IDXX - Earnings call transcript Q3 2019 | IDEXX Laboratories, Inc.

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Operator

Good morning. And welcome to the IDEXX Laboratories Third Quarter 2019 Earnings Conference Call.

As a reminder, today’s conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and 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. differ our are the uncertainties, subject cause results that forward-looking will that reminded discussed actual that those statements to to are discussion call during include could today. Listeners from materially risks and

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

certain During Investor Generally this earnings release, call, is Relations financial GAAP. non-GAAP we the measures also Principles most may website. Accounting which to prepared will A with measures found be directly accordance measures in of by GAAP visiting these discussing section financial provided in our or be our reconciliation not of Accepted the comparable

results, organic growth, growth all second XXXX our note, references please unless reviewing growth otherwise to refer comparable growth, to equivalent and to noted. compared quarter period In the in currency constant constant XXXX growth, currency

participation have broad please free participant follow-up additional questions and queue to we take necessary. ask back permits one will that you one allow his so your or questions. To the her Q&A, limit to appreciate We the into as additional with in questions, may we each get feel if time

now would call like over I to McKeon. turn Brian to, the

Brian McKeon

of XXXX. also third you follow full us joining the our overview with our through I outlook and comments. for quarter results will XXXX. call. quarterly updated thanks And year an his on our everyone. Jay, morning, will our Today earnings for Good I will take preliminary provide for

QX. and continued profit gains IDEXX revenue strong in delivered

growth revenues of benefit as million rate over In from of X% reported and terms XX% days. equivalent XX% organically, including of grew highlights, $XXX

day international of benefit, CAG organically, gains nearly growth and U.S. revenues markets. equivalent Diagnostic increased XX% across X% including double-digit rate recurring reflecting

comparable margins. currency constant better currency revenue XX% supported constant on expected $X.XX organic which share per a growth, operating than from basis, in of EPS increased benefiting improvement XXX-basis-point

Excellent financial operating on keeping towards track full year are us results strong performance.

terms increase our our full In updated million at billion are our year midpoint, million $X to we guidance the QX $X,XXX billion, organic for increase of outlook, overall higher guidance This reflects $XXXX an performance. a incorporating revenue of both to strong growth XX%, revenues, to and refining XXXX at range. our XX.X% of year Diagnostic full XX% end to recurring CAG XX.X% previous

our constant our related on guidance charges higher adjusting CEO QX our lower constant third comparable $X.XX share midpoint to comparable performance This from $X.XX is our our per is $X.XX and this to $X.XX share and share prior per strong a for to $X.XX corporate We currency outlook incorporating XXXX midpoint guidance benefits in announced XX% transition. year operating Adjusting projected quarter are EPS basis. for than projections growth or to costs. XX% full recently interest impact, at per net lower

to XX.X%, $X,XXX reflecting to X% by high CAG revenue we In supported are our Diagnostic XXXX recurring revenue outlook, terms billion growth preliminary in $X,XXX revenues. projecting sustained growth billion, organic of of of

Our currency EPS constant $X.XX per XXXX share to is XX% of EPS to XX%. $X.XX share or growth outlook per comparable

tax share approximately $X.XX As outlook for in XXXX activity. share compensation from we $X.XX year-over-year expectations per and EPS incorporates benefits FX will discuss per reduced headwinds, our impacts share-based projected from and

Diagnostic equivalent our performance benefit X% recurring nearly a Group. strong CAG Companion revenue growth momentum including review QX in of quarter days in organically, Global driven were revenues, with Excellent our quarter. by begin by revenue revenues gains Animal third from growth increased results organic XX% reflecting Let’s growth continued XX% in segment. CAG

strong continued consumables rate growth recurring U.S. Labs. Diagnostic including days, organically, CAG benefit revenues nearly of XX% reflecting X% and in region, gains from Reference increased By equivalent

recurring X% gains price X% continuing CAG trend to growth primarily in to U.S. the net remains range. with driven volume diagnostic

maintained also consistent outpace improved of revenue customer market in across trends, the broader high recurring levels quarter. continues We which U.S. retention exceptionally growth to modalities. CAG Diagnostic IDEXX

visits growth In overall practice increasing QX, X.X% was practice total X.X% X.X%, continued visits Companion year-on-year per growing with U.S. Animal practice per in trends growth reflecting Healthcare solid clinical per revenue at and market. the

of high revenue International approximately including in day single-digit consumable recurring revenue benefit. Diagnostic revenue QX, organic approximately CAG equivalent International gains sustained growth and for international at days rates. Reference of growth approximately improved increased X.X% equivalent to organically benefits X.X% from normalized XX% XX% Lab

QX, service revenues and by Lab gains volume-driven acquisition net Robust moderate driven continues in be U.S. strong same-store customers, to the price consistent gains. Globally low at growth grew organically growth by by U.S. augmented customer XX% consulting supported IDEXX sales Reference net and benefits in to mid-teen lab

U.S. the will on of service adding our closed Jay As in we discuss market provider a Wisconsin capabilities. acquisition October to Marshfield based in Laboratories, national

nearly diagnostic instrument XX% including of benefits. and expansion Global U.S. These QX, base. growth utilization reflected driven markets test our X% growth increases increased revenues by day of in in consumable international results organically across strong equivalent and installed

supported increased our in had placements, XX% in high year-on-year base. Index year-on-year XX% in installed quality year-on-year, instrument catalyst We catalyst quarter Value global Economic terms XX% supporting EVI. increase premium or in our an placements, Overall, of instrument growth driven outstanding double-digit which an year-on-year placements by

XXX X,XXX competitive markets. in competitive placements placed and in international the and America Globally in accounts quarter with XXX we new new North and catalysts yet

globally XXX in We up levels. placements with year also line placements, XXX premium SediVue strong prior achieved XX% hematology and

earnings base. include snapshot instrument region, as our category in and by our global Please on premium website, placements premium note tracking well that, of as quarterly we our installed the to shared have Investor Relations available expanded quarterly data

growth SNAP revenues grew products. expansion of plus, first growth assay [ph] X% Rapid and nearly including organically in generation of XX% reflecting benefits, XDx continued specialty, QX, feline equivalent day day

installed globally QX, SNAP supported our an Growth over high XX,XXX. global SNAP placements to engaged continues assay business base additional in retention by of installed Pro in base, customer expansion bringing from in X,XXX benefit our rapid our to Pro

revenue recurring software revenues and QX Overall, very X% placement diagnostic service revenues. comparisons in levels. Veterinary digital imaging VSS prior organically gains in by services increased segment system gains by continued driven were to strong QX, constrained in systems year strong

of revenues Water Livestock supported Livestock and our and revenue, grew X% segment other terms XX% dairy growth quarter, nearly In poultry markets. the continued business U.S. organically, in international business solid by organically. performance across and poultry increased

strong favorable year-on-year in were year a markets, Third which from quarter benefited gains results driven prior comparison. by Asia-Pacific

of The swine negatively fever impact to in swine population continues prolonged the China. outbreak African

testing screening from levels and QX. in relatively quarter. sources, than higher year strong levels levels herd while food alternative However, for were increased expected testing demand offset Health prior diagnostic for down testing poultry diagnostic programs recurring new the swine lower also in volume

QX segments. as increased on reported basis in driven currency a high and operating Operating currency increased by growth. gross Turning leverage XXX to P&L, the Water and basis, revenue and solid points profit expense a gains margins constant solid CAG, operating LPD XX%, on reflected gains basis, across profit on constant our margin

strong price lab supported Gross or basis XX% productivity a benefits XX% constant moderate gains profit as net revenue increases. basis, points growth, XX Gross constant increased currency on currency reported, QX. a consumable mix basis, margins on from by and in increased

and approximately Foreign exchange year-to-date. gross were profit QX hedge in reflected gains, $X $X approximately million are in which

expense driven constant constant Operating basis, currency growth on were currency expanded basis related expenses QX leverage. X% to in of Operating margin resulting increased reported, points and in spending operating commercial CAG increases R&D in as and capability. a increased by XX our costs XX% global

higher per including $X.XX of related share, basis, increased in QX compensation benefits $X projected. than share-based comparable million including EPS or was per of a EPS share was constant benefits XX%. share, activity, On which $X.XX $X.XX per to currency approximately

profit of quarter. EPS in on impacts hedge year-on-year an Foreign exchange immaterial net the impact favorable had and operating

flow quarter the was cash through free third Year-to-date million. $XXX

to a and year income XXXX. flow XX% headquarter free to of related relocation. Westbrook XX% expect spending capital German continue of to expansion $XX million incremental $XXX of our full to $XXX million core consistent million, We of main approximately reflects outlook spending our cash This including for combined lab net for

XXX,XXX towards the in quarter. repurchase the of million Our cash allocation $XX of flow generation the in strong supported shares capital

We have the end X.XX quarter. with of X.XX cash net gross as balance adjusted times EBITDA leverage multiple of sheet maintained of the ratios at of a strong times a and

a multiples million, of similar XXXX shares year which outstanding full stock for now X%, outlook leverage in We our of an net compared maintain average repurchases reduction previous annual to $X.X at approximately of maintain EBITDA. of from net $X.X continue assumes guidance. expense We million project to that we interest improvement

refining third XXXX, as to of $X,XXX for organic this midpoint, outlook we at both of increase guidance revenue our reported are XX.X% full range. revenue factoring XX.X% performance. end P&L growth noted, billion to At updated to year our million reflects XX% growth outlook $X,XXX an guidance of billion, XX%, recurring our diagnostic reported quarter a organic in strong our the reflecting CAG of revenue prior higher and $X terms In to

updated from projections this projected acquisition outlook, by completed FX In U.S. modest refined lab for recently offset our are benefits impacts.

and full-year, the For growth. X% FX now revenue headwind from a we expect

impact projected transition. are $X.XX growth $X.XX $X.XX related per CEO per XX% midpoint charges. approximately incorporating of the These to In terms by XXXX to share of share impacts currency XXXX to to of for we EPS, guidance transition X% $X.XX full including constant in of related lowering our growth comparable results at per year to XX% share QX

of an separation the by is estimated will QX XXX for impact, end the full-year improvement to basis year million updated prior XX currency in or full margin agreement the higher points Costs is outlook basis XXX of impact, excluding points operating XX by $XX.X basis related our and year-on-year points. lower points approximately transition margin profit improvement guidance range. XXXX basis operating improvement Incorporating this operating to consistent to points with charge basis our constant which XX

year-on-year which outlook year growth of effects including advancement higher operating field margin in discuss will the of his additional levels of includes U.S. commercial in an Jay full from our expense operating comments. for resources, expectations QX, Our expansion

$X.XX operating year compared margin in from yield performance operational year guidance. lower Strong share benefit and transition costs interest benefits EPS charge per full previous approximately full excluding projected to impacts

effective guidance guidance X% approximately impact assumes of rate estimates, exercise X% benefit share-based year to guidance. $X.XX compensation also full tax related tax rate in Our compensation, an midpoint netting benefit. updated includes this upside estimate rate about year transition $XX share equates or XX%, of approximately XX% the of CEO from EPS of our million This including tax approximately to of a costs. updated full share-based and compared XXXX to previous tax projected per At approximately of

upsides Operational since call. compensation the $X.XX conference our share of benefit the last tax share-based are to related of strengthening per negative impact by U.S. mitigated dollar

full $X.XX projecting EPS related year the impacts $XX.X and hedge of now net full hedge impact XXXX charges we assumes Our gains in of FX guidance million. are for XXXX, negative to year

growth profit goals. and with revenue strong continued targeting our are we long-term consistent XXXX, at look we As

Our preliminary revenues. to revenue revenue growth high outlook Diagnostic X% in is by sustained expectations billion, XX.X% $X,XXX for reflecting supported billion to recurring organic $X,XXX gains, CAG

reported an XXXX acquisitions. Our growth strengthening year-on-year guidance to revenue X% completed of foreign benefits X.X% reflects offset recent estimated exchange to of XX.X% dollar, expectations from the with headwind, overall U.S. related by the for

of Our including preliminary basis per margin improvement, the points XXXX year-on-year the improvement for charges XXX transition. XXX to EPS expectations points to QX related incorporates currency basis, share CEO basis share XXXX points to on operating lapping related guidance to $X.XX approximately per XX basis of $X.XX of constant a

estimate hedge decrease in our EPS established pre-tax press by per $X.XX approximately by positions, result in basis FX which approximately will reported that XXXX. assumed of and net we margins share, XX gains points we rates in $X of net estimate At will operating release,

our effective in XXXX share future timing assumes million XX% benefits projected price. $X This option share-based compensation share-based $X share XX%. share to Note incorporates outlook price, compensation per assuming of that tax current to is tax approximately our or for projections Our expirations. benefits, rate $X.XX million tax

in effect XXXX. from $X.XX to XXXX, options XXXX projected expire XX-year the lowering level a of compared of in As year to IDEXX the transitioned lives tax contributing to reduced XXXX, option scheduled to has seven in this benefit

expense interest $XX shares are related outstanding assumed X% repurchases, year in we million. XXXX, share leverage at projecting ratios net and reduction consistent next to net of For a

conference providing benefits, outlook EPS XXXX our and a Adjusting an XXXX of share-based for currency in to end update XX% guidance compensation to review comparable constant changes currency to year our tax projected detailed rate. XX%, growth this forward more We in and call. equates look

to financial over our will turn Jay. review. concludes That discussion I the now

Jay Mazelsky

in Livestock Good full attractive and IDEXX’s third strong performance, solid delivers across High keeping key businesses, capability and growth Brian. an our operating results on revenues IDEXX CAG Animal, momentum our lead execution reflected high year on area return quarter morning, profit, growth to is team you, consistently track Diagnostic theme to a and globally. in achievement with by continues Companion on our benefits through enhancing flow us thank growth, to Water us Diagnostic investment. our results. deliver in this Excellent a continued commercial outstanding

U.S. momentum, as from quarter. IDEXX clinical increased benefit our growth we customers, growth in evidenced with the same-store business engagement in visits In X.X% seen solid underdeveloped in diagnostics an the CAG with the market, by

productive, Our equivalent approximately U.S., growth business high in including Diagnostics CAG was revenue delivering U.S. benefit customer remains in sustained and both XX% all commercial organic the modalities rates. from impressive team highly Board, days. excellent across the retention resulting revenue X% gains from Execution recurring

expanding expansion instrument growth double-digit Labs, drive to organic mid-teens customer to and revenues, by by premium in consumable our low Increased engagement organic is base. and sustained, installed same-store helping gains Reference testing led supported

led new quarter, in installed competitive U.S. catalyst year-on-year growth by This supported of growth double-digit Instrument and year-on-year our the placements EVI. base expansion catalyst placements. in in U.S. a U.S. were XX% and excellent XX%

SNAP also electronic the Pro our assay and capture placed differentiated medical diagnostics. with U.S., record QX placements charge over in were X,XXX XX% robust rapid that significant bring complement workflow SNAP in Pro benefits point-of-care year-over-year. up

engaged connected who to SNAP us with Pro and customers are longer. stay highly Importantly, are

in commercial total new since customer XXX launched QX, our care quarter. In excellent bringing least U.S. one at enrolled practices, in continues team nearly our VDCs of progress Our to new make enrollee enrollees our X,XXX, advancing preventive we two-thirds almost the had to initiative. program

clinical the in Day, use for utilization, as relevant work was medically XXXX. we inspire to a included diagnostics Investor work a clinical blood X% proxy blood and of to visits. As customers of When commercial discussed increase wellness only is goal at in consider representative visits key it about

we of year rate been program is approximately enrollment annual include since care now care work increased of average per if blood XXXX preventive preventive increase enrollees take a a in have notable, in diagnostics in specifically is that our wellness is our The testing program the XXXX. and for with over work who practices percentage year, the blood X% post

recurring see compares This to CAG basis increase These to of reinforce contribution this success to annual convincing initiative. points Diagnostics approximately revenue to X% the for annual early growth indicators we XX from XX X% non-enrollees. potential

to growth continues demonstrates strong and that diagnostics profession. veterinary Our grow as the category importance the in a relevance to U.S. in

asking turn them. experts to Our spend time more with customers are in category our partnering

growth Preventive U.S. and expand confidence commercial increasing of combination results Care, our commercial a healthy initiatives and strong IDEXX The product customer the in operating engagement gives key momentum like and pipeline us again to presence once

expansion our We place are be to largely in with X% of the professionals, already QX underway an beginning U.S. based expect we XXXX. by field in which

and patterns factors regional these differences detailed As size past our a planned supported as expansions, including territory analytical thoughtfully field that population modeling by growth. are with number of and specific considers traffic geographic such and

expand and category Reference Lab market the and testing base, important installed diagnostic opportunity, grow across factor as share is our modalities. most by our The ability expand to calculated in-clinic

continues will to The prove more with bears out they the have customers, U.S., this we up XXX an repeating. field-based grow us the it While professionals more to with bring XXXX. spend from in data time before of that at we end estimated the This IDEXX. the expansion XXX said

very XXXX. We affords by into expansion us excited heading the this are opportunity

as recently expansion And importance are The well. completed a in from as basis in on category international global diagnostics of increasing seeing a is the markets. benefits our commercial we result, CAG

gains of by recurring by equivalent our normalized base, international QX catalyst benefit. were days saw increased XX% international again XX% approximately business equivalent approximately revenue including of We which growth consumables organic installed growth XX% CAG and year-over-year. continued in base for supported led organically, X.X expansion business growth Diagnostics These

completed Lab, as IDEXX that high benefiting execution, Reference and character. improvement focus growth, well international in strong year-over-year, on as from Our single-digit showed the expansion, XXX service increasingly multi-modal are commercial commercial programs customer

EVI, double-digit benefiting The the IDEXX year-on-year gaining international accounts growth new placements, our XX% XXX is in and in competitive program placements supporting and instrument excellent with traction, from increase internationally. a customers,

and and a one is excellent our key commercial industry-leading performance. differentiator’s execution, of strong growth innovation, theme, investments to second ongoing addition In our IDEXX expansion the adoption of supporting

growth Our by supported run of antigen continues the XX% for in growing strong in quarter, reference adoption approximately fecal example, by to parasitology, third up from our U.S. reference test. In lab parasitology in markets driven U.S. like XXXX. lab in in of our be high-growth approximately panels included, antigen PCDX proprietary the QX XX%

sustained plus testing continues also following in engagement in preventive we Our our the growth U.S. XDx expand. clinic, XDx Reference addition in performance to growth plus are Labs, with of in care high to leading programs. seeing franchise levels our solid incremental In

have highlighted in receive plus some a vector-borne dogs test. additional of for As a we a U.S., the past, vector-borne U.S. This full in disease received approximately kind, very disease expansion XX% the while benefits approximately only dogs only testing. XX% vector-borne the is XDx sign, in encouraging multi-analyte long-term to of test with of usage

to element lab SDMA We launch from customers We chemistry early our essential has and of reference installed excellent have SDMA, while X.X total purchased a have of make introduction in an also it. of which advancing the catalyst globally, progress on our now base to who as XXXX. benefited million almost since XXXX continue panel, its run over translated XX% into have XX% since slide. This have a used catalyst customers Catalyst

chronic about of is renal very the We of new that practice kidney SDMA disease. the chronic management clinical staging and panel excited expert for interest guidelines disease by evaluation nephrologist, an issued evidence-based September society. were are international who establish This based renowned guidelines the also in internationally kidney

an disease reflects processes. be other function. guidelines which the The widespread may disease of to measure staging of kidney or The SDMA SDMA CKD recognition is kidney impairment due full of incorporation accurate into that

step landscape early patients are next staging the veterinarians kidney updated CKD, patients. manage individual impaired has also how but SDMA SDMA improving with base not These diagnosis in the guidelines, IDEXX treatment of tailoring of only transformed function. to

and software Finally, we our multiple in continue simultaneously. extend advantages advancing veterinary capability on our fronts software, to by

practices both is their truly provide run to technology that around world a independent and goal businesses. the offering Our to on groups comprehensive rely corporate

for XXX placements Neo, in management a Smart on U.S. new software Systems. placements Adamana efforts the XX% commercial IDEXX of systems, year-over-year. of In software again the accelerating and was America. Inclusion Cornerstone, strong QX program North grew is quarter Flow practice global

the Sticking X.X with for of practices the user than year-to-date demand U.S., interface driven clinician we Cornerstone new upgrades, by pace more North X,XXX customer with upgraded streamlined have in version precedented it a seen across the America, and experience. all

Cornerstone We achieved running successfully and yet more Initial the the many of standard another making benefits feedback in to clinical for positive which software. environment management Cornerstone Cloud is in practice in look QX, now of to that milestone extremely forward value a development is quarter. a bearer as customers thousands cloud the the eventually live for customer available we

year-over-year for strong subscriptions. with QX was Webex in another for quarter growth a increase XX%

corporate enterprise engaged and out C-suite had more to growing for Our functionality strides, XX,XXX big providing center make widely sharing veterinary with medicine strong results groups quarter, parents platform diagnostic and the in pet analytics globally. a to group corporate VetConnect most and than practices management growing command plus control continues for another for and app used new

a laboratory of addition acquisition the In upper pleased employees. a our customer Marshfield Marshfield VetConnect and to Midwest the that relatively growing a today. of many we and like SDMA, just We mid base regions. national Fecal with few strides with to PLUS forward Labs addition work well-run a name whom Antigen innovations our we highly bringing unique in our to of quickly our professional their recent to look has organically, customers stronger the and presence highlight is are business in Marshfield also

In across financial believe very deliver and good XXXX long-term about of build well-positioned summary, we our our we in are a progress on to this business goals. range momentum feel fronts strategic on and

as behalf held role our and like Ravis their I’d of into beliefs the my for love John IDEXX all Before affection best translated John’s thanks around in play world, John’s unique continued to I and preparative conclude on wishes colleagues a that to on our our the in deeply rehabilitation. his pets care extend and lives.

a IDEXX committed of what’s strengthen reminded As IDEXX of pets the organization through and who I what of veterinarian will the health diagnostics expand role contribute an trusted note, Board unique and Directors a animals vision of wellbeing It’s the result, as could to helping looking love and both pets he adviser. our we with the love. and people that of remain lives a the that forward possible a and to the as On relevance key software us John’s on to John as and improvement work and the to continuing am them. the always personal

And open Q&A. with up that, we it will to

Operator

with Michael of will ahead. the We Instructions] Please [Operator of go Ryskin to go line Bank America.

Michael Ryskin

guys. How doing? are Hey, you

Jay Mazelsky

Mike. morning, Good

Brian McKeon

Mike. morning, Good

Michael Ryskin

First XXXX off QX, solid I congrats to want the quarter results briefly. outlook in the really ask on but on

bps the the that on gross cost progression quarter. think margin in sales you price of of talked the the about about bps constant U.S. have pieces operating in You currency? some SG&A? CEO talked force gains we on about charge in you First year. How fourth pieces this to the in gains, a margin seen the we with controls also you some moving have expansion XXX about do line think should strong gross different the really couple the margin How operating also margins But highlighted moving in the extra XXX you

pieces. So a of couple moving different

could a to Reference or take early realize line instruments you that glance view just how $X million $XX.X follow-on more for still changing So just this all organic just just particular year, cautious on markets? initial consumables Labs I in a conservative the point to broader or is within guide, million, And very I then on. or anything the shake next is out? want or does for market really top at any this area But outlook the slightly level to the high

Brian McKeon

Yeah.

start with the clarification. operating me Let margin

transition charge highlight. that to the a have we -- The right. we compare CEO here are tried with You

XX to basis It’s comparison preliminary points, consistent Investor basis So included points at adjust basis for noted that. to the is you to related if which points the Day. very XXX were what indicating, were for our we basis related we back XXX basis favorability points our and outlook goals long-term so XX goals charge, of or our with points XXXX what to XXX

that are are and business leverageable rates is nice for delivers At in as good XXXX. a with we the outlook results that have this flow-through model that demonstrating We when a our targeting and we QX our profit progress grow. reflected

Germany, I would highlight of heading moderating be or into that two -- as significant costs outlook. online have next year we have into facilities margin will a are level couple that, of operating year the involve that next we the core we will new factors we that is of grow that that our are But margin as built something will that headquarters. lab coming initially new Westbook into in gains. a and And has well overtime. will incremental effect new One

expansion with stated a have our additional a have growth got U.S. expansion, earlier rate with that this R&D investing are as we goals. U.S. expansion our are investment of healthy the pointed out, year-on-year our international ramped you consistent year and and fully we little commercial the pretty our as And in resources we we initiatives we in implemented now

basis of that for But improvement moderate outlook year. with to got comfortable points basis XX the So will some of we kind XXX factors very we upside of a points that. feel investment, have the on healthy next level underlying

is continued outlook CAG X% sustaining noted, Dx our strong to revenue a growth consistent On growth the XX.X%, main reflects really we for revenue outlook. recurring driver of our which of the

in looking Dx U.S. revenues, CAG ranges. which fronts the international growing to with the progress both are long-term our goal build We and on we recurring solid made right on are have on line

In have overall macro growth, are business That continuing their in we know African some are relatively in terms of going dairy some we which us, and by rebuild as for on are had Australia, are screening, maintain -- highlight, and outlook we growth places for pullback we herds factors again with on like in Zealand some to we LPD on smaller for potential would health fever Swine is on I compare up -- to didn’t still better-than-expected going be influenced a revenues. but about that is producers that we this a area much year XXXX. New tough calibrated cautious

smaller for the margin X% outlook. us, overall at reinforces organic to growth us a business comfort of but it’s to So, XX.X% levels with, our kind the that

Jay Mazelsky

market good And in about terms feel just of we the market Mike the is. itself where

Brian clinical over As indicated, growth revenue growth and we formations. practice X.X% million X% QX $X.X doesn’t new saw include that in

So the range. market in that that our outlook assumes stays

Michael Ryskin

Thanks. Great.

Operator

Blair. of And ahead. the Daniels line Please we Ryan go will to go with William

Ryan Daniels

the Hey, guys. Thanks regards the in purchasing a to let It’s assets, Marshfield U.S. you for to for taking unique question. one Jay, little you Labs. alone lab in see

that was anything can I the So will curious what from existing there, and there was the network lab client base, that into IDEXX that network acquisition? proprietary specifically, you you am the strategy get the be from more and labs then broadened outside of garner the

Jay Mazelsky

Yeah. Ryan, for thank you question. the

are acquisition. business high-quality, with. Marshfield already excited It’s a very very the we are some which do by These -- customers. adding Marshfield We approximately laboratory, we X,XXX of professional

Our like needs continuity PLUS of and introduce focus to able maintain time service, them. some of those the over and of is SDMA to on that VetConnect innovations understand the antigen being better really and we customers fecal have

and -- laboratory it’s So think it well a overall a acquisition, great our fits it’s great strategy. in it’s we a with

Ryan Daniels

or facing a it’s Is have there and on making a there, may the commenting different if on changing customer it’s on all the American kind QX Thanks. in particular in hires I VetTech, of many is specific organization. it territories uptick this, this the in you at focus but field territories? will North then And is it it sales the just X% of question, are you reps, Okay. focus anything a that is existing be is missed

Jay Mazelsky

you, Thank Ryan. All right.

overview on we VDC the XX model the why. background is per I an at Essentially, territory. are our you model have give its give core, will a of me Let we and adding territories and

XXX XXX will XXX. territories from we be going So -- to

the expansion single of of has about we two will number them, of support XXX the VDCs expand as case average, augment FSR. the XXX and is about post-implementation VDC to reps number VDCs, be we when the and On service down per to today the field generally accounts

So to territories, addition XX any the and XX VDCs adding we new FSR. are

the So of represents change. core that the

take really market. our you is, thinking look And a at our when

in U.S. has the do have growing with the with been strongly average we -- the customers and business our We grown.

from us business years the XX%, many XX% breadth ago. with of customers both they just so have and that in standpoint, the do And three depth bigger compared we are terms to

preventive us more couple take a business more as getting where and we more layer of you identifying with draw real they like VDC practice us, on initiatives that trainings them. including customers opportunities they whether There’s expectation of Marshfield that their understanding like the channel. upfront, help things can staff of or Labs mentioned care, it’s is I then better, capacity those and on top do And full our the Their see of thousand new on-boarding the calling commercial time relatively which customers. of that

a like the we to customer, revenue, when customers, we historically, IDEXX XX% not incorporates customers, that about a reached metrics, thinking a but -- sort that we if look you to about But One which of this. about are take at are is so take XX% reached at you there’s reach our a look couple of so. to where, we look be. at, or competitive look tend revenue metrics QX, which We is guide just a

So we IDEXX like we really think be. installed bit of base the a We outside opportunity good still. there’s than are would to lower

our how thinking guided implemented So this. and we that

Ryan Daniels

as Okay. to wish That’s John helpful. just And want best well. you. my super I Thank to

Jay Mazelsky

you. Thank

John Ravis

Ryan. Thanks,

Operator

a have you from go question Wright. Erin line ahead. of Please And the

Erin Wright

Marshfield compare on how any much how competitive Thanks. there? I to there speaking, know lab much capabilities that Thanks. side the on have across laboratory, are you overlap, Do your count SDMA just like for some maybe is, can kind cross-selling then, SDMA transaction? so competitive changes for reference I Marshfield U.S. the movements the about you IDEXX testing, how guess, point-of-care broadly been following customers environment of you there the can to kidney disease of does or your customers speak compared at broader And generally more an there others? now, side or Great. and we the opportunity put lab at the what do know reference think are

Jay Mazelsky

All right.

of So number are -- of I There will in there’s few there. those. a take questions a

about As of Marshfield X,XXX business we in I total do with many whom customers, currently. there’s indicated,

broke out We in haven’t what across terms the of modalities. all specifics in the modality

do Generally or U.S. fashion, us with business products. some speaking, whether most it’s our and assay in customers rapid software the in

to nice our customer do our there’s really solutions. work needs But focus to being first able that those we on is them. think So really a with understand and full opportunity cross-sell,

to terms marketplace. you SDMA. mentioned had no In offerings, really competition of, our SDMA the In in the specifically are view, there comparable

you is the only SDMA expanding SDMA but We to progress, slide, not catalyst. gave in lab excellent reference I make differentiated. on the of adoption continue our terms statistics some with

for progression guidelines staging course, biomarker. of terms really staging puratone, Alongside and primary We an in chronic the are that or that, by disease. SDMA, super CKD, a on in diagnostics excited guidelines the kidney Elevates severity to mind, disease updated of recommended into important of adjunct virus of by from an of care to rely them keep veterinarians classify the patient, is thing treatment

this the outcomes It a getting the more as market that assures helps for treatment the they drives for marketplace care parents or So best treatment. pet that patient. whole. it paths approaches the the their -- the It we standardize take, standardized that best on pets guides think better

excited big So something is a we and by. think this deal are that’s really we

Erin Wright

Okay.

Brian McKeon

U.S. labs the XX as quality including we in had operation. before a which high we adding a Marshfield, this -- will the are be for before Core we locations, additional Jay it’s mentioned Lab Erin, And really few and

Erin Wright

would normalized across current what I just market. veterinary characterize this impact was how the and is also noted you quarter the day think, trends demand well? speaking, Okay. then, Great. clinical you And this for in you visit guess, that, acceleration Thanks. and as growth driving generally slight the that

Jay Mazelsky

the Yeah. growth that those it’s important because healthy. in million it The revenue -- we track, is is I metric and mean, visits market overall The testing. X.X% that’s healthy, we growth diagnostics practice $X.X was X.X% involve involves at -- think the pretty clinical

some It It’s in -- be with seen what largely quarter-to-quarter. think the we tend variability does it’s have to we consistent past.

with beat market from pretty PIM as We data practices. got analytics a on the a X,XXX the -- result systems. our the of approach leading of We have take good five

data strong showing both a consistent, regional got So across it’s nice representation I the we and practicized this growth what proportional pretty think have and in is market.

Brian McKeon

Hey, Erin.

Just on the had days QX impact what we in clarified. Basically, was extra an Monday.

which that in have of we rapid labs, positive our on context, on shipping sees of more do impacting and And very highlighted and it’s limited we it so benefits actually that shipping dynamic. was impact and consumables to really metrics a so assay, the impacted lot really market Monday a wouldn’t what business,

Erin Wright

you. Thank it. Got

Operator

go line Rich ahead. will of Sachs. Goldman We to with Please Nathan go the

Nathan Rich

to wanted for of the what the hear revenue growth you factors Diagnostic the influence in the next growth year. would range didn’t growth expectations and talk to type about of could next the I have your recurring guidance, a key should year? I Brian. if just you of question. follow-up wanted CAG expect the for mind for on Thanks we I kind kind on for that outlook know

Brian McKeon

-- our did year we we preliminary want get We high XX.X% that, we looking of outlook XX%. to are in don’t to highlight growth the are Yeah. the level sustain to this that guiding granular. that guidance X% we to XX.X% to in

been kind indications XX.X% now looking on. for and we that we bit about which reference a year-to-date relatively working of is actually adjusted had are days are trending improved better growth, all in We we international and something right as So international well build the quarter. quite have to and in on the U.S. in are lab XX.X%

to our are get will share and the as of year-end finalization we looking sharing the and we planning we that, be process on more that call. build through we will So on specifics

Nathan Rich

you numbers there? are earlier maybe you you of wondered, a talk think had that had saw in seen a you competitive little bit drove just it what some gave, seeing looks drag just improvement like that specifically Could internationally new what about and I and Placement in been you that China, nice if improvement placements. specifically this I year,

Jay Mazelsky

Yeah.

clearly consumables for growth focus It’s a XX% So we been growth and an internationally, of saw couple think ongoing there if really us. I factors. normalized nice placement is and

VDC of VDC our maturing model I our continuing think of helpful. is model, maturing the

in I IDEXX We that with brings think are access in program, appreciate the XXX ability getting traction terms with nice customer’s, to our they of international the our flexibility what solutions.

And we the products profile physical of think I for see that international -- question. we footprint and international in said its themselves, the One really markets in was cost terms to continue it address have Brian’s our we initially going designed Catalyst just past momentum sales and markets that in China well, bit to our fits and the

Brian McKeon

we prior and very lapping good we new and a to of on through had competitive continue we where high test the upgrades. vet of levels performance Yeah. China, work to levels placements compares had

mix So the has shifted.

EVI We that growth about. and underlying our revenue reported quarter are think we across revenue are in our the high gains doing double-digit new overall we and from -- constrain growth, performance regions, that somewhat, lens the competitive talked but does very the quality accounts the of I placements contributed quality

up It’s as and for base the to that expanding highlighted, about progress solid rates. we up and good really with feel foundation year-on-year revenues catalyst across sets we So, consumable our sets base, about at high that our us and really Jay globally, installed global well. continuing making installed are XX% our markets grow are we a

Operator

ahead. David We go will go Please Westenberg. to the line of

David Westenberg

taking the questions. Hi. Hey. you Thank for Thanks.

customer shifting it is preferences switching out I know rather has So very high that to just side. PIMS solutions. the difficult barriers on seems first noted cloud and you based

having just competitive you solution, Can market, on out? you in maybe -- are that in cloud see success of of lot switching a market that adding you PIMS terms the that dynamics way of customers cloud through is kind the Cornerstone please? So or the shaking run

Jay Mazelsky

Yeah.

take our PIMS for that. So David. is offering The -- Thank question, broad. the I very will you

the we that more workflow of practices address advanced or those practices but in with So mobile also single -- with Cornerstone, be the the market may NEO.

industry, both the see independent at of standpoint a use it workflow, practice. standpoint, all in veterinary help does as what we you challenges, they benefits, customers, specifically care as from address is ease customers focus business whether the well of like a them And appreciate our delivery

X.X, telling all appreciate really are they our the what the us the the with fewer to Cornerstone which do in is just improvements with made interface that and clicks, recent easiest work that do benefits. And they user they have most ability is with we revision,

when more us of in Board. It’s and all IDEXX find with deciding, across do choosing works are So that, in placements as customers it better. diagnostics they we to the terms are I mentioned, included, what seeing really nice so software, our program, had XXX is in they go

of there think able hardware over at tend bit terms the their in At think maintain will time are terms we this indicated, is a in as I that migrate the that least practices. really being for In as software the point, PIM the increasingly Cornerstone but be sticky, trials. that part, I to in of some customers lower recognize cost having Cloud, benefits cloud systems marketplace to had you field in indicated. in

And basis of to practices ongoing somewhat two shutdown hours, hour, an expect an that that without thing. more for quick can or a having number of type their on revisions they

our in in mind, system already ready we that benefits, and in the time, is Yeah, of we lots NEO for the it. will think, direction, move So management over that be market keep will cloud. practice

David Westenberg

going right. housekeeping one in the Well, very quarter. out thank you day you really do to I for I the appreciate All really much how color. quick question. just am the do call extra

growth there in kind So -- maybe to QX housekeeping then an anticipate and need I as one that just Is question. day look of of extra headwind any of we terms terms there, just was XXXX, we be then need there housekeeping. in as extra less we that at days wondering or a in is day to

Brian McKeon

week QX, holiday around anticipate will On some positive Monday, benefit time the we have less but one we link.

we There headwind. it’s be I full modality it’s team is and are neutral. that what some relative I some is impacts, -- leap QX year, benefit in modest the may relatively think we the for out it’s net but but So get think year, calling me year next telling a -- the on not

David Westenberg

so you Thank much. it. Appreciate

Brian McKeon

Yeah.

Operator

ahead. Jon the of Please line go to go Block. We

Jon Block

about It’s the in I that responds well versus have got a was with commercial just sort you in you Jay, North morning. of maybe of American are get it marketplace first I I why caused and guys follow-up. now Good investments. a guys. Thanks just couple it. for a business to seeing and maybe ago, But one the quarters quarters a then move increased the that curious infrastructure I Great. what good your said, you, you are now, guess, force, sales curious you to think, of couple increased

Jay Mazelsky

Yeah.

customers A of territories So think, what our it Jon, to from have working large bigger more as customers, a the our and have use in expectation gotten of I they really customers. And there’s number earlier. It’s over VDC demand terms with time. broader I they our of deeper. describing more comes in down number was these an that

these successful. customers some And on-boarded upfront, look at make mentioned, you like then take these do of preventive them I care, and time in of they when as more a require getting initiatives terms really helping

more Marshfield You customers add in Labs. thousand of a for couple

As we alone. well in billion as billion business addressable Day, what Investor said market, $X wellness it’s at $XX

they of comes diagnostics more that our use more to do really down better. It that when time and to see with we that grow just math. we apply we So and continue customers

Jon Block

on stock-based Okay. on Fair comp. then enough. the Brian, maybe one moving parts the And second for some you guide,

we I in where think a but was revs were. midpoint the tad below of largely line,

like XXXX, is to does So interest may rates expense B of which we And alluded net decent then it despite what from I that product in a new continuing does this year-over-year, standpoint the you a down. I see that? guess just bake million, seems thought question go $XX.X to in is, step-up reflect part

got number a I do right have if why step-up? Thanks and the to sure so, So guys. make we there I want

Brian McKeon

Yeah.

for outlook question, including our any the business on first your current innovations across XXXX our for new incorporate of introductions. projections growth Just adoption and

in. factored that’s So

kind higher always very it’s with much that’s of try of trending. we talk we have how in Jon, the what feel line We been we at about, end of target with to long-term growth, appropriately. to We we the in context are on But very and goals. growth just that build calibrate rates strong comfortable and are the our looking execute the outlook what

that assumption included -- interest on in question expense, not rates. $XX change the to interest a related did -- an it And your for million was assume we and

think benefit be I modest things like that. may to that interest some would rates there there in reductions variable if are So we

and will our the into assumes market. But not we rate we saw interest underlying was this basically assumption flat that are leverage net broader -- the in so it interest some projecting benefit year, a rates, ratio, in year reductions next rejections

Operator

of Mark Massaro Our question with come final the will Please ahead. line from Canaccord. go

Mark Massaro

Hey, assume, guess, guys. are you guidance, Labs. we Thanks question. I XXXX for contemplating the the as think about I Marshfield the Brian, inclusion of

four level regions three can is, So Minnesota, it it about like Reference in what Wisconsin, can give points Marshfield Ohio. Reference you reference has of how then in us with up? XXXX? strength think us to bump was One you you or sense Lab that growth your sense share line your what Labs, lab looks in for a for could in particular add think basis Michigan, and give that those might a you Marshfield of And

Brian McKeon

Yeah.

Marshfield, lab national on So a just it’s customers. with

is $XX annualized FX. the $XX it expect about in we So Mark, our to capability. million and Within million, Marshfield, as revenue roughly national we see is this it’s baked our guidance, by offset adding from what’s that’s

see you So when organic in numbers our reported of terms those offset. factors two

have would say, factored I in. we So got that

real And working IDEXX customers. employees mentioned, with our think IDEXX the capabilities. expand to those I innovations here as Marshfield very with adding there’s and their nationally for with about excited very are opportunities us our We business family Jay their to pleased and leverage and

Mark Massaro

excellent. That’s

or and in ask believe in new field speak internationally also you of to in are on next opening year. Germany dynamics I not people for you and so have global are over us infrastructure. But a contemplating can about up is competitively you guess, potential some focused sense to the for related wanted globally, you the internally significant future the lab I XXXX? give certainly sales a Europe XXX expansion at both And And where I just organically you internationally. Can that, have hires you play got OUS? to whether which

Jay Mazelsky

Yeah.

internationally, have capacity are expansion opportunity where the in think So we We we right and our -- are we we the projections. to completed address and and Europe just our comfortable growth we are.

So at no additional plans go this there’s that. to beyond point,

focus. focus so with the customers are to the our out grow, that’s point -- organization. really What to able is that deeper maturing relationships really find is we It’s where those at to with really continue takes deeper we develop time it this relationships and

pleased we In terms the Brian marketplace, where as are Lab with indicated now. earlier of right Reference are we

able IDEXX think, we our being the on on focused with improve sales and to program maturing time, over reference we VDC of our can that. XXX performance organization, lab are build and We the

capacity be to new at on positions to in excited in the that are that, Germany, specifics we other Lab future but point. bring this us Reference the additional no We well able think

Jay Mazelsky

Okay. conclude people strong And okay pets, that, and of livestock our the for around employees the the enhancing call. which is so in will -- purpose, the and and we I With want progress thank our thank advancement very of you. health world. to and performance QX well-being the

Operator

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

You disconnect. now may

IDEXX Laboratories (IDXX) 31 Oct 192019 Q3 Earnings call transcript