IDXX - Earnings call transcript Q2 2022 | IDEXX Laboratories, Inc.

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Operator

Good morning, and welcome to the IDEXX Laboratories Second 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

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

Brian McKeon

our XXXX. our welcome you earnings QX and morning, updated call. review to and Today, through quarter for second outlook financial take Good results our I'll

X% prior levels. X,XXX gains in to and levels execution an basis solid organic placements, In revenues growth and drove in were premium terms diagnostic revenues. by CAG X.X% veterinary nearly software IDEXX continued a Key premium metrics CAG organic strong revenue Overall, revenue IDEXX QX recurring to growth of results. Diagnostics service growth supported increased recurring revenues highlights, double-digit XX% in organically, high clinical in excellent, growth of instrument point compared visit year reflected U.S. execution continued strong same-store

For organic clinical at end slightly impact X.X% investments in year share first $X.XX low visit high international overall of sustained for increased impacts was impact in XXXX, X.X%, and with Profit from EPS gross to results US half quarter, the headwinds growth expectations, stronger macroeconomic expectations regions. guidance in our growth of levels, were the XX% supported below reflect our half These per results $X.XX net first the R&D line from lower margins. range. discrete relatively increased dollar. of year-on-year full $X.XX of year-on-year the our including by US was from

discrete quarter $XX in As reflected impact expense growth, R&D high planned, and EPS results of from including effects commercial investments prior million in carryover the the operating investments.

trends for revenues. XXXX, second the As of X% growth half, organic midpoint IDEXX's price range organic the X.X% we organic we're recurring We've continued increases. X.X% on to look half outlook year IDEXX this to and execution reflecting CAG gains aided full outlook Diagnostic an strong year by in in reflects incremental updated benefits solid for from the The overall through continued expansion of our full business X% updated building growth second revenue pandemic. the targeting organic of significant forward growth, XXXX, to to solid

constraints work the demand and we'll XXXX of vet the growth pandemic. pets in continue high the supported by practices through As new during capacity lapping discuss, to levels significant

higher potential end we've XXXX. second organic additional At our estimate growth the growth to climate, half midpoint economic risk X.X% global impacts an our challenging organic also pressure second the in incorporates updated the for macroeconomic a in expectations on of in outlook clinical range, visit factors continued growth low on these Given half levels demand. incorporated related of

to discrete margins year outlook updated on strong levels, and based effects for We'll and of flat estimates prior exchange details foreign continued XX of through new to in EPS for the effects points strengthening estimates $X.XX full our Our year foreign growth expectations also reflects for basis costs $XX million comments. R&D the sustained reflects revenue $X.XX adjusting in later exchange the organic US updated walk below of operating dollar. It outlook P&L XXXX. our in my

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

veterinary in X% a recurring supported in water addition by by the X% X% to Second in China. organic our revenues imaging CAG quarter increased growth growth revenue year-on-year in diagnostic Diagnostic strong X% swine were revenues,, regions. X% to software African the growth X% to year gains and reflecting the and CAG moderated These revenues growth decline compared in supported revenues gains driven prior of organic levels, organic by US by international organic gains and CAG and fever primarily LPD business our X% was related in organically acquisition. in in reduced QX, X.X% CAG benefits organic business. organic were in gains ezyVet QX growth impacts also from XX% instrument in testing

This half increases on of QX demand and were QX, same-store drivers, to updated were of visits of clinical the an visit below strong CAG healthy utilization sustained sector X.X% X.X% estimate US trends diagnostics in levels. increased X% second year moderated an by terms declines increased compares year-on-year of clinical growth. prior X.X% XXXX. to relatively In supporting estimated pressure In in

continued sustained first these and capacity supported population by demand and benefits and XX%, including by for clinical in back X% levels pet XXXX, during the primary staff capacity by levels impacted visits reflected services, significant from levels, have diagnostics. these vets XXXX efforts US step-up QX the staffing contraction increase practice XXXX. Extraordinary X% absolute XXXX. half significant time. average the XX% expansion. practice is jumped in In and the see in visit care clinical peak recent clinical XXXX, US US in clinical in including visits clinic annually, pulled strong pandemic, specific approximately factors and Our per capacity for analysis challenges from the through during visit supported in clinical in the their implied XXXX two brought to a improving still visit higher at increase in high vet change longer demand pet levels pandemic in This the health pet reduction Historically, sector Between US in driving term while these the being trends, the has growth of the in visit population with XXXX. We by to trends, dynamics from QX practice of expansion. more per demand line steady implied nearly points metrics below clinic lapping the over the pandemic vet expansion average X% capacity vet clinical grown

in However, clinic IDEXX half challenges US the Offsetting diagnostics near-term year. headwinds it's visit given recent we and levels demand capacity, continues by on continued this the in the appropriate growth lapping visit level, and is plan believe these pullback second pressure of staffing of supported underlying strong throughout be affected continued to growth clinic clinic at innovation which near-term the the engagement. of by revenue to XXXX, year-on-year for per expansion

in demand US momentum instrument macroeconomic IDEXX' the premium Reference in retention growth same-store and to solid single-digit globally. of to expanded diagnostics increase growth an build, premium growth of continues comments. QX, in same-store in assay solidly instrument per X% reflecting strong X.X% recurring revenue premium year-on-year growth organic Diagnostic the the as were revenue of we're US and be in clinic in US QX net X% supported Diagnostics levels. in international will the growth visit SediVue in high Global basis efforts QX, revenue QX, a sector as quarter. talk revenues organically, QX higher continues in in reflecting global benefit clinical quarter. moderated XX% IDEXX in globally solid on XX% on our by clinics X% first supported Consumable in placements. momentum premium to on continued continues X% in remains benefits installed placements We across gains gains. half. gains more globally. organically diagnostics supported to organic X% outpace revenues solid our support US clinical increases. reflected with gains worldwide price confidence growth impacts. consistent reflecting IDEXX XX% international new towards in X,XXX new X%, Globally, continued modalities recurring year-on-year increased average the in reflecting reflected CAG visit excellent, how trends revenues X%, X% by in strong catalyst, expansion hematology Global demand double-digit year sustained flat a in achieved increased by Europe, regions, the Lab prior XX% quarter US VetLab While CAG the our revenues year-on-year declined to assay in gains second and in quality revenues and reflected by gains including nearly organically QX hematology customer gains placements investing his increased regions. price with The internationally, global instrument in increasing placements solid One our increased competitive ProCyte visits rapid business for pressure Catalyst net solid basis growth across increases performance from US the point base, in organic achieved trends. platforms. growth about across increased and was premium Rapid visit showed and Jay consumable growth Lab, strong compared revenue and volume to in expanded CAG front driving this

offset revenue gains for these growth and of of our through X% swine X% are testing continued organically to the across revenues dairy from service Tough LPD XX% from revenue and our Water US swine of strong half business, by including organically recurring organic in changes and core and impacts. We've ,reflecting high worldwide revenues double-digit QX, momentum comparison reported worked now poultry fever in includes veterinary CAG business. other basis, positive year. overall decreased in Livestock, areas enhancements acquisition. LPD growth inflationary were software revenues Results outlook imaging CAG to provide of digital benefits price areas additional organic an will benefit imaging supported product additional updated and ezyVet implemented to increased diagnostic from benefits Diagnostic software incremental in XX% organically In X.X% gains increases and comparisons price a performance cloud-based other revenue placements. August and increased prior net including this in on in and QX. African and improvements. recurring CAG levels X% estimate We in the and price reflecting XXXX. targeting revenues the China strong in regions, in moderate second in benefits second Our half impacts year software

Turning profit in to net software the discrete with reported and Benefits in reflect recent $X was our basis half in the results initiatives favorable basis. gain helped $X.XX increased offset R&D operating increases of more We're effects the benefits productivity Operating on comparable solid P&L. levels a prior $XX gross the carryover related growth Gross in per gross share-based comparable per tax comparisons. share, to related comparable lap a per high for second million XX% moderated which year on a LPD in lower quarter compensation, X% impact $X.XX inflationary XX% as R&D a related XX% QX gains, from from supported from a revenues. million from was related to the from and second planning discrete margins by included in and impact in quarter investment. to quarter and impacts X% on profit a share improvement as expenses impacts results line XX% investments down increased on expense year-on-year year $X.XX leverage of XX% or particularly fourth expense margins basis, reported lab XX.X% service global including were comparable share basis. advanced a price prior capability. OpEx growth Gross expanded and high year-on-year decrease profit gains. to the investments including as EPS EPS levels. Operating quarters we these commercial growth investments. to in were

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

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

Our a strong shares times to X.X We net of balance repurchase ratios appropriate intend million We the this [ph] to balance strong our allocated X.X to sheet in leverage remains position. share times leverage continue as of capital cash. and with in program QX. We support XXX,XXX on gross ended round. quarter $XXX repurchase our and sheet of

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

to We're first revenue the and to half expectations lowering incorporate organic growth rates. to additional our our recent full projected strengthening growth updating at US outlook. impacts the incorporate our recent our for by current exchange adjusting year outlook of foreign sector of macroeconomic end dollar reported in reflect EPS X% from potential care interest range guidance Turning impacts the lower range. and our P&L trends changes and for also to performance, factors full revenue XXXX We're year outlook

$XX headwinds recent of year-on-year to of of Our in full estimates. the adjustment now billion dollar. project revenue for with to year by $XX growth the earlier X% QX. We includes X.X% exchange will an strengthening reduce revenue related approximately year-on-year $X.XXX the million X.X% to to reflects US $XX to foreign a billion, expected $X.XXX growth updated reduction full range This compared million year million

to X%. year noted, full to a outlook updated to full year X%. recurring X.X% This the organic As revenue growth revenue growth organic Diagnostic reflects of we've CAG X.X% outlook

X.X% operating end risk an and outlook the normalized X.X% trends half commercial of growth from X%. in half organic outlook our with recurring growth midpoint second is period. growth CAG second A CAG R&D to Supporting performance, would XXX for consistent an to QX to adjustment higher we R&D planning impact X.X% a last Adjusted growth our of gains sustained the second rate approximately midpoint our approximately for we're basis the to reported days visit At strong increases of compared outlook and organic growth this foreign growth the demand. higher X% half XX% implies Diagnostic supported we deliver discrete revenue We're full as for by strong by related for prior to for This XX approximately basis execution to Diagnostic of reflects from of XX high operating QX in revenue margin higher revenue of second in growth basis outlook. discrete and in lapping modest on benefits half on points outlook second provide X% to XXXX, for related growth we expectations margin the an investments. benefit, will operating CAG is or premiums are recurring to recurring decrease margin additional the and supported flat realization, margin to reflects effects, our rates, benefits year of including growth X% recessionary recent XX.X% approximately IDEXX by investments, projected point align of in XXXX sector comparable second of revenues XXXX stepped hedges, increase Diagnostic The net revenue improvement on approximately revenue levels additional execution. advancing the XXX of management end outlook improvement now from basis The gains updated CAG improved Diagnostic points end HX impact outlook the in worldwide equivalent strong X%. continued exchange impacts revenue in efforts half from organic Our operating points estimate year XX.X%, the a growth with estimate for of gains potential trends. X% benefit levels. high levels. clinical XX%. XXXX to of this updated CAG of this last for year-on-year our of global comparable recurring growth of half benefit for recurring seen macroeconomic factors basis reduce which which incremental reflects low prior exiting higher gains outlook QX growth the XXX cost strong IDEXX of HX. increases investment in were The price outlook margin of lower Net will of building but growth to operating CAG and HX will half benefit solid Diagnostic relatively first year year price estimate The price targeting net targets goals the QX up end flat updated supported goals reflects margins price growth margin compared require IDEXX full

from Our $X.XX outlook including FX. $X.XX higher impact to the share, per including from additional investments. midpoint, $X.XX decrease and of the at impact related headwind R&D a $X.XX share per EPS $X.XX $X.XX represents of interest This projected of discrete to is rates updated

our gains. the review. That estimated foreign $XX XXXX earnings is benefit provided tables EPS our exchange million updated details comments. For per by in year turn hedge now concludes estimates full share. and $X.XX to we I'll $X.XX our per profits his share year release by our and in at from will snapshot. reduce $XX outlook, Jay for the midpoint financial operating on million over the net estimate We projected press full of or an This call

Jay Mazelsky

pandemic. execution the in and CAG growth. patient and of of a sector remains function visit teams. in quarter health PIMS IDEXX growth choice another of software Demand cloud-based reflected placements veterinary solid IDEXX care is and growth pet building our delivered recurring IDEXX placements, pets the on step instrument morning. high continued good visits by and growth, during This excellent IDEXX record was clinical for second high, Brian, of Diagnostics global you, to partner growth by Thank premium diagnostics sustained premium quarter a clinicians. in revenue supported

and in high despite our I'll commercial and integrated aligned potential The the Our while expand delivered growth advancing them initiatives international financial quarter solution business, that of creating growth increasing care. IDEXX animals. visit headwinds for in health and to the long-term grow helps our key performance. clinical from support solid that us and position an that of insights businesses, pet Today, innovation growth by for support factors standards results capacity their macro providing veterinarians durability and levels our solid some of diagnostic context products reinforce in clinic-wide confidence progress trends with the in current sector companion care and performance continued discuss near-term

companion experience. Diagnostics by X% continue X%, second sector. prior Let while the the base, benefiting best CAG some care significant clinical the services an IDEXX in quarter, differentiated me trends animal validating to excellent profitable against deliver per grew a faster, use context and US pets practice very points building with the sector providing start US standards, recurring global value of veterinarians visits revenue pandemic. strong reflect revenue in growth. we and customer bring nearly to two demand as solutions year from patient for diagnostics during observed veterinary step-up number CAG grew on strong diagnostics updated services, a during trends the on

was both driven the of growth quarter, much and of as revenue base. growth a revenue even to total areas from basis. trends of gains utilization. contribution outpace practice pre-pandemic revenue on per and US were one a growing diagnostics remains diagnostics veterinary same-store and higher once positive above clinic frequency diagnostic X% practice frequency clinical the faster Specifically, both the growth at both utilization in again the noted Diagnostics by continuing

visit lower highlighted nearly the the headwinds clinical expanded As earnings of per quarter, X% snapshot, revenue from visits. in critical diagnostics use in offsetting by

a to population in around pet We're visits adoption in to clinical the that our expansion, example, enrollment XX% the the average wellness on continued care, shows We of impacts a increased macroeconomic reflected weekend clinics in instrument pre-pandemic. expansion expansion it's indicating second the in for combination particularly including trends. see the of for diagnostic related staff visit progress initiatives Europe. since with areas of impacts moderate make capacity higher XXX including from pressure almost prudent program Germany, moderated the the also the Recent XX% we demand veterinarians the platform. of is largest We're on quarter solution premium period compared issue, also during been adoption seeing placements, of think open platforms, impacts of future We late of to fronts to our also days in preventive continued strong continue XX% demand revenue. global were across growth progress research turnkey plan appointments. in of where capacity pandemic. step-up XX% US year-on-year continued drive In This and seeing of international We care they pullback of the diagnostics enrollments, on One these approximately some levels while growth to US, or momentum of performed a in IDEXX pressures, significant new US from These recurring have that regions an saw reflects we by a of XXXX. ProCyte XXXX. provide on and QX, half following to successful a year-on-year major indicate majority related

well-positioned pet for we over is expanded global working are clinics population. care pet indicated, with Brian in likely dynamics health demand a address through in to these As what time underserved significantly

us keep these As long-term near-term track we're half, work through second growth momentum targeting the in goals. that headwinds, building organic our on towards growth solid we will overall

product to building our These along strong and to diagnostics discuss our commercial innovative results. help commercial strong continue the model. decade-long customer ongoing growth areas instrument in introductions team new support strategy. record enabling on execute capabilities, within of grow world-class of with EVI drive appearing commercial levels. products. A games, results sector, highly new utilization years, in demonstrate sustained very customers IDEXX over This gains in These retention the reflected factor and is strong the software in business with our net now development faster market significant progress benefits key focus solid our to high-touch supporting Let's and key capabilities IDEXX’s relevant several placements, high last a

approaching sales in-person Our challenges now desired to over end state customers placements an the professionals capacity, growth goals. shown International applying to access have to was visits ability leverage also strategic where to manager and with support gains. to performance drive we're relationships despite deep XX%, are US priority, excellent maintain successful a business playbook and these levels account related at the international and staff US close strong is new XX%

The innovative for X,XXX is year six and many already second analyzer in were year-over-year are use. realize as significant surpassed been is resulting against country-level of X,XXX in-house Day, regions integration diagnostics on last ProCyte over us piece largely care, key professionals Europe. represented consumable and with our Putting technology and streams. right commercial hematology global has completed placements a long horizons. across continued to in in for capable profitable optimization, friction Customers modalities tremendous, drives run the hungrier which requirements enhance Reception utilization international onboarding analyzer, instrument base in launched positioning growth and of growth solid that basis been supporting expansions of progress have the Meanwhile, of commercial continued We A growth with in adoption have future placements supports excellent for our been international One which customer portfolio have never of product our over a trained the the hematology headwinds quarter capability ProCyte as the of workup products workflow performance innovations gone regions veterinarians strategy the Investor quarter units. global One highly work of One, drive a like Day. clinical installed first shared when placements. levels fit shared near-term to constraining year's these regions ProCyte exceptional, and an worldwide through opportunities last advancing and our where excellent to diagnostics macro-driven in from in particularly future to satisfaction underpenetrated gains. extremely to expansions The that and patient. Europe, well. We the and sales regions benefits premium has these ongoing second look adoption we customer-friendly opportunity are Investor organic and across of expansion This global progress annually aligned doing integral base premium installed placements high is on estimated last XXX,XXX and opportunity basic retention, continued the the customer as had hematology in the year's instrument addressing approximately for in forward

growth product tests we service announced In In launches. to to investments these targeted key three offerings. another and we upcoming enhanced and in as laboratory QX, commercial to addition IDEXX's capabilities, is of service technology pillar strategy innovation and endeavor add value our product

PCR higher capacity customers constraints shared earlier flotation mission an customers this management dogs of the the and FGF-XX, type detection goal common diagnostic to XXXX the antigen one, With with will revenues is within of in of addition include; million support timely our expanding Investor These reference antigen of results, most improved ways which of a services incremental testing sector. biomarker innovations customers new customers. shared and Dx enabled pet extension we the testing, an given fecal that PCR our to disease taper these Day an which the Louisville service The of long-term XXXX. by clinic, reference fleet customers cats. laboratory two, pet kidney efficient for towards the Number taper, and addition, Fecal $XXX support of to provide by number at services include provides which accurate drive new in clinicians, insights. a an more reference fecal timely earlier of common and care of will of even new in only tests that Dx these to during three, greater kidney stages direct addition a number our in veterinarian health and current And targeted use alone will deliver more highly that as disease. confident reference next but health crucial, a parasites in progress a test with times standard along increasing to up detects have And care diagnostic to our and These not innovations also This delivery We lab prevalent SDMA, access so IDEXX's Fecal signs for with five APCR our the earlier at chronic diagnostic infect delivering recommendations therapy with site. enable kidney antigen care. to customers a way of our products value partnership lab deliver disease IDEXX IDEXX adds benefit US by the using key chronic do in insights.

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turnaround product our times customers, is to to continue than very demand our to rates capabilities given with and forms, availability within high execution demonstrates advancement capabilities every world-class to Underpinning of commitment the service our integrate of in consistently reference delivered of technology be reliable benefit The on commitment against labs. faster. business the IDEXX availability long-term high the commercial growing long-term our highly-scaled level sector. grow centers. including help supply We takes the to building the service our a manufacturing diagnostics focus IDEXX our at chain second of to product XX% from levels customers' integral which and and that quarter, strategy is day, level pleased greater software Strong high customers many providing especially earning this

Our run price future to to product reflects network investments cost business US ensure levels and excellent chain including recently higher increase our of resiliency. supply continuity the in mid-year communicated

on in I'd in in the dedication animal for They our our the our extend dynamics, the ongoing value, like potential. creating efforts. and to globally. supply those strong thankful manage We're chain call, mission of a for financial growth concludes more making the strong Given as on advancement delivering animals, and this, are our financial IDEXX's through for in levels while also remain to advance meaningful building company execution better create IDEXX review. supporting care performance. This is long-term XX,XXX planet. are future well financial results difference positioned in while our enduring we colleagues to performance than strong to I'm a to people and solid growth thanks positioned world. aligned the heartfelt deliver long-term there and their our well listening significant long-term and To towards inflationary integral

investor Assay; and Brian idexx.com and Commercial and provide Care extended Michael to live by times. we'll Lane, live to Veterinary President Q&A also Executive I'd IDEXX approximately President We're strategy and George clinic Dr. the the and We're Facing remind Information Day. the management and on the GM level to Investor make these event Services; conversation trends management be their Point business GM Vice Before event CAG led and Maine like a and of CFO. President Godon, global for with a supported Participating my members for person. team. information who Westbrook, GM we President Executive for Laboratories Thursday, Rapid customer Executive how Vice Technology; Executive Operations; at and last the senior Organization to and senior Americas the Senior Chief Hunt, years event and Senior for holding cannot Customer Vice with Fennell, including Mike will Julie look four during Vice on of those excited at and Officer; After President long-term McKeon, our GM at you noon. Worldwide and Software recent The the my of it Schreck, of session of will President Global headquarters will via host pandemic Reference lunch Vice IDEXX Vice has also August Q&A, team, line more and open and Polewaczyk, I President and our in that hours Tina streaming XX, discuss and management forward GM Jim potential an conclude Vice for team upcoming two virtually, we the X:XX in hosting recording Diagnostics from to event

So with the call the Q&A. line that, of open prepared for and section we'll end the

Operator

Thank you.

we We begin America. [Operator And will Ryskin question session. first of with question-and-answer Bank have our our Michael now from Instructions]

Michael Ryskin

[indiscernible]?

Operator

hear We from you. the mic. You're cannot addressing

Michael Ryskin

Hello? better? that Is

Operator

Here you. go. Thank we

Michael Ryskin

Thanks. Great. Okay.

that. of that. much first you do Just there, called That's price price uncertain about weak in half. start wondering forward of sense? the X%. And you elsewhere? from Sorry of on pushback. you the I little you lot I you're the think macro got out X.X% taking want understanding you XXXX and because questions especially take dynamics to top we've the just August, side took of things conditions a incremental ask then just in a on X% that is Am you you're seeing of a just Is correctly to until can pricing on first, a that talk bit as pulling in the how about sort this price some the

Brian McKeon

Thanks question, the for Mike.

Just on the first part, that's correct.

worldwide be customer X% in the had let worldwide we half to the the will So and we in and half. increase incremental X%, so second X% X.X% to that imply I'll would anticipate the X.X% US a first an approximately talk it for Jay dimension. to benefits, the

Jay Mazelsky

Yeah.

So been Brian driver increase was running that's really, reflection of costs pet I don't of business. question qualitatively, to your indicated, we a think, owner higher around as date. a And pushback, the that, price the think to

to traditionally consumable consumer of other have prioritized owners spend pet pet total things. fact, care In a health expenditures. percentage It's small relative

strong to don't the and we owner has So it's been expect pet we piece. human a demand that know growing, And change. and small relatively

Michael Ryskin

on a we're came Obviously, the tracking the seeing and talked follow-up same in all And visit relative first a to ask quarter. of we're vet indicators, can about. the I lot growth XQ you how

the like I'm the assumption for but of year. to end this is we -- If make there all, terms at are second a improvement rest next this in then XXXX. gains vet in of next and can in vet year, of Thanks. are the vet gradual backing grow there from correct? for made into want you're numbers And XQ half year? of I the correctly, XXXX? digesting sure the capacity still or that's normalized some in still in gains we off sort year terms headwinds level more the we back normal and what's the this of to then negative You XXXX, talked visits, of is Is your of the for After visit or all more for for -- then XXXX visits there of about capacity first year? of assuming

Brian McKeon

through QX. of very we the softer that's down think outlook So visit can link modestly sector build think levels, the clinical would The the positive the we're kind as But underlying in we're, strong. visit don't just back that I quarter. that QX, and how we X%. Mike, the relatively than were And were as at But try grounding, very I per revenue to the to trends. a why clinical about It visits out, pointed walk was you thinking say, of indicator was X.X%, on. clinical analytically to can I you down up and end year-on-year

take So of recurring, the for in there's looked you the headwind at as X.X% CAG midpoint second we Dx QX. on half, midpoint days if the a X%

And the that, to back comes X.X%. to it X% that's X% if normalize to if you pricing, off for X.X% X%. So up then incremental we

in we that trends forecasting occurred pullback benefit in underlying capacity basically with the get still coming are in pricing. that that the similar the plans And year. there from second the half the underlying this working we're we're earlier Fed So and sector incremental QX out of assumptions are that through

there a QX half comments, year. saw my was level about the big QX XX%, the to in X% in sustained XXXX. of from XXXX step that's pullback first mentioned average we And throughout the I As in up XXXX, a then visit

population challenges, year, that demand So the through going through year. still to that ongoing still And including staffing expansion. we're that working is strong last step-up something to we're benefits be given very compares the the we working just this from pet the think

question, be into and as latter the on this in part headwinds dynamics the those be year, realistic we improve, through to we think to and see near-term through head trying your specific should continue we'll we're do the trends should XXXX, working of we we -- those improve QX, through headwinds those but think outlook. of So factors just our given reflected kind prudently that that's the to and

Jay Mazelsky

Yes.

-- there's at mean evidence other the potential think I in visits if to growth. Mike, I this there's the you pets a that in would there's I the pandemic. expansion number The demand is thing a add XX% of net that, take underserved some given look

clinical just extrapolate number visits should the in saw and If based the clinical you take out on be the trend. visit population. to at higher We X% a pets, look X% pet just pre-pandemic of add

about, we've So constraints I that -- from there. a capacity I some the think of through talked recovery as see think profession we'll the works

Operator

We have our JPMorgan. next with question from Chris Schott

Chris Schott

some dynamic Hi, guidance versus in the so dissects, guess this change Europe. get I great. was vet the of bit trying visit on as a just growth to you of Thanks demand clarification returning referenced much. little softening I

seeing just guidance point change in factors? two quantify how maybe of basis on so those from just the, much. can you the greatest specific so So of impacts are broadly that elsewhere? is kind seeing are you on pressures And organic this markets XXX where side, or are elaborating you the Europe, guess, macroeconomic across much here? I than greater Thanks seeing maybe Is or

Brian McKeon

in the the reflect The trends Europe, visit for and that more Yes, question. is principally principally Chris, recent seeing adjustment your to made around in thanks we the both trends. we're US

think quite I remained about We strong. levels our good that. feel execution have

end metrics are of as up is holding per we And on that. the think can underlying reflect see dynamics, the trends, the were outlook. you the revenue lower well. to utilization in more principally aligned adjustment But we think build recent visit more I can the which the with

that's reflecting we our to that's quarter, pressures we we've that some the about we're the and visits, of guidance, what that back -- and for earlier what we've and on appropriately. end continue, through lower think adjusting the talked had seen Going second

the think in in second I the range full opportunity that for reflecting improvement there's half. we're some

think that, positive I believe that can the dynamics, could we the point, clinics that out that demand underlying be a to factor cognizant trying think adapt risk I we're improve as course, I I And a be additional there. capacity macro could to and of some to that there's highlight think calibrate, for that Jay's difficult think potential more is we're that there's And factor. well. that's but

on I trends. recent the we reflecting and So we're think adjusting more the outlook think balance, appropriately

Jay Mazelsky

Yes.

your directly question address around Let me balance. just geographic maybe

a US in the And a we've major So we're our or of of different majority both number country Not veterinarians is especially to surveys, is the Europe. issue. largest effects, in capacity what is that say in the and impact more done so dealing Europe, macro indicate regions is Germany of moderate when the Ukraine-Russian seeing energy than stack that And factors the much and closer terms labs are with primarily surprising not testing. some and consider you in-clinic and European of war seeing the on some our that from them. in sector reference inflation to we're

Operator

Stanley. is from question Wright Morgan next Our with Erin

Erin Wright

Thanks. Great.

instance, think for you particularly than backdrop would was more the less the macro. or here. in now maybe economic a versus, during If mentioned experienced you you expectation growth guidance the of the on time, you embeds lower on you tougher from initiatives I leaving may Dx downturns that the make during for going Catalyst end challenging question similar about difference across economic more insulated here. Another backdrop, the I going a prior differently US? what But here, I as be positioned would the heard XXXX into And Thanks. correctly to guess, that I economic launch, what instance, your business you here what a guess, those that XXXX,

Jay Mazelsky

Erin, much very question. back a of, we're thanks think, the Yeah, XXXX I than on a XXXX, in morning. position couple in think for were important Good dimensions. I stronger we

XX% a direct have sales Our decade channel, a we revenue And a distributors from ago. over we plus worked standpoint. in through now presence

customers, more standpoint much So we across from board, our is labs, reference innovation robust software, the an relationships for those in-clinic with example. both direct have portfolio

a veterinarians help to and think technology practices. we manage their tools lot So offer more I

anything, bond grown itself if more the stronger was had and a cycles. decade the on think profession pet I think is managing industry it our itself, than in that ago. sophisticated is has through And I

of practices, business managing they the of, I whether number think adopted a in corporately they're care. practices have I practices think, terms owned or individual it's

think I were. position a stronger we than much overall we're in So

Erin Wright

material for that you you? your help about long-term and this think in And the I'm made these gap about between And that that will as Investor discrete will historical your capacity recent do well this Okay, innovation out hear an you in on Thanks. see contributions as can But here? efforts the generate give you macro rates? then at when the And us how the great. innovation, Day. we'll Thanks. could sure investments the called headwinds update and you ultimately to you prepared bridge continue see growth remarks R&D

Jay Mazelsky

Yeah.

standpoint, So never productive. think been from an innovation I we've more

innovations the over really the instrumentation, years across services, type If and last testing, out of board software. you look the couple from of

of think, very to that just performance instrumentation an from very exceptionally a the economic been at love incredible the the easy So piece, I customers, spot the look sweet to success an marketplace. if it. you responded and it's have in priced our They fact it's has use. high, standpoint, is One ProCyte take The well

So we've international with Typically, to is are a software our suites. regions, uptake a with the all is client well, then really practices multiplier communication facing with on and hematology And sell and chemistry of part familiar productivity seen dramatic regions about A surprising. lot thing the or that of we countries as not in do are increasingly first nice which there's challenges and do. workflow those the it's from standpoint. marketplaces. really And It's hard to hematology in-clinic front, think we're staff impact. SediVue, I hard

challenges, reference introductions as expanding fecal -- are and deal uptake last antigen standpoint, relied a have, and our up It's we've those had with in some we on in a or solutions important cloud-based a fast-growing, much that software for that. five From is practices, it's contemporary five some at continue remarks franchise [ph] months regions to portfolio, think to in tapeworms think O&P. of way to whether testing we've of I have country I and we for especially as flotation internationally. Anima looking takes rapid of very over really times our I cloud-based traditionally address in the mentioned labs, -- compared my a ezyVet number couple portfolio of PIMS the So on-premise or which important flea solutions as seen to times or

overall of use important of they it, but it when preventive labs an customers, reference the an of it's piece part fecals care a important because it. piece panels, So

So a or I for lot fecal. is the the testing either think by of anchored driven need

that by excited. time, the So including over we're struck We're on we at agreements very that continue overall, to Investor Day. updates we'll in-licensing and provide excited

to that. forward able being about look talk So to more

Operator

[Operator from Block you. Instructions] question Thank Jon comes next Our Stifel. with

Jon Block

guys. when questions Both XXXX, way. recurring XXX be it's morning. it shaking I about around price looks centered in think Dx the Thanks, out Good But some for like growth price, might around bps.

if points So bps, the closer in price, And take. the historically, or other got XXX CAG, words, correct. midpoint less you've I've ex-recurring give year X% been of Brian, X,XXX to guidance, roughly full that basis

been to XX%. price XXX CAG was to Dx You've closer growing And around XXX bps. recurring

comps, or maybe anything it, growth for as color from that call some Is than on incremental innovation call ex-price. a maybe there what share perspective So out that such rate even compression? of from seeing less compression other to contribution you're market of,

Brian McKeon

not I that fundamental signaling we're but think math, in your of kind visit follow the excluding of levels, to growth of price of compression kind a trying am in I Jon, kind changes. underlying excess

first specifically got that it, levels, consistently benefit basis of and higher of high the forecasting half signal in closer the roughly it's compression point imply premium point imply our underlying that with not And coming pre-pandemic. trends QX that X% to kind pricing I that would out think X,XXX front. range not we for to We're a US end saw growth, the we're we we've XXX saw X,XXX basis clinical but visit outlook more the trying of of would in this on that year. to we're the year

well we think execute we're that's need that continue I So to -- something to against.

that the margin. impacted factors think consumer I by at be can

our we're and full I numbers front but think from that will year second continue are things don't to want we to those well not say get outlook So that additional can numbers. benefit pricing some I half and think considering, deliver some and support we midpoint our that signals that solid that on

Jon Block

not XXX looking be guess, the visits. can Okay. maybe about price. from you've then premium at it maybe about, just basis recurring underlying But and to I'm growth, might contribution same not X% move answer, clinical Dx I'm Brian, -- a I the we your talking around to on. just midpoints point talking I'm got CAG And clarify,

XXX basis points. points Your your been XXX Dx growing had CAG to Dx XX%, XXX price basis CAG So points. is And around basis right? XXX ex-price X,XXX, or previously, it was is

I'm to And it a So to where answer the fraction growth again, where That's hopefully, the to it. less incremental why price would. throw from market versus or going year question, if years. but of with there is we But it an you're of guessing that contribution move of less prior share better clarify. gains. on, it we normalize that getting from was I like And and looks you other comps innovation I'm for the components that's contribution same can where are a just attributable might with the this we be some was sort if going out, just

Brian McKeon

we're X% it's clinical visit mean, growing X% the I Jon, Yeah. and QX. growth. principally And declining in the in swing

the I -- the is, believe including been couldn't clinics basis mentioned, saw we the the that good. step-up significant XXX pandemic, I our the got in mean, we to execution the step-up So we've factors. and demand are -- adapt points. I lapping we I think And It's And can capacity of patient in that that's the the in clinic quite in as a underlying -- after retroactive expansion. over two we delivery think benefits time. in of has that some And big from sustain. -- but swing think pullback period and expansion and the

key change visit is where XXXX, make XXXX, of growth the that's terms changes. key of difference the had we've think trend the clinical this We, some is through. in our been but key the adjustment second visit in change level of That's factor in I this full for to is the working the levels And we. that's that year from half outlook year. obviously, the in So kind

Jon Block

but got I've minus and bps XXX follow got offline. I've lot that -- up XXX could bps, and That's swinging a helpful. two I to yeah, it gets compressing to me closer, plus ex-price two XXX

around uniform why your Maybe CAG say, question I modalities is is Brian, does curious, lab, consumables, about asking anything, price. that's to XXXX? rapids. market the rate So terms same to importantly, in of more shift ability increase, about not, and just the of just second if if share across lab? in your following are And all and what into and your innovation. price was And still I'm gears care of competitors price the on reference Thanks. same both that for the take they're point magnitude it

Jay Mazelsky

was change. a across and -- Jon, and Yeah. consumables it not primarily reference a was capital, driven this US

Jon Block

ask in? best Sorry, modalities didn't and of Point of Dx of your -- your reference labs competitors does if the it your all the CAG what across price in your say have recurring Jay. Point of knowledge? capital. I followed about to care And suit not, take ability

Jay Mazelsky

to. have is We competitive insight of any or landscape what competitors terms up don't in

Brian McKeon

of inflationary overall reflective It environment. the is

industry think is everyone dealing a factor broader the that So that's that I in I think with.

Jon Block

enough. you. Thank Fair

Operator

from next We question Elliot James. Raymond have our with Wilbur

Elliot Wilbur

business, performance continue other and price the this such US in Thanks. in there just understand substantial Thanks. whether is But or not the function in to US versus clinic the on on or bit or over visit that? visit difficult Any trends lead the wondering comment specifically versus to deceleration Good international if difference attain. differential lab on same ex-US could US are as purely visit US reference the of trends general, rate factors morning. performance trends, you just ex the clinic perspective little versus I to more performance a more level And US? growth ex is granularity seeing a in in utilization? relative in of then that

Brian McKeon

question, to internationally. point, your visibility to Yes, your

don't we have different base size the across installed PIMS the So same regions.

So don't would have North we're that seeing on similar we pinpoint type other of say that in we America. do based data. accuracy I trends

in the you. think what pandemic, same I same UK, a practices we because it's Germany, in of boom of know Australia, countries have during we the reflection pet the the challenges some saw the capacity, like

business overall we or preventive big some the do impacts is and impact XX% so that's point-of-care, see wellness there's in than factor the visits, specifically see but internationally, modality. lab a Europe of surprisingly, or more primarily not we the probably a care reference macro it's think internationally, does so that of I as labs -- not reference there

see some do we that. So headwinds connected to

Operator

last from Blair. our have question We Ryan Daniels with William

Ryan Daniels

taking thanks can a to or get increase question, on have near little you I a you IT bit want type what and guys. take for approach different in the investments insights term any help of make customers your intermediate Yes, the capacity. of to

that some et with your priority actually that you? And Is that's cetera. customers high for something things I'm help of pressure? think like throughput digital intake platforms billing, can So self-service or for and alleviate a you this thinking do

Jay Mazelsky

can on be in the what morning, Good whether could their practice just We back, piece of like for if take see yes, time XX% patient. And it's systems, much done an provide type A focused it's – them for pretty board, virtually automated. PIM be tools, of allow and industries. but is practices other done the modules, of pinner-engagement which lot a that that step across hunger us, systems, tell those independent you intake corporate that administration lot XX%, of of or about patient about which Ryan. incredible a IT practices, the staff just not owners

optimization for every I in to where these patient business, very a tools workflow visit step client And seeing mean of software rapid I the these software growth. reports it ability suite have been our high because to on now willing PIM use that and that the and systems And been seen practices. switch think but software So practices it, is they because we're hesitant modern a of what they for and for deploy and bring. data communications, -- priority and away they're move the all to trained see the can have on from somewhat benefits historically, they've make the we've

going to that's -- work only the time think some I So a that's stronger get capacity address over to challenges. of as

Brian McKeon

continuously the just like in for thank the I'd and to enable momentum support for purpose like our world. to I'd despite this and high very engagement, continued you the and a through their look And to thank your rest at to devotion on the unpredictable our Thankful customers everybody strong participation IDEXX of employees continuing with our morning say that, excellent and wavering, listening, to XXXX. dynamics and evolving on phone to Okay. forward effort execute your our for around level sector us

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

Operator

for you. and Ladies concludes you Thank gentlemen, our conference. Thank this participating.

now may You disconnect.

IDEXX Laboratories (IDXX) 2 Aug 222022 Q2 Earnings call transcript