IDXX - Earnings call transcript Q1 2019 | IDEXX Laboratories, Inc.

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Operator

Good morning, and welcome to the IDEXX Laboratories First Quarter 2019 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 first 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

and excellent delivered IDEXX first everyone. high financial quarter. morning, growth the good revenue and you, Thank results in continued

CAG organic we achieved revenue gains XX% driven In revenues. organic recurring growth terms of Diagnostics by XX% highlights, in

projected, well Operating CAG per as from constant-currency as revenue the operating expected, than revenue to margin strengthened timing growth. reduced and Diagnostic currency X%. constant-currency strong revenue and on reported select operating which impacts profit basis was R&D FX from basis. benefited related up gross high growth leverage, improved $X.XX IT expense basis, on gains share, XX% XXX points by delays better a a reflecting margin about U.S. margins drove and on reported As constant EPS operating dollar XX% comparable growth or growth XX% a Strong project spending. gains basis recurring

We also than from in higher stock related projected activity. recognized $X.XX about per share tax benefits to compensation upside

X.X% our In revenues. billion $X,XXX reflected in our range for to year to guidance, billion growth, our $X,XXX of terms annual organic consistent we’re in full revenue maintaining outlook guidance XX% of

constant-currency $X.XX outlook interest and range full and We’re to related over XXXX margin in XX projections, operating This upside to updated EPS increasing XXX to of $X.XX to by per basis year $X.XX share. incorporates points points from expense for an $X.XX improvement, to about from in updated $X.XX guidance to share increase basis updated $X.XX an tax benefit $X.XX effective $X.XX projections. rate per

– a Group. outlook performance and in with our million, were strong factors lab operating support strong and while continuing goals. Companion currency $XXX EPS continued operating gains advancing organically to system a with growth customer gains Veterinary increased software with organic levels. by in recurring Global across by rates by up of placement recurring review imaging CAG additional begin organically and digit services strong customer-facing my performance year organically Diagnostics overall expansion comparison revenues year strong long-term resources Veterinary by and QX applications deliver software the XX% digital were software XX% let’s skills supported improvement grew practice constrained supporting review in platforms updated continued revenue prior overall base high-single later X% outlook financial diagnostic growth software investments management revenue constant our CAG margin revenues at revenue. imaging and very capacity, our our services reference installed were segment of to this Our QX, We’ll QX comments, very PIMs results in XXXX X% of comparable services our margin a across our and in and revenues. results capability aligned with corporate Animal reflecting systems region.

levels subscription imaging to business digital system revenue Web expending in PACS linked continued placements base. and radiography to Our high recurring achieve of growth high our digital installed

and solid Dairy grew first continued Livestock, trend assay million, with to CAG revenues rapid net was continuing markets. U.S. organically, gains in $XX in quarter and volume in up Strong the business recurring the $XX and Poultry were X% sales. poultry the X% growth by the market disease products million Water revenue of revenues and up were the net dairy in lab X% in solid continued by pressure double-digit our on to diagnostic X% headwind. approximate Diagnostic eradication screening, price swine in demand related range. on reference revenues, impacts X% in day Diagnostic program Our in declines health growth growth revenue international reflecting in African continued U.S. herd region, By gains QX gains million, primarily equivalent reflected gains XX% European organically U.S. driven epidemic Gains double-digit organically. revenues, $XXX to driven quarter and mid-single-digit revenues consumables recurring to and fever business were an swine sales in testing moderate X% U.S. offset in impacts testing pregnancy growth in from CAG China. continued

reporting on and practices, quarter, with practice information from five approximately different in we practice our weighting of X,XXX framework trends, revamped expanded terms also management set Animalytix. refined systems. We’ve In our based region representing in broader market data prepared U.S. our from our as this collaboration significantly

revenues visits practice and our visits growth on We’re reporting basis formation, Companion XXXX recurring advanced visit efforts added growth our reflect In we saw which now in same-store and benefits our on and base revenue as business, do line some providing of mid-single as revenue made same-store we overall quarterly a benefits Diagnostic growth benefit gains growth at an of million, year-on-year types. digit International this CAG to in QX, growth on not driven additional as lab growth XX% we to in in for we X% organic approximately expanding per in data continued plus modest XX% practice greater QX. International growth practice include are well per practice strong metrics of approximately clinical for total in in for growth ahead data data annually. commercial our consumable and shows snapshot catalyst X.X% catalyst added earnings Animal incremental X% gained clinical We growing UK a visits augmenting XXXX clinical to practice was XX% range, consumable in in from the website sustaining Please the in refinements organic to Brexit visits international total global in these international same-store were install install base on accelerating year-on-year that revenue XXXX growth we while methodologies markets. from targeted XX% for information reference deadline, of our quarterly QX revenues, Veterinary describes momentum outside organically. continued X.X%, estimate $XXX efforts. U.S. from as advance growth QX amount including in measurement growth on QX all ordering the historical insight which of with The the the improvement at analysis we’ve results of up were additional visit X%. that International from strong our towards note saw we’ve by

hematology higher new competitive segment our of of up at and accounts. QX. of instrument in instruments, X% In instrument terms rate catalyst We placements economic a performance, quality of XXX increase were measure with QX solid progress supported North driving by were which EVI, of in strong in at placements a achieved placements. The placements our America, and results new tax value competitive multiyear drove premium continued in accounts

X,XXX globally, in accounts our in placed base. placed Overall, X% placements in QX, very a strong year-on-year emerging upgrades also catalysts and results, premium XX% Internationally, placed QX we new levels IDEXX customer XXX at overall in We in compared catalysts X,XXX accounts. results And analyzers XXX to at compared growth X,XXX markets. second supporting utilization international X% North increase. prior XXXX, we to competitive at catalyst catalyst in year levels. year were supported led larger to America, QX XX markets, North placement placements XXX continued in placements of global retention VetTest XX% accounts, XX% up record X% placement high and high year-on-year new of compared catalyst XX% up and down results XX%. which install down prior by internationally. growth in included America, by catalyst placements in in Strong By reflected region, total competitive is represented America North and

catalyst noted, we strong hematology in QX commercial placement high premium As our QX, by XXX competitive placements which down focus attach in instruments supported as X%. placement very high levels EVI, premium globally, versus as prior opportunities. and XXX well rate impacted QX, SediVue XX% in exceptional hematology new instruments performance up were with a in chemistry QX our saw of capturing SediVue placements on

revenue from with run in gains care expansion Instrument continue base, double-digit our live expansion $XX revenue supported Diagnostic momentum revenues capability in solid grew double-digit X% a Diagnostic SNAP strong consumable mix million, lab quarter. QX markets. drive from of Reference continued recurring preventative be in included in approximately the and premium instrument X% revenues very tough compare price SediVue gains in strong which QX. our consumer High instruments. to X,XXX benefits combined consumable major of which addition Results gains lab and to with strong of organically enhanced services to CAG gains, with plus U.S. reflected of volume-driven U.S. growth continued quarter. estimates expanding strong momentum modalities. quarter. international organically SediVue million placements test in instrument consulting continue volume-driven organic and results, in Pro gains drove $XXX we reflected placements organically the In were an paper contributed decrease across million programs. placement year-on-year and to XX% a grew innovation the revenues XXXX, of first XX% supported revenues, higher in commercial CAG Benefits remains XX% $XXX the in by of revenue by

lab first plus Rapid was gains generation mid-single by $XX QX of supported products. reflecting International assay gains digit assay were U.S. range international As X% and in organically Rapid grew in markets. XXx in revenues million across noted, Europe. and in volume-driven growth the by supported primarily solid gains reference growth solid

Water up reported CAG and moderate mix up Gross gross Turning million, gross basis, benefits currency as on reported, Diagnostic LPD points profit expense in constant-currency price from margin across XX% QX Water basis, X% and as a supported $XXX and high to reference up on solid segments. business, improvement XX% gains $XXX basis, or and increased by basis. well Gross gains to gains continued margins leverage our or million CAG, constant-currency XX% a margins LPD growth the lab productivity margin was profit our and constant-currency volume constant as profit in basis P&L. points solid was a by basis a in net gains, businesses. as XXX on on U.S. consumable operating XXX leverage. Operating our reflecting XX.X%, QX, were Operating supported

mitigated were in QX. CAG, basis G&A and are were by and Operating and on positive by leverage. a Operating in were hedge increase a in points and X% million of modest R&D margin exchange phasing or from of resulting basis. comparable constant-currency up reflected in X% benefits certain QX sales as in basis, spending driven was growth gains, per Foreign QX XXX gross which expenses on operating later increases constant-currency cost, in growth profit reported constant-currency expense share, spending projects. XX% EPS and $X.XX increases with marketing IT-related including an XX% overall $X.X

profit impacts by exchange, operating by share. million XXXX per XXXX in and of QX and decreased Foreign hedge EPS $X $X.XX net

projects. benefits million including related activity, compensation rate $X X.X% which reflecting than per Our to effective share-based to quarterly projected. major cash or Free per share our higher seasonality QX, tax minus increased approximately share to related normal spending capital of $X.XX rate was tax QX, for XX.X% was and flow in $X.XX was

$XXX We driven million full continue XX% flow of year for capital of income million in spending, capital quarter. Core cash approximately notes XX% tenure of ended $XXX issued German free debt, to to impact, million billion to in We allocated $XX the capital a approximately combined in includes XX% our repurchases XXXX net new to in of of outlook free by for and our Westbrook, We $XX with headquarter shares for and including in expansion spending QX. incremental maintain cash Lab $XXX million related Maine flow which million of relocation. $X,XXX QX XXX,XXX the

$XXX remains $XXX credit liquidity with million million under capacity strong in Our facility. in a and revolving our cash

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

We’re in leverage X.X%, X% stock at to average for EBITDA. maintaining reduction assumes our repurchases full outlook outstanding of net XXXX year X.X from which times shares

We’re now favorable interest expense, net annual outlook. expense full million rate incorporating projecting more year $XX interest interest of a

our our while full year $X.XX per range reinforcing by raising our to XXXX share. guidance, outlook, Turning we’re EPS revenue

XX% consistent CAG expectations organic revenues. to $X,XXX revenue for reported overall X.X% recurring growth to year in growth and organic full Our guidance remains XX% to XX% million, diagnostic $X,XXX million reflecting

growth a press X.X% projected reflects the Outlook headwind consistent revenue at in revenue reported release. full rates FX assumed year Our our

basis the XXXX year, EPS share stock refined for X% full growth net interest to a This currency range. improvement XX% year points currency to $X.XX in our for at exchange XXXX $X.X year EPS decrease approximately effective tax in year guidance, to gains. our reported outlook share our – a gains range. hedge share-based approximately per margin operating increase in to or raising to our improvement combined per $XX.X of from incorporates $X.XX million and projected guidance expense EPS approximately an basis per million XX% XX XX% by of We’re foreign updated constant point in also for estimate $X.XX full in for comparable to our now full rate estimated including We’ve to at updated basis. outlook constant and our on year compensation our $X.XX year, rate XXX X% exercise compensation. $XX benefit resulting EPS in which X% outlook or million full XX.X%, – rate tax benefits, tax approximately net estimate We’ve will full $X.XX $X.XX of We projected that to EPS XX

quarter, gains. XX% revenue second revenue CAG we X.X% recurring X% the and X% by gains reported revenue supported to For of organic to XX% to expect diagnostic XX.X% growth of consistent

basis higher investments incremental QX areas staff levels VetLab outlook points expect prior basis. We margins to to commercial operating currency the capacity. plan staffing levels for XX increases investments, than be impacts U.S. This of higher constant a incorporates approximately including of international on select year our and re-phasing in

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

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

Jon Ayers

Thank you, Brian.

We expanding higher we a color EPS highly in quarter together, both constant gains supported and international of year-over-year across diagnostic our total in the QX. start growth Now at rate the XX% by than and regions. Instrument XXXX and with by considering the revenue little full solid with we’re better to organic a This revenues Europe margin related currency comparable CAG gains growth in expected durable placements strength and XX% U.S., quality commentary. first XX% our had Globally, of the delivered IDEXX’s strong end America in comparisons. primarily in growth gains. of declines XX% globally Latin quantity offset a tough Asia annuity in revenues with U.S. Pacific, year recurring solid organic strong of contributed

and quarter see latest field QX, rates we expansion. In the was change high at the any competitive organization second in environment. expand to continues territory base the U.S. install of premium Our do in not our

new and expires X% IDEXX’s organization up to up of And our as saw in technology to so placements momentum trade competitive offering. customers catalysts advanced we strong in accounts field

X,XXX, placements year-over-year. of almost exceptional We U.S. XX% the by driven up an quarter also SNAP with Pro had

methodically We into model. and transforming assay blade razor rapid base customer are business a our

from is supported our QX really Europe new Despite prior the in SNAP XDx great and Pro gave index year SediVue we’re active a As a comparisons and also and did strong charge economic Pro European instrument when adopt placements – value growth SNAP in they catalyst customers SNAP in high of capture With given job. completion and the higher which The Pro value, first value in loyalty They sales solid workflow to expansions the are XX% instrument are in mobile placement of over their workflow. placements quarter quarter. brings SNAP to And now the QX, occupancy. U.S. coming and connective impressive significant expansions. practice. rapid SNAP catalysts way growth veterinary competitive to assay solid their XX% field on seeing and well saw tough we’re placements, Pro customers. at growth

in And footing when are time as Animal through pet as same be major The the the in based owner expansion the U.S. productivity field undertook first we trends result, as in field on Europe on their is in reps XXXX similar This the is However, a market a we and will and Companion year. see. and advances. U.S. macro building solid XX% experience dynamic XXXX. saw very of sales in general we is territory

We System. are total both growth a methodology to upgrade variety the coming IDEXX quarter number of in an a improved much expanded X,XXX snapshot presenting of practice expansion and as from market excited shown and of of and on in to an be the reporting second third-party our our this Practice with Management earnings page

weighted the of type and and support for terms to Additionally, grateful the reflect we’re and partnership. in of with market Animalytix size geography practice their

quarterly with by basis, important publishing data a market an no to of earnings. industry the industry otherwise as our of limited metrics kind. these to this part back giving on is We’re This

to from we’re total seeing market data, we to the data bit course, practices X.X% From we new growth, IDEXX clinical X%. infrastructure investors the with helps add opened. practices Pet about formation, the veterinary practice and to practices estimate be visit making understand U.S. also little to which QX very impact need growth visit being of healthy market in in is and new a investments care this existing technology in better. existing Of net get a

recurring QX, of growth net in Companion headwind. about the U.S. in diagnostics the Group equivalent revenue Our was XX% of X% day

our We growth are visit for and have several been than volume diagnostic growing faster, reasons. patient

to same we’re our clinical volume care. on sales and increases Across you visit innovations that will. X% To IDEXX new – diagnostics share we about unique strong in growth of and utilizing of focus in-house, volume adds estimate our this, add utilization our primary diagnostic the gain, you or if clinical growth, driving their X% growth. it ongoing the incremental partner, lab number as by same-store another beyond this in seeing be reference in modalities, visit customer both, driven First, call practices are pet growth whether diagnostic this

fact, IDEXX at reference we least topped record at QX, sample labs practices XX,XXX in and metric In this one the our QX. for sending

X% diagnostic net We Companion to X% recurring in realization also price revenue. to continue realize Animal

Care of visit. To-date, X% with we low XDx uncovering reference growth revenue program their care of IDEXX great Together, over we the growth QX, with by aligned the disease – IDEXX enrolled by creating and the part as quarter. in new justified So CBC, a panel, PCC our basis. volume SDMA IDEXX’s PCC. IDEXX practices in being Dx innovations realization added potential end how in in PCC XX% market Preventative by fecal include practice long-term which X,XXX PCC sources through a sales diagnostics, health the care recurring at IDEXX trailing Same-store are pet minimum teens the a Preventative in in with they or Challenge what since XXX chemistry, the inception the an IDEXX’s and make owner of of a of fecal from variety enrolled part well new is call offering its into U.S. preventative have profiles, nearly pet XX-month annual with lab under driven gets practices price X% growing the level and adoption growth of practices a us all at up offering. incorporated to a These U.S. high antigen of investment new to X% the example wellness pet’s on our XX%. to just at are X,XXX is all diagnostics X% underlying

market of staff. practice value. capabilities parks partners their the puddles. is believe mainstream our to generally medicine IDEXX’s this care as the PCC even the the seven IDEXX, drinking dogs any blood more it can’t care. physical serving And unique diagnostics that we revenue Running alike. with of just panel year think an only lot sniffing and pet XX% got addressable there’s important where exam offering of work dog XXXX The years. in of the physical PCC the a Just is is panels, a a IDEXX’s into as with way. care practice, speak part When with pets, the themselves. we’ve like preventative is And a proprietary annual total every veterinary the pet getting is yet, by growth pet moving practice different veterinary veterinary a the preventative difference and these we’re for running the a finding a driven blood IDEXX Clearly, human of accelerates owners overall on is and situation It’s expanded benefit without around of around for from work addition of only

equate XX%. only to innovations In to not XX% value with compete, our do nice value evidence and competitors loyalty. of the sales see and see it’s now adoption QX use We from through SediVue same-store where in at to stable of the price new catalysts the our consumables levels they’re in an business their rates and progesterone. our price environment VetLab customers nice U.S. catalyst remain growth weapon the menu, including SDMA, of also world-class the retention Customer

New we X.X which both all of of internet – launch a instruments. software strong benefit update newest of in expand our helping availability the things U.S. strategy France included led with software and with and release the that Smart veterinary and transformed of brings Neural Neo, the Animana the in reviews. veterinary the our a in to Flow Network placements is of had systems quarter rapid start, intuitive of Cornerstone And as the clicks this quarter. catalysts a seeing release in We field X.X SediVue new and This the Cornerstone, progesterone, Product and result. to to more off portfolio, algorithm, the take great strong released reduces up poodles. a internationally. excitement more rave launches completed We new we’re user new is experience

the cloud mobile who this practice In prospective we as end addition, full Cornerstone the of formally value also version month access. availability want of as the announced but a cloud, of deep go-to, Cornerstone, functionality benefits management customers for the of our unique and such the software, high

plans is of advancing Web We’re wellness software and VetConnectPLUS, nicely, well to to PACS Plans ability strong in IDEXX stack. which our the with and in are Petly growth both comprehensive make parties. reference functionality its advancement as enterprise IDEXX for those offerings from Total other subscriptions offering work steady software-as-a-service our a image third a It IDEXX corporate imaging utilization. digital seen technology with IDEXX support library seeing including adoption have new course, indeed year-over-year, from software XX% to as our both PACS, systems customers cloud-based impressive IDEXX and Web continues

diagnostics growth our and supporting serving further a through advanced software We’re market and technologies. market growth

– our expansion, Of footprint have to facing Given for or have the corporate strategies. and account no a planned American small support the accounts. XXXX, expansion in expansion in further our and field lab the corporate other investments plans diagnostics Europe, no works in plans internationally further software our and the capacity orchids, in we completing market, investments based in serve augmented occupancy in reference customer we than resources, success, U.S. the including of in North

we’re such innovation CRM In which markets these time track our see cash XXXX such advancing XXX. on from further we investments very agenda, and outlook summary, in for investments, of field EVI million comes in sales advance in driving advancing to remainder and $XXX and the focusing strategy of as solid With remain R&D. our on and programs to our territory XXXX as trends about our IDEXX our globally productivity, on

XX% I’ll our the XXXX Kevin, augmented with – call XX% delivering to the of comparable gains EPS open for our While outlook And questions. on to and an constant year. that, goals currency revenue

Operator

Thank you. [Operator the Ryan of go Daniels Instructions] of Please from line First ahead. Blair. question is William

Ryan Daniels

all for mentioned clearly detail. the I maybe good Brian, you. you than anticipated. spending stronger margins for one in morning. Yes, Operating that was some there and R&D comments, questions think IT your Thanks taking And and the delayed. were

of the in So bit that? dive related can rest items think economy the Was about for hiring, into it little you given regarding more a the in spending? or basis. personnel to rationale a to we behind just noise anything then two, need year the investment the cadence And on those number quarterly

Brian McKeon

Thanks, Ryan.

able the a spends. On R&D but just plans, the project of some when IT project spending, change wasn’t were It execute it we to was just a timing. normal in executional and

highlighted year, on the about Jon which still are XX% a spending cash as increase. We’re for this R&D track goals

also relatively QX in more that through through so we’ll face will the front. IT continue in And to And execute QX.

would that favorability outlook lab today, have some of some U.S., highlight highlighted margin through margin there benefited LPD that our incremental in benefited particularly growth consumable line. a year. that online from some was balance day those capacity was the versus We I highlighted got and we we compares estimates. we’ve quarter. very work more a factors. second in some pull benefits investments the QX, had in in our we’ll some couple we as on growth that’s had to So the timing We favorable years, mix be That of and our into business And the coming it in some forward. the added just international, adding had in gross some going strong Brexit the factored we’ve of points quarter will

the we gains good started. are moderate I factors through as work So margin year those we about clearly the the We year full how operating raised year. will but the of feeling some goal, think

Ryan Daniels

to regards to XX% follow-up international know then year. you very within Can what that the helpful about seen their more force. States? regards my Jon, said to little And ramp you’ve you you relative are Okay, United first a will in talk I color. in be for bit sales the

I’m So and XXX of matures? moving sure little make gauge to anticipate hard other and But versus levels. to that the regards factors a ramp both confounding historical like of is and there’s expands a maybe to it initiatives you curve in what productivity nice there’s the salesforce that some would IDEXX

Jon Ayers

Yes.

I think question. a that’s good

we guide, progress them, for – so would this undertook in we things was that a very last markets. of expansion will it we in of expansions would a of a sales of see international year. U.S. think build as like months, months to country more to the organizations we to so around use expansion was and they have your. in I strategy. and with our our phenomenal got very the the demonstrated four already. major selected service But just of a over – it as And order undertook But course we I the going instruments world. productivity six strong expansion, it’s think strong, had progesterone the yes, go that of regular that I product and all to kind – Obviously, part will Obviously XXXX its that gets software say more very over that placements was this see the line we’ve the internationally things how expansion. smart add the over will And better we with in we’ve I with there updates the as course, would we

Ryan Daniels

color. the for Thanks Okay.

Operator

Erin Next Suisse. Wright, question of line ahead. is Credit go from Please the

Erin Wright

thanks. Great,

can challenge You remarks us that financials, on embedded anything program, when and if more for care will around your give there’s contribute Or XXXX? the you to prepared a sense highlighted again in preventative if front? the care I other the guidance there’s metrics, quarterly your preventative remarks a gave any Thanks. of prepared on efforts think we progress to on just can basis in success track you the your and that some measure in

Jon Ayers

headwind it. that’s We Thank is recurring the to That the day question. growth in in U.S. you. XX% – a a which revenue, reported contributing of had great

as mean care the that bringing getting a opinion for done care preventive our And is leaders. local to key is stronger big that data we – is of expansions. the the preventative field that’s we’ve with deal. put the that we it stronger and the these – evidence, So and organization, the medical all a is together one of are They practice. reasons I share And the industries this why it and the evidence

couple So practice. by going thinking. of to the threatened practices who hundred being moving the a this new They’re retail out we’re of every adding way all of quarter are

anecdote, nice with to and grow diagnostics, to And is it’s impactful a more in that issues Then higher, it’s And so but more progression turned a their only late higher realizing not satisfying they’re so the a it’s a productive, financially higher, has to then early that’s practice. very that whole margins. it’s satisfying retail, lot address the with more pet. a it deal them way

the we’re insubstantial yet, success a market. see X,XXX so momentum approaching demonstration of of this beginning of the of practices. not And significant think That I is of course, early And think the to support program. That’s tools of They’ve days. the so. every really got be best as do time. adopting practice we’re practice and our field this really a to organization over should only We XX%

Erin Wright

competitors the as drive terms directionally overseas trends. as the if from that a sales can Are some same-store here curious seeing points And awareness in we some the protocols about then be gave on presence also of underlying kind international if market. those thinking advanced great. internationally? in so, the CAG more you I’m how help underlying practice market Thanks. volume broadly Okay, well of Europe you trends should health great and broader keep data track U.S. And of of in demand you of metrics

Jon Ayers

you. Yes, thank

dog, to U.S. pleased industry able Animalytix, to doesn’t It’s In a with different be that. partnership this And present in in reasons management call in sophisticated all data a we pretty there the It’s because, XXX there’s more it’s we standardization we much not for metrics. are found amazing. just ways We’re and it the see like almost no dog. really have human practice as to healthcare. – systems, know,

yet. learning capability. speaking, the level comparison the here. With they’re of have we aren’t that to into there same fraction. coming we same to But And AI machine pets really is just, people pets. their still generally our So of a that adoption is We play international, don’t and regard love the diagnostics

product routinely intention around profession somewhere that revenues more the brings U.S. we diagnostics the in and but we recurring grow really Diagnostics the of all the not intention, we’re we’re why to to accelerate of advanced a will attention internationally that clearly the really which industry going a the to course, is done these seeing the cultures the phenomenon so we certainly help growth And market it’s by cuts in this double-digit value U.S. have the And any amount veterinary bring practice great And that and geographies. the seeing of medicine. And bringing growth, outside expansions to of adoption that it’s line the of CAG market with we’ve think that’s the drive the world. in we’re the that – of really it’s across diagnostics can support

Operator

the question Bank Ryskin go [Operator Please of America. line ahead. Instructions] from Michael Next by of

Michael Ryskin

Hey for to question. the some taking follow-up you just few A guys, quick ones, earlier. the of things thanks highlighted on

mentioned growth. tied think UK the with international you in up stocking to I Brexit, said consumables X% You the some

quarter. XX I’m about So consumables to the that’s thinking bps to XX total in

in make or belief expectation or your the So that going how of XQ tell fade and sort that’s sort us correct of outlook. that you reverse that rest that’s just what’s that into your of, for could factors throughout the years, if sure to

Jon Ayers

was is The number correct. X% That international…

Michael Ryskin

that’s consumable, exactly International correct.

Jon Ayers

the those we the I markets how full And U.S. that’s we’ll have on are think see, overall consumables estimates take… effect. – that’s – relatively. insight weighted we’re And are customers, we international an but many that have into don’t you reasonable and towards the

Michael Ryskin

perhaps it evolve. will Correct,

Jon Ayers

were there point. this have plays and into we anticipate at full how level in we’d see that pullback anticipating don’t But We Exactly. – was we’ll concern QX QX, in some it’s but out. the that visibility a obviously, with high of uncertainty

Michael Ryskin

quick And another one, solid you thanks. organically, revenues where a down then across but the Okay, disconnect, think think mentioned pretty on of the the board. were X% placements instrument you sort I I saw revenues,

think in apples-to-apples of you on dynamic, of but the how’s on in comp was could the equipment played and that tough pricing mix was the you year-over-year, I it positive a of onset I what’s an how terms overall, into I then you say some mentioned? side of things? and want wondering but basis, sort mentioned and CAG for instruments to You on – going capital focus

Jon Ayers

similar that have posted the quarter, and year competitive had basis the can different programs set say dynamics. But that for, QX quality cash We we of placement – on of view, similar look on a would out on of kind saw in year. instrument tough compares we a numbers in quarterly it’s was had organization focusing at in there. of I the couple exceptional we placements really our was think Yes. last with had put on that trend support metrics new the year you front. we last which We had very and big QX did the of in we line – amount I we placement opportunities, of an the the strong

that one factor. So was

second going crit quarter that we’ll in very international the markets vet including see as results had year. one well upgrade strong we as test China Another last into

basis, helping on placements EBI for against but of towards front. us focus revenue absolute we’re our and shifting up just the so that’s competitive And tough an lot compares, net-net, the on we’re a

just very XX% pointed we quality So, we the got Catalyst reinforce, the about and a out increase installed our we’ve in base that of globally. to good growth year-on-year, feel

year. our great and very the big feeling consumable reinforcing outlook good that driver we we’re where the have in confident about that’s and of there gains momentum So, and that’s we’re the for

Brian McKeon

want asking really, the includes also we placement, economic highlighting the the the on color our and economic question of Mike that that. And but includes which business that with I’m a the placement. pricing do glad that instrument value of value to instrument We and associated the the commentary, annuity, just of Yes. revenues, I run course, you’re estimate of instrument of the

instrument And don’t so revenues. it we based on run

a the it be about placements, would to wrong and was revenues the it positive really way and to it little business. that was quarter. And about creating bit the So really, solid value up different the one mixed each growth than those has very that with it in of a the think word, value was put value. in It’s

Michael Ryskin

back get guys. queue. in Thanks helpful. Very I’ll

Operator

Our next Jon of is Stifel. from with question the line Block ahead. go Please

Jon Block

since Brian, sort margins, gross other of were up with some believe the start strong seen XXX that bps. year-over-year margin of level, at real I’ll the businesses. But of first haven’t expansion I of from half they that don’t expansion XXXX. morning. Good gross Thanks. I was

out to and LPD it You in up called bps around gross XXX margins bps Water were bid, year-over-year. but XXX

and So, if you sustainable to step can what new that largely going that talk to drove function forward? divisions in is those level the

Brian McKeon

is, are We year screening, that a I of highlight we’re relatively health are in growth some some gross anticipate well. of higher and that revenues yes. it higher in continued a the very forward different benefiting margin think margin that I us don’t We same compare. – as some moving businesses. would good did which that factors herd LPD. strong in we QX performance should We had have level that across business. last was as is that And costs

a forward XX for be as we I year we dynamics be we think, in of moderation expected that points And the and bulk including the some of think have improvement The be Jon, by next margin move we’ve well. there as about but our and will to But performance. basis points to some quarter that we be XXX we we the advanced captured of overall talked to basis the mixed we margins, the we changing we’ve just as gross some of as in in full-year outlook. that investments delivering driver continues year-over-year I moderation business. to in key a we’re we think gross build a it’s hope that margin And us. business the – anticipate we’re this to So, obviously very a that. our I are think had sustain healthy we that but confident I growth, we – on expecting can performance – water some dynamic, good

Jon Ayers

growth the lab, with it’s call gross herd. want was you one really performance with a has that the U.S. very It’s – more than led – very I is pleased the really the really strategy. Jon, thing very, U.S., in lab Just our higher I out, in global And I that to that we’re reference double-digit know pleased successful margin by XX% being part our the very been of the very reference well organically. as

growth margin We’re seeing there. gross nice

service reinvesting that level we’re an as really investment expanded continue an geographies year. course, out all capacity across of of Of U.S. balance called for some in exceptional and provide incremental that to the to the we’ve in

Jon Block

on set down global penetrated take. a figures pivot dictate helpful. very here, clearly didn’t it, clinic me. in XX% one mentioned, you around be surprise basis to year-over-year as go the where And urine you I find to the surprising. instrument And future boxes I my or the second a might XX% just was U.S. the a annuity, believe of give sediment in but Got to these the

chemistry, into to launch. put and closer So Thanks respectively. XX% do might Jon, perspective you guys. view in be of hematology urine the and SediVue sediment, rate years U.S. which penetration know, How XX%, of a it couple the peak and in-clinic of you

Jon Ayers

Yes, thank you.

that, of product to that future. America. see has to-date the been in a case and And American be North by mostly the in the area all, it’s continue been SediVue driven near First North could we

– economic it organization, challenging strong lot than even American – adds more some have our in Those of catalysts, okay. are U.S. they Those had in a competitive particularly, quarter lot very value. North are just SediVue. ways Our organization, that a

be front to about, chemistry have And remaining XX,XXX relation SediVue that so compare penetration of opportunity analyzers, when and in in hematology. talked probably what over the SediVue us could we we’ve we

past. out numbers I those think the conversation in laid in investors we’ve with

which remain new there’s Neural know no menu to across keeps base, done our just class own And the by a in with our customers really And change so software in but And really – we’re regard any really don’t just a is continued a went experience. better. see better, yet with X.X, SediVue greater our and SediVue we SediVue entire investments for silent upgrade penetration. overall and we opportunity the that Network not installed SediVue. better gets getting really, that And and ultimate

accomplishments So a about our you’ve placements. to where more I the Also, that catalyst got I Jon, field talked competitive the one worked proud think, regard. tell was you, in know on And of was pretty thing. in it the I it I quarter past.

a in You field course, really great got XX% to SNAP of effort year-over-year I to that also that’s a with mean, takes Pro that’s And impressed placements. growth be out strategy. turning to be accomplish.

Operator

ahead. Next of Genuity. question is Mark from line go Please the Canaccord of Massaro

Mark Massaro

congratulations for additional Hey X,XXX you questions of think guys, dataset. team together I to for ask practices me, and large wanted to thanks your maybe if the putting this could help of came the where really data from.

revised I probably of last you like then XX think, basis and reported XX location X,XXX increase total Is is you to revised geographic And there of out QX looks and that down largely data? nitpicking, function but basis points decrease. called, I think were previously. growth. a something it a referring to of Or like the largely points was changes. visit function additional practice else that I’m quarter this Is you that

Jon Ayers

Yes.

Brian first take Let question, the of first – then part and the answer your me part. can second

Animalytix just segmenting represented with have than more of them straight geography. a weighted five major management our haven’t and to go practices across it’s that terms number been that to we’ve always So practices the is X,XXX that, the which that to of proportionally X,XXX there, them in another, not and systems out one we’ve by third-party. that. in market, of the some only in some really able the these while addition, practice growth ours taken getting We’ve geography are includes, Cornerstone, been which growth, do beyond only We PIMs. for included but adjusted we And weighting. And which information of supportive the practices may a we’ve are expanded are the across greatly practice

figure or what are clinical a non-clinical is comprehensive prescribed service it our which really services diagnostics and would machine of versus that apply and ones they’re the visits, and involved and learning what out the to higher quality able been have visits revamp to such veterinarian. veterinary medications, so algorithms course, these that I grooming, retail a call as visits the So we’ve are maybe the boarding the

So the they more business, – give greater so and these they are visibility. get more important important

So I to… think long-term trends. Brian, want you

Brian McKeon

to consistent and And in time with make just this Jon’s and data even to we’ve went that. Yes. refine accurate the adjusted the and the back point, more to be prior – methodologies

historical So it’s intended but in to the all data, you’ll see some apples. minor be changes

Jon Ayers

clinical at capture looking including look not at we same-store new growth this which we’re visit formation, information, net not we sales do at think I practice in level, year-over-year. practice the this because

a a same-store practice see X.X% sales market. very basis. seeing apart as I approaching sustainable basis, in think X% whole, same-store And had I generalize, about the we as robust visit stepping of to X% quarter we think, I estimated we’re on growth on would that. we a from sales a said, that

Brian McKeon

to and So bit it’s does around was little I quarter nice a bounce healthy to first quarter. nice see first very market think metrics. It the it’s from but I the see quarter-to-quarter,

Mark Massaro

maybe important. and think as then become speak you up you Can going animal for of how some the ago, great. join as be Can more won deals, forward? increasingly more these choose contracts might and some how helpful. three groups, just to your That’s years of opportunities, of front to larger large your renewal. you whether it’s four have the may competitors positions or to, – you some in clinics these you speak positioned And feel value just Okay, you’re of

Jon Ayers

and our Thank high among loyalty you. We think we’re exceptionally very have we well practices. positioned corporate

Our us of a practices couple value for corporate reasons.

which drive great drive that and profitability. First drive we high to cost practice a technologies our and revenue improve reps place sales the sales �� fixed and preventative care Diagnostics underlying them very is better just leverage. drop helped the a preventative technologies such the diagnostic And with of both has nice a same-store through same along has care as help same-store benefit field our in than growth. them growth, all,

practices and It’s practices our And retention. loyal the staff corporate in and hard his likes our engagement had they on corporate one the that that. products Second, the and to current issue staff to appreciate they’re environment. recruit products our very number and –

best And issues so that lead they them. reasons really has impact if staff impact take retention, usually that’s to pretty really high they to out And why the because negative acquire can want technology. one a on loyalty, and that staff to decide the such practice. on practices on keep which products And they pretty engagement, be of which of our has with course the support them of able dramatic the economics to we they have with local a

a you’ve not pleasant experience. and So someone producer you lose got go a to key that’s find

of So in corporate recurring industry our works evolution you growth revenue the of our slow corporate in period can see the a and model even sector. it the larger in the to

That’s individual all in, to corporate regard revenue mentioned in all that’s that recurring loyalty strong remarks Our my growth XX%. those I is prepared quite that in factors and embedded. of XX% and

Mark Massaro

Great. strong And for in if I can you consensus across one last and performed board sneak or less in, with the one of kind more line QX.

moderate I of saw the lab of are OUS, should digits. in kind the up opens? against lab reference first in particular speak And to going tough can this might But the the you based comps demand last eat OUS lab? reference at we’ve On think underlying How half reference the of came from whether when or on not you sort growth year. comp. think segment, And rate of Germany the single on about mid we change

Jon Ayers

All right.

new lab Germany, QX the of which with lab in track in replace on really are existing opening XXXX. We core will

regard half comparison reference think half I comments first your second on with the international lab. correct and for are to a

business reps and that very use highest course, growing very, very – we too. the I us. it’s are of our that’s But that’s all for very, most think growing part got labs placing productive these of is of instruments, because profitable a

there’s time And that together, pull so to it’s experience really – putting off. that it’s some all

the expansion regard we we’ve got impact to expectations instrument lab so of in hope relation to reference with placements. on achieve to what moderated And the

Operator

from the of Please line Raymond Cooper James. is Andrew question of go ahead. Next

Andrew Cooper

for thanks questions. guys, the Hey

the change then in the of a margin one of whole these the I me. think not the to couple Jon that, guide. really in XQ And a the saw in when about, the dynamics rest of lot was queue. in Kind that that like to bulk we It we increase we looks point what Just relative think year. for modeled outperformance the is about asking had of there’s the and

could his versus you your sustainable how gross question, So to just one-off and up bit the color a fell more in of step is on provide opposed quarter. some any how in of a of to expectations much sort – the margins a that first as little

Brian McKeon

We did see than anticipated. more we benefit

to And some of it we highlight here. tried

think have investments outlook reinforcing I through. broader didn’t we’re for flowing we’re And the some the theme we’re while four we that on outlook. outlook, year is maintaining we’re our that track, advancing

full in the good So out think we’re it’s in moved in a of aligned and for projecting their I with and were some not number balance upside of have the margin operating right. we it year think goals the QX long-term what to things all are was there improvement. There direction talk that But you’re I we goals year.

Jon Ayers

This ROIC. an this business high very, investible It’s is very an is amazing speaking, – generally with business.

so and are enduring growth continuing for revenue. we recurring in sustained profitable invest to the long-term And

XXXX. our our year and growth year year year investors for beyond So customers five value the our maximizing is timeframe. factored plans, or we our was shared really into the five extend it the over way of to plus a outlook you we And the look what with the course, as and

Andrew Cooper

margin size, of you’ve not think incremental might’ve make layered that can What this in did That’s anyway looked those you step-ups help helpful. profile I like you the were of otherwise? with sort – guess, is you to update. there kind

Jon Ayers

It’s relatively differences. small

advancing highlight guide. haven’t and but into We trying additional some we’re to just investments it’s up, that factored the that – broken that’s we’re

Andrew Cooper

international terms of And along one just and of about, sort the think again, we my would sort higher of asked helpful. That’s growth I think Erin Okay. that, about then level in and there. last be the lines how

on Has – kind you been focus faster. really same-store accounts and talked of of that seen but pace on is the as internationally too same-store of of kind much, about the U.S. in drivers. more new consistent growth terms much Or not there You’ve strong in a not like same-store much or the

more great. think there’s lot U.S. there, maybe would that color it be you opportunity kept So with but any on hasn’t or the up

Jon Ayers

you question. thank that say what is, Well, will and for I

But, see through and realization. do driving don’t are modest we appropriate store we have than placements. nice yet, sick North just dynamic have both on higher get utilization a test and don’t – without pets, customer of new revenue you think I to the some because the America an we I recurring today. simply it focus be care price yet outside growth a We preventative growth really and lot instrument double-digit we new would think

speaking and It’s off. testing. opportunities we’re them talked because about with sales globally, are have ready instrument sick the great platform for organization diagnostic total U.S. be we pet last something an taking outside quarter, So will regard. turn we visits. today modalities the add have markets, relatively point growth overall we’re it an practice And the of that it’s with not preventative as diagnostics that we internationally just but pull convincing obviously I the of placements ahead some them and new is advantage the preventative just And selective where and have small reason proportion very, to a a broadly it, and that the the thing of yet of the no there’s part but care lower animal At us. – sick care opportunity higher couldn’t utilization to visit, which we preventative quite proprietary to started standards, in outside is U.S. very

Jon Ayers

IDEXX Laboratories (IDXX) 1 May 192019 Q1 Earnings call transcript