IDXX - Earnings call transcript Q4 2020 | IDEXX Laboratories, Inc.

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Operator

Good morning and welcome to the IDEXX Laboratories' Fourth Quarter 2020 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. 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

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

Brian McKeon

year and XXXX. an to our provide financial overview results you through for Good morning, everyone. and pleased I'm our XXXX outlook fourth initial of quarter take full to

operating snapshot. Diagnostics driven of XX% of The margin operating gains Robust basis. revenues. CAG high of by Full CAG growth, comparable a margins revenue growth constant XX.X%, on EPS of of reached increase Highlights in share, position per $X.XX combination CAG basis. market year XX% points an expanded full nearly trends recurring financial in gains performance organic year outlook comparable key press shown XXX currency operating XX.X% a overall release revenue XXXX. constant and to organic include revenues. information and strong full XX.X% initial an revenue table in XX.X% our growth, and metrics to financial growth providing supported for in outlook Today, we're by and us Diagnostic revenues. an Diagnostics through year expanding In terms continued U.S. reported our growth growth excellent the increase fourth health recurring organic basis on Diagnostic delivery increased and recurring supported sustained XX% reflecting at in care. supported of international Revenue growth IDEXX visit across results demand CAG high clinical XX% by quarter, financial as markets organically, organic delivered growth XX% trends driven CAG levels companion QX, for global strong animal by in highlights, included and revenue and achieved high nonrecurring $X.XX which supported $X.XX outstanding from recurring margin and tax benefits increased benefit proactive of revenue diagnostics. Strong XX% in full and year XXXX performance, financial in our benefit of controls IDEXX supported compensation growth Diagnostics of a cost EPS, achievement stock-based long-term growth CAG tax utilization CAG Flow-through goals. delivery full year activity. results above XX% for revenue recurring an currency for from $X.XX continued

long-term outlook aligned strong targeted are our point These basis, XXXX to building EPS operating comments. outlook We'll reflects goals. XXX currency later support comparable to constant on discuss gains constant with my improvement on financial XX a XX% in XXXX comparable performance. a Our margins projected growth, to currency our in basis XX%

LPD of human growth gains gains COVID-XX revenue $XX was and supported recent international XX% and by fourth a U.S. XX% growth XX% full revenue and million in our of by to quarter reflecting the with CAG market growth in Overall, was or contributed OPTI revenues, pandemic review in quarter IDEXX and X.X% pressures, from results organic business also which our benefit test XX% growth year gains decline driven and growth in XX% begin revenues. trends. approximately of organic Strong recurring instrument Diagnostic markets. related by growth year-on-year in constrained our XX% was water organic organic moderated initiatives. a Let's Fourth overall VetLab

with healthy noted, sustained gains the CAG Latin levels Asia recurring or gains through fourth regions. America, American growth global revenue North higher Diagnostic markets XX% CAG at high Diagnostic in Europe, As Pacific across remain recurring the organic CAG dynamics and revenue quarter. achieved

X% year impressive support CAG growth XX% to in both patient same-store An markets. focus from in estimate on visits. wellness veterinary full Diagnostic increased XX% and visit recurring same-store growth to U.S. clinic QX, strong health X% For X.X% U.S. added growth an a overall recurring markets. veterinary which quarter. program continuing initiatives high QX including investments from organically same-store the U.S. growth continue increase in reached gains overall clinics XXXX, to expansion in XXX in clinical in QX, visits, lab benefits clinical Overall, X% strong increased continue to by care including market X% increased services, in higher XX% revenue lab global wellness growth visit support is gains in driven of high up an international high in and standards supported commercial positive wellness visits revenues and growth categories, drove visits XX% year non-wellness growth the care U.S. in improved in visit to revenues across our in diagnostics, higher gains XX% from high full from we in by revenue testing be in to benefits well in factor the testing visit testing to and led reflecting dynamics organic gains of IDEXX's growth X.X% QX, clinical teens growth reference Diagnostic the modalities. A capability, U.S. across increase High X% international organic of QX IDEXX clinical wellness quarter. CAG the the Reference sustained growth in ahead international visits. and XX% first-time aided revenue an support clinical technology high with to overall to levels of volume major be markets. mid IDEXX and agreements gains and organic These program nearly growth in in to growth and by

growth and global supported in supported in increased full-year organically, VetLab For XX% in revenues high the lab in VetLab by approximately in organic markets. mid-teen revenues retention IDEXX testing international markets. utilization overall a These on international in QX, reflecting levels high expansion an increased XX% growth reflecting our of organic year base. XX% gains customer and to regions, consumable IDEXX XXXX, Gains across consumable across the XX% full U.S. U.S., growth installed be dynamics global and XXXX. increases basis continue revenues premium

XX% below upgrades. a of Catalyst QX $X levels, included half placements In placements below prior revenues improved restricting representing XX% the decline. high year CAG million in vet strong While solidly continue prior were constrained be CAG XXXX. pandemic to international organic have which – instrument Overall second instrument over year-over-year by impacts were year strong trends revenue to levels, sales of clinics, global access levels QX, restricted

reflected America a were placement results to high. constrained year degree and of These overall Globally, were prior levels. accounts levels in placements new pandemic, competitive and competitive the instrument placements and in compared down CAG new North While by approximately at placements strong XXX placements and international new quality to accounts markets. the at remained competitive X,XXX X% Catalyst

XXX customers. to globally Catalysts high-growth We also with placed our second support

high levels premium drove year-on-year We supporting year-on-year a in global New placements X,XXX Catalyst hematology installed XX% increase in base. hematology achieved XX% our placements base. expansion and a our in installed retention continued premium QX, customer

bringing XXX in including global assay placed in driven high-growth with SediVue installed organically instruments, in gains XX,XXX the to We base U.S., gains also robust QX, broader wellness nearly up by demand clinical Rapid year-on-year. for testing, our diagnostic analyzers, XX% increased in aligned XX% business. revenue SediVue

gains revenues recurring revenues revenues recurring remains Overall, For in specialty diagnostic our business, areas XXXX. gains were CAG price In the X% net organic rapid increased to price year growth strong We're was the growth system service placements moderated revenue solid by new of X% and XXXX, primarily fourth canine, volume-driven, in lower in imaging in placement and our improvement net CAG augmented diagnostic feline gains testing. levels. of diagnostic system recurring by X%, imaging planning other for software levels volume in for overall reflecting X%. and quarter. Double-digit consistent full software of CAG organically revenue assay growth XDx, similar veterinary

on by increased revenues imaging services diagnostic and strong new software placements. veterinary in offset organically, XXXX, year pressure gains imaging were software full the system For X% as pandemic-related

organic as activity. impacts posted our Turning in other XXXX on full to modest by compliance contributed in growth non-compliance-related revenues revenues. business year in Water Water segments. a solid pressure to QX, were organic These decline pandemic-related testing offset X% gains business

have efforts pandemic-related While Swine year in Fever QX, planning as volumes Dairy driven core diagnostic supported in for improved levels screening organically growth non-compliance in region. demand by our high Poultry increased strong LPD large work export in impacts. to we revenue to relatively, and African our producer compared herds. strong health in for China, recent testing offset gains we're to markets results. rebuild Better-than-expected Livestock, trends Water Asia-Pacific in These swine uneven testing lower reflected through business in results XXXX, by demand testing programs for and swine continue in continued gains XX% herd prior

full revenues organically. XX% For year, the LPD increased

growth from see Swine of ahead the African to benefits programs. to step-up constraints lap expect XXXX XXXX, testing in we as rates revenues the LPD we Fever on expanded Looking

the flow-through CAG gains. in revenue Turning were results QX operating P&, profit Diagnostic reflecting very from strong recurring to high

increased strong reported lab points a on year-on-year well XXX results fourth the by quarter. net operating prior profit CEO productivity reminder, were growth impacts results year Operating in in expense instrument net for QX impacts, basis points reported revenue and in in Relatively transition benefits on on from lower a constant a charges. lab constant and X% gains our CEO increased Normalizing comparable anticipate from We currency growth these $XX comparable accelerated reflecting increased sustaining CAG capability. basis growth growth operating and a profits reflected operating comparable a on and of transition enhancement forward currency XX% mix XX% as commercial and in as higher we as excluding as improvement. moving XXXX margin on points margins operating reflected a costs million revenues impacts high from supported support global basis, and These of of in constant XX% increased price basis charges. As a investment Gross R&D increased moderate as the relatively Gross strong by XXX currency QX compensation basis consumable global OpEx favorable organic healthcare impacted sales higher well incentive rate operations momentum. basis expenses gains. profit basis. basis, our our XXX

up margins points and XXXX, reflecting comparable CAG on from year operating XXX full reached the For high reported cost XX.X%, points currency basis, basis Diagnostic XXX benefit revenue controls. a basis constant as and growth

to As strategy. $X.XX in guidance tax highlighted QX per tax long-term $X.XX per The with as XXXX, build was compensation performance growth related for including on our benefit in high non-recurring this targeting and share return we're share, advance in benefit $X.XX share investments activity. we initial to aligned strong EPS share-based per in our

constant XXXX, tax non-recurring basis. benefit and basis related year XXX $XX For XXX year from item. the included a effective the rate provided EPS benefit per or also $X.XX, benefit to points which $X.XX comparable of of rate up currency full million share-based or was share XX% on tax effective results tax Full EPS basis activity, points and $XX tax compensation million

$X dollar. million. to revenue terms other favorable profit exchange nearly losses $X operating of impacting growth hedge results, net effects factors and our have QX, X% reported weakening given million of of foreign of the to the recent In turned In QX U.S. approximately added FX

rates For our XX% are $XXX German now of million. gains EPS headquarter income conversion FX was per of decreased XX% at million year foreign XXXX, hedge complete. and share, expansion net adjusted full by the our exchange cash which or flow investments for $X.XX Free cash Westbrook net lab relocation, of Free XXXX. for $X was flow

in X.X is with sheet borrowings times with balance We strong and times million cash ended net outstanding position. a XXXX X.XX ratios in $XXX of Our cash very of leverage and in quarter, on billion didn't no gross strategy. $X share the credit our QX, long-term share have growth to repurchases fourth reinitiated in revolving We confidence reflecting repurchases but our allocate facility. we capital in

outlook. our to XXXX Turning

environment outlook other financial release included metrics, revenue and As in table it terms and dynamic recognizing our remains initial of press our growth for that snapshot reflecting forecasting. a in noted, a we've key relatively financial

Our CAG Diagnostic outlook XX.X% to centered initial overall revenue for estimated to growth XX.X% organic is XX.X% of of range growth on recurring organic an XX% revenue.

revenue Diagnostic premium full of IDEXX strong and into a clinical outlook on year As clinical approximately for trends is visit X% with growth of the heading recurring U.S. XXX same-store growth strong recurring growth the X% to consistent CAG revenue pandemic. benchmark, momentum this projections U.S. basis points, growth for XXXX a visit growth X,XXX building to to XXXX, with our aligns which

XXXX each also our levels reflects the year. strong comparisons plans drive Our Diagnostic continued the of very in to half second recognizing outlook while revenue growth high growth to CAG recurring globally growth year-on-year range

terms overall revenues, moderated will from continued in growth half estimated pressures rates from certain CAG growth, in the year. growth for instrument given in of overall including benefits year-on-year this LPD water there expected In that organic in comparisons higher as demand. noncompliance expectations quarter business X% launch and testing One likely variability growth related XXXX. with of are tougher capital growth revenue net year These the COVID of an lapping growth such revenue note first Please ProCyte significant factored our prior be to COVID by higher be in the by areas positive benefit impacts Diagnostic we impacts,

financial key XX.X%. planning targeting to annual to higher momentum to points OpEx XX.X% lab margin reported solid we're our reflected continued we relatively operating is and margin operating support staffing improvement outlook of constant for benefits in for in growth. to Overall, noted, metrics, mix strong XXXX. anticipate of support trends. forward XX currency as basis terms XXX growth This a We're impacts gains XXXX rate from some gross high-volume margin with and product In we of comparable growth moderation moving sustaining related as of increased a

some We pandemic as also travel claims in care restrictions relative and eased. costs, such expect costs are related certain year-on-year health in increases costs areas as employee

will XXXX to positions. foreign benefit impact to X% at rates. a provide projection incorporates leverage our expense $X.XX exchange outlook positive of revenue positive interest XXXX of assumes outlook rate be release, We've exchange FX for Our net recent approximately for estimate net net XXXX. At a X.X% an in included shown exchange in growth in the maintenance press factor that net and a EPS of consistent established hedge relatively ratio in we

share Given outstanding. average growth reduced benefit year-on-year repurchase XXXX; limited projecting we're EPS reductions shares from activity in more in

per higher to $X.XX in related Our $X.XX XXXX to estimated to $X.XX share includes anticipated than share-based an per activity compensation outlook tax benefit a much of share compared XXXX. benefit

expirations and XXbX-X Our XXXX option estimates reflect known any plans. established

strategy performance, financial managing long-term on while growth environment. terms in results, prudently our be year XXXX our focus full advancing our dynamic strong delivering of In will a

towards continued turn review. aligned organic That Given in while CAG growth-oriented long-term operating comments. margins, our our the to improvement to now his in inclined Jay in lean delivering I'll investments for goals. business, high-return momentum the call our concludes we're financial strong over with

Jay Mazelsky

full expansion trends year Brian, and Strong driven XX% market performance to of capital. Diagnostics had growth, IDEXX morning. operating growth. growth recurring on CAG basis a CAG enabling deliver overall invested return to constant XX% strong margins, Thanks, comparable XX% exceptional currency QX, good us and organic through outstanding a XXXX, continued finish by on EPS with significant revenue our

key in we're emphasis well seeing strengthened build we to are the we've and managing steps core I'll of commercial the on trends customers, our markets in deepened initiatives momentum the global business. in of on provide rates an business update dynamics advanced areas that also an agenda. Today, I'll connection growth growth supporting our key of our our XXXX. in us These some provide with of on year. and achieved some elements our While position innovation our capability this update impacts, impressive our pandemic through our

with financial how I'll a in the initial manage dynamic plan what we outlook aligned Finally, environment. macro business, our to discuss remains

begin trends. on an Let's update with market

see strong in Companion new visits an healthcare accelerated same-store reflected growth continue trends in the care. patients of We and in clinical Animal in U.S., higher to high-growth growth in expansion

pandemic We also international solid despite saw across sustained markets, impacts. market recovery

clinical Brian As the by X% of growth noted, visits were X%. overall up in wellness strong of U.S. QX, visit same-store led growth in and non-wellness, XX%

we effects. consistent the visit years, in clinical due X%, year, approximately recent growth pandemic to full seen the though by with wide For growth with variations have quarter was

Clinics sustained feedback trends veterinarians new by growth early consistent. supported are patients. market of higher U.S. have from continued demand with into very in Market XXXX. levels remains busy growth high Solid

Our indicates increase X%, in pet XXXX X.X% patients in of evidence overall a growth U.S. market same-store X% versus to reinforcing in data to which tracking new visit the in of There XXXX XX% robust population. QX. growth be in growth an contributed estimated continues the clinical incremental clinical

year-over-year we've growth the as in half test in well step-up new a indicator, pet the an As second XX% IDEXX patients significant progesterone in clinical seen a XXXX in as with U.S., parents. first-time of revenue

X% we've are the visits more a growth revenue in of driving by in been number of of with the total for significant XXXX, even the XX%, XX% growth average revenue in reflecting care. New There performing diagnostics half this, owners visit, provide the trend time during with has same-store market checking approximately QX clinical veterinarians the XX% the of care. even step-up second for capabilities, up a grew patient may visit diagnostics veterinarians may XXXX more in per which attuned They commercial of core a procedures during U.S. pivot faster services clinical in We’ve saw at into also marketing staff programs. year. continue their the with conditions be as and practice care. health and pets medical calls. diagnostics delivering is recent clear to revenue prior growing enabled pet standards customer-friendly per as full higher expansion in noted the increase diagnostics value year. as owners accelerated our their required for faster per drivers runs, diagnostic business, on to clinical We per growth practice growth are revenue strong Curbside per Diagnostics Pet their And leveraged in Overall test practice. more supporting our proposition. veterinarians pandemic. helping QX, augmented the and focus to pre-approve by helping, year XX.X% innovations in backdrop U.S. the of potential spending to generated practice be revenue

a late a is For focus revenue into in backdrop testing full raise XXXX, compared product they care standard with U.S., commercial now strategy and heading XXXX. One, next-generation approximately making dynamics Veterinarians an of veterinary our a this there is ever, pandemic. customers final ProCyte access and basis and are example compact considerable launch. highly for experience the A growth, QX. Diagnostics expanded to and revenue in This is run especially and represents strategy busier diagnostic X,XXX the experience, and recurring our context. year believe premium range opportunity continues of a as our affordable, up easy flow we market in CAG partners our XX.X% to broader to ProCyte the before to streamlined in planning cash the range is healthy XX.X% phase inventory growth hematology Field consumables to hassle-free. be chemistry outlook high With through organic and which overall ProCyte basis commercial in through XX.X% innovation marketplace is growth economy together, paper North adoption QX, continue momentum We advance XX% to the a in-house we our our thrilled to shipments revenue to unknown pandemic organic are solutions support are Customer stages point management. CAG significant growth presence great X,XXX for Diagnostics next pet XXX delivered One’s hematology auto well, visit customer, our relevant. with global trials the expanded to is One growth IDEXX expanding recurring work instrument, in the We're of in and want trial hematology initial healthcare, with to replenishment our business our management recognizing innovations. to and America in the of utilization planning and clinical analyzer business, functionality the reasonable point-of-care points footprint. growth than to unlocking CAG There by the will anticipate in to XXX of beginning support but early proceeding best-in-class diagnostics and reach model maybe its the of makes in internationally. from

customer As experience we trials. complete

of We will beginning with follow an international QX. rollout

to volume existing new expectation generating awareness commercial and in as our hematology are our of is build hematology placements. solutions raising our hematology strong throughout class led organizations Our as driving marketing of by is in-clinic an interest This appreciation and increased hematology portfolio. well world XXXX. Pre-sale efforts analyzer,

Another key of analysis. is urine innovation leverage area

Our commercial our to SediVue’s capabilities. enhanced teams about awareness raise continue

the or a for detection veterinarians practice analysis. could Bacterial painful bacteria. of In this not pet with accessed important bacteria help solution highly are for example, visibility sediment the within or SediVue's early pets case, absence detection. advanced owners. are, providing diagnostic them the better the informed the real-time allowing kit, to more part presence decisions bacteria value stressful have most whether for to detection of Now patient bacteria them common window. Customers of make practice, for bacteria UTIs With Determining be that is is advanced present often and diagnosis medicine.

our of SediVue America. outside technology XX% technology an in increase through We to than digital our our through North team a service markets a of pathologists. in cytology in our clinical enabled of Innovation international in interest many delivered strong our And for driving adoption is base our life forms. global continued example XXX installed also year-over-year XXXX, for platform Innovations saw new and veterinary platform. strategy imaging drive offering SediVue take over greater personalized can greater

customer and results We appointments Most for needs. IDEXX efficiency business clinical with in have premium integrated the practices following customers, enabling Customers accelerate in their service and and cytology integrated and are combined cytology our placements benefits by revenue trends treatment with We'll with reference the placements important daily satisfaction instruments feedback XXXX. and how being cytology more customer Patient we integrated It's one-third these workflow growth same-day of world-class well way plans. its digital Android device clinical as launch in program and PLUS, of expand QX were example Many some are XX/X/XXX in app. with the or point-of-care as the VetLab into placements are schedules part on almost ratings, and factors new great with additional realizing With a watch labs. management adopt were their point-of-care practice major exceptional VetConnect attracting an been continue VetConnect analyzers. of systems seen any the support we digital of opening in utilization have PLUS a iPhone pleased available strong workflow. as mobile fully instrument uniquely closely support category. in to that placements

initiatives. our accomplishments to an update commercial and let's on transition Now

customers growth organic with allow spend time results to outstanding which accomplished an strategy. returns investments more the We highlighted be execution, that Our commercial see we in us high person essential in in disciplined in have our past without or virtually. couldn't pillar as

the in last with As call, leveraging of country we've made efforts have expansions, markets. our U.S. long three international noted a history expand progress to excellent commercial on significantly footprint we

trained and half first U.S. of year expansion customer pandemic. complete latest tenure We has talent our pressured in hired, to sales completed team year. the from ago customer onboarded productivity, now, all the and about the access and expansion relationships this We the against on building ramped track COVID-XX have are new and a force

constrained In in-person In year manager new account international levels a of to They to modest levels patient and were visits. continues Our Catalyst overall to account in acquisition veterinary customer of as sustained North by traction QX. premium supporting and gain than second improve our and levels placement team's supporting international support in-person second at VetLab markets, high customer somewhat focused levels remain prior continued placements. usage instrument IDEXX the These in levels year XX% levels, sequentially had markets, were visits practice as due year performance America, placements access managers in was customer placements priorities prior almost we up competitive results exceptional, doubled restricted to volume on demand. to in including visits clinics practices Europe. reaching high major Catalyst placements year-over-year QX reached achieved access strong customer of instrument lab while full placements in-person in and despite XXX placements, to catalyst reference or prior and significant suites and well increased catalyst pullback XX% more commitments. QX,

high the While likely that policies spread we social of distancing challenged are commercial veterinary relaxed, expect will and are to pleased sales level until our continue execution. measures with combat clinics access to we professionals be COVID-XX very of to

global the advance positions and the initiatives to in preventive resources expanded like pursue opportunities vast us U.S. commercial Our international well we markets care see in

with wellness We continue kittens growth of implement in approximately puppies pet enrollments a build has QX and the levels with support and market. enrolled pre-COVID healthy care Program care healthcare run program expanding category view existing now X,XXX. a means newly and total interest growth the relationships enrolled never were to in as line practices as and high new Veterinarians see customer-centric bringing our levels visit better in establishing of preventive preventive see tremendous important more Care Care an to customer to pet in we customers, over Preventive program health both rates, practice pet as deliver more been The IDEXX to owners. the care Preventive practice. timely XXX and of

year. and North Our our growth expansion installed The had the an a placements PIMS PIMS record-breaking cloud-based double-digit globally, with and software recurring full exceptional growth year of XX% strong services in supported subscription customers America over also and number in base our software revenues. portfolio of for

enjoy Our momentum. to solutions, general, in cloud-based continue excellent

Web For X,XXX customers over example, utilizing XX% we have an PACS IDEXX year-over-year. offering, our now increase

We has of to elevate center be COVID-XX for mobile-centric and insights solutions practice clinical and Investing data efficiency. software care the further and tools our cloud-based will for to the needs. increased workflow enable continue area customer that deliver solutions an workflow need deep continue in only to on And high-quality pandemic our us. patient strategy focus

our of Diagnostics growth lab the business, supply lab the European didn't XXXX. achieving in accomplishments keeping up remarkable focused this on-site is while of Take the recurring reference teams, an highly Court has where CAG safe Notably, at logistics lab And employees miss our were experience in our for chain XX%-plus sites on customers like an operational but with new challenged. supporting operating times Next, opening operating well. exceptionally beat highlight XX keeping in transportation reference only since fashion, and has and a at they global second customer Throughout while and record team a X,XXX Westland business. number networks positive half organic I'd XXXX, lab revenues our been to in It uninterrupted continuity our did sharing example. environment open not of and facility. approximately our reference for May lab it assessments is

make to remarks, the highlight positive lasting and serve. conclude today's our impacts to I Before communities efforts I on we want

support announced established IDEXX last we charitable donor-advised activities call, recently a the aligned Foundation, the on purpose. As with our fund to we

Veterinary well fully been which of support has has Fund IDEXX Scholars' most veterinary more Medicine, in educated funded of support engagement the proud recognized and of advancement our the that I'm providing of College create impact inaugural, mission and inclusive by opportunities, outcomes-focused health students. positive Tuskegee veterinarians. the nine to lasting is for initiatives. wellbeing the access people, nation's for veterinary support environment to area the Our to diversity school medical diverse mental share programs An as as veterinary U.S. animals The as than Tuskegee learning profession XX% in African-American focus with will and and the through multiyear scholarships,

excited purpose important are We in and this mission. initiative of about support our

thanks collaboration responding rhythm to wish of XXXX to a a never and testament we've experienced, was turn operating my And and more purpose-driven that year way maintained in questions. year in our focused employees teamwork, an we and required. for remarks. at the the I a that of The the express time We that team's challenged employee the customers unknowable for have face professionalism like record innovative stayed achieving our disruptive of challenges. pursuit resulted organization business, We couldn't a circumstances in concludes year the for agility in The be exceptional on high performance for our grateful resilience superb purpose. gratitude and new I engagement. Q&A, IDEXX. some prouder is to opening while a organization. with the all while serving my as in levels now culture Before to

Operator

Michael have Bank session. Ryskin. America, you. And of go the Please begin And Thank from we’ll we now Instructions] [Operator question-and-answer ahead.

Michael Ryskin

for attention the going forward, most and and on the with investors taking Brian, thanks the to all. your first where where comments the the want most question, on had guide of we've outlook that's and of quarter, is. start I congrats the Jay, from and feedback Hey,

XXXX, growth clinical If revenue single but of of XXXX to things from more said as XQ you they're about mid up with you line little whole with in step-down sequentially other what think XQ digits. diagnostics guys utilization, we're year, next a a just clinical visits what seeing about visit bit bridge, being a XXXX, the still high parts in of

wondering, landscape, about bridge, any half, continues conservatism in just I of back year is, of would this pre-COVID my or and the does normal? the little something next your I'm when those how once to baking year, beyond? question of this next on rolled of the revenue bit thoughts out tailwinds especially seen that your we you views go the are reflect bridge what these vaccines components guess COVID a we and the we've second of year are for to half second you So refer think and in are like

Brian McKeon

don't trends. I I'm why in can Mike, the Jay sure off, on broader Yeah. start then and weigh

And we growth top think the our as very DX for I rate know, end the business. range of got on XX.X. I very we of CAG you healthy healthy we to a the the full range, growth had a think XX on this of think, for year we've recurring outlook higher a year, is feel the

– we think for entering the first I momentum do feel about good the half.

step-up I the there you're pets, factors, half, rate was that think key first second in And of from in by demand early COVID a half. more we'll question, impact. the they've and over number which I some highlighting comparison testing, have growth relatively the is pent-up the stronger driven more carried the growth a think the in

– So we the on our I I into that more the dynamics I for momentum high amazing that amazing think some be that. about the the outlook in reflects But good we're recovery industry. will think that year-over-year learn as go just It we're year. And an we go we'll growth recognizing was feel there about business. think very – the XXXX, compare

Jay Mazelsky

Yes.

is just So logic data. of add linked to the I The guidance that. would our to market

visits visits, time with veterinarians just clinical first-time So driving medical first-time are we that in outlook We're And more are And aptly Brian sustain. seeing I is the we're of are the the seeing And will beyond pet pets diagnostics. that. services clinical painted parameters the we're benefits marketplace. by the more first visits. including think seeing about services are more What optimistic clinical enabled those medical providing parents.

first You treat. have before to diagnose you

said, very is – So a plays it's still I a as it it's a dynamic And and out. see it healthy environment, how backdrop. think we'll Brian

Michael Ryskin

on One well touched ask quick that I ProCyte as is the Can launch. follow-up Thanks. on you Okay. a

wondering, customers your And contribution launch? color as the the full the You ProCyte outlook more provide are on gotten – you just image product gave in the of of on XQ. from specific review in us you One some in I'm any baking color rollout for XQ, any from XXXX. sort launches affected you that may also how feedback from sort far little pre-launch have as for could just early of a bit

Jay Mazelsky

customer Sure, trials to into talk have experience impact it I'll I'll factored experience forecast. well. extremely terms the hand in Brian then done trials, it how the customer The to the describe of we off and about

but standpoint hematology approach think and these customer of are because it customers is the compact I varies just the use diagnostic experience the the is by the terms usability breakthrough the we And the that in complicated of very analyzer. the take. category. a testing ease not best-in-class something that trials, that footprint with of From thrilled – it's way, the

out We the but an and on on an that in environments put other chemistry. feedback. analyzer to the thing amazing hematology, testing know place have and our of they our customers use – real markets even We're before priority you in is meaning – You develop driving that the environments just it get can to type relative also of hematology. hematology-first of increased importance are that markets hematology many it's focus

think optimistic. there us. it's we're are XXX,XXX a approximately on We that think winner So to We be opportunities basis. for global or over going placement a

our So we're describe you And into excited it how Brian, about it. don't factored forecast? why very we

Brian McKeon

overall, XX% to very instrument contribution includes, growth that that specific Mike, projections And not to we that's CAG the and get from XX% But by revenues breaking rate platform. to at highlight instrument the revenues, out revenues. One a healthy would obviously, of X% Yes. imply from growth we year We're next benefits expect ProCyte kind instrument in growth did launch.

that we forward net contributor, our outlook. think looking positive to in So a got built appropriately and in being we're that we've

Michael Ryskin

Great. Thanks guys. much, so

Brian McKeon

you. Thank

Operator

Suisse, have From Wright. Credit ahead. go Erin Please we

Erin Wright

Thanks. Great.

in new same obviously, pet curious I'm two how the key Thanks. or point ownership, or U.S., level international of You you're what the and quarter U.S., the you're are trends -- in seeing had are of patient markets? the great Are on what markets trends resiliency there? overall And seeing you market some what differences the international in between terms in what on in is demand visits, the but into some And it the you're anticipating fourth at of the seeing veterinary clinical consistent trends. the XXXX with new side? data, this

Jay Mazelsky

Yeah, I'll comment.

Brian McKeon

Go ahead, Jay. Sure.

Jay Mazelsky

international with I'll in and the Brian, to in pullback continue to the financials. The healthy. going give was subsequent to But provide be and general ask terms overall international I'd markets I'll think U.S. Even markets the visit you just seeing continue comment to for then of waves, three -- great to going invest in top in, we're person. of overall of we the we've the I a specifics flavor there related the that has mentioned to country comment. and on trends U.S. customers market, We a a modest those of the some international some that, -- around extremely just able I ability quite the pullback our seen markets into we're you the continues well. human pet be type in as expanding expansions. are be that expansions. opportunity And tap same bond outside are to to we

The our customers. other XXX thing IDEXX nicely adopted program that we by European the is see is being

part our instrument having to XXX. That's aspect lab reference services now that. a our are as nice on of placements So impact of majority also IDEXX the through the of volume commitment

any to like that? add you would flavor to Brian, So

Brian McKeon

overall you in terms being very and growth in point out we at -- recurring don't that the would more clinics seeing in Europe, in Pacific of U.S. underlying level And CAG the growth of try Erin, just we level the regions utilization. We as America. the of and the did data, driven to of trends by to the but know, same same business busy trends well. we in insight were granular strong think growth, vet Both PIMS are have Diagnostic the internationally. I basically XX% and basically I No, had captures quarter. we it level just DX CAG recurring Latin same higher that throughout some same Asia had hearing revenue and our revenue

trends. it's So similar

insight we our is the and have but U.S. that momentum the global the particularly the in strong, of U.S., think data strong it reinforces I business. more and in have think we I benefit just

Erin Wright

potentially normalize should pent-up they a demand then quarterly thinking Okay, year? be into placements as any instrument the you stepped throughout placements level in there's instrument think great. on trends about you the that And XXXX, anticipating we more basis do up broadly? Are or of how

Jay Mazelsky

Yeah.

over We're still early QX clinics, initial social that. The QX. and clinics distancing to pandemic, impacted grown modestly have see by did these, in QX along they on over the QX, access So in restrained we've placements we some effect. policies with the

thing is of clinics a lot traffic are There's through busy. really other patient there's the The that clinics. to a in themselves of -- just lot keep mind the

take So in a desire practice and to those the time cases, may or they to new suite, -- instrument they want may to an have don't retrain. but not interrupt

I instruments But as medicine. that. that responding both as some that them headwinds and well connected very with there's practicing could with better help productivity overall, to think are So, capacity favorably our customers

Brian McKeon

one just I instruments the is factor just the demand to on think, going point about forward second busy for being And good the I'd clinics point being and catalyst we driver Jay's placements. to, reinforce Yes. that a feel

diagnostics utilization. second you with of the reflective the U.S. see high placements trying levels and that's international up the catalyst of If markets, keep level to of in higher clinics

through headwinds, for think working that's general I some has the think access we're positive factor. I a the So, but And still positive us. of been trend

Erin Wright

Great. Thank you.

Operator

From have Please ahead. Nathan we go Rich. Goldman Sachs,

Nathan Rich

on CAG start guidance. Thanks for Maybe Dx and Good just the the Brian. questions. morning Jay to

was I this the year saw that of guess? a much to of And Because year, back spread narrowing the that X% first driving think -- should of you utilization question. that like expect the the back it that conservatism, this to reflects trends and to how kind XX% of continue. it saw Going from the you diagnostics range frequency seems lot potential I you XX%

we of are about as that's that kind back range? there So, of right other keep the factors mind any historical just in kind we should towards going think

Brian McKeon

in reflecting second primarily it's step-up the just think I growth, the of particularly the half. lapping in Nate,

was but X,XXX points in clinical look QX. it, the premium ways that the CAG in we're basis shorthand to Dx it about premium about It use, of QX. growth looking at U.S., at trying you the recurring X,XXX the points was visit of in growth, basis If to

I some QX so -- there benefited the And pent-up think demand. that, I from think of

I step-ups rate a we and I as -- I growth visit of the clinical just that But premium to but I in growth are And from some expect growth, we is think, continued forward. some we some seeing position us normalization do get is XXXX, excellent had moving in. driving XXX an think premium, would think for strong the we're those that us. have we that, very think and demand think, And very The projected recognizing dynamic. here into factors we so well X,XXX healthy we strong built

Nathan Rich

should growth sense. Brian, to I in high about right second the than could sort it roughly growth then of the current And year? that just, continuing revenue sort the to Makes the of the guess second. it like year of seems be half Dx the quickly, growth half the the your and of I on if XX%. be range. XXXX. cadence CAG in half the of on comments first recurring cadence that up the think the stronger trends back the Is if between first XX% quarter, would of half the follow way will That first single-digits into is Understand of we in probably sort about think mean

Brian McKeon

going and Yes, going without are little quarters, there's so COVID year-over-year, rebound to I of things the noise projections, impacts to and But beginning to specifics quarters on in because think a the as meaningful had be of QX in a and directionally, QX, like more know, we're QX, so bumpy. we yes. lot in the getting not quarterly be in doing going to projections, maybe the you Nate, be

I implied year-over-year rates in of moderate growth, in more growth expecting is higher growth the And the half that step-up given range. guidance our what's first in think second half. in we're level the

with the -- about work as still how that -- how the thinking hopefully, to of we'll normal. lives factors a out. those I unknowns people it. lot dynamic forecast the get that's directionally, how There's to to how imagine, evolve here pandemic plays back But a see think them. we're It's so back and get very And out and environment, you markets world try the just to play might as,

Nathan Rich

Great. Thank you.

Operator

Block. have we Please From Jon Stifel, go ahead.

Jon Block

to the Maybe pre-COVID mid-point XXX the recurring bps, Brian, acceleration, acceleration just XXX around it's the levels. versus Thanks XX.XX at one, guys. Good morning. of think first I CAG

million some high-level like seems high incremental $XX another running to $XX revenue. margin Just million math, it

you that in a look about, profit gross can as as the position out lot follow-up. seeing you that investments. as some then just willing do so, incremental international if so of And we're just puts talk CAG guys a obviously, U.S. the you're flow-through subsequent We as stronger think you years? a these allocating it And, talk about I've you're the got And where we in get, recurring. to dollars? And from specific

Brian McKeon

start, profit point recurring growth. for high view. point, to I of business a diagnostic of got point dynamic Jon, just very expansion your revenue to from think our Well, last That's CAG a you've gross profit a and view good

And driver so performance years key XXXX. of clearly, is, in recent a our particularly and that in

going to into terms in I trying were of ensure to lot know this we was with controls sacrifices. would play and XXXX, year had a in going been didn't that that we we've that capacity. side, really lab business do model make caution just There asked that out of wanted went I'd very last point a our Just tight with into we like seen. on that very people early was areas dynamics anticipate erred the year and -- costs to in healthy say, and we We're that. we growth some unusual investments out, to XXXX on, keep up the how an strong when

things reflect we've travel high that, and high reengage to to the of XXXX coming that that had going to we're on in trying year highlight cost like trying to costs in to costs areas the that and have and year-over-year growth. we later held going got we in care back had there's control, across are here expect that health well line we're like a so back that and level just and as investments be year a compares and to And some business, the as come to and we things perhaps very investing try

lean to to continue to want that support like things in. an noted We our as we've commercial agenda. want R&D area So we expansion international

strategy margin moderate that And organic on to operating aligned of with support that we're top of in so performance. our are growth it, and have the strong to all that's intending gains intent areas very number reflected our

have demand here, that performance investments So but the to if we're in on recognizing for the some you building pent-up business. will, committed we

Jon Block

Yeah.

Very to certainly I think I then the same I'll went it. differently, Mike And think differently. maybe but got helpful. Okay, bit as that little goes it a road down well, question, down second ask

your So commentary been XXX seems is X,XXX to clinical your your and premium With acceleration you're guiding greater to function recurring expect premium at but an a around acceleration in the to expectations clinical, versus of that bp CAG the clinical, visits XX% around premium. XX.XX mid-point, bp around to the you've it you that to the right? XX%, per

and that, sort to versus guys? to level, guesstimate visit would investments, that And how premium trying just clinical a you dynamic, your innovation with utilizations so driving control in commercial the talk increased the be at can I of high think the would shakes more the out. underlying

the the growth. -- the levels So, why be with and but sort unchanged one of in curious comfortable place, you I'm clinical why you up end would might versus same more just high visit of feel premium

Jon Block

guys. Thanks

Jay Mazelsky

try me let this So, Jon. frame to up,

different of growth. there's So, I a think number driving factors that are

has more think in that Then First new piece services guidance provided And the and of include that's an that point, puppies majority off, even arms that innovation we hard clinical And our that some about get beyond It's know impact. for are medical commercial the talked intensity both marketing control and and kittens, use that through what being that I these We've your higher to being customer-friendly past. provide impact diagnostics. and and can around to exactly clearly clinical pets. clinical strategies there's we that there's more the but visits, more to the there's is, visits and we your visits program. pets. used

better think really that medical So, what by I that's care. it's and And very to that education of And terms that's market and some deliver where ranges is provided healthy awareness our our we've looks focus veterinary a on backdrop, to adoption and in able the focus where like. customer drive is. being

Brian McKeon

I we have more time think for question. one

Operator

question from Schott. have ahead. JPMorgan, Chris our And last Please go we

Chris Schott

much. so Thanks Great.

Just quick ones two fairly here.

that topic Just new growth. on pet of

we in XXXX, you've are this through promotion played a very just I continue historically? you think out? you've normalize to so emphasizing the of moderate given or learned you that XXXX. much. vet a and given in starts over X% and what you kind how pet to about healthy so business. Thanks changes grow out do so? of rate go willingness pet expect to you And kind But about what So, we referred year I another How you're think the have playing the how approach dynamics? year or the you or be the of the XX% about about we to are in approaching year, that or trends you my Is changed got XXXX about lot envisioning world owner spend you're just last as growth, may one to all that bit, know lock was commercial to second talked seen initiatives these of that down making to back we've favorable that the then

Jay Mazelsky

Yes.

kittens into new make kittens. just and as come that, initially growth to includes because marketplace and was initial which that's diagnostic dynamic pet that growth new the the we practice to point, versus think XX% Care other so to twice puppies their a those tests. and healthy or programs related. cats, pet So, as They two basis an in continue really answer, total become clinical well speak checkup, they care If programs get year. do your that are our we job they puppies to second and with And and annual the a on dogs Preventive

healthy both place a it's suited commercial programs we marketing plays have So, as and dynamic ideally into strengths, we strategy. are our actually The drive to think that. in and a

diagnostics in the about driver think we a enroll of great you in that, have program customers a and, that's Preventive of that services if Care X,XXX-plus medical turn, usage. So, example

are programs non-wellness our wellness adoption So, geared testing. towards education care of and both type and driving and

we're we be can the trend that's think to a that. sustain, So do think very it's we that and plan and to able aligned, we

Jay Mazelsky

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

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

Operator

gentlemen, this and and you you Ladies concludes you. this for conference. may today's you. time. now Thank joining, Thank at Thank disconnect

IDEXX Laboratories (IDXX) 2 Feb 212020 Q4 Earnings call transcript