IDXX - Earnings call transcript Q3 2020 | IDEXX Laboratories, Inc.

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Operator

Good Morning, and welcome to the IDEXX Laboratories Third Quarter 2020 Earnings 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. 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

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

Brian McKeon

strong reflecting globally. CAG business in results in Good morning, everyone. our delivered IDEXX the gains third quarter, financial continued excellent

reported on CAG CAG saw increased recurring by revenue high was of XX% global in organically, revenues. in building growth growth trends the business and terms in supported In throughout Diagnostics our CAG Diagnostics strong recurring we revenue XX% highlights, QX. organic QX, XX% as

currency on increase health constant enabling benefits CAG comparable revenue In a extraordinary drove quarter, organic comparable $X.XX increased currency share, high XX% demand Flow-through care. Diagnostics QX an XX.X%, constant date, year the $X.XX QX matter. animal in recurring of a margins reflecting point growth the to recurring of from delivery improvement resilience companion global to $XX.X in For earnings a an we per-share basis basis. revenue XXX growth per or operating in ongoing accrual related million litigation recorded of for

constant metrics charge. margin EPS Our this comparable comparable growth and currency constant operating currency from improvement exclude impacts rates

$X.XX, comparable year-to-date, delivered supported up of a For revenue basis, XX% constant organic QX on EPS we currency XX% by growth.

We forward moving encouraged revenue we’re CAG continue be aligned growth strong growth and for profit market long-term in to and with planning trends, our our robust by goals. business

will for uncertainty ongoing providing guidance not financial and we the potential time. specific giving XXXX dynamics pandemic, XXXX to However, at this related and be

As our focus trends on context. how in we’ve done in manage effectively we our business to the and this review our in we’re intend recent markets quarters, we’ll seeing

trends. a with and revenue results Let’s of begin quarter review recent third market our

quarter. initiative. organic water benefit declines gains LPE also Asian though XX% as diagnostic our and imaging in were CAG from the VetLab the PCR in approximately human Strong reflecting gains new IDEXX well moderated organic by by supported international Third organic continued in organic markets, quarter compared growth instrument Overall moderate on these to revenues, constraints improved test trends XX% OPTI as in gains organic markets. growth COVID-XX fronts in and placements was on solidly X% in of second XX% by by driven growth XX% and was recurring of organic XX% Diagnostics growth growth driven strong our by growth revenue revenues, U.S. business,

by in led growth growth in quarter very third in sustained Canada CAG the regions dynamics was QX, levels in revenue pent-up key XX% U.S., growth aided across as growth recurring of Europe strong August reflected healthy broad CAG noted, at demand. wellness high also the organic XX% through global business. reinforcing and high Revenue other combined of remained by and in organic the growth fulfillment Diagnostic in July, key and gains markets September. and in strong CAG Australia, the approximately quarter, in gains As Asia other and markets our in recovery approximately such

XX% markets. on available visit in growth to supported from earnings demand, sustained visits Diagnostics gains clinical continued growth XX% X% by revenue CAG continued CAG we our U.S. our growth weekly Diagnostics including in data recurring High X% recurring in the website. growth non-wellness be overall year-to-date, estimate clinical clinical increased and gains visits, to solid aided benefit QX, published the international pent-up in has XX% demonstrated solid as For same-store at tracking X% wellness growth Overall overall X% U.S. revenue snapshot, our in and which by the in in contributed quarter. to visits in in

growth same-store positive will CAG has in to clinics clinic XX%, added in of a to visit QX. help detail, than we in for which follow increase Diagnostic are more commercial services at X% closely organic in been growth. QX which market X% XX% visit testing years. growth acceleration X% major high clinic premium in As premium IDEXX QX, increased business. has trends in monitoring visits across overall QX to lab development encouraging capability, visits, technology recent CAG of growth revenue a point we’ve approximately By in very growth exceeded our veterinary by In higher organic the growth testing. focus clinical growth were of fulfillment discuss, visit basis, of level, where increased U.S. backdrop quarter. Relatively pent-up supported clinical stronger than on years, markets. visit clinical international These levels an revenues XXXX, trends consumable supported recent trends, testing levels we to look supported supporting by global increased IDEXX in premium ahead of testing in in increase clinical veterinary install gains steadily ongoing XX% XX%. solid advancing focus reflecting from revenue estimate acceleration core in recurring positive to and to expanded in clinical approximately the and visit gains which U.S. our XXXX growth a the and reflecting the to in for overall X% services Jay gains for the high that dynamic Diagnostics wellness trend. an and revenue compared ahead increases Diagnostic in average X.X% factor In patient in more wellness led growth health will international well growth quarter. visits our IDEXX gains per drive recurring overall A retention CAG has X% is market are overall care modalities. first-time strong in gradually is on supporting A VetLab X% a clinics premium modality, a overall discuss to our gains customer market of base. recently year-to-date higher in reflect to this we’re market U.S. Jay growth replacements diagnostic these and in continued program seen and even growth with in enhanced the growth continued revenue in particularly from veterinary revenue of to QX, market to mid-teen reference expansion support XXXX, These to This organically similar by growth metric Year-to-date, been further global revenues sales metric in clinics increased across an Gains demand. instrument improved premium CAG solidly diagnostic we’ve which an the benefited to the on has organic QX, an of utilization this markets. regions, initiatives U.S. CAG key high growth access levels, U.S. strong XX% supported and testing. recovered XX% aligned testing as increased strong

year-on-year near-term to constrained contributed restricted at replacements new access placements instrument of revenue $X quality CAG a instrument high recent demand by competitive overall The degree the trends XXX as America reported factors in supporting for from markets. a some to services. work on While to competitive in continue well in in million CAG clinic their improving XX% quarter. accounts sales catalyst clinics, for These as reflected and North be by placements decline placements focus new or international remained and XXX high, and

base. with also a placements, and XX% from levels our second-catalyst global driven install North customer year-on-year catalyst on growth American These We XXX by supported retention placements benefited new high momentum customers.

In prior by remains install for solid growth of business, gains gains gains demand SediVue revenue pent wellness X% X% overall. revenues imaging replacements diagnostic backlog We by and our in to organically QX in was the other price our driven software also revenue placements, XX,XXX for by in up service Rapid placements Double-digit net continued placements U.S., software outstanding year-on-year. CAG volume in SediVue primarily of increases of base up over testing. revenue rapid and to and CAG by moderate XX% bringing organic strong Diagnostic veterinary recurring system increased driven system year global XDx date areas achieved testing. diagnostic driven, assay levels. X% XX% imaging instruments, organically and premium assay high by lower supported to compared with new volume X%, fulfillment growth XXX Overall specialty strong revenues to the hematology growth. were supported year growth increased consistent QX, orders our XXX

Water Turning pressures other testing XX% organically by which water X% noncompliance-related segments. of QX, about revenues. in represents declined to revenues our on impacted business

an our the by volumes water QX have are regulations, related volumes in mandated government testing majority As service. vast sustained noted call, essential or of as compliance and earnings our these

core increased from work for noncompliance demand for in by poultry large persist, improvement as China, uneven efforts diagnostic testing through rebuild Livestock, XX% continue expect by strong results our pandemic-related continued swine LPD We in and supported we driven related to testing revenue impacts. in to to swine strong Asia-Pacific volumes region. growth demand testing dairy African QX, producer and fever herds. programs to benefit organically in swine to

for prior solid These also more globally. results. continued screening to poultry health compared levels herd strong year offset testing We’re lower seeing gains growth than

we fever our of growth in moderation forward testing expansion LP of benefits lap our see African to programs. our prior as rate to year expect moving begin We the swine

comparable from Turning benefits gains to in very actions results high mix product strong continued a a gains operating driving an a XXX XX the benefiting currency XX% basis, comparable recurring revenue currency reported proactive basis of operating These and as XX% well in from were Diagnostic point improvement management. on basis cost as on margins, CAG increase supported constant Profit of favorable in constant or basis a on points profits basis. QX, P&L. and reported

related is noted which we ongoing or a an matter $X.XX year to related bringing share, higher in $X.XX $XX million including and our from or was share-based per-share date share a recorded was expected benefits $XX comparable recorded metrics. $XX.X benefits $X.XX growth per per G&A As excluded EPS $X.XX to earlier, than activity, share. to much of per million charge million to related compensation or litigation share compensation

on comparable benefits a margins profit XX%, currency of constant approximately QX. constant Gross organic as points XX% basis these strong revenues in impact sales lower gains. EPS and adjusting solid currency over productivity from basis, well price in noted from instrument net lab As as Gross increased benefits and growth increased on basis, the a operations, XX% XXX for increased improvement litigation. QX reflecting net moderate consumable revenue by favorable and benefits our the mix supported

a the on rate Foundation, Jay QX FX funding expenses for year accrual. million a which in reflected basis, impacts impacts, mitigated IDEXX revenue profit by and investment profit previously and with Operating year-to-date. growth expenses QX positions. recorded which a year established reported million litigation excluding in included will QX rates $X are would a a Foreign gains comments. constant on QX discuss modest loss of hedged increased XXXX, operating benefits fund, hedge the Recent $X indicate related the base gross established in exchange XX% his million of donor-advised the favorable newly comparable $XX currency from and in to on X% impact

our global with we’re including and recovery investments CAG prioritized As last capability. strong in of long-term aligned international call, demand, of noted our growth support new in targeted in our hiring commercial advancing augmentation strategy, the

Overall, individuals QX, we we of health moving incremental anticipate trends. ahead employee also seek claims we We final steps One solid advance forward care higher our growth deferred care. previously support launch the Ex increase and as relatively expect as R&D of costs as to rate and ProCyte sustaining dental in cost health growth Op expect a

$XXX basis, of income expansion was free positive our flow, we year or relocation cash cash Westbrook generated for date. terms now cash In which to our headquarter conversion XX-month a rate in net XX% free and adjusted million flow trailing our lab investments complete. German XX% are On flow in to

very the financial the in took our balance sheet with exceptional a quarter and capital and X with credit on net repurchases $XXX performance position, ended $X billion cash share times Our enhance year. leverage quarter. not QX, our is aided We in steps cash, in the ratios of and revolving earlier to million times no the of X.X We gross we flexibility in did saw facility. allocate to and liquidity by strong we the in borrowing

generation level our with now tremendous we his looking with demonstrated to show we that Given model business will of repurchases with in for CAG market business the Overall, in and long-term future, call high I’ll our share strength execution continues structure. and and cash and have at business operational capital prudent be amazing to over and in resilience a aligned we’re strong momentum an in growth IDEXX confidence maintaining positive recovery, QX. Jay market a comments. strong pleased great the of the potential. turn very the the reinitiating our results

Jay Mazelsky

first business. sustained as more High QX, and of see excellent revenue to value provision is trends a testing. paradigm. overall accelerated Animal continued Proprietary recurring often place and and IDEXX strong services. these morning. We’ve up the point exceptional growth treat, diagnosis. in part services for Thank CAG sustained demand of and of role veterinarians diagnostics. toward were Delivering a V-shape a clear, must our gains key enabled shift delivered driven in Companion supported services, Diagnostics use patient recovery as veterinary you, diagnostics global in to good performance intensity Brian, CAG higher for health this by an These by care important pent market care towards diagnostics in of proposition are underlying they care IDEXX health by a in potential a continued level trends well

how review our supporting update organization exceptional execution in observations Let customers start our brief a of me with them. are on adapting and market commercial and tell including trends, the on our engaging

very in more in Brian The clinical markets. same-store in the international we’ve demand visits noted, well for evidenced growth visits, just Many more XX% of continue XX% pet healthy overall or employees, rate. approximately a owners, are practice number recovery X% of trends IDEXX resulting more visits. strong from time likely health and visits their non-wellness some markets across as As these in solid account wellness XX% demand like well-being, in We’ve spending of growth QX. these for continue up global related factors as These work by in key seen approximately pent at to visits with growth their pets; a been markets. expand see significantly like we in results U.S. clinic to sustained, higher strong pet to home our supporting attuned health has our and high revenues, recovery were of reinforce clinical while further and which moderation diagnostic begun estimate levels, significant to care, the

which seen of accelerated averaged of XXXX. supported of CAG work market U.S. in at through the average we use have are of this be their recurring the revenues. Veterinary growth care approximately This recovery, to levels that can increasing appear pace. in percentage QX factors visits additional clinical emerging, high Diagnostics Evidence in XX% diagnostics. clinics an be As very standard

compared this Diagnostics increased. compared Pandemic drop-off but and these per desire QX XXX supporting to expand take X% Companion the increase has may curbside typical this a more approach year Growth to promising to step higher. of also to more result a factors. the per practice practice to the in continues year comprehensive in in revenue Diagnostics be only XXXX diagnostics, to the U.S. trends. growth average increased Diagnostic XX date revenue, slowing To visit Animal procedures an pandemic include increased year points Not This years. the like care approximately of per While revenue to approximately health over as last context, basis U.S. growth five-year X% average to in revenue growth these clinical is is in was XX.X% a XXXX, by workflow put basis metric compared was due per approximately measured X% to recent to visits years. recent has in five higher up do more average point X.X% date visits of X%. intensity years. despite of to

with these focus continues vet technology practice a Our for development expanded favorable practice and steadily insight at presence commercial supporting the on and drive rate. improving innovative to dynamics

some we Increases It a positive moving use to Diagnostic’s moderation While speak a of point to uncertainty. prioritize economic basis role average in in during of diagnostics percentage QX, the basis compared may in business forward, in as pet accelerated willingness levels practice an U.S. a care and the in approximately of these of dynamics year healthy total recent for market vet increase reflected times an to prior their above even practice members increasing reached of percentage services also Diagnostic growth. shift family years. long-term clinic model, for in these potential of revenues. see points XXX in health backdrop owners revenue the revenues the reinforces the of XX diagnostic trends XX.X% as and well-being reinforce

growth these channels. profitable product additional the most migration the to service impacts diagnostics during clinical areas heard interest increase of be emerging supporting accelerated to can increased of an kittens one online An is appears in patients. are and all higher that seen and puppies services practice, Anecdotally, the diagnostic pandemic. in we’ve and mitigate of adopting sales in clinics, help vet and trends For first-time the about factor

While our visits first-time with intelligence market tracking year an a this growth of approximately difficult are measure, in in practice recent average to data. growth seeing meaningful we growth to increase has accelerated compared increased database U.S. to in is to in area clinical X% our measured date April, year-on-year visits years. clinical since Year-on-year a X% first-time

X% that seen incremental approximately estimate Brian step a U.S. our to the growth In we increase in business, in As meaningful run potential up number in a running in reinforcing tests overall. new-patient levels, own we’ve growth progesterone hospitals added noted, QX of clinical-visit breeding activity. average

that While emerging increase it’s in accelerated the early these the from an potential impact in evidence pet is there to population. project is trends, growth U.S.

While business our are future confidence these trends potential business. to very long-term encouraging CAG pandemic, in the we for the for recognize the reinforcing our potential related disruption

market this organization Commercial the Our enabling center at development. is of

So key our next, Commercial will I highlight in agenda. developments

Our X,XXX saw accounts. X,XXX recovery close QX Europe. in in globally Access placements instrument at practices competitive in-person including in managers Commercial excellent. approximately We placements with America premium and now in the instrument XX% to solid with on customer-account quarter, with by North average execution approximately placements, to in in and XX% QX international and in through in-person continued the in new continued regions U.S., Catalyst was our visits to improve in QX, XX%

distancing access sales care. remained continue measures COVID-XX has to demand market professionals’ to the and veterinary pressured as that impact clinics to of policies will dynamic we diagnostics continued strong, expect to underlying remain and combat social for spread be likely veterinary While

scale we over reflect commercial of outside efforts in strategy rolling Investor total time two-thirds is of markets. market tremendous important roadmap months. in Leveraging our key best Day, in a expansion efforts footprint as the our international plan. As QX, opportunity the markets through the highlighted tracking a international U.S., programmatic on multiyear basis be to U.S. during targeted the will footprint double potential coming addressable is to European essentially commercial playbook a two These In develop successfully multiple over our launched the expansions practices, commercial to expansion we

with on these on-boarded all continue made XXXX. We past momentum great by of talent These trained Europe. the investments years strong the make efforts commercial first-half in initiatives to remainder several over to hired, progress the through the expect resulting and complement year, from of

service in For providing example, Kornwestheim, Germany, and levels largest opened now our Europe. the our is across and reference in world lab newly differentiated functional fully and menu excellent

internationally. received One of is ProCyte the enthusiastically by customers. Hematology important modality And has very Additionally, a announcement been

unique in with IDEXX XXX, commercial customers in by needs Care growth last the prioritized Finally, innovations practice supporting across key One, using our performance, integrated analyzer. area hematology total is high. Program IDEXX the an cost Program the region example and solutions to were wellness their latter IDEXX diagnostics preventative with part in recover profile second to this with analyzer, program approached consider year. recovered in traffic. Kornwestheim recently usability, IDEXX proprietary for of are corporate The medicine. and great team ProCyte commercial our footprint elements which levels support of Preventative are trained results quarter, XXX A the very excited which quarter Enrollments the our adoption foundational in premium offering of the like care enrollment by XXX, in expanded the it for customers approximately look and key customers of in as element instruments is Another over pre-sale. best our new of of ongoing the practice strategy. countries IDEXX approach a strong to which our launched in was quarter brings with the have enrollees embrace of visits markets key combination Both supported month, XXX Growing pre-COVID commercials evidence that XX% in embraced the the Europe of This a accounts new level Care of of care teams, over and focus sustained configured coupled engagement and the Program focus customers is continue and program high placed more with new ProCyte our One, productivity, half and enrolled they X,XXX. IDEXX that to IDEXX Preventive of with is the the QX select

with We in point care, globally. in are we for are our QX diagnostics Customer month. of live ProCyte approach reference point suited profile. replenishment. with hematology over costs. quality that Coupled practices progress menu small and with ensure years, solutions for approximately objective including trials packed IDEXX and part we ship gradual and much eight efficiency sites new that blood over only with of customer patient brave more marketplace our clinical current the as solid environments. clinical to installed varied for with another shipping with opportunities and platform no ready to including the chemistry hassle-free use making XX technology simplicity, run proof time-tested It four-clinic in our is the to a And the care affordable and eight feedback premium to yet paper also part commitment quality lab when our to the follow comprehensive the comprehensive placements a of units hematology to placements next upgrades enables patient latest solution in broader of chemistry access inventory of build approximately tests economics, the ProCyte trusted reference most customers, to We large each the easy demanding XXX,XXX perspective, environment balance an our advanced a almost legacy to other base encompassing provide growing to field XXX,XXX plan a of us with make to begin is analyzers. Expanding practice access facilitating a support and with equipment for One at customers From Catalyst the year. and in analysis a it’s long-term competitive, globally a program, complement XXX, IDEXX is both and with practice results. it placements One the up-front and billing lab has with greenfield of is One

early We us the programs IDEXX extremely enables over This well-received XXX last new offer their and these to year by with have flexible, for to grow year expanded formations. practice commitments earliest days. been has practices them from with

also product introduced positive digital cytology and We is adoption VMX innovations in at January. point experience our to initiatives great case service offering. customer of A continue see and in our

in were customers satisfaction class. are Customers hours, PLUS and consistently by Moreover, we make customer viewing first with two results our under XX deliver easy lab and Our X results the delighted survey our services best for VetConnect promise scores with on. ordering we convenient reference IVLS results used already customers lab diagnostic IVLS of new advantage IVLS. data and recently of now And approximately our suite, lab with IDEXX X,XXX reference with more portal. clinic formerly by but in was are jus for this point functionality care too. taking customers reference results,

our April that our even kits North capability a kit of American started we platform. will appreciation SediVue urine our half value, advanced detection SediVue and to is Detecting date. key to this enhanced and over As noted of used customers clinical advanced in greater confident ship and call, the our drive last earnings have bacteria bacteria on driver bacteria are

Our seamless are differentiates customer test to further by offering anywhere unified providing the at us practice unique, strategy order our or solutions that pricing. IDEXX flexibility urinalysis integration lab, common with and

Our customer-centric very rates. we and appreciation our customer urinalysis see in retention anywhere, high customers holistic reflected approach that like value

and pipeline our We systems. and in built and the to healthy software on they strong system on services the by our cloud including saw new year, earlier commercial in organization the XX% hard veterinary diagnostic work software, new Moving globally, of premise growth QX, year-over-year with placements in supported businesses. imaging placements PIMS

by excited we practices most COVID-XX, our recurring offers software market, imaging pressured driving the provides double-digit veterinary solutions imaging with year-over-year, with Although revenues. imaging placements service subscription base capabilities systems The diagnostic that digital the was for other about in access imaging new our and new systems our software along imaging streamlined DRXX, in growth announced customers and efficiency the products install continued digital customers August. decreased to of ImageVue technology The strong, and as workflow DRXX, a are our advanced in practice. digital cloud of are our system growth

we’re Today impact donor-advised with advance excited the with $XX our we the also and we a people of to purpose: communities capabilities, million I’m IDEXX to commercial positive health livestock. pets, the a As our charitable and serve. of foundation, an to to we our well-being make we commitment that activities fund contribution aligned established have support enhance in advancing share

aligned reach will IDEXX’s overall in invested IDEXX principles. corporate The initiatives geographic The health on decades priorities the also of in in IDEXX animal for and impact. complement care. as efforts, fields, foundation part inclusion while including and and IDEXX our with will investments partnerships and equity responsibility ongoing areas local veterinary As stem organizations our in foundation’s our has be outcomes-focused and such education supporting guiding broadening long-term diversity, purpose social

home in and also this IDEXX offices. communities The work health a technology mission. important about to and excited We’re their our step virtual engaged priority travel safety workforce of remotely and employees stay of continue connected majority continues support from and families remains The leverage and of our be us. employees as for and our their purpose top limited, to to

strong, exceptional very on-site levels the specifically, Overall, safety continue in execute performance resilience health our we’re high support animal category. procedures. while important more maintaining Our teams market in health about and to to excited and market at demand, continued and

investment strong and with capability in innovations expanded faced means commercial continued growth, This to solutions the innovative and markets. the And problems potential continued support most veterinarians. by that to financial goals. to existing the customers aligned ourselves and new challenging long-term our solve bring positioning We’re

extraordinary, IDEXX’s While the situation business the is in and of resilience our industry dynamic. remains particular

and continue pet to react pandemic’s the We impact and consumers owners appropriately. closely on will monitor

some Lastly, during economic their and opportunity safety requirements. both thank perseverance for would workplace customers and extremely take the to challenging resilience our to I like and employees and uncertainties new I’m employee of for us. accomplished look together my opening what remarks. journey proud the the to time last still and forward we’ve have questions. And now two concludes We in that quarters before

Operator

first Ryan our William [Operator from from Instructions] is Blair. And question Daniels

Ryan Daniels

like cases interesting somewhat and ongoing you industry a is an dichotomy And in all bit significant in seeing making your COVID if lockdowns. there because and information. expansion. lot could growth curious speak It’s investments there. to a But the for sounds OUS, thanks a in you’re international I’m the more and uptick detailed you’re a the outlook of strength little also

sales So I’m potential against field in particular, market going contrasting the you’re that in could hiccups your growth forward. Thanks. be how balancing curious more what force

Jay Mazelsky

I’ll Ryan. pet pets Brian significant, may much Thanks, thanks. see their market. Yes, international know add take our And as additional that, very of international the about potential addressable as and opportunity we the customers, owners, two-thirds color. some as we love do. We

to We helping a of marketplace. market of it’s U.S. done really a So the see to what lot to develop overseas. the we’ve parallels in question creation

standpoint. a customers in of experts, and So provide reference footprint that speaks this type the and terms products management the case to of ProCyte information and markets European expect, One which made fit lab which network a builds really Catalyst of field investments number like now in subject-matter investments in price diagnostics as a service our from as the that brings levels well footprint those we’ve out solutions, One, well lab

we So organic growth XX% very revenue on basis. international, nice in an recurring saw

renewal with of that. seen parts of work wave, wave think U.S., in really to our parts through towards long-term want work marketplace. also We’ll them. But to some the third will customers through cases the you of did anything but Brian, potentially short-term of overall, some headwinds. have that We provide second Europe. can investments That We the growth the pointed add that? are potential

Brian McKeon

no. Yes,

by really as we’re think, that, of point I the think resilience I key globally. the the Ryan, markets is encouraged

health think focused pandemic. resources we’re support to some there there bumps reinforces is of terms the on But the the ensuring in sustaining could and from potential I underlying we management of that of market in invest be anticipate front do growth adding us long-term continue business. very that. can just We commercial includes and it that long-term development, towards

front. to we’re trying on be balanced So that

we’ve think been demonstrating the since specifically lean financial the invest, we into deliver seeing, that we’re good I second as trends and that can we we’re positive quarter. intending performance growth to

Ryan Daniels

more guess. And follow-up, then one I

I mentioned Jay, You your this think, during comments.

sales and flow change could and a long be pharmaceuticals form period seen some online that client curbside And from base. revenue have drains of your and sustains product We pickup. some a of to that for behavior

high from of they’re view teams Thanks. from that structural a or potential tailwind if profit revenue leave big kind something that on more a curious sales long-term is I’m as the really this you Diagnostics, that given vets So for that’s they’re you more that stream your Are hearing viewing focus can’t as to clinic. forward sustainable going given changes? going

Jay Mazelsky

do while, pre-COVID, more specialty-diet not on its services. are they pivoting may not that outside more a fact the both anything, an sales, obviously about delivering tradable. pivot to we have practice been online have on even focus veterinary that’s pharmaceutical, mind, going a the COVID accelerated to And practice the diagnose, very probably talk so on treat, that’s area It’s migrate trend in the by we so front. have to to it’s Keep think seen that’s you the to going veterinarians, If that. of for just nature. And

unique trend And as that that time, see a but not may do COVID it accelerate necessarily environment. positive it we existed. So to had the over already

Operator

Our next from Wright Credit Erin Suisse. from question is

Erin Wright

how of the play virtual of and the us virtual follow-up rope into into can also that it’s that that, can on there? that side, landscape, really you telemedicine how you play care because to how on give counterintuitive traction and care of Kind into and you IDEXX? kind trend how kind impacts can but telemedicine an And preventative a you the care, update

Jay Mazelsky

Sure.

than access. on We on, to the solution to if offerings Teladoc. practices it. in ultimately, pickup telemedicine, of lot visit our initial may April/May or and revised with a see would more the require restricted of cats it’s diagnoses drop telemedicine cats brings lot it to frame especially integrate so that In look Whether of has remains for the more with business, like you side solutions have interest this our software positive a telemedicine practice with seen of that post-COVID sustains sort the not to and a think, A on terms And And be marketplace. the practice. off of physical a early seen. we goes that into of the practice adopted as patient something solutions. primarily workflows the part back human It’s and time curbside

of In saw terms we levels of preventive less my of the as enrollments. in care, the quarter mentioned remarks, end pre-COVID tail more I or towards

the quarter expected. towards So type XXX quarter repeated of or on-boarding the staff. training both the was across for interest we to require is that from access tremendous in more general. of slightly were which in-clinic again standpoint so to programs end there be But less is normal that’s the piggyback levels. than programs These the movement but amount And an pre-COVID, wellness fair in entire there and interest a tremendous the on of in

Ryan’s and think a really see speak the tying and is that question, preventative does piece question service amongst we it of I obviously veterinarians, big together orientation care your that. to and wellness

Erin Wright

the competitive promotional on the or How back? Thanks. And aggressive on attributable equipment spend to cycle environment that when you to equipment versus capital changes environment will have activity much dynamics? come product willingness in side, front? in it And is any that capital on seen this

Jay Mazelsky

fairly both Brian and – provide restricted. of a from has on capital QX dramatic I’ll some recovery a equipment Yes, is couple That placement a additional access flavor. function that clinic that, We may did see somewhat levels. remained add and comments

to indicated remarks, And of and XX% network, workflow prefaces – about can We’re do just It’s pretty busy. the in throughout they also visits that. challenging integration itself. and U.S., button suite its which they’re expect it’s we access. function XX% of the modifications, but a But function, period the placing some if COVID-XX local in of time when of days in-person training an in-clinic his gaps that their able lot for have the really in recovery you a some know at the think be internationally to just pause environment in overall hit And impact into do to that much you practice in continued working year. a be the as full and without Brian requires their are schedules on

Brian McKeon

force what don’t as by that that. challenge the sales think I for date capital as being a anything changing to being see Erin, through is a indicated we we’ve something that’s pandemic, learned Yes, competitive the like or outlies dynamics, caution

In fact, very are retention we’re They levels having. about dialogues improved. high And record our levels. the positive we feel at actually

working that as through, could we’re recovery what are. grow in the market like it’s add the I just distancing things that, We can to time. from the been strong the noted, this highlight on The vets QX. a the position spending placements that think, because in their restrictions point, to vets increases, the of that industry think underlying see in about of look are front But this good demand news of how consistently more is QX instrument at that seen. a area ongoing would case busy I enhanced anticipate impact at you procedures be and in the or Jay prioritization so access is deferrals improvement, where social But a again, good we good puts they kind if lockdown Encouraging. to healthy can Jay’s we’ve that rate. some more has we relatively as

Operator

Michael Our next America. from question from Ryskin is of Bank

Michael Ryskin

bit visits, government seeing little more to hand and you of be hand up Have clear. in UK, any delineate trying France, on I be Germany, quick just just we’ve lockdown. from increase a moderation want start, an any trends a in I’m an seen one uptick. like could of in markets on to whatsoever the came on impact earlier. COVID that like to one Jay, the some European to the other something where seen the increase follow-up - cases an just you specifically in

want second wave but but it is really doesn’t noticed region I clear previously and was the the that think it. the the U.S. sort what of if bit if look first seem it the more of to by drove really so seen an data And at like was be key parts there we’ve some is I is that we you’ve far, wave of advanced. the a where impact world little in anything lockdowns

Jay Mazelsky

Well. I will - ahead. oh, go

Brian McKeon

that. recovery, kind of some kind expect of in QX don’t I to kind held same report and just the rates in moderation we this, if some context. you would know Europe into markets with QX. the and so say up more pre-COVID of will, wellness And wellness kind benefit, just the of well. in this kind do the level can well of non-wellness U.S. was of terms towards saw talk in you’ve strong and is that’s pent-up I maybe sustained on The of some that visits in And type data, have demand you in benefits but this the we were care. solidly - very Mike, of in Yes, just Jay what seen even sustaining pent-up gravitation we international markets Asia growth the provide demand from would volume they how late context.

look so it’s how a business. been early think and March impact new to And factor Clearly had at in April. lockdowns might that I back the

markets services. the think I here continue to learned provide have to adapt to

and a cause to there earlier front. constraints this some that on mentioned think As but early any impact demand anticipate I it’s you or for us always on projections make instrument chance is placements, of would underlying could I selectively areas this services, we prioritization know some like think could

Jay Mazelsky

Yes, a couple build points. those on let of me just

policies. international as distancing social biased in-clinic which more as sick impacted well testing towards less non-wellness or markets are COVID-related patient Our testing, is by

internationally, from and point wellness. we in less usage than testing, bit little seen between or return we what to non-wellness And of flavor also different the or Brian’s to the seen the It’s and non-wellness so close but split with a levels a more is So higher. XX% percentage standpoint pre-COVID diagnostics believe to have we’ve a mix U.S. the is

that hopefully on So impacts potential you some flavor gives

Michael Ryskin

so more you the West the parse looking me, in has indicate spending posted for that does that of investments going on It right, website, a into some it’s as wave Midwest guys been, second does follow the forward. for in U.S. of the snapshot the can. and Brian, region the where it at on that’s And the up seem you’re well. kind has really just now stable. Quick you you like little much as And held and

free obviously very earlier, touched this strong on cash You flow year-to-date.

and forward of You What XQ beyond are else international up again. into you be? go talked to with How this ProCyte. a talked detail comments sustained going this bit is Is going you the Could And capital some things level on more ramp changes some the to is on Or in little you then in R&D the going about sustained higher pulled early forward? spend starting the be about to year? any investments you going to there’s there your if that’s also catch-up maybe beyond more this going be share back a front, new deployment buybacks? targeting? the

Brian McKeon

a higher be are front we a of and at period a of to pulled we a business early have tried where we’re lot going Yes, the growth. many underlying froze we good on And where ensure on tried us of really to level back high a on on place. we’re period unknowns through with transitioning cautious level market in from investments hiring companies, compensation like in now confidence a and growth. with And

frozen, our are things going We And hiring advance thinking wanted had with. ready and XXXX move to for about and manage new to getting and business we forward. that positions to we’re going we starting we’re forward how

and underlying us going labs forward. COVID for in more kind in volume the market to the think We’re keep ensuring having indicative our staffing impact I and And confidence that growth. of XX%-plus we’re our a business adding this how higher to try is prepared up may with of level demand of

that, doing year a in salary are reductions reinstated and conservative support on areas, central now. and to that that things place reductions like I and in the earlier we’re quite better And up like can XXX(k) catch things were we compensation and tell accruals that. in we reinstated We you

healthy we’re and bigger So we can and do and the very some going that’s aligned ensure looking But we market that financial I well delivering confidence growing that with rates, on. that business is supporting we’re that while to that think and our is that’s long-term towards performance investing there goals. of want have that picture a here at at our

Operator

from Stifel. question next is Block from Our Jon

Jon Block

one, One us details. XXXX might question essentially contribution, don’t just throw Thanks But things And you I be. it ProCyte or you. we’ll at Maybe contribution think that time, Good the Morning. expect and the year can first for with two the guys. what if or help start I’ll conceptualize and through

think units-ish base I I XX look was your months. if X,XXX XX,XXX. SediVue And in the is over snapshot over first your hematology at

ballpark arguably it a And can talk units, that’s is Jay, because so very be urine dynamics, if type were to Should that’d X,XXX greater the of just XX% pioneering about you helpful. and base maybe replicate sediment good a be clinic? to this in think to should was launch? turn SediVue in that you that SediVue somewhat if that that

Jay Mazelsky

Sure.

from that of ProCyte to a more that ProCyte is a your for mind, of the consideration. But think there’s presale just is lot interest it One it. into One Catalyst point, I reasonable America period the placement established the quickly One, Catalyst analog about then benchmark Keep more as for plus there. of in One hematology two-thirds marketplace. had To pace you as the standpoint belt. I thereafter from think out a longer standpoint, first than a benchmark North really - is opportunity it a so got and a follow take is in more where internationally, I the we’re rolling nice, think certainly, There’s way

consideration. that into So to you have take would

it’ll One very rate ProCyte have is, high thing have will chemistry. other a The believe we - a attach with

to So to and ProCyte chemistry, say just hematology Brian, add to account site upgrading and or just did hematology place laser suites single really of our account. a on is anything focus competitive taking let’s able urinalysis One, want versus potentially, being a that? you

Brian McKeon

No.

right of I all background. the think that’s kind

noted, Jay rolling - And phases. how of Catalyst will as One insight But be some on as out feeling on this - launch gradually depend exact we get we’ll call, is give outlook. closer a that so of some timing or we’ll how year-end we’ll through we we’re reasonable think the provide how that that the of more I year about benchmark. the think more this to I indications

Jon Block

long when margin that XX overdue XXX I’m recurring Brian, throw But even expansion years clearly year is about I just off from some bp is we in I a just think are I’ll you’re But equipment’s not want just notably in next question your so And can and XXXX, of your thinking margin if on should and you the and guiding. be I’m goal a words, temporary place. in as in in just ripped. you going this - salary know one margins about reductions takes. pivot had goal, I’ll you next one been second we shift to puts talk this how with don’t They’re benefiting for benefiting the check ever backed mix way. year; perspective, I to down And outperformed. significantly from the where And right, other the

that the I just out And so thought of the to threw sort XX you variables to about bp XXX Thanks. get next rate expansion XXXX, for next into some into when we have that we year? at do Or of we do you stick to year? as normalize think of

Jay Mazelsky

shooting Jon. goals, We’re long-term the for same

in So guidance, to CAG you it’s support we’re goals deliver reasonable Diagnostic litigation certain that’s, in us – high have specific in things things is executing puts that you this that can we XX highlight, adjust and kind Clearly, we long-term the goals. growth of for try providing business. that good growth, same you we are And not like as recurring the of well think nature we estimate. to we’re to accrual deliver We have our but XXX a position know, know, that think investment and very But it one-time when a in we business. against right. the the

business. more the goals for to on follow same that So but

Operator

Sachs. Our Nathan next from Rich from Goldman question is

Nathan Rich

maybe the CAG Jay, start, you business. highlighted kind the to a of impacting growth trends of favorable in number diagnostics

you bit were pent-up beyond, longer a could how term those that like about dynamics CAG term. shorter-term like guys from see the teens. and subside think factors X% been at we As new of maybe growth quantified it to even into and would X% there mid saw you excluding But think high demand some have growth that the quarter, translate you looking that maybe to from I the guys patients into in this about little kind what diagnostics XXXX longer still growth seems

business asking you’re be I’m what trends growth type feel based on that would in that CAG the I recurring So like sustainable the do that longer-term? of seeing guess you is positive diagnostics

Jay Mazelsky

give Yes. that. some on I’ll additional you just maybe flavor

think So of demand that just piece aside I I through lot QX. a the from a worked because pent-up standpoint setting think in wellness

rather obviously going if maybe longer-term So lot from we trends is standpoint the something and three the sustainability tracking the that to visits, care, new that kittens new and that as we’re that two is is to clinical think a age. puppies need a or there they patient and of they’re that marketplace

a of whole intensity in data it’s terms pivot see that time. use we use and that’s more over this in average dollar diagnostics, And I volume. diagnostics, intensity when and a include And how service, develops visits positive. more tied and up then spoke So of to they higher to certainly want use at diagnostics to and that’s

to of to our in our being the commercial veterinarians innovations terms able them And of some in it and and control allow cover that tools approach more. is that to provide

be So top of an that’s accelerated part veterinarians. we’re something the seeing that even in think and services we And pre-COVID, we’ve to it. of it on pivot I on fruits may see of that invested certainly the

the So for positives certainly, those business. are

see we to I more and at think time what play how level. need they just out

Nathan Rich

CAG could And then we questions segment than maybe the follow expected. at margin had up John’s looking if on margin, specifically. Gross stronger on was I

quarters mentioned quarters? that productivity, on to mix, next reference that seen segment? and past CAG labs obviously driver for relative that’s And of over over kind the Do or sort adding favorable specifically, with the maybe the price reference the then you what called any several drag Does think we’ve out create one of I you gains. staffing. two like sustainable the feel lab you

Jay Mazelsky

lab grow-through percent we’re we driver kind growth had when costs. on sustained And of Big lab was business. XX% projecting of QX the levels in in XX-plus productivity not and controls kind

the We’re trends. encouraged by

than – to we we’ll need is something more think lab to that that’s and productivity, continue that moderator a that’s it staffing. be But to do a if So able is headwind you get will. add of we

continue gains going ourselves position business, a positive do in we’re we’re back trying some I in think to and So good get to we’re CAG investments and to highlighting just the gross you we think growth, adding position margin have when forward. that recurring high

of and development. our to So just something also it’s deliver long-term improvement, heading what year. are the but next to XXX of bps that that’s towards to more moderate want good we’re into continue will invest And that as on working And ensure we we goals gains. XX reinforce, annually market we’re to performance,

Operator

a have from Guggenheim David Westenberg from Securities. We question

David Westenberg

great a Thanks for taking the and question, quarter. congrats on

revenue the benefit tend we’re in looking macro the I reason I increase we’re and over a per-visit at when quarters data between seeing the year-over-year two of on or think being volumes, think basis. basis, Diagnostics gap So a last for about to as practice maybe volumes. and maybe revenue practice a

am actually And the reason you’re I would the volume, look So into that cause increasing is how about like of you kind above in this the about next volume? lower revenue company factor practice to that just about this and revenue? then the we and I we factor be year thinking way think this expectation, right practice the factor of to model and actually major thinking thinking why on be should as we a in should about – if the we how – growth? Or be our above ask

Jay Mazelsky

been address obviously levels. XX.X%, revenue on year. The XX% a We different recently. saw let to most growth practice so try that yes, has Well, strong couple very the over me

clinical than believed has But I on a that how all caring the best, being for faster patients. veterinarians So think for that’s your – Diagnostics the we’ve what patient reasons always positive Diagnostics obviously the that, that and into sustainability growth and that longer-term services the is enables feeds demand able around as and discussion we And services, for to backdrop new to our previously see drives is well question as do obviously, been visits have the as meeting focus which interested plays we’ll out. and practice. pivot cited, within they

Brian McKeon

bit we the Roughly mentioned that the per frequency, practice, was of Diagnostics. per help growth with years, that in maybe Let per referred me Diagnostics over metrics X% revenue average visit give on of call, last if came about little from over last is contribution growth you that, Jay down the a you percentage practice growth. five it the years. five of growth from X.X% break a in so which which some about visits increase was so revenue X.X% can include this that X% the Diagnostics was revenue And that’s that visit.

seeing contribution we’re X% X.X% frequency what from increases. year-to-date clinical revenue from a So increases, and X% from growth, visit increase a is

frequency we’re this so which is we sustainable? and about like to central and be this going Is the see learning on the And of Clearly, that But visit this. clinical over answer time? Kind the dynamics both what’s to Do here? dynamic it piece, question, question. coming expanding volume, understand. is revenue we’re would the your

could service the new perhaps delivered, us, diagnostic through and overall, some healthy frequency of there’s trend utilization changing some this trend the the that which how it’s are think can has things of that long-term growth? So the of of benefit set going question But pandemic, expanding it, the I some is from learnings, and the it. terms for accelerated is sustain. for been underlying patients a on to predict some stage early being In

it, do encouraged and market. in certainly been what we’ve We’re the with consistent it’s to trying by

upon. that to build something look it’s So we

Brian McKeon

I think to… of so out unfortunately, going we’re we’re time,

Jay Mazelsky

We more a opportunities animates appreciative I of some employees the express their for and while everybody I the still view company the these during the on purpose in we And the have the delivering also way long-term to of calling IDEXX a thank work. in. want that to couldn’t us which be ahead who Yes, day. so takes know team my our times. challenging of obviously are call, want for gratitude performance run I and extraordinary

call. with Thank we’ll you. that, so And the conclude

Operator

concludes and today’s gentlemen. That you for ladies you, participating. Thank Thank call.

disconnect. now may You

IDEXX Laboratories (IDXX) 29 Oct 202020 Q3 Earnings call transcript