IDXX - Earnings call transcript Q1 2022 | IDEXX Laboratories, Inc.

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Operator

Good morning, and welcome to the IDEXX Laboratories First Quarter 2022 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, Vice President, 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

or please generally GAAP GAAP. most growth financial call, now references and reconciliation turn measures unless discussing not note organic over growth be Relations in accepted to equivalent Instructions]. visiting Investor we accounting refer earnings accordance in growth, directly I provided found all would this non-GAAP like principles our During of these section the also website. our certain results, In with to comparable A our the compared of which noted. financial measures will [Operator XXXX, prepared to reviewing may to release, by period in to to be growth otherwise measures Brian is comparable the McKeon. call XXXX first the quarter

Brian McKeon

recalibrated first Good results Today, I'll to very our welcome results. earnings and year quarter call. solid morning, you XXXX. through review in to and take IDEXX for QX compared our first financial our delivered performance outlook quarter financial strong prior

during from X% expansion CAG revenues and as which compared new organically recurring benefits a by driven organically higher business of our CAG and pandemic. in patients increased in reported year terms to of highlights, our X% significant levels, X% pet revenue In organic gains water included the increased XX% prior Diagnostic in business.

in revenues strong on a in solutions. excellent, growth XX% was $X.XX in comparable per momentum CAG execution X% and instrument cloud-based organic basis. up was EPS commercial software share, reflected continued expanding Our

ongoing execution investments Diagnostic to continue prior operating levels and gross in commercial constrained and CAG commercial quarter. As IDEXX during margin demand on the in step-up the levels increased significant expected, comparisons supported diagnostics the year year-on-year achieved gains to adoption by gains build and high profit pandemic, utilization.

XXXX. in organic a growth moderation basis revenue additional original results seen Diagnostic In trends, CAG outlook recurring XX%. the strong trends, XX% compared clinical international and We first full XXXX recurring return half growth recurring outlook revenue year adjustment constrained targeted of levels. reflecting have appropriate dollar. $XXX baselines. second to near-term for year U.S. growth HX. reduced significant We're to in work Combined, higher $XX XXXX, impacts in guidance we're cases CAG We revenue challenging these been globally, the prior the higher compared in visit from the adjusting our year are year half organic to period with approximately XX% of CAG strong a of growth visit strength our our like range reflecting Europe a our clinic growth at X% original to in which these Diagnostic full expansion. outlook compared U.S., the XXXX outlook. service organic with second form of high growth overall for reported early to range. sector to more our availability following half veterinary challenging also affected more through from our also in challenging growth an of our million in comparisons Factoring capacity million QX factoring levels in recalibrating in conditions, full constraints addition and QX levels end Diagnostic visit on our and our targeting impact labor We're believe to COVID year macro now growth by regions growth changes targeted X.X% growth X% primarily of CAG similar additional in by dynamics and or an We X.X% to recent as the midpoint near-term XXXX We're at market, dynamics prior adjustments revenue COVID sector the we constraint outlook range, saw have impacts in demand projected XX%, of capacity which have CAG to

commercial Companion for supported We're increased innovation to and by our continue building customer the confident approximately will advancing ongoing by the and discuss to long-term driving and pandemic. technology high-return million we're in-license focus achieved capability in in quarter, including encouraged on potential CAG the discrete this the conviction, globally We in year, second the Jay in be of during our remarks. for related demand with his during investments business, $XX sector Animal gains innovation which strong this sustained on the Aligning development. engagement diagnostics growth investments

in-license share Our per and outlook, impact the $X.XX EPS XXXX of to guidance of including $X.XX a well as our discrete technology, factors $X.XX as from updates $X.XX of to operating share U.S. interest to related per and full higher in outlook more We'll our impact in to later detail comments. EPS adjustment my related stronger $X.XX year dollar of discuss the rates.

with our results. a quarter of review Let's first begin

XXXX. second organically by factors from year-on-year overall business. quarter. organic as X% these recurring reduced half strong by prior business Diagnostic gains in as expected QX was African compared fever XX% our X% a These will in Combined, levels, in organic gains LPD approximately fronts revenues, growth regions. by in in on supported revenues. growth Comparisons of China, in testing and revenue XX% in testing growth IDEXX CAG decline the U.S. impacts to X% gains million of human included increased and swine X% quarter as year in in both reduced these XX% our first reflecting the X% in by international were which a $X growth First organic decline Water revenue CAG organic COVID revenues improve the moderated well

CAG XX% effects. organic by Overall equivalent CAG instrument were QX from benefits quarter First from veterinary supported also software day in growth and CAG acquisition. in revenues, in imaging organic benefited recurring X% by revenues growth the growth to and ezyVet Diagnostic diagnostic revenue gains addition approximately XX%

clinical U.S. prior demand sector X% second when visits the levels. drivers, approximately in during to demand XXXX same-store quarter were CAG in of -- below that pandemic. in increases half first to of year X% terms began seen we saw In to lap testing we This the strong demand compares X% step-up in the the

acquisition. Livestock, in X% in a veterinary gains of revenues continues gains Catalyst, growth that net Compared testing At the for organic towards benefits up his continues consumable is pressure U.S. QX, globally, continued to levels. revenue QX, and CAG the on investing achieved increased in recovery instrument strong, in volume reflected international annual in dairy new XXXX and supported will new as outpace increased were We X% first confidence U.S. net regions, organically revenues regions software the Underlying premium very growth these in to in remains and poultry basis. veterinarians. trends, Global was our and clinical gains gains price relatively factor and challenge in speak gains, service services our ezyVet demand of supported noted, Water our CAG prior same-store in XX% and momentum XX% diagnostic diagnostic across remains price organically with other constrained by reflecting these management organically Catalyst clinic placements. strong price revenues revenue by price with IDEXX's demand health and Jay reflecting pre-pandemic Results X,XXX by growth X-year gains solidly Europe. IDEXX increased trends customer organic organically Rapid retention to U.S. CAG XX% expanded access and in increases average premium high a continued U.S. related of One achieved a global the near-term organic The show premium in level, gains increased in As and supported XX% in base, pandemic X% build, year-on-year the from in relatively multiyear on from reflected to Assay gains growth revenues XX% of a day regions. gains in cloud-based agreements. growth growth solid clinics placements by areas lab moderated Globally, from realization Consumable to which Diagnostic business, hematology double-digit revenues solid X% from in XX% XX% was benefits quarter, Assay SediVue U.S. double-digit growth seen impacted a to X%. visit international demand vet reflecting gains visit equivalent has of revenues and and of revenues pet gains part to increases. diagnostics Global supported global on visits robust more recurring installed momentum higher quarter. our to ProCyte practice a supported U.S. to across growth diagnostic constraints global in across IDEXX of U.S. clinical double-digit XX% momentum single-digit premium a Reference influencing were including expansion levels. sector in solid year Rapid same-store and net platforms. low international placements. respectively, increased business and in across internationally, growth resulted and software across levels modalities organically the capacity recurring X,XXX strong CAG revenue compared and imaging in regions. levels continues benefits increasing recurring software for on growth hours basis in higher increased by we've globally. in support compound XX% to reflecting placements double-digit premium clinical by reported hematology placements on quality the XXX Diagnostic lab care U.S. the imaging organically, VetLab XXX%. revenues benefits. revenue the decreased quarter, QX In in comments. point revenues dynamics in be instrument competitive solid from supporting clinics digital X% in XX%, high, base, increased by and benefits gains QX first as and QX. X% basis, trends. XX% QX solid a

African in comparisons testing LPD tough to our year other prior moderate overall swine and organic revenue revenue high areas in China, for levels offset fever business. expected, swine As core of gains

improvement second the through comparisons the in work in We expect rates Asia relative see we the in year LPD Pacific region. as challenging to growth half of

Turning the P&L. to

basis and We're helped to first XXX of gains in impacts. as Gross net quarters QX commercial reported increased in our in Solid comparable in prior quarter from lab basis. well and we year levels. revenue, were and offset revenue comparable gains capability. higher as a margins related on also and distribution points year declines lower XX.X%, increased our productivity costs. on a X% service margins of year-on-year moderate compared levels, business levels, inflationary higher base. decrease seeing QX recurring prior the comparable controlled to CAG and growth profit to operating gross instrument expenses comparisons as high CAG high benefits the Higher freight price global Operating EPS gross expand investments reported XX% margin reflects impacts recurring profit select initiatives expense X% basis. lapping impacts XXXX operating software and on advanced as mix XX% expanded to basis. a recent revenues revenue supported comparable Comparable from growth a Gross reflect as from LPD and improvement

costs prior We to travel low also compared year levels. saw higher relatively

basis. of of share share increase QX $X.XX share-based compensation per we from discrete growth million to $X high second as We on per was $X.XX share, year impacts, included quarter expect or in projected benefits down group relatively the comparable R&D comparable OpEx in-license EPS in a impacts was X% to related benefits, higher an levels. per lap which from addition activity. year-on-year prior second EPS the these $X.XX quarter

QX, income gains. by flow EPS net $X.XX hedge cash quarter. Free operating in net Foreign share conversion On trailing $X a in the million first rate cash in our XX%. $XX profit exchange flow per million by and of free to reduced was was XX-month $X million basis,

the XX% $XX free approximately conversion estimates. spending conversion driven for outlook million sustain for including to This high capital product For expansion a the and investments, higher flow of of credits. of modestly tax year outlook levels We're manufacturing from free R&D to estimate availability discrete consistent now XX%, deferred levels inventory X% and full by million, we assets of our $XXX approximately cash warehouse approximately maintaining increased earlier project. reflects below new year, full conversion R&D XX% impact flow cash higher

position. ratios cash. in XXX,XXX remains $XXX X.Xx sheet of and net QX. balance We Our repurchase X.Xx a of to leverage quarter with gross ended of strong capital shares allocated in the million We

a Our projected assumes with capital maintaining to leverage share reduction similar full count. X.X% financial outlook year a repurchases net aligned ratio, allocation supporting in share

Turning our impacts revenue performance, growth reflect the reported CAG full organic to outlook to related and U.S. outlook. sector revenue XXXX QX significant We're projected recent to Ukraine growth our recent adjusting the War. also We're of our dollar. strengthening updating year for the trends ranges

million Ukraine reductions recent reflects and to to to Our full exchange $X.XX midpoint earlier year-on-year of full year-on-year project year businesses, approximately a million X% This projected related U.S. million reduce $XX revenue revenue updated compared in by headwinds $X.XXX of $XX estimates. billion growth Russia, expected includes adjustment the billion of our with $XXX at revenue strengthening approximately Belarus reduction dollar. growth range We for the to will now QX. the a and X% related foreign year, of

of XX% of primarily planning organic growth end X.X%, an range XXXX, Diagnostic recurring our to in our to clinics trends reflecting a reflects recalibration our CAG overall X% X.X% adjustment growth Our the original We're we of commercial half second We're this at range as initiatives. reflecting adapt comparisons revenues. organic revenue challenges, and to year year from targeting growth vet improved lower more CAG guidance first the full in rates challenging to and XXXX half to full for of second outlook work for of outlook quarter. the capacity recent in the benefit of sector

Diagnostic growth on revenue outlook building CAG strong to recalibrated year Our gains. prior XX% full is X% year, the recurring for

updated recurring year. XX.X% end margins growth now This performance. XX R&D growth incorporates of range effects XX with basis growth with XXXX XX.X%, for discrete Adjusted inflationary the this year R&D levels. the from business compared compared margin aligned of outlook and second commercial operating revenue original strong the includes basis margin goals goals. XXX high-return for our approximately long-term for half to revenue benefit approximately investments. of points gains XXX points noted, reflects investments Diagnostic in in outlook year-on-year net impact to basis XXX This from effects full a basis on reported projected down rates, points and margin foreign potential discrete high reflects operating in aligned year captures to we're full our to our points updated As exchange growth our CAG At to basis X hedges, related to XXXX investments strong on IDEXX's year this prior planning

of $X.XX impact and from interest impact rates. $X.XX of to This Our decrease an EPS share investments, share, headwind $X.XX a R&D midpoint. outlook projected per is foreign additional $X.XX $X.XX includes of per at exchange to $X.XX per discrete from related share higher

includes guidance on comments. changes. call tables We provided his now release Jay snapshot. concludes our updated our over our estimated investments, to EPS XXXX tax the in growth minus X% comparable growth X% in and X% financial earnings impacts rate plus unfavorable in international estimates details discrete R&D press for an the for impact from of That Our X% review. of and turn from I'll to the

Jonathan Mazelsky

morning. to this health CAG is pet choose progress continued see rising in QX XXXX, This years. solid our Brian, IDEXX' Thank building IDEXX' the in continue in Diagnostics turns and strong ProCyte continued growth One. solid standards services had on their supported is adoption over last increasing on on global animal premium and diagnostics for and to Veterinarians recurring meet inspiring instrument reflected for achieved you, diagnostics, and utilization strategy clinics the placements, record solutions increased pre-pandemic of routinely reflect a rollout products good innovative our gains IDEXX companion by demand and significant global care. focused to software to and and results business compared of demand start X path. our

businesses, capacity stream only future. not grow expand an recurring the help Our veterinarians also integrated support revenue and solutions in enduring their but

during sector the and While strong have to for drive ongoing CAG and growth on us moderation in growth seen care. confidence some strong initiatives of IDEXX's the we that to and of serve potential of in growth Today, discussing durability people and levels pets, we've progress strategy growth as in the see very health and from enabling high our mission-driven enhancing advancing pandemic, I'll long-term key significant build we our metrics growth companion animal business, well-being focus our the and growth we our financial livestock. purpose performance health on are opportunity performance

on to pandemic. by trends some diagnostics strong providing on trends demand in sector building solid Overall, start rate, the me Let continued the very sector. demand at a CAG in expand recent through seen context CAG the increases

As IDEXX's revenues supported compared noted, the and U.S. consistently same-store on the has growth strong quarter to Brian focused prior engagement increased first clinic our results. strategy diagnostics by at very and X% year in practice utilization diagnostics adoption level, in investments innovation. been commercial driving

diagnostics; or both growth; for in highlights visit from diagnostics diagnostic the XXXX. in include show trends quarter snapshot, We've growth diagnostics percentage ahead we information including continued utilization, clinical X% clinical building diagnostics decline additional last frequency into front. and a to saw X% growth frequency, a some diagnostics on solid dynamics quarterly progress which of clinical solid practice visits, diagnostics benefits second were half in the breaks breakdown diagnostics. This year-on-year impressive change per X X% visit the pre-pandemic that drivers: years. very in rates of key a moderated the continued by revenue over in on level of or QX our revenue clinical is visits, results this provided down First increases very seen gain X levels, strong in and expanded utilization gains growth visit These which

appears in and the COVID we've expanded, levels. the resulting are As dynamics in capacity X changes, spikes in the same-store the clinical challenges of there from increases and weekend The these continuing to themselves vet impacting when weather as the near-term recent that sectors track effects addition that are facing percentage it activity, staffing XX% hours. adapt levels have on is constraints sustained pet extraordinary vet XX% can their workloads. as case from scaled appointment and clinical levels, in with staffs U.S. balance Pet visit years to demand quarter, analyzed first in many back clinic are to reflective double-digit that are achieve population Veterinarians declined in visit pressure growth XX%, time some over clinics on well pre-pandemic, clinics are looking their their which in of approximately currently. to the metric near-term as clinics more last to QX we

more to As have in industry seen factors We've clinical CAG similar growth visit remains in many the terms near-term pet some additional care pace potentially over with of But the Europe these related last owners international to for health X demand wait extraordinary had of recent the in the strong. we've appointments, macro years. pressures secure underlying headwinds. like dynamics pet seen levels, regions moderating effect the longer

felt was clinical our it Given outlook. we the and XXXX recalibrate noted, dynamics to visit prudent macro near-term

trends builds for record continued our demand sector software Diagnostics The IDEXX all benefiting on years, This is average Our full over goals which laboratory second in health for increases drive in instrument operate array service high CAG the potential of from connected enhancements. driving innovation services, remains the focused owner to satisfaction is to from of X% exceptional to software to half new cloud-based placement pet on continued high growth strengthening favorable and XX% continued record supports and of levels advancement revenue clinic point-of-care through positioned recurring workflow gains an annual the of last very organic customer benefiting and services reflected at longer-term capability, of ownership, and solid efforts. pet very retention outlook our X in growth continues The levels, the level. pet XX% team the bond. models. XXXX with and of continued year efficiency growing in outlook and accelerate strong, growth commercial and IDEXX pet demographic by well business and broad reflected growth help products customers is high reference gains, this in and care our

commercial our us model in business. solutions near-term and and help growth customer through the management to to well Our work challenges strong software customers extend momentum diagnostics high-touch innovative positions

we globally. discuss growth some engagement strategic key progress leading Let's of strategy, and remains build that on these pillar fronts. our sector High of growth our recent on commercial supports levels a to commercial capability continue

continue of we noted, drive As net modalities customer business solid strong with regions. performance gains across acquisition, new to terms and in

variable ability segments placement achieved QX of type supported Our as our have across are base use and to across products, strengthening as and looking highly We in accounts, by meet growth their to customer demand manage to of our installed new, driving customer trusting and regardless delivered within their technology instrument in clinic highly commercial healthy efforts a from largest recently speed capabilities international revenue center enables in targeted and while key Germany, of these measures enabler are smaller This growth. complement analyzer, metric each skilled our Italy to global commercial our in it commercial teams hematology been momentum IDEXX retention and international Innovation loyal And efficiency, of of return despite the outstanding is including of with clearly and quarter. as investments. gain Spain, our elevated execution a on veterinarians Commercial include advancements expansions strong our performance reach in corporate and within France, early our completed critical premium easy-to-use which growth are our sales in well by benefits We're they South strategy. expansions. supporting IDEXX teams supported EVI high Korea, These clinics. reach globally, customers, momentum provide capabilities and region keen country customer business. had in regions. U.S. encouraged investments strong One, relationships multiplier innovative approach, our access the to excellence customer our growth opportunity that to IDEXX's performance such like strong Brazil, the for ProCyte And which our platforms, as with and demonstrate as the has to levels through needs competitive strong warrants, overall continues

platform the broader most after now are Just units, the One multiplier rates This and launch, upgrading to range, One its XX,XXX high from trajectory the benefit around the our key innovative our installed highlighting we placement business. shared of a Day, the premium hematology with global opportunity. favorably worldwide of X a business almost enabler year approximately in outlook of premium ProCyte a product recent mid-XX% aligns our with the attach at penetration utilization is has for power Catalysts are commercially right support commercial XXX,XXX trending [indiscernible] world dedicated and demonstrating hematology sales placement point-of-care customers the available force. our estimated Investor is instrument base ProCyte rates to side. in X,XXX hands of This

more vector-borne innovation disease our and detection, of standard from example including Another XDx and benefits sensitive this enhancements approval key an XDx the product canines, advancement diagnostic gold the storage will with provide Plus, test end-of-plasma of longer support room in year, clinical workflow performance, agenda customers for It's for Plus. temperature in for SNAP decision support. multiple which our Xx is approach point-of-care IDEXX's assay USDA enhancing decision clinical whole product

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benefits with innovation customers, to from As long-term well. advance continue we capture innovations near-term existing as our agenda our we

companies the financial guidance in technology made record noted point-of-care companies, use in developing forward initiatives for As the and on our that look has X the of long applications. build platforms enhances to on as with portfolio. more track in our compelling to quality we with real-time in-licensed pet a future health technology apply update, worldwide sharing of care diagnostics investments exclusive care. IDEXX We we these partnering

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the well-integrated and of instead equip with practices greenfield outfitting they technology. recurring software With revenue vast veterinarians highly and a have that solutions care as continues significant our providing recent global a investment is we of in customers a software cloud-based also placements stream. cloud-based our a headway profitable clinic. our IDEXX over mobile for XXX with preference customers solution. to allow maintaining establish constrained, revenue We modern, move capacity for as choosing on installations, partner acquisition focus a With technology. ezyVet towards majority cloud-based significant base and software These to PIMS had key made solutions customers appetite accelerate, the of new many Notably, record

our sustaining we once a to and forward most in performance, upon innovation quarter in Johnson benefit outlook. lab year while outlined IDEXX Laboratories, leadership decades welcome highly operations enabled while highly from support dynamic at of Diversity Abbott in as as talent key strong deep build our IDEXX and long-term Michael concluding cycles brings manufacturing impacts demonstrate we experience us are of supporting multiple is Resources service that of organizational strong and financial Human like HR confident and of role of life leadership organization. dynamics of ability advance reference to where our of in long customer Chief full investment supply industry Officer. And Michael The feel concludes he to as chain supply geographies, capabilities, The availability support, product performance. a was capable years development Divisional continuously President engagement, In to XX in first quarter allow levels our highly again our Human excellent initiatives keep capabilities to As inflationary I'd developing built Michael's growth new and the employee to in through in our managing in customers recently chain financial Chief committed performance enabler and our across strategy This busy relationships, up capabilities the our we review over these product first our over with centers. continue service we to we effectiveness, customers Michael. continually well advancing Inclusion. and areas. XXX% to our benefited demand, review, and availability our metrics and Welcome, commercial and we disciplines Resources our levels and Vice and look Officer outbreaks, close our These Brian COVID-XX growth outstanding multiple by product of turnaround environment. deliveries. as skilled high regional supplier monitor the manufacturing time on-time

the Q&A, extend escalating and Ukraine I want of has devastating war to region. the people sympathies as Before toll in pets taken the people opening to the on deepest our a line for

company, the purpose-driven invasion strongly there. a condemn and we As violence

true that of focused our on been the employees families. of part We their of region our in health supporting and IDEXX, heart to the pets safety and customers, the are the have

in scaled sales Foundation Instead, the Ukrainian supporting Animal Russia, that we of provide of the International rabies the Medical all in focus including and needs displaced leveraged veterinary the free for have tests our has significantly the the essential through region, Central to Europe. International humanitarian over the funding we for Welfare, while pets Kitchen IDEXX extent providing have Court, diagnostic World existing operations to also support Fund on equipment back We the to been To the pets our of customers. care country. can veterinary suspending

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Operator

our And is Chris question JPMorgan. Instructions]. [Operator Schott from from first

Christopher Schott

of vet like we've this On for issue been constraints, pandemic. about it of much seems the this hearing issue

trying bit So to guidance, your get starting XXXX starting where a in of back now just of its into changed kind what's to this is numbers more. revenue a kind of better understanding hit up to I'm

trying also in a what start you're slots that? sustain just that seeing there'd guidance see just kind to to same the take And here I'm vets question, And where take and think will second of there vets sense that normalize. what just part a some to people? of little do a need the there were growth other the trying Or understand, of a if same can't the finally just bit to more slip these I'm path of one get just a just is Is that visit maybe it to to slowdown hire you just completely to forward pause one in for demand lower demand of point So of reflected the we they've hit maybe visits topic. capacity see normalize? be some for some then start to Do related? growth elements who here need breaking So today? of doing? for been what's as

Brian McKeon

can your for Maybe question, can provide I context Chris. color. Jay more and some Thanks set

which the main cause in our the visit On half step-up and second increases that saw And levels through was in through outlook of year, of solidly services in big lapping that this And clinical in pet to additions us and diagnostics kind going the of clinical would here that we the demand that's XXXX. the the benefits the highlighted we on HX. the we've pandemic. started in visit up were recalibrate were change really the trends, the flowing pandemic

that higher X% were base. X% to they So growing off

And relatively dynamic. a recent so more this is

can it's Jay this significant capacity. vet is more color, a clearly think here into I in go the factor but

that these working And sectors demand significant dealing many through of with still near in a industry dynamics that to think we're just expansion adapt labor of and are in a following, tough I the term. year-on-year some the the is with dealing trying compares. there the

year step-up. that through this will the half of I think of continue first the in terms

dynamics the So Other factor. primary that is on are all incredibly that are here going positive.

great. I service Instruments Sales record utilization service, and think retention, up. our The are -- software very placements, focus at revenues on strong, still customer growing. levels. services, are diagnostic same-store are the -- frequency level, clinic service is

long-term of we will as And capacity this to primarily some demand sustain. is as related that clinics constraint. work is adapt we think think this compares this that think, to So will through largely I growth in we which normalize, dynamic, the these and

Jonathan Mazelsky

Chris, to your demand. about supply, dynamics the context pet from let talk to a of question a try owner standpoint bit and I standpoint, the capacity me want both Yes. from or and address then

deal is towards focus has pleasing pandemic accelerated So includes future provide pivot indicate pivoted. a well conversations the veterinarians services excellent care, all Their a optimism had all and in prospects. I The and and growth able of medical and good of to the terms the really, the surveys client being we've as as it XXXX only their with patient about experience. think,

So relatively diets. like a pet on less standpoint, owner seeing, really specialty emphasis clients sales, also They're who things care. full-service from demanding want product

approach are looking remarked speaking come an just in of of they to pet sort when veterinarians with still owners care. number really So end-to-end a to have yesterday,

both patients. to that at guide And And there's a the to strong I being think, the pandemic, if has accelerated role Brian's in key So talked that. whole able plays the care diagnostics they been pivot. point, And time, anything, same that the only clinical services know and envelope. about I some clinical a There's businesses some very they that, staff percent the the are of all extent, themselves, more pre-pandemic, And terms to of in facing. in challenges been higher visits. step-up number immune haven't and of practices significant to activity, to XX-plus labor pets relative percent XX-plus

through of itself in appetite solutions. and many large that for create increase dynamic that they're us instrumentation. to like IDEXX and And So capacity. some while higher trying things in higher looking manifest sales, have this activity, respects, saw balance they're cloud-based at to software working We looking

future, it's tools and recognizing indicative that that higher both I both think have productivity their for if can they standards and better of staff support the optimism of care.

dynamics, strong. time. Let pet demand think pet to all bond. all very grow. think data all accounts, remains question going over your the we me pivot play how look by And talk continues to owner a owner there's that strong a about and out know because we addresses By We all very that this I is bit human-animal at, accounts,

across from in a smaller also that pets spending spend as a that, much We standpoint, services of percent all that. X%. still medical economic under they're cohorts, demographic and than just power on discretionary piece, spending know And all the

pronounced they not about So Z across their pet out pet they actual the in extent dinner. prioritize the like care. health on so, entertainment And generations younger much relative indicate quarter surveys, travel going veterinary even behavior to prioritize owners, but spend in sometimes care, they that or like that larger first and to would more Generation and consistently just in to that's things on their Millennials. even own consistently spend But that a before they groups and

percent last things couple baseline. to We significant we of at we years. adoptions been back real of number there's the don't like to that getting any see the -- So and a know movement over surrenders pandemic, XX-plus from look

pet say to the In are overlays, to numbers. potentially that, some from home second headwind think there's to returning that their survey pet looking pet like a to flexibility that dog actually companies is a, we working more know model. fact, first-time take cat a a be able From owners we of, to in adopt the some standpoint, and the what But veterinarian. or the sort hybrid-type owners still gives appreciable

trends. So on remains we we're a net demand eye But on basis, an think keeping these strong. think, I pet-owner

Operator

[Operator Michael Bank question Instructions]. is our from from Ryskin next And America. of

Michael Ryskin

follow the seeing what want to touched on I on demands Brian, that the some points sort you're Jay, you up the and in channel. of just vet of

year, comps, second it bluntly, put to easier. if growth a last X-year at last at But half year, bit or second it's that visit got half more first basis, a you normalized. look on X-year -- gets it on half obviously, the Just the little actually a lot if you you've look comps

your expectation X-year So doing start we over putting X-year you getting all aside, for visit is the a of can compare. vet of into that the compare, math over X.X the growth it at the But course mean I didn't but the improve first the it in in There we're quarter. quarter. of like Omicron were issues year? some dramatically January, seems rest negative what

vet of year? expectation business So your XQ for course then and And over what's follow-up. I've the in the got entire growth a

Brian McKeon

Yes, Mike.

question, we're at multiyear So on to your look these too. first trying dynamics

first was incremental one I the I half into think in that growth thing point we the pandemic, patients that's The half largely to is out that think, think XXXX benefited, of aspect the occurred there step-up I'd through second right. that an the of the new XXXX.

balance, about back So we noted, the that CAG higher original good, It's first think higher of And range informs growth at as trends little end provided, our some healthy for the in look recurring end effectively, agree revenue range the trends. assumes I at of the -- on the visit there's that we second and the more multiyear positive the of on a a thinking making towards the move half look a bit our that's the Diagnostic rate growth we reflects half we're But goals. you the clinical the a to how dynamic terms if challenging. we additive of quite growth year, that optimism. that

year. were we And in line what so -- the seeing that seen QX. the is coming we're more what we've end lower was And into in with

of So year-on-year there's some continues. pressure level

full But explicitly I metric. those, together. not guidance guiding on year that logically, ends how that's the So we're think

Jonathan Mazelsky

Yes. part of add it's And but one an been it's algorithm, to just visits, I important part. would our clinical growth though, that, just

the seen highlight and diagnostics The what from pre-pandemic in higher we've than mind business the adoption other is to the keep or in thing piece level. that adoption strong. highlighted very and where utilization of at is the the is We've utilization earnings

I be ultimately, and the customer and well-defined and through innovation have playbook. and to inspire from solves creating that the and But adoption trialing. think been also bring pretty and to So diagnostics utilization, able innovation we drive a practice over really optimized challenging and a problems. to engagement standpoint, patient It's education honed continuing awareness both years

we're continue So and do ability effective about that optimistic to way. to an in our do that

Michael Ryskin

of trends, same quick. Okay. growth strong And the could seeing sort X August, higher year you point Analyst long-term number you percentage view At bigger squeeze pointed guys diagnostic the And same if now, hopefully the we of be because because should pets, talked higher we full some of to Day constraints. it obviously, in sector should than about picture prior your secular the higher because diagnostics a to months we're of of of months X or where the forward if a adoption, of last drivers. But I one, be utilization. of near-term are sort sort in flash

are with term, diagnostics X% you So above of historical wanted I growth that longer a just sticking to, multiyear basis? on still

Brian McKeon

Yes.

over the you're the as over in the trend. of this, we range, seeing pandemic time. And Diagnostic our think, And of a we their revisit, had and pre-pandemic we annual range that what in basis focused is the like -- was pre-pandemic really XX%. with I in that and basis diagnostics saw customers reflecting point use percentage our the improvement aware, points. we recurring XX this And more the time, our into revenue roughly lower the effectiveness on had and growth, Mike, we XXX XX% work underlies levels, been to the a strategy percentage on range, confidence the that raised CAG of to and end growing multiyear in business metric a diagnostics, utilization that accelerate Just to improvement as business underlies range of that is blood

we're very see highlighted, to Jay utilization. continuing diagnostic as nice improvement So on

and So our That customer ability our our we're innovation very the strategy. the in and that heavily that front. we're of in confident very the we is engagement, with strategy confident on that part part influence of

And those so dimensions. nothing's terms changed of in

and period pets the step-up some but in working in long-term the are a in we big we're view business long compares the higher have hasn't here, and we're I off transitioned for this we a think growing here through and demand through through base. where the term optimism the ownership pandemic, working to And changed. we of had

Operator

Wright question our is next Stanley. from from Erin And Morgan

Erin Wright

macro and dynamics relation of to And consumer obviously Great. economic of did dynamic a goes comment to a clinic to as beginning into a us as and a a your little you constraints picture the remind levers business I'm relative past. are And in was we've just surprised the I that grow prior prepared kind to well. your a at challenging you in what we've seen -- that expectations. backdrop of in this have if actually as seen tougher backdrop business remarks, vet Brian, surprise well? sensitivity such was capacity even in But can well. changes you question the you labor the of mention, bigger visit wondering your or And the to in economy grow challenging your constraints a

Brian McKeon

Yes.

then made I saw business. to softness than -- It on Europe comment the of and in talk can let about the the Just Jay specifically more we more reflect relatively anticipated. me was more resilience We on Europe. related

from and energy indirectly the And to related that so we're impacts and prices higher nature. just of some signaling that it of war things may be the Ukraine

it -- for but that parse -- comment that was harder that, we what So was to us related the it's to.

Jonathan Mazelsky

in terms the of of business. the just Erin, Yes. resilience

Recession Great XXXX, X%. XXXX, and the in grew to our revenue back the recovery go you If

human very XX-plus and our in increased reference both And and this standpoint. point-of-care has stronger and third-party know very from and with channels, U.S. a lot channels. more just increased portfolio, strengthening our has a I the environment, direct We and across own there's Obviously, think, appreciably. lot a through that diagnostics and importantly, channel but portfolio, in has now positive appreciably capable, I We innovation the distributor not customers. We Now the relationships globally. and gotten, software other labs suddenly the animal have pets. very direct more of that think over the changed years, worked bond bond our

resilient we're a very that resilient even become those factors. result business a think more as has we So of

Erin Wright

the in Okay, terms is to embedded quarter? further pricing, are now of price the realization in you shaking in embedded what's relative for terms of what remainder year increases and great. last And there guidance where net the for then And out of the year? price disclosed

Brian McKeon

we U.S., our was so it's in improvements solid we've bit other the X% originally, range, well. had our comments markets CAG in better Diagnostic as base in mentioned I got X% average indicated on a the overall over than and to As recurring

clinics something over we And think pass plans, in that feel about we to to time. growth reflected that's I an pricing and vet look showing their pricing continue well, ability will note are also I at So good as think numbers. on our and I that's

Operator

Our next Stifel. question is from Block from Jon

Jonathan Block

actually also talk constraints of to about the we start, But to picked for had just a capacity similar amount in start Maybe up demand similar roughly a amount, also equation. our quarter. checks recently this vets we

embedding? weekend metrics? guidance, new give are And Jay so you your revised of a it, part be the still year? there? all or play might What you call thoughts occurring what pretty did direct about the capacity for wiggle to those the here. Brian, you what Is embed back need earmark the Or guidance But room also or constraints, are And some question for might or stuff some the consumer? what out, the into

Brian McKeon

And the changes in have we indicated, to like the outlook. on in are been quarter would of some recent our X.X% macro projected anticipating more the dynamics full year including environment capturing the range of So as in I that dynamics, regions we're of going growth growth that we haven't XX%. which second organic we end impacts. say have our at may What is in be some macro the lower explicitly that will Europe, signal, they

earlier. the outlook, the what we shared think includes we're range may that that's in -- macro are impacts and I reflected capacity believe So year going we trying dynamics, into also what full I capture to on but be our

again, influence think think always specifically, pointed If the out, that's has this business been anything, over that time, are strengthening just and Jon, as pet a something, support bond forecast So we only been growth the in I to but supporting whether owner not the have factors it's be Jay resilient. I or improvements capacity of as grown. industry our company own our it a demand,

So positioned that in well think -- guidance relatively capturing have appropriately to And we we trends recent we'll the that the kind changes. think we'll we're range reinforces of we've be more shared.

Jonathan Block

Got it.

me Okay, I friction that there's enough. Is follow-up. little to we're answer. And The on the to it the but forward? like you test or XQ fair X.X% to then on bit you back Dx Dx to the this then normalized it, contributor down on looks and maybe diagnostics, Why pre-COVID. the XQ wants of some the maybe we're Then color, that 'XX, that as maybe that then is a guys CAG it try step return information. stepping that what veterinarian an a just of -- reflection side get there, that 'XX. and Why of But in Is drop-off And here growth frequency, like give anticipation percent longer went going no pet it let for. to down? hit think in and to drill less X% normalization? call a curb roughly visits, or sort of was looks a CAG clinical move? And X.X% and seeing that the why a down of ton frequency practice, helpful revenue per including

Jonathan Mazelsky

Jay. it's Jon, Yes.

pre-pandemic keep is of that X.X%, So a -- the more from base. norm mind, historical that's in is much higher from which

X% XXXX. saw QX we're So off that we building that base in of

then higher there. which includes they it, are base, some to include as dollar -- we And able that a diagnostics, more of look and growth to that, And extent in we want to so clinical the do when nice have at using be they year seen effect standpoint. price to continue that's that both grow as from visits volume we this well X%, and use

in broader that envelope. veterinarians think very the as an we the enabler is of how to diagnostics see use terms So services of medical healthy

Brian McKeon

and hearing what's owners anecdotally that more are going in we're interested invested And on. pet

their testing interested as owners that So expanding bringing for done, in services of pets is in. are the they're those scope

the base So metrics I we're higher here, showing are off building reinforcing think that the them.

Jonathan Mazelsky

Yes.

drop side, the We relative to that I endemic from up. Just and in think, though curb specifically see continue pick practices comment we've, around your to pandemic even the off transitioned business, it's pet productivity mean probably owners of the that they standpoint the of that. cases from minority practice, of I lot -- like in of a the -- XX-plus supporting like the

adopted level some thing. service have practices of think of type around concierge that I

don't I whole. still peak that will sort that, away. So continue think step of it's of Certainly, going that's some remain of go extent. smaller It down to a probably part the to to it's the from but there pandemic, a

Operator

Goldman question And from Nathan Sachs. next Rich is our from

Nathan Rich

CAG sort that, to come Brian, maybe one relative it down then next if we like as you next correctly, the function do in kind what of kind growth I -- I back, the and points of come R&D just year? first initially next think and or that XXXX seems lower you any on is margin I lower And at deleverage moving we Dx CAG see just kind impact mean, the in to realize you you see the guess, clarify, of into margin, you you basis that Dx Maybe the a does so 'XX, I'm mean or I what wanted constant return if growth might do currency of might get margin And core back the is kind looking think I expectation expected. we year a back the get do this and moving outlook. expense guess, pieces just do XX the of get of that to of -- year? -- the there? back I normalized year, lap that

Brian McKeon

Right.

that last XXXX. a On We're in yes, we investment will that point, that. as projecting the not occur view discrete not

specific impact, provide you that. favorable will be to can a and that we So for try so year-on-year, that calibrate

outlook is think currency I a R&D of and the basis interpretation away improvement. impact that XXX your the we XX -- to discrete point an this year, had Nate, clearing right, originally

did early of factor year and this returning know, than in. long-term that the things It our travel. you We've into time. and And that's working better had year. do impacts inflationary like this have As doing in that some last goal. organizations we're sales relatively half internationally second been We our advanced we year over expansions through of costs,

of with our level to as that And growth were performance. we costs while through so a we good it always profit in started working delivering growth cover do,

calibration rate X% the the moderating that. So is in growth

we be of believe, that produce to we to a margin can. we and good and off absolutely flow over We're the I grow it's going an does as support your expected think able it committed And is goals long-term question through expansion that we back business a is, of that's away, to pull can appropriate think growth. It's time? that. have bit And kind not on we our believe that come model really back? good I

Nathan Rich

take issues and issue of curious, a that kind Brian, solve? getting might and is vet kind offices thoughts be vet it get could on these it little some and follow-up, industry of around or kind you I Okay, what kind you that out this of additional But from a with longer issue? hire bit more to play more been call. just just are standpoint, out maybe have quick to is of capacity ask I'd a during of to has staffing great. of some challenges? your a seeing And And do if capacity Omicron. the that. touched Is Or adapt know Jay throughout tax? the clinic Just, I -- it

Jonathan Mazelsky

as PLUS clinical staff and care. solution it's the the productivity a of, of things or as they're very of can that so when a COVID really both there's even home. We bit software in clearly well that. that base. number is the it's standard the VetConnect spend a because staff there investing support for -- increase though related software standpoint practices -- there's increase a But that part of significant I seeing really proactive out, are ezyVet adapting premium think, installed our Also talked to get growth staff it's of appetite our shortages. it's whether activity of being just from of standpoint that's XX% an in And placements, doing, important technology. From about we're of some been are deliver, the productivity Normally think level part very in I just in enable that think see hospitalizations. they solutions, And and premium COVID, time have Nathan, the we've much all not people higher XX% decision I instrumentation the able to it's to in at some significant, in resulting and the including above. growth instrumentation,

they owner the that's of and and they baselines. that think practice and than recognizing that practices revenues, In at to I right need owners techs, that formulas of staffing relative generate higher they now, client higher can they higher vet at have increase ratios veterinarians cases, are some can I and support pet current in and vet cases, think had the latest non-licensed have number to their techs recognizing reflective other looking technology. mix staffing

really capacity. increase at to practices range of to So a able broad be looking

Operator

is Prasad from question Barclays. from Balaji next Our

Balaji Prasad

me squeezing in. for Thanks,

do. constraints what longer solutions So addressing R&D curious of terms near onwards? to term helping the customers. in front. the what mean that question Will mean be again back this it's the margin in XXXX track veterinary wanted secondly, I'm to and on should clarify your expansion on for previous And up I in in anything the else, of from of both EBIT capacity these term just terms kind it industry your you can see that opens of versus challenges cost opportunity an workflow extension

Jonathan Mazelsky

Yes.

about talk opportunity. So the this, I'll

mentioned from platform In addition software practice. solutions a testing laboratory standpoint, clinic serve extension the of our to what solutions, I really in an a reference as

to services. and So insofar or send want they strained medical practices maybe out even as get our testing

that. So and specialists, we have boarded a very they radiologists large medicine pathologists can do of internal group and some

the that, positive to being effect. of to think and to continues able we opportunity that that open a So terms net support practices in up is

Brian McKeon

question, through will highlighted R&D for the and the are we discrete our investment goals that expansion. results, that And on quarter nonrecurring. million margin as second we our long-term And $XX we come maintaining view operating

Jonathan Mazelsky

I'd that, to you and to morning phone listening. say this participation with like I'd and devotion continued for enduring the Okay. And employees to our for thank focus on purpose your today. everybody delivering to on IDEXX their the thank like

thankful our enable forward in around Your a evolving to the our execute engagement continuing very our sector unwavering and efforts and at look the unpredictable momentum excellent customers 'XX. us continuously rest We're world. level strong of support for and support and to dynamics your and despite through high

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

Operator

ladies and That participating, today's gentlemen. now you, Thank you Thank you disconnect. conference. for may concludes and

IDEXX Laboratories (IDXX) 4 May 222022 Q1 Earnings call transcript