-through share to guidance EPS our per our XX% of long-term is of margin XXXX or results $X.XX $X.XX goals $X.XX rate, effective our and our an operating currency of in upsized our currency comparable constant basis, XX% tax comparable reflecting per of our midpoint we This a to gains for $X.XX increase partially of aligned basis to growth per calculation. goals. growth profit reduction

We’ll foreign you our walk guidance of the consistent comments. for details in guidance later expectations exchange Our impacts. through reflects year-on-year XXXX my

These recurring the CAG X.X% recurring to revenues U.S. driven performance $X.X million million period, continues strong revenues increased revenues. high-levels, revenue U.S. clinic relatively as CAG aligned visits and of lower results per with X,XXX reflecting moderated diagnostic a patient metrics by XX% including begin full clinics. and results base. trends CAG diagnostic solid Group. recurring growth segment business of year level up by be This visits gains market our in revenues growth solid momentum from reinforcing Let’s organically to Companion or revenue our recurring X%. clinical and revenues. and to visits, In revenues IDEXX’s new growth is XXXX from were review quarter with consumables region, visits approximately By our retention for XX.X% recurring Standard compared recurring Animal reflected growth ongoing rapid as continued overall and were X.X% of CAG X%. overall durability to trending modified U.S. QX organically, to Global region. X% practice practice compared seen driven restatement. for at primarily growth was are related up outpace mid-teen in of recurring our CAG $XXX were the appears growth types benefit a approximately customer visit XX% driven, QX veterinary data gains we’ve U.S. increased fourth practice sustained U.S. sales same-store results. CAG in organically, CAG to by reference revenue all growth Diagnostic growth non-clinical Global closer primarily continued retrospective a prior-year in clinical dataset Diagnostic trends. Diagnostics of continued recent a net lab growth revenue increased in volume strong price in by the growth Accounting impacted our in veterinary and with

QX revenues. Mid-single-digit associated growth constrained on to and non-clinical We’re benefits strong refining Smart more clinical results revenues increase commercial select from part system gains imaging a supported by in-clinic software recurring and organic organic third consumable management driving increased practice versus to increased this gains our our Services International unit forward impacted of revenues Software in trends of markets XXXX our overall in services front These in by by with continued tracking posted CAG reference and sharing of softer were X% the quarter organically Imaging Diagnostic look recurring Imaging recent to placements relative and in conference with results, improved in performance data calls. reflecting for visit focus analysis in XX%-plus future digital lab on and Veterinary XXXX. QX, our growth in driven XX.X% strength acquisition Diagnostic continued Diagnostic in by our gains. in platforms X% a very full globally growth year business, revenue which solid Flow. XX% Systems international

gains changes. by Diagnostic instrument this Veterinary effect For nonrecurring continued Imaging from for organically revenues organic and premium our benefit in Software the our business, full X.X% XX% XX% rate strong Accounting our goals growth momentum. overall target the Digital CAG on revenues, increased Diagnostic XXXX included growth year, growth recurring year CAG solid in placements business revenue growth Standard CAG our low-teen and strong CAG driven new Full business. in in revenue Adjusting building

Our by Order the driven business degree offset strong moderated were grew which of $XX QX revenues timing growth. by which million, in in international overall X% to shipments, year-end markets, organically fourth quarter gains the to a U.S.

revenues For operating million, up operating reached full profit faster year, growth, $XXX the with organically X% Water XX% margins. reflecting

market our QX high-XXXX momentum as Livestock, continued organically We’re high-single-digit X% outbreaks sales. in in impact very and China, pleased Poultry in government profitable end-market in in to swine African swine and with bovine was comparisons in pressured which to highly growth our revenue distributor and organic pregnancy XXXX. also demand the ordering. targeting constrained growth largest in diagnostic was fever related the which Water milk expected, reflecting for low business test key growth Dairy to impacts for million, Dairy business our prices by year-end markets, of is Quarterly testing, continued this $XX has testing program continued down and and

XXXX the organically. For was LPD full X% our revenue $XXX up year million,

in-markets LPD macroeconomic than our the a impact the LPD business XX% as whole. As can have larger on China relatively revenues are company a pressures international, like segment

LPD Given in business. flat XXXX in factors these growth factors, our expectations organic for relatively outlook our

reached up international both For Full the to of approximately by XX% total long-term $X.XXX and revenues year target full recurring total revenue XX% XX% IDEXX’s and or organically, U.S. $XXX year were solidly revenues. organically gains markets, XX% CAG our ranges. billion, in driven in U.S. Diagnostic increased international growth revenues million growth within revenues XXXX,

of year we continued X% QX Globally XXXX global of an in XX% premium levels hematology to analyzers instruments in strong full SediVues year to in increase, strong placements premium QX X,XXX Catalyst globally, in XX,XXX, QX results up QX total increase a base. We expansion line very placed prior-year compared XX%. instrument premium and high-XXXX premium and full XX% X,XXX X,XXX bringing XXX Our reflect levels. our placed with year-over-year from up benefits

drove America gains In in global on XX% and placements in in in international. QX, focus increased Catalyst a economic North international placements. accounts high North total we at of value global newer America, North placed XX% or Our and new International and QX, solid accounts EBI placements competitive instruments, competitive both placements accounts XX% Catalyst newer Catalyst contributing at year-on-year Catalyst to competitive total of at placements Catalyst XXX XXX America placements. XX% increase

competitive totaled For XX% our year, the new placements X,XXX increase. globally, an year-over-year Catalyst full impressive and

the we placements in In XX,XXX. gains program. North in QX over include SNAP expansion by instrument XX program organically, a the over X,XXX QX Diagnostic instrument off Accounting premium results, million to in CAG million the in a impacts. base in XXX revenues of a worldwide customer related were moderated primarily instrument our placed strong increase $XX.X Pros strong QX with addition in revenues to instrument attributed XXXX, compare bringing by to IDEXX X,XXX mix supported America, quarter installed Standard X% to revenues

finished placement XX%, XXXX. strong record up XX%, expanding our up our nearly base We base. X,XXX up a of XX,XXX SediVues QX and results reflecting the instrument premium SediVue XX,XXX XX% premium in progress in premium increased in XXXX. instrument placements X,XXX instrument year with hematology year analyzers Our globally Catalysts Combined substantial XX% nearly capped a

base in CAG organically revenue continues XXX international by sustained run were markets, in recurring mid-single-digit in again from contributed X% gains. and strong of SDMA QX. High-volume-driven U.S. Consulting gains quarter. which markets. instrument grew new to million XX% while from supported and in growth in SediVue a mid-teen consumable lab consumable in consumable lab by quarter. organically which grew revenue XX%-plus combined U.S. Reference select Diagnostic up fourth of year-on-year reflect moderated international markets our benefits momentum slide expanding Our to organic trends growth gains Laboratory QX, were strength revenues paper test strong mid-teen in and continued commercial the in volume-driven revenues revenues, about gains. innovation drive Results XX% reflecting growth and with remains impacted continued by expansion Instrument revenue and capability $XXX of gains million soft revenue Global gains Services the was

developing moderate our commercial the as we markets. and growth build growth supported near-term, continued across We’re the in Rapid XXx very grew Rapid Assay VetLab QX our business reference in million on in IDEXX primarily in we’ve enhance organically strong of solid by progress Lab X% to lab forecasting our in Assay XX first business of driven international international plus, international gains continued Specialty markets. reflecting revenues and volume-driven gains products. focus generation U.S. were

profit up gains basis. million $XXX impacts Turning gross in revenues. increased price foreign Gross supported for to in continued was the XX QX growth exchange points a Adjusting basis on net reported and about strong Consumable P&L. XX% by solid margins

in constant OpEx currency as-reported, hedge operating gross basis gains by Market profit basis gains X% $X revenue resources up supporting a disciplined driven CAG basis. operating was currency Operating XX% in growth in and in improvement constant in million XX% LPD. in and in strong growth which by as-reported XXX profit constant on control Operating currency expense supporting or investments up a results overall from QX benefited exchange the X% point leverage a our Operating and $XXX margins or and G&A mitigated on Foreign QX. were profits benefit million business with quarter. expenses Sales cost were QX

points operating profit an in for reclassifications result basis margin operating cost points constant-currency of of our This was for basis or points basis. XX an outstanding approximately adjusted about gross the reflects year, million. reflects of XX.X% business. to full increase improvement year, on full $XXX the constant-currency gains related basis of impacts XX XXX This For lab margin a

Reform. in net strong we share EPS which basis. software year globally to or significant $XXX reflect margin Our leverage full $X.XX including in cash marketing On our R&D, FX benefiting XXXX operating Tax constant-currency QX capability U.S. EPS tax nearly while products expense sales share, increased on per in a from operating and investment and our activity basis, revenue was XX% negative related and growth per from benefits million in $X.XX reached impacts million $X.XX also to share-based related expanded and benefit year-over-year a increased including compensation in $XXX comparable results changes. accelerated

For related million $X.XX to tax per was activity. share-based or XXXX, in $X.XX, share compensation $XX EPS including benefit

full year, share EPS million. a hedge growth basis. net of by for and impacts, XXXX per impacts exchange rate year constant-currency discrete the EPS For $X.XX $X changes these was FX comparable increased prior foreign tax on XX% Adjusting factors of loss

Our activity. tax rate XX% related was net XXXX or Free share-based approximately additional for for to of guidance million was favorable tax approximately to $X.XX benefit effective rate $XXX rate This including flow was to related activity. benefit cash XX.X%, $X.XX per estimates, including income. about about of X% share-based compensation of compensation our earlier share XXXX

relocation. Westbrook, lab Maine of $XX Our capital expansion investment, of $XXX investment including German our related and combined free cash of core to headquarters flow million was million net

instrument the IDEXX very in QX supported allocated XXX an million in placement We support increase $XX $XX million year for in the in associated share repurchases instrument for year, XXX,XXX investments growth shares successful $XXX the capital full of program XXXX, internationally. of of towards also repurchases strong with including $XXX premium year-on-year, million million. the for We U.S. program in

million position. balance in facility. ended in million under billion in year credit $XXX the $X.XXX revolving $XXX our with We an sheet cash Our excellent capacity and debt, is in

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

for and Our return on capital a supported disciplined excluding and XX% cash strong allocation investments performance invested after-tax of achievement capital XXXX.

financial performance outlook to with our build the in with strong this well-positioned goals. on long-term aligned XXXX We’re

organic implementation the We’re maintaining of consistent growth X.X% of CAG release. year-end organic This growth a related $X.XXX on exceptional equates components benefit of FX for XXXX, revenue our revenue assumed planning billion of recurring our rate consistent XX% press to part Diagnostic at revenue and headwind our nonrecurring revenue as of $X.XXX our of of to X% XX.X% revenue reported refined the outlook guidance building X.X% XXXX growth finalized new in and XX% X.X% to which X.X% included in XX%, standard. the outlook organic growth revenue to our net projected the to billion. growth We guidance to growth rates to

a $X.XX, profit net We’re an This raising our of per $X.XX share our XXXX benefits $X.XX estimated activity. upsides offset the tax year-on-year of impact estimated in $XX in at increase EPS million to reflecting compensation outlook to midpoint, reduction share per from estimates. of $X.XX XXXX approximately share-based hedge $X.XX an flow-through per negative share by outlook $X.XX consistent factors projected FX from in gains, with preliminary guidance in

XX%. XX% while and a As profit million, plans we $X by press positions in elements our a sensitivity, $X would EPS XXXX release million currently place. maintaining the of X% in from outlook to XXXX our our rates consistent refined revenues of assumed dollar growth change comparable operating approximately net approximately as of impact outlook We’ve hedge by P&L in a finalized

targeting range, is high favorable currency our margin margin to the end constant by year-on-year of to interest primarily share with XX for now driven XX gains operating targeted slight offset a reduction gross improvement, and projections of updates improvement reduction. to our expense count We’re year-on-year This improvement. basis refinement targeted by points

levels aligned $XX maintenance with and net times average metrics shares X% both interest million We’re XXXX an X.X% leverage a to now outstanding, in at with million net X.X costs of projecting to reduction EBITDA. our in $XX in assumed approximately

to recent tax for as tax of XXXX, estimates stock-based by estimates at XXXX compensation, to compensation prior are sustained X% per below reflecting share rate benefits in rate $X.XX from outlook benefit updated below price in high-XXXX per levels. remains Our effective XX% more shape million upsides exercise XXXX $X.XX $X.X project in share stock-based offset for tax $X.X or approximately of now million levels. and approximately We XX%,

In spending, million German of instrument in to expect and we in $XXX terms to high-return to capital $XX free of related completion programs projects. to our headquarter lab invest flow, million million cash core growth approximately Westbrook to continue $XXX deploy and including globally

XX% XXXX, income of approximately net outlook For net for free income projects. these an normalized two for XX% to this or in XX% major of flow cash results of

expected be of our our margins full resource expansion. operating QX X% gains quarter the to XX.X%, international implementation in headwind. we growth terms XX we XXXX, revenue basis are outlook to a to of equivalent of X% to expect in points first days’ X.X% organic range, of the In at reported advance of projected reflecting QX our net lower-end improvement of goals commercial to year XX as continue X%

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

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

Jonathan Ayers

XX%-plus have care appreciation incremental thank as International XXXX to our instrument grew an for impressive expectations. of organic finished XX.X%, questions. will importance you. generated the revenue, and A Brian, even to XX% years almost of open commentary the growth. with international full year, that of the support the Companion diagnostic CAG supported the revenues our with We of then organically come. diagnostic consistent recurring XXXX recurring XX% pet generated owners increasing generate global to XX.X%. consumable organic significant for investments strong was constitutes U.S. little and while which growth growth two-thirds we’ll quarter results, and in Okay. Animal IDEXX’s making total color Clearly, in of for by revenue which business we’re their pets. health represents it bottom-line overall growth revenue, customers, revenue and sustained up growth

technologies technician morning’s now, IDEXX talent job – play a market as to you and can medical report. veterinary are value in importance competitive really and for and right as from this customers diagnostic The unique see is see up also care. in wraps Our IDEXX’s XXXX the the growth our trends the testament offering health

reported fact, veterinarian In it’s there’s available for veterinary every openings. been that five one job

owners attract and to partner And the importance best an retain their so more tools advanced IDEXX’s far to innovations. and support job providing a practice care need staff the patients; essential thus and of take of by valued well

which foundation so so at if revenue are up of the continue a And customer high-levels not retention QX, our metrics, slightly. in exceptionally ever inching in recurring growth model

and in primarily the the in augmented R&D cash of that reflecting with advance $XXX diagnostics price XXXX. continued by projected almost approach upgrades remains in as modest behind-the-scenes instruments almost the life Neural our and platform, Network for X.X technology advances R&D The of point-of-care progesterone test menu. the growth software Catalyst regular organic advancing includes same software. million benefits years software Our for in latter volume how a offerings the new cash test PLUS as our $XXX the happen of realization. diagnostic cloud-based our for million benefit like XXXX This in and platform, our driven, seventh regularly And on seven Catalyst our in VetConnest for recently-announced SediVue well

of in were placements and accounts XXXX new competitive Catalyst For up XX%.

placements Catalyst instrument organic QX. IDEXX XX% important competitive the to the in an consumables VetLab course were and growth over contributor of year New the and

contributed with X,XXX QX instrument rollout the Catalyst results as year placement completion hospitals. We’re the over to of praised well has as at that of analyzers that the Brian Banfield one enumerated the

The relationships their important the strong. settling coverage greater an their of were U.S. commercial or this in We’re with from of place the against metrics reconfigured expansions There’s having quarter very first Especially the for QX. professionals, in North the newly-recruited entering always during organization customers start with in deeper growth also as in our new territories. including expansion, some base, develop compare XXXX was light, expansion strong the professional the American professionals, customer world. field a completed around

that unique U.S. analysis number new this of with the As world-class growing This from initial an of largest, protocols on in enter is urine technologies. growing and preventive team IDEXX’s benefit and Software category, using we overall advancing as diagnostics, experienced team beyond care we’re customers in-period our our focused adoptions professionals such leadership. of in antigen fecal settling frontline the SediVue diagnostic customers market, testing, XXXX,

in footprint comes is from in our on field U.S. our the a time Our field that U.S. focus and – and with quarter footprint productivity rep U.S. place ago, is territory. place XXXX development

commercial XXXX beyond will Our in the the investments footprint. in on U.S. field ROI focus opportunities high

complete teams’ a in resources timed revenue international At to expansion were a Group this Animal accordance largely Companion about we’re growth generally than quarter advance plans Our plans. U.S. commercial recurring in hiring and point, with diagnostic the instrument expanded later our placements

international teams building key with are Our commercial strategies. competencies our

prioritize For units of high-value of over saw competitive internationally example, new of is Catalyst was economic index which itself to and the from XXX placements in was the in QX record we value a an which placements a record. placement XX% XXXX, to quarterly XXX instrument QX chemistry growth why reasons units which up one a

by XXX outside North Another to drive leveraging to with generally growth. program type as the program recurring America strategic is the progress IDEXX of instrument This here placements adopted of competency accelerate IDEXX being and year new teams international our revenue is pleased team’s wrapped the up. I’m and

targets IDEXX’s innovation Catalyst Our best-in-class international benefits period spreading to and confidence first the additions. testing Catalyst. is complete, of net offerings modest quarter primarily teams XXXX. settling a and gains price expansions our volume our realization the great diagnostic with have growth SDMA, customer secondary including IDEXX on driven are they the gives software us as a international as offering These in revenue by are along placements new unique in such support technology expansions from with XXXX, hematologist and Commercial poised

than innovation investments benefit growth of noise, adjusted our differentiation by steady macro our in reflecting current of recurring broader a revenues bond nature solid growth our sustaining us the industry-leading Diagnostic economic CAG the XXXX growth and by times on gives solid recurring the XX% While bring between the the pets remains supported organic growing XXXX in durable IDEXX’s enabled revenues, confidence the projected as growth for to to and an their we enter XX% sum, which us momentum XXXX similar In are trends owners. we basis. of

health customers deep gratitude my continued their and to IDEXX pursuit for to to well-being the call our my the in have express of Before and in people XXXX and I accomplishments enhance to confidence our want technology value-added gratitude Livestock to partner. pets, purpose I the a the as also of employees and open questions, the

So we’ll questions. comments, to the open Cynthia, with call those

Operator

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

open. is line Your

Ryan Daniels

and somewhat taking Yeah, disparate questions. morning, the for ones. Two thanks good

for push the Jon challenge preventive we off, opportunity think that you, XXX First there potential force too as driver? international to reference the and is those care more integrating about think IDEXX in sales kind protocols it point-of-care be and of rollout of and organic actively, to those an markets the a still your expanded markets could as in a well? is bit Or growth and early

Jonathan Ayers

you for that. Yeah, thank

some We’re more in actually of look that to international markets. beginning the advanced at

I it think benefits have. diagnostics addition, is reinforces preventive we wellness the a in an running scenario, about in of talk presentation. we a diagnostics it’s And importance of the opportunity care when it when not

where very in XXXX, it so days, ago. market. in our kind U.S. U.S. of international think now and in of more and But really XXXX years days at in XXXX big were more the early care see in come growth and age we’ll And early a we of the it’s Canadian several component preventive has I the

Ryan Daniels

little for Millennials and it you focus Okay. noteworthy for that in you to that vet I specifically then proclivity a if organization. do size Thanks. Can out detail relates U.S. industry given it it how to, to at the a their bit and know, being called you’ll anything you in tailwind serves and as thought press look more of the as market the then note more care? the Millennial a release was And on spend that we like the market, somewhat speak large

Jonathan Ayers

span more. which taking also Millennials, an we community their Yeah, think pets. think special XX, And part and you an XX-year I all important of in are pets. growing to is that we I XX% XX% own generations from Millennials really as health know, their XX are and out vet one the see their, with have their now the of They’re the of special evidence is tune which health the metric and veterinarians that visit professional kind the in pets. of They’re pets think with that Millennials technicians, so define how Millennials that generally have in needs, of feel while touch it more of their their prior calls of indication needs, maybe care pets

see as even even I – evidence consumer we category a this obviously health the further, of and it component the for and driver this maybe then of generation growing the be now taking early is a think the the that, beyond And long-term key largest will bit but right so care. pet is importance

Operator

you. Thank

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

Your open. line is

Erin Wright

Thanks. Great.

kind few giving patient of visits you across market? at how trends demand U.S. growth you years, metrics clinical Looking in the more the some would the visit a in demand demand aspects that animal your withstand is sort some the year? U.S. up the color the And Can trends business to companion you’re metric Thanks. your new underlying you the to can gave, that guidance characterize which resilient X%. on underlying past fluctuations that were that gave does for terms How has of assume and I there. metric of underlying speak trends? assume what trended over you of

Jonathan Ayers

Yeah, I kinds of all is we’re importance with last presentations. diagnostic part. utilization in want growing the of doing What the to start and we’re

you’re running the think other people just equation pieces course without physical to of of and I of missing exam a a lot running and if you’re that a are history, IDEXX the doing you’re not missing equation pieces diagnostics, by realizing diagnostics.

the visits, market, clinical over as the is IDEXX. the I visits have in some are type of U.S. less. nonclinical important pet of course clinical Which of is that visits still, of So even only which so. got visit not though in factor XXXX and the But really IDEXX. – we think the second industry we’ve moderation data, to for note, X% you the the course moderating a is we’ve The growth visit that market some only seen in slight is half really

good growth. demand seeing We’re

so And is really we with in consistent saw in XXXX. our expectation XXXX what

Brian McKeon

Second half XXXX. of

Jonathan Ayers

very I coming outlook line recent the think factoring and the trends, much with we’re in back our is half. we’re of that the out driving in growth adjusted

Brian McKeon

we’re base use Let’s the also slide our growing the Catalyst in you know, seeing growth recognize, on the new of preventive care. of and instrument growing associated tests, SDMA consumables with installed SediVue and

So Animal of growth recurring XX% growth for on of that we an the drivers Companion organic number to make up XXXX a projected total revenue XX% have diagnostic basis.

Erin Wright

typically to the – on when what international relative is will Thanks. that And going see meaningfully how we sales the ask improve side lab? there? about kind I’m but mature of over – Great. reference of the quickly question U.S.? how in of to force course that the to think reference you lab do expect cadence Thanks. to kind international And quarterly year? that Okay. more another on the When should really you And international in start then

Jonathan Ayers

to I volume of the XXX%. we to is are chemistry bit virtually what sale at a consumable the largely as year-over-year on Catalyst -- recognize, growth let’s little like accounts, showing go. XX% look while is really we’ve customer an place the and done prioritizing prioritized placements – is a IDEXX the harder XX% some loyalty the placement our new a in once using to I is we’ve market in whole, there chemistry work. competitive volume remaining VetTest ROI is that Catalyst internationally results And than international VetTest the upgraded highest market, is think because international with it’s and the This the Catalyst, And which to we’ve international existing Catalyst think a I the VetTest.

that for we We are using And in did reference get from To utilization going prioritized say in we life, see growth that XXX focus will over customers markets of I really we lab Catalyst very a So our was are those of some validates be part going placement high protocols. a adoption on on But start to productivity menu the of see growth utilization nice this enduring already organic important force to QX revenue overall the – a of where recurring I the we placements. saw the which and both side percent or in. kick Catalyst let up tick half couple second we’ll get probably equation. saw part weather. that’s IDEXX and any slowdown of the or alone it to international is probably – program think, the in be XXXX going in lab, QX in instrument of is these really, as additional what the would reference and QX in pretty chemistry with to to selective sales

Operator

you. Thank

the Ryskin Bank Michael from Lynch. comes of Merrill Our next America with question of line

line open. is Your

Michael Ryskin

some I Thanks, deeper get want for the to to dig and guide, XXXX taking updated couple guys. Thanks question. the clarity. the on just of pieces moving a

the It the think it’s to bit you I mentioned revenues versus more; XX% and sounds X.X. to So CAG is recurring the XX% – is XX.X% think you refined a you to accounting standard I said outlook XX.X%. previously like little now X.X

I’m of for company to X.X% offset is is else? in challenged swine guide better is if the fever. wondering but buckets? something that’s the bit part or is Water a and the a quality two-parter a of then second XX% a total decision. shift it’s And between to is various be because this Is of if XX% somewhere going question to So of now It an reason the but XX%. like is – rounding entire bit a just this rounding still question the that’s full just the the looks LPD this African there reiterated

Brian McKeon

Mike. be really and is and not it’s Water refinement our and input CAG, each really VSS flat high-single-digit we’re would finalizing just it in-line of said It’s we our to again at decimal implies just our year. trends that in We’ve effect, adjusted growth wrapping up and recurring high-single-digit very We coming and the the provided been placement year, to adjustments accounting to effects we growth like digital, but year, adjustment, revenues, It just XXXX. try with plan. kind as into related if be that. growth wanted of our very you change exact you provide we nonrecurring a the the number that in relatively been finished a instrument rounding through X% areas above rounding out so of look We point. and through that slightly for the accounting extra low-teens LPD, and of kind segments of fully – plans the the It’s much our with for the end should plans the so the call, the benefit. Yeah, is as X.X% finalizing we kind have normalized is of rate heading that consistent CAG it’s

Jonathan Ayers

comments, comments think right. I Brian’s you’ve of supportive Mike, characterized your Yeah, I think it and

in October finalize just year it, for outlook, really rounding really the plans and of profit and enduring about talking the providing We’re revenue and pretty year considerations. before the nature we our and some as following we’re of guidance predictable unique in shows which

Brian McKeon

would say mid-to-high in I an of outlook QX labs And had the we international for single-digit.

that and the at well some that’s factored as we’ve did so bit that see a We’re well we in We improvement, got lower-end. think of calibrated.

Michael Ryskin

clinic the there data you wondering there’s you out or a stock on data could Okay. that volume in the if XQ, to I’m the quarter And think throughout then October, increase. that the weird the anything potential GDP the whether data, if just in other had saw in was I if you led in one – the thought just U.S. squeeze you if late California vet had so terms .X% negative provided any one from that vet wildfires year, visits? decrease some wondering there in the move impact was came I anything in the quick the of macroeconomic year, of there we in for market

Brian McKeon

calendarization, moving which then of the they lot in I holidays December of say, have a parts. to and fell. you the and would with It’s too, where throw

are analysis visit preliminary growth from that better that’s those practice yet I channels. understanding. we’re of to and maybe is Are clinical understanding going visits closer about are we’re some trends better but a clinical of in think of visits the really just talk revenue what what other getting we’re it a portion getting visits of visits .X% system X% total deceleration I the the of management are. into don’t in clinical ready to think so out QX and detail

what management the that course veterinarian, Some benefit doesn’t software veterinarian direct the go through like sales the through we’re which channels is but channels of are measuring. the practice from

So solid the U.S. but certainly companion think fact in our the portion and of I trends, animal of overall state for of diagnostic the our speaks growth recurring industry. the growth in revenue XX.X% the

Michael Ryskin

appreciated. I’ll queue. Much back in the right. get All

Operator

to with will of line We go Block Instructions] [Operator Stifel. John the

open. Your line is

John Block

guys, and Thanks, a morning. probably ask good questions. guidance-related Great. also I’ll couple of

that’s X% So organic the if XQ of Brian the first about XX midpoint to headwind, X.XX with I year. one a think the largely the correctly for I heard in-line with the X.X days you organic was

this the So going I for from think maybe cadence be to a I’m weighted? out with a guess bit top-line? we anything Should call stable a is and where there would expansion on margin perspective the color is back-end Op then Any helpful. year

Brian McKeon

a that’s call, think fair I John.

I I targeted don’t differences have meaningful things think we’re or we calendarization any not, note. to think

we’re And the and and that’s year, out we we by just years segment, expansion. that on lower-end but but the of at that’s the the that the the as likely I segment margin, full investments You compares XX of yes, work specific the the through of of to think XX coming commercial blocks, some have fair. always made operating on lapping

consistent our Jon, through plans targeting all as of are year. factored that’s some that that that expect improvement spending well, to as I gross from to too. on still the R&D this We’re And primarily that, margins we’ll noted expect and we did we’ve but be got advancing of in, we the build year, will increase this note so year international that aspects so

John Block

question. amount and a lot XX notably that the you’ve baseline months investments guys. can which second you the and go time bps, so the would margin of like haven’t muted to XXXX but just op you said for fair to over to past bps. to some expansion is months? at XXX that’s second I in Op maybe XX Brian, high-level a probably to XX higher of In I’ll And XXXX helpful. Very I believe expansion months to more pushed expansion speak have versus force lapped now, for was you margin the made the XX a Okay. XXX is, you year margin months the maybe on in is XX why XXXX past this incremental my investments sales good the segue around question be back the be Obviously bps and guidance Thanks, XX into

Brian McKeon

year. as R&D highlighted operating year. imply growth heading is been this would We’ve Yeah, And be, this noted, the Jon R&D lapping closer which commercial additional it in metrics cash an expense to really expansions highlighting will XX% story. into the I that

on the return our as So growth we’ve had in high ongoing invested very highlighted our by capital organic on and… of investment the return XX% business, after-tax

Jonathan Ayers

then And business. investable

Brian McKeon

deliver favorable point. outlook the the pleased have very had our of flow-through growth we’re And which this investing years, and we that revenue that towards keep with the goals with higher look, are providing comfortable if We couple benefits. end some the at can we’re we’ve want last at to very that. But

Jon Block

beat Notably, we high R&D what quick the in looking ahead one I in of if of for. Okay. And quality the maybe one, The really quarter. expense was came can. the were

comments, per about, You R&D expectations your talked XXXX. Brian, for solid

you some we XXXX, that maybe time, that’s materialize more all talk So if Thanks is term your pipeline about Would or the those Jon, of in that to for of projects? a good can expect event? at time, XXXX turnaround guys. something a for use, to

Jonathan Ayers

or portion their to advancing reinforce going our some of software a it’s cloud-based Yeah, continually talked I our about pipeline talk R&D capabilities. I’m PLUS, not in R&D but our only specific imaging, about, of R&D that. anything advancing, that’s is course haven’t VetConnect do expanding whether to products’ and we want do in digital Not already that are R&D, our going about veterinary investments of have menu, services, software significant we and our the to that

that So it’s it’s continual the we’re no launch, which the advancement growth. big in course product recurring of capability giving but revenue supports a customers,

time new know is something doing you automobiles almost customers, model. VetLab the instruments Station. be Tesla cloud. They’re Catalyst you is items we this years new talked new menu better now advancements on know, and for through doing and over been seven our four some could quite by them in the continually that’s got what scenes we’ve in the Anyone that’s for software. the and our time ProCyte software offering continually Network, who’s are in we powered advancement capability – Neural the it I IDEXX Our incremental advancing advancing on on about hematology what and with cloud-based consider that behind have with as, parameters seven the of the

steady a very individual they have sustainability the of things our good don’t of And but on impact software growth. necessarily the there’s So meaningful a diagnostic have of pipeline a lot play, we very a that get diet across and categories.

combined R&D our amazingly input ability knowledge our our business access Our of and the – with to productive, offering. and customer very group into it’s requirements and is our leverage third-party and technology

in investment of industry. this continued cash I’ve part R&D a as close see in the diagnostics to sole being IDEXX as part, the in million we it’s $XXX a and with So core innovator said, software of XXXX,

Operator

Thank you.

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

open. is Your line

Mark Massaro

on and nice quarter. congrats Thanks, guys. a Hey,

Jonathan Ayers

you. Thank

Mark Massaro

is between OUS. the mix on first My U.S. question and

think your so you your U.S. expectations on base of us growth can growth, historically, given your you higher remarks, When in international business largely OUS. and your just also talked in we XXXX? markets sense trended growth about lower of about QX, than are where has stronger in OUS, are OUS international a those select but a give in what markets So soft based prepared trends for

Brian McKeon

reference specifically labs. Yeah, so, international Mark, a that reference to was

of So all we across exceptional performance. strong markets. growth had was XX% in was growth It really consumable overall The international. our

growth at instrument resulting… the look you and the If placement

Brian McKeon

the year. revenue XX%-plus. with That this the that pleased recurring progress driver of gains. We're was key very

markets and the in we intent, think in focus don’t just fact reasons, do of we that business. from not weather we’ve some of labs, we what the weren’t some highlighting impacts reference as reference key the and in driving related like on was markets to this really a the the but And year we but have had lower specific on highlighted. that this recovery growth largely lab and outcome commercial summer in-clinic to markets, growth for competitive relatively recovery high we a our we by the from QX continue highlight As focused, in to been the some is we mid-single-digit gains saw shifted saw

will to annuity happened track, and get what’s quarters. and last it the of but the on it will four an really working growth that We’re be business, that, take we back reflection expect with is successful a rate

that on front. progress highlighting be hopefully we’ll So

Jonathan Ayers

That’s across of a team do commercial consulting I the executed great veterinary to the want we – well. diagnostic in the really to move take a they’ve our and model organization the our the U.S. more board. we and QX have course, really German they of to opportunity year, at beginning lab, the had lab than shout-out to big just German Germany, but

corn the facility Of noted the building which we’re largest new is lab, the course, where that in expansion. capital Westheim you

putting the performance, and we’re one so I’d the I where that’s money kudos really give So is market to. the think

Mark Massaro

a type a you it price, market; the whether it’s how of market intend other like instance? potential then the what for know for is to to as And premium SDMA there we weeks about guidance. in slide, point-of-care coming size us as new your raised haven’t I ahead, sense your such for think innovations, progesterone. in of And But give Great. can you progesterone think XXXX launching the test you the you

Jonathan Ayers

per small, is obviously the market; list and. really Yeah, a that markets, be it’s a contributor. price, test But U.S. very it’s – in international so to it’s $XX.XX the attractive be of going direct that test very market-specific, little list price will

this that an what that have things we addition that place it’s a technology And think we’re and as this capability gives done the in continue to not urinalysis One Really installed platform; opportunity is, advance both life is it’s to well adding chemistry is do is and our customers one loyalty about of it to very are responsible the individually, our to the call menu life. us position serve to continues it to what to puts advance to and that. And each two in-house to can Catalyst us indication in we in flexible breeders. I requirement be relevant instruments. instrument of investors. Catalysts developed a because base unique hematology a as things for menu capability have the the second,

Mark Massaro

if Just see think a Abaxis you space can, then about U.S. as the outside you becoming competitive in OUS the and are Abaxis? your some strategy Europe acquiring any and result more year? Zoetis consolidation of this changes as do And the seeing meaningful we to of Excellent. I in dynamic changes

Jonathan Ayers

so a our ownership U.S. most can markets, I with It’s even is customers is major loyalty, you it’s high-XXs, regard competitive And would the always our say see market. been competitive the – to outside market. a don’t have VetTest with as have any really a that that market. come to always been the in U.S. is of the been changes in play We see Abaxis. change consequence of competitive the

Operator

Thank you.

go of America will Ryskin Next the to Merrill we Bank of line with Lynch. Michael

Your line is open.

Michael Ryskin

guys. Thanks,

a had wanted there. throw I follow to Just in ups couple quick

selling minus mentioned the You quarter. in one day the first

give modeling Just there throughout the in us and was the the to confirm for just year, XQ no of could of you days’ impact our purposes, XXXX? rest impact

Jonathan Ayers

timing shipments, both QX it was QX, effects the offsetting benefit our holiday, we we had in at enough believe was a didn’t favorable it the kind and adjustment so call to So which of day not think day results. Year's really activity New highlight. our there, weird quarters an Christmas factor we to really as the we XXXX, offset and but not so think so a by Clinic benefit, have of favorable out and the a but I we because impacted are that year-end, was that other also QX year-end material

Michael Ryskin

I one reference that, I questions earlier follow-up just then Okay. the of lab. the asked the international and about on appreciate other

Sounds like out to driving just the wondering called the the you force quarter. relative mid-single-digits sales of had in the single-digit Lab. low you Reference I’m the improvement from Point-of-Care focus versus

is think in the gradual through step As range? quickly get to little this Or can should this high-single-digit move think that something more back Is the more take to to XQ? higher another international that is reasonable we XXXX, to a how up?

Jonathan Ayers

near-term, it the take in We, will time.

So…

Brian McKeon

we’ll think of gradual over I the improvement XXXX. see course the

that a had I moved Consultant Veterinary every when I Reference Lab. to organization territory They happens moved model of think and fourth representing quarter account one of the good first to we in get time model. that German they bit mean, and which are market where think a XXXX, we shows in-house our to coming new I what very the little and quarter Diagnostic and across-the-board learning you really have little back a and with is different. manager

Some of them already were there.

Some them changes are model. to that making of

are expect not an of XXXX. that’s business, but Reference or lot really I have there’s over Some relevant, so models markets of to markets think of a where we them different we Lab of where a Distributor that’s indication course don’t what see the internationally,

Operator

line Westenberg And final Guggenheim our you. of from Thank come Securities. question David will the with

is open. line Your

David Westenberg

squeezing for Thanks Hi. me in.

revenue the number but estimates, bit away the little the my Instrument Instrument actual a in trend So least number, line. number below, was blew placement at

So is there international rental that a increase strong an style of placements? in Or is function contracts?

Brian McKeon

last It a that of too growth did that factor but on with have programs moderating XXXX, year, compared a and internationally, programs results great out, very the and David. a the is the impacts, QX as we a revenue an really rental like They’re in strong had question, high-return, XXX can on exceptional affect It’s program and of recognition. the all and can great some very we drive, programs pointed performance to you X%, can was of mix an strong was have internationally effect Instrument bit note up Instrument other growth.

drivers. So those were the primary

Jonathan Ayers

there QX call of really the out, They expansion, were the had did strong very tough out and compare, the year-over-year, had on The expansion, a so were QX they rolling quarter first to can Yeah, strong rocking I first they program quarter recent results, most laid Well and compare and where of a to up also want the as a in great your revenue, in but expansion. impacts. David. was mix and job. XXXX. U.S. the XXXX be point a context Brian the

incremental to Instrument placement As are pleased generally we’re the placement, very, fair each a placements placements point, going U.S. QX. small generates revenue practices, globally than think very little said – in that, I but international a recurring with less generate I are having bit and that’s our so think

David Westenberg

of just the maybe up build revenue one side. Just kind follow on

growth. You utilization kind of Can parse out consumption SDMA maybe had is really of organic the SDMA from right what there. us on help XX% consumable kind doing there. you consumable versus help number That’s understand a or and us great contribution of slide kind

Brian McKeon

Yeah, that in consumable X% the growth, of on was of They’re paper I SediVue slide and highlighted organic a SDMA pretty the QX a consumable growth, combination equal. run.

we’re both I think X%. contributing about round I think

Jonathan Ayers

the we topped of really of it. we so who the close SDMA pleased Catalyst run metrics we’re have it. U.S., This to actually And practices when in actually very include with unique adoption who total XX% amazing U.S. XX% We’ve adds have purchased of they’re and million adoption the very with adoption SDMA the are is XX% a in similar. to meaning now results are metrics These SDMA SDMA. the on reference the Catalyst runs last million and It’s to quarter lab. the Catalyst IDEXX and course, the globally, have SDMA adoption. solution, XX% In XX our running

on XX% global SDMA. the smart our measure course, purchased brings has install of which can have including instruments benefits, because our uniquely and Of to ability sorts of all we base about service we that measure

importance providing SDMA, So these the we’ve the on shows launch, education and are in year being metrics, as it progress of are really amazing parameters, the highly to to story. of made -- these something so the going need first adoption on closely, see is a correlated you’re look with and elevated it’s with going and great meaning GFR, says more SDMA, traditional that not field to you

I’m education our in as to with contributes adoption pleased growth. instrument part also marketing we it and revenue continue going XXXX of organic the certainly the plans, our with We’re as consumable to mentioned SDMA but investments rate

Operator

turn to to over I’d closing it that, back any With for comments. like Mr. Ayers

Jonathan Ayers

day and got express constituents year, the way in We really and for our customers and future, Poultry gas I to the market, veterinary call. significant in want our everybody Water IDEXX for think some fantastic as run blood do we’ve a in gratitude delivery I future great OPTI we here And and a enumerated that work in market calling think want the our my progress Livestock, systems. thank the the made in again a I delivers XXXX. I we on other to also had and the know the market, this we’ve employees and the with the market for human and in that secures securing Dairy company world, the through in and employees across in Medical I the

will that, the started with XXXX. Thank we call conclude so on and get And you.

Operator

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

disconnect. now may You

IDEXX Laboratories (IDXX) 1 Feb 192018 Q4 Earnings call transcript