IDXX - Earnings call 3 2023 | IDEXX Laboratories, Inc.

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Operator

Good morning, and welcome to the IDEXX Laboratories Third Quarter 2023 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 noticed 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 generally GAAP GAAP. most financial call, reconciliation measures discussing not be accepted visiting Investor we accounting earnings accordance in directly provided found this non-GAAP principles During these the also our certain Relations with A the of which website. financial measures will prepared to of may section release, by in be measures are comparable our

please results, section Investor note growth prepared in Instructions]. conference call XXXX quarter remarks all concludes. and to XXXX, [Operator be organic the third the after our to unless posted reviewing refer Relations equivalent growth, the comparable Today's earnings of will compared idexx.com growth growth to period noted. references otherwise In through

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

Brian McKeon

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

impact gains third net of solid approximately achieved growth terms highlights, pure CAG revenues, recurring by in selling from of negative Diagnostics equivalent organically, In IDEXX X% XX quarter. increased supported points and in strong X% revenue days. revenues profit the Overall organic of growth basis

recurring retention and premium Organic levels customer gains, placements, growth business revenue execution in solid high from IDEXX drivers, including growth supported instrument veterinary continued strong benefits was by revenues. sustained of software high new

ongoing below levels. were This management gains a challenges U.S. wellness revenue by in same-store and expectations trends, U.S. relatively clinics at recurring Diagnostics flattening was for U.S. reflecting X% softer visit moderated clinic clinical CAG relatively the capacity decline in quarter visits. our Overall

in full end Based of on operating EPS we're our leverage, profit year. This Operating outlook expectations gains gross financial which margin of margin our and this quarter, by the delivery operating our XX% $X.XX up on higher range. previous reported XX% were aligned supported reflects guidance as per comparable comparable our results gains expense and ahead basis. for updating results share, of enabled strong strong expectations, EPS the year with a

We're guidance to trends also our sector detail to comments. results recent as review reflect updated guidance our updating my the well We'll full as year of strengthening ranges revenue later incorporate recent U.S. in and dollar. our the QX

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

organic driven gains revenue X% organic effects by including was of growth was Water human wind moderated organic million growth related our CAG revenues, quarter growth lower COVID headwind testing and of organic OPTI our $X by business. Medical X% to business LPD the organic down and X% approximately our Third X% of growth from Overall in in revenue business.

X%, approximately supported recurring global in for to revenue growth gains net Diagnostics reflecting our X% days revenue organically, X.X% recurring of by year. half and in X% X% QX of regions, growth second equivalent X.X% gains Diagnostics improvement organic increased CAG effects. line a of in growth average in U.S. international was global from CAG this net headwind the in with price XX.X% expectations the

Recurring driven supported Software was revenues organic by strong Imaging growth continued Diagnostic Overall, by Software revenue growth revenues. organic in in Veterinary and XX% gains

levels. sector levels, reflecting and prior remained recurring instrument Diagnostics to pricing comparisons XX% CAG year mix. above program global growth high revenue solidly organically, down CAG were revenues growth effects IDEXX

in the declined X,XXX normalized days same-store an reflects basis compared growth recurring overall levels, clinic the growth CAG U.S. negative an in This growth from In including impact XX visit of quarter. to approximately X.X%, approximate U.S., revenue point basis which was selling organic Diagnostics points fewer estimated QX. X% premium

price reflect growth strong and drivers, new and customer retention benefits higher in increases IDEXX sustained from frequency levels. net gains high continued per execution solid IDEXX' visit including the clinical results level practice realization, utilization diagnostic business at and

visit for in of the U.S. relatively X% below declines visit same-store of our growth clinic expectations were flat noted, second XXXX. clinic As half

Softer QX ongoing U.S. effects impacted appear at capacity high clinics, management trends challenges in been including to have from turnover. staff by

capture also refined quarter, demand from trends level. these wellness potential reflect reinforcing in in QX, our saw outlook impacts We while the full clinic our may macro strong on a year in We've performance. profit for the relative visits slowdown at which revenue some to outlook XXXX impacts

in International reflecting new results execution sustained net double-digit supported business from our base. Diagnostics improved QX high was also were realization instrument CAG and instrument revenue installed growth QX, IDEXX higher supported and continued reflected in which price placements, a gains benefits recurring premium by IDEXX of premium expansion XX.X% gains. International volume strong

the execution from in-clinic from continue negative growth in growth Double-digit conditions, IDEXX offset impacts strong Diagnostics to revenues. quarter. supported by results growth QX of volume Globally, rate benefits were trends international recurring pressure same-store IDEXX CAG macro which

Consumable global international revenues and installed by IDEXX increased platforms. U.S. strong gains reflecting premium base, gains premium gains with our double-digit instrument VetLab consumable SediVue XX% growth catalysts, XX% year-on-year across supported regions. were in hematology organically and in our

which metrics decrease quality levels, We One. placements prior launch EVI international record in in compared benefits high X% and placements placed year U.S. in be The the reflected competitive global continues our and premium year-on-year instrument of X,XXX sustain a catalyst the CAG included gains new in instruments solid to ProCyte from excellent, of of QX, to

One expansion a instruments. XX,XXX in decreased catalyst tough a reflected base levels. at base year overall, pace prior solid installed of Global high over global X% placements comparisons reflecting continued ProCyte to placement international installed

single-digit supported and high revenues regions. benefits growth in international from Lab X% U.S., Global net high realization. in the Rapid reflecting organically, increased mid- gains including the by single-digit Global improved growth in Assay strong expanded U.S. QX, relatively organically higher to X% price in revenues

in high XX% increased supported Results recurring ongoing momentum Diagnostic and continued and In revenues other cloud-based in Software revenues Veterinary were Diagnostic Imaging growth business, CAG organically. Imaging by areas of placements. software organic of our and Software levels

in increased by driven continued revenues prior X% solid QX Growth including compared improvement. levels. was to from growth gains the price Water benefits organically U.S., net in strong year

integration acquisition reported approximately progress growth. well Water TECTA-PDS X% continues and to Our to added

Livestock, U.S. in herd moderated revenues screening Dairy to China continue to X% revenues and reduced international gains testing. Poultry health lower strong constraints the including be as from increased on by organically growth, impacts related import

operating basis a were to compared reported were increased basis XX Gross P&L. high XX.X%, to year quarter levels. Gross profit gains, and margins results operating comparable comparable profit by prior Turning the from X% leverage. basis. benefits in including up strong as QX the a margin on expense comparable points on supported

gains improvement net reflected in margin from service business Gross gross realization, benefits price higher mix software and margins.

XX XX prior basis gross negative expected, headwind gross the gains in FX an basis impact FX, lapping lapping moderated margin related year QX by to were As projecting hedge again, driven to margin prior gains. year of related primarily point We're point to by approximate a related hedge of reported gains. the

operating commercial R&D of On X% benefits advance from a investments increased our and planned platform a and basis, for of planning year-on-year and year We're on OpEx we launch. reported as growth cost increased commercial as QX and XXXX R&D our expansion U.S. comparable a prior including innovation in lapping new investments. initiatives, expenses reported controls aligned level basis, with our higher reflecting

on comparable an of per increase share as a XX% and in $X.XX reported QX, basis. was EPS XX%

resulted reduced hedges million by XXXX share impacts from exchange the quarter, Foreign million prior million in per in Impacts lapping the $X.XX by in gains. profits operating including exchange foreign $X $X gain $X EPS hedge in from quarter. the of and year a

in the million income was XX-month quarter. flow basis, Free cash third a trailing conversion ratio $XXX cash to our free was net On flow XX%.

million. XX% flow XX% the free of projections, our higher net income spending outlook of of reflecting the $XXX to estimated For we're to year, conversion full end to updating million capital earlier for cash at $XXX

as share our continue ended the balance leverage sheet shares $XX of a quarter position. with remains X.Xx we balance the Share quarter. and strong outstanding on current environment. cash. in manage in Our to sheet more the year reduction repurchases allocated last We for rate capital the in third We conservatively X.Xx X.X% diluted repurchases supported gross quarter in interest of net million relatively a over of ratios the

XXXX U.S. dollar. the guidance. incorporate updating foreign our We're results full for our strengthening outlook revised recent P&L to and year to of estimates the QX our exchange Turning impacts, reflecting

Our X.X% year to revenues billion guidance $X.XXX updated reported growth full X.X% reported to for is $X.XXX a reflecting range. billion

We limited year-on-year The outlook million approximately reduce revenue includes updated to impacts growth estimate for QX. $XX estimates. now growth prior will FX fully FX effects by with reported in X.X% revenue reported compared reduction a

organic of of X.X% outlook growth guidance guidance midpoint supported our we're aligns revenue terms updating our with for our full Diagnostic recurring X.X% most CAG lower ranges our revenue X.X% operational recent end XXXX. In XX.X%. year to the to in for outlook, an guidance the by to This of of original organic growth growth

improvement CAG growth reflects to expectations of net sales continued organic of execution macroeconomic and a clinical on for guidance drivers, second reflecting in consistent outlook our Consistent international on in earlier positive Our X% U.S. with including recurring price assumes same-store solid same-store management diagnostic levels guidance, dynamics for revenue X% benefits pressure XXXX. and IDEXX growth clinic continued from the ongoing half impacts visits capacity level QX demand.

price X%, gains with global increases. QX, within approximately this expect In year range, we reflecting lapping net price improvement prior the price U.S. of net of

share, outlook incorporates outlook X% full midpoint. headwind. $X.XX our and a per also maintaining the share narrowing range guidance the of reported $X.XX to We're at per QX Our end of EPS EPS growth volume high $X.XX day equivalent to increase an year

year-to-date incorporating At positive million million operating our organic for operating of investment for points as XXX payment to XXXX. XXX midpoint, including basis This comparable reported We've points range revenue by combined QX adjustments to to outlook of we're to basis strong performance. R&D of in reflects margins, from discrete XX.X% XX.X% benefit approximately EPS increased $XX are the revisions consistent margins lapping in for growth our projections expansion operational for contract resolution full an to margin year. outlook and XXX operating maintaining $XX a second the the our the customer in the quarter outlook offset

tax offset impact interest Our tax outlook, combined to including updated partially in positive related changes compensation by at These negative $X.XX per full exchange to share-based gains year EPS guidance rate are $X.XX from rates. expense share incorporates updated of our and foreign and upside benefits. $X.XX revisions

full by per lapping share estimate the approximately year hedge that decrease exchange foreign will a including now $X.XX reduce by basis to XXXX $XX We of full points, and million in impacts EPS impacts gains. margins will year operating for XX

tables the on provided and our earnings snapshots. updated outlook We details in press XXXX release

over That call for will now the concludes comments. his to our turn I financial Jay review.

Jay Mazelsky

QX, in revenue Thank to make performance. delivering continued progress strong morning. you, solid and IDEXX Brian, strategy organic in and financial advancing business while good excellent our growth

high-touch Our strategy supported IDEXX' of commercial and world-class continued adoption relevant and by engagement of drove testing workflow services. innovations products

customers' standards durable trend Diagnostics and solutions. the our of mission supported placements the and fastest-growing high requires gains, expansion QX of in high the veterinary including through of building price testing. in of support revenues, execution practice patient's momentum by enabled solid treatment benefit the remains new CAG sustained off continued solid software solutions from of very recurring often a care, expansion was realization path placements Diagnostics of the net utilization deliver The health across strong IDEXX and recurring status in year clinic major performance of instruments level. diagnostics a area at multiple to frequency cloud-based since determination continued business our best financial revenue revenues IDEXX levels, revenues premium regions. prior gains IDEXX' drivers

make to visit These in for clinic overall veterinary who continue as clinics near-term their challenges in balance management globally, macroeconomic are staffing well services. offsetting remains challenges levels ongoing gains necessary to management approach dynamics. top business demand and medical priority reflecting Productivity as refine capacity strong impacts practices for a with from veterinary headwinds trade-offs

business strategy while I'll multi-modality significant how offering, opportunity developing by IDEXX performance. address growth focused clinics the the advancing we're solutions anchored delivering give our for strong these our review financial Today, long-term on software-enabled dynamics. our tools to

and on focus engagement our utilization and I'll global of start the supports on with adoption commercial update how performance an diagnostics. our increase customer in

supports that diagnostics IDEXX [ commercial customer-centric ] use customer expanding existing our of teams highly are base. customers' model engaged in a and both

of QX. another delivered quarter professionals in commercial results Our excellent

and Solid diagnostics base revenue from partnership to expanding clinicians. reflects the veterinary our CAG importance model recurring communicate installed Diagnostics benefits of loyal our to

solid from accounts benefits growth our high-value competitive EVI analyzers reflects in competitive supported placing at recurring growth. revenues It North to also focus and order profitable drive in including which on future catalyst existing America, X% placement

focus relentless high the owners no this serve services continued for care the need expectations seek of demand providing on pet products, front they veterinary a the for their Our the and progress the on compromises increasingly and services busy and demand reflects meet to who clinicians in with support pets.

to driving a in visit both in visit, This their use expand Diagnostics to care frequency to the Diagnostics key demonstrates was the the medical pet their center, building pandemic. utilization diagnostics on continued incorporate In spend the addition by profit increases per to veterinarians services and in clinic, and on wellness supported growth are gains core substantial due in show protocols, owners clinical per continue to in willingness continue of pets. growth while that testing also

health environment. growth visit level, macro a X% that This diagnostic performance is gains continue IDEXX model growth growing despite pets, being and customers focus pet solid by to supported resource-constrained prioritize same-store headwinds the for our at customer supported challenging the This which solutions. sector. gain that even clinical And diagnostic practice achieved are integrated ongoing our reinforces engagement shows in and their of superior care owners in direct faster in revenue resiliency

sales supported diagnostics to care serve outpaced they advance sector helping building points experienced professionals by growth and momentum XXX-plus the strong through in both QX, clinical revenue diagnostics basis partnership that revenue growth practice in our testing. health pet veterinarians on IDEXX' with deep revenue

a Growing of engagement in our way our commercial a footprint key element strategy. customer disciplined is

and points IDEXX. revenue we growth, patient, broader This practice shared at practice generate clinical with customers Day, Investor the basis using XXX that offering analysis data extension extensive our economics trends. diagnostics higher practice execution consistent our approximately As by and benefits DX shows

of size us expanded Our well to U.S. U.S., are across IDEXX encouraged IDEXX years an territories in and and clinics many expansion This growth. another support veterinarians. countries our with our place. in the report focused commercial most portfolio appreciably professionals and we developed third volume international remain have plan, year and first in enter in deploying on growing reach revenue to benefited Increasing revenues expansion the quarter is quarter progressing to then. in U.S. prepares team CAG metrics, Higher recurring increased expect with between is we world from in commercial of Diagnostics the and improving largest and Innovations. strengthened the new since commercial engagement in-region X playbook reached region to Outlined the that relationships

helped as a international gains Our commercial expansion solid in increased of installed drive premium commercial XXXX double-digit our year-over-year presence X platforms. since instrument result international base across

record which potential right growth includes regions. third base. region, associated instrument quarter international demonstrates development placements sales our the Asia This growth reinforce the the right capable significant at XX% have international time highly our drive teams in Pacific products the that of helped installed in with This and

of for our These over outsized portion geographies premium represent long-term placements an incremental of instrument opportunity XXX,XXX categories. existing

agenda. Turning innovation to our

from we facilitate to are and enable. pillar growth that efficiency trend are the desire in communication. and software an a in aspects adoption important driven positioned improve these applications Higher key points. all well embracing business in diagnostics in their patient modern by Software realize significant Clinics is of a our focus pain the area is clinic, of software owner to interpretation strategy to to workflow of and benefits and technology to billing the address processing pet

the high-teen Software highly Imaging our in software significant, in profitable gains our scheduling organic through that recurring aspects and solutions benefit other multiplier use It IDEXX annuity quarter lives. and Diagnostics pet reflected rely that our their they on adoption and in stream. segment with business from to is other incorporate engagement also with third owners to of growth positions The in increase practices tools of

adoption strong while digitally that workflow placements. our solutions minimize and in quarter is profiles products execution PIMS denominator the that over broad-based outstanding our Most benefits point now use on inflection veterinarians customers our activities. all of comprise commercial better career PIMS of administrative stages interest This The reflects software that earlier technology installed represent XX% customer appreciate delivery care notably, base. common native. contemporary in of drove cloud-based are their adoption of total PIMS result, an stack. them focus more a third to placements software cloud-based and as Sales allow wide-ranging the Excellent PIMS and easy indicate achievement products careers of reflects XX% of and non-value-add

Our next across a software step also product use of offering also insights clinical clinical includes diagnostics testing and VetConnect not range an growing that portal, DecisionIQ only IDEXX integrated support, provides PLUS but with cases. decision considerations results,

a as with IDEXX Software benefit is and in drop-through from base accretion and operating as nature. that trends well the us Data associated increasingly revenue Solutions situate recurring to these margin well

is our workflow. our transformative approach point innovation by our are as to instrument We're successful diagnostics with insight software excited continued very and practice our and Our of capabilities cloud-based progress connectivity evidenced plan enabled platform deeply VMX January. enhance highly new strategy, at announce innovation to bringing and that about care, on integrated in by platform we in solutions

development aligned expectations a efforts details placement and our XXX,XXX opportunity months continue to just over how we're short in product estimate existing to few our categories. and it will more advance add instrument Our timing to for share excited to

by engine goal in care states new veterinarians, aligned also patients. assays test earlier We for clinical drive menu, in that with outcomes since they insights to like health improving advance provide standards innovation other our advanced and areas is of continue the higher innovation especially disease of valued their

from over assay, IDEXX beginning will industry-leading uses of marker American key recent in and XXXX. kidney stable members progressive kidney from course and the multiple North that announced the of followed lab distinguishing This new December, we support injury. IP earlier available active detect a and highlights ] disease receiving our This renal launches article Internal launch network. beneficial early the to will year, Society insights an our [indiscernible], Veterinary in this by leaders, testing is by with [ injury be novel expands notably, opinion Earlier definitively detecting important international Medicine, coauthored more journal broad portfolio Renal Interest clinicians of help in the be by

These included at clinical our important million year panels test IDEXX launch. represent post be X Labs Reference insights the to urine and first medical in in run close will contributions,

an in we lab reference testing will additional announce expansion menu forward, to Looking QX. our

key notable service differentiated when reference to early In Western addition innovation, to strategy. service opened third area We this in Perth, advancement we examples a expansion of in a the and newest Australia. made these product of advance as delivery our continue our we element laboratory quarter in

decisions Perth is including it that difficult this new make customers enabling our particularly patients' an a flight times X-hour vibrant Brisbane city addition to in to to economically the faster is making time network and ensures from service X.X-hour test informed lab will receive for wellbeing. for turnaround The difference, past. their global our timely them of laboratory, results,

provides IDEXX in reference veterinary New the laboratory Australia Zealand. only accredited and network dedicated and

important So addressing bringing footprint an of way our this location The strive value. of area global sustainable one of to outside just we're X/X long-term is online the focus. is of our expansion approximately reference as TAM lab achievement we U.S., deliver opportunity an the estimated

With that, prepared conclude the portion of the remarks call. I'll now

our to to affected heartfelt to take the I in a we Before week. for move sympathy express events last by everyone Maine Q&A, Lewiston, want moment

priority our difficult health providing keeping time. well-being as by during supporting communities, a this violence other senseless We active each safe, deeply impacting colleagues and are our and the top saddened support

to to working have who also I personnel continued to and impacted. tirelessly safe and been aid public all have enforcement teams thank medical who law safety our want community keep are

Q&A. the open for line let's Now

Operator

Ryskin America. first Instructions] [Operator move We'll Michael Bank of to of

Michael Ryskin

pressures -- data. you've about that talk relatively of saw to what mean, the expected some want trends, consistent snapshot, the I a the market. I broader remain, you we said, I third-party in visit numbers as with First, as from

it's the not surprise there, think going year. anyone longer I to but So had a huge lot into say that a it's safe than expected lasting

this improvement, impact X% and business? well year, targeting this organic the expectations If to below it XX% way, growth despite that's does and without X% might model for any X.X% another significant how put taking this target, your your continues long-term I longer-term long-term price. you're

levers there if power not offset extent same you mean, there So have not is pricing recover, to to what I or volumes the do and other don't that?

Jay Mazelsky

this Mike, Jay. Yes. is

specifics of I'll very PEP backdrop Just to talk model. of mind things, related a is been of higher the an in sector maybe the the Brian and to turn about a Keep expanded level, to positive. it It's at couple over just some the population.

and seen realization. execution health and We've that strong pet that very, I net very in a things PIMS have we as directly think placements drivers the the could been instrument very company, influence pricing strong. has human [indiscernible] placements at retention, our

good related are there demand practice some very some to all there. things, there's been end the very We good. think, cited as So think challenges those I customer capacity constraints and we are

of good the working that the see with but and in in technology. through, that the equipment, our they're software There has churn lab on grow. for We continued to optimized may as think appetite both I use have is front clinic help workflow some them practices with be news the And that reference heavily hired. that labs. additional well investing applications as obviously, they're

some to very And our is strong. pipeline our of will result continue then a differentiated strong competitive and offer overall, advantages. And we be as think innovation position

industry a I it's standpoint, positive from an very So think story.

capitalize continued work I some through cited. has well trends of we to the on those think we're practice constraints just and to the positioned

Brian McKeon

we potential, ownership. pet of terms the just look competitive dynamics demographics the I diagnostics sustaining frequency positive and and a expansion associated adoption reinforce towards, demand see Yes, long-term of think we that point, with expanded of in the IDEXX in to favorable pet utilization, of terms Jay's of we population positioning, XX% Technologies, key that Mike, lot long-term the drivers growth see our factors our

positive. So of are factors those all

continued, to of assisting I is near-term I through think factor that's help something impacting the the clinics. near-term is is a capacity near-term but over a that as at with some And the has macro something have we're think growth impacts. thing solutions challenges we'll that management time, we're working as -- and well think with I combination believe of is that and that

times as we're past, growth near-term long-term company. resilient potential of we've but as the competitive immune I is the I the at something impacts, many those also we a don't of I from for constraints in not being that's to either in we've our but the positioning types And to growth view, So that see the the margin, factors very and think think that's ability those impacting stated our we're terms think that a to continued been position a ever of of strong as expansion support in of point sector [indiscernible]. business

Michael Ryskin

And where to that is Okay. I'm number consensus today, sense bit 'XX-XXXX 'XX. XX% that my roughly see use in think guiding a line right pretty you that is now, of 'XX below but November, model? good I you're follow-up at conditions trend Do market All risk about is what right. maybe I'll 'XX. given be are. there's then just not for already looking for long-term we not direct know a got I just where on it guide, also as just at they we've more long-term asking we a still sit mean, little that

Jay Mazelsky

and move I ability execution, I terms year that going growth all we innovation we the that delivering obviously guiding factors continue to forward today, demonstrating We're our And solid in competitive I got that think into continued our of on I we've heading of do year. number position next pipeline as a we're think strong on noted, to leaning financial things be that think delivering we're forward. be are performance, will this to but sharing which positive those to not more looking the see

get We're So and more on front. the on that we'll very a our execution we that front we focusing impact about on, feel share on direct year. have drivers next as that into we good

Operator

from Our Goldman Nathan comes Rich next with Sachs. question

Nathan Rich

Can morning. me? you Good hear

Jay Mazelsky

We do.

Nathan Rich

ask there played the maybe performance challenging third a during expectations. relative had was I'd in how Obviously, out that a from detail Diagnostic than diagnostic you wanted a you that to traffic volume -- decelerated And standpoint maybe you anything But quarter. Just recurring the on quarter. more bit category more little if to wonder could could the go about just was if into CAG U.S. from expected? standpoint,

my stop and then ask And I'll follow-up there maybe next.

Brian McKeon

in difference this I just much performance expected. shared to and here they where quarter and some the The what visit We flattening through was we quarter line and for was the was the more then down very can The did were with on our some in trends reinforce Jay side. X% execution softening the the clinical Yes. in of metrics planning were expand dimensions relatively see wellness on quarter. it

think I So that that, something testing we is smaller but relative volume, overall that that's a part the see of did impact.

to held CAG was deliver revenues. Dx was -- planning growth on terms the and enabled different up So in -- that had was it metrics trend visit of hoping that recurring us than that the solid execution we been for or for. well the And

Jay Mazelsky

of to seen all other there's veterinarian end prioritize bringing making against continue are that start from comments owners They in couple and Certainly, talking what get spending care the with that A the end-market customers, their they the they pets demand. always pet for need. categories. additional we've to demand. customer Yes. and our sure [indiscernible]. We with and good

of The other position. But practice. and And increased, within terms is many that's necessarily availability working. may piece that's we've that looking spending of terms insights employment has staff be levels just how of hours practices, in been overall think that good a shape. in they think don't that, we We at have within just we in time the good a reasonably

There obviously practice work to that its practices churn goes within some is some way is the practice system. done additional as have through that surveying. We qualitative from will staff something

to side It's up picking non-wellness visits, so. or higher. the is Just against the much diagnostics X% on wellness usage or X% the visits versus Brian non-wellness higher, mentioned patient the sick what

I think as the out we of part back that Investor Day.

I And the that's, business. so think, an tailwind important for

U.S. thing We to of grow services veterinarians the of to frequency medical relative the point positive out to practice. seen and a a importance very the trend. within diagnostics continues think in They very first patient. and test. other utilization see Obviously, would I We've have be the able The core often that to is that that's treat

it's that positive. see and strong those think held grow, we and great So that's to continue trends up have a to

Nathan Rich

just And you the year. the XX basis if margins kind on currency next of see of margins. sort constant point visit with if grow could kind I pressure the kind to guess range line ability just I persists, to into in of XXX of ask

If kind you just leverage, top line kind expansion on do on how is of margin curious dependent of see softer top environment, an growth? of overall that how kind I'm line much much of the

Brian McKeon

I been consistently perform headwinds our that well ability some front despite the seen on year. that and think this we've we've of to demonstrating

I our is updated R&D we've this of that's that headwinds the the that out we've of XXX outlook and take if be normalize customer year. the despite well think and above some highlighted lapping if to you -- foreign margins, So you guidance seen exchange, for the most year, to prior we're for credit recent as as bps XX

That's got the and leverage that So driver innovation favorable of that. I for we the new us leverage, we business we And strong which we've a support consistently the demonstrated we've the We model, dynamics highlighted coming that as ability to got number software growth business. think in to grow. market. have can we've positive investments a

building I that on well think of and strong margin us delivery number trend. position to that factors will keep help us a So

Operator

Wright will Morgan Stanley. to Instructions] Erin move with [Operator We next

Erin Wilson Wright

in VMX? the platform on Has if we early is plan material been feedback? will the launch both new at both out second and technology, roll testing so, XXXX? And that any have XXXX? on you on in what's track -- Or the initial will platform contributions like And there as to

Jay Mazelsky

development They goes hands you go reiterate, rather of Not platform about you customers. and marketplace. you to new couple new that. talk than the about Yes. going provide to works VMX, It's the just looking just forward. speaking, feedback process, is develop generally way can get prototypes, talk put to product of through away more we're ready an it More a in the and process the from additive we months

additional platform a but -- really make it's think can't into the details business right go have will We beyond excited. we clinical that and contribution, we'll we're So that.

Erin Wilson Wright

this and -- your about And advantage more with maybe question, your encumbered now about peers and also with positioning little just in competitive reference I guess, your how of can point-of-care where be competitive U.S. the you in of And about closest share? broader on both are is it today? kind lab, stands a thinking the particularly particularly And you this taking than have landscape models a Okay. the disruption landscape. peers? bit your to But ability now the this you new take you with this unique how talk less innovation. and any other of capitalizing associated accelerate, are Could thinking

Jay Mazelsky

Yes.

and really high-level couple specific. of a maybe then strategic The to -- So points, and an our set innovation get more the approach integrated solution I'll is bring marketplace. to

staff what is differentiated. the as highly in and clinic suite, reference It connectivity are our practices we well supports think provided to lab as and the that's So software of more specifically, trying by expansion optimization workflow new innovate client improved care, things. terms of communications, continue to through important and optimization, we menu then platforms. all in those standards accomplish And of productivity,

a able it marketing these give are to it's or of platforms, really XXX reference customers of labs an the that terms the of new place one, we in to get model systems our capability to use programs, business as primary dollar based lab quality being reference testing and or practice. within PIMS We part rapid And our volume -- then Software-as-a-Service being commitment. able placement assay our customers, IDEXX important through component tend place

a come out you impact innovations. new So when multiplier with significant it's

life We to a it continue philosophy. technology for build just through

platforms marketplace. the we existing have So on

chemistry examples, innovate to for over lots of customers they if slides, example, in new it, call with or continue the time within other clinically of labs, lots and more [ grow more becomes weaker we so use will it as We antigen valuable reference ].

Operator

Chris JPMorgan. move We'll to next with Schott

Christopher Schott

also that hands trends seeing Just to two coming to So macro is trying the versus to get expectations, back about your better the right questions there. we seeing for is we tease as to some think dynamics what of macro we're much around, and much where versus me. one this now isn't you just seeing pressures my maybe as getting situation just a or And setbacks we're I have how mid-year I'm from is capacity you're are on now the where just stood relative updated capacity then at well vet side seeing guidance? is out visit how follow-up possible some guess I it capacity? with the

Jay Mazelsky

primarily capacity it's continues think We capacity. be to

practices definitely time. of that. investments. mean they're number We've things have And working I that making seen think through takes it done. are I a practices

could they as investing and balance they're to that hired. that trying of staff make also teams technology sure their they've just lose it think balance I in so well work-life be stabilized. They're the their as don't folks

think that's important. I So

macro the there do non-wellness consumed some point of -- is impacts or of We wellness. relatively lower in also sick we've could that be And intensity-wise would wellness Diagnostics. seen just that percent I XX-plus Diagnostics use XX% a margin, are through patient visits. of Diagnostics the think out at piece the

Brian McKeon

a Chris, great it's And question. just --

frequency that always we than of the diagnostics more is in discretionary I quarter, where choice it the be and side, actually the per in in down non-wellness. see the was on utilization think said visits terms well, wellness Interestingly, owner. wellness of the we've macro, pet wellness of stronger a may that up, visit were for might

lower we their able actually So visits. saw that diagnostic for overall, to of testing. wellness they're owners the more pet in But in, and pets are come doing get levels

into on there. So some commingled capacity of going with does dynamics get it are it's management. the there impact be level of And a -- probably may that

markets that as we've seen go. have been we in international that highlighting We

as an I paying to and that -- for. be Jay of the impact pointed -- something continues planning think they're more that be demand able think out, practices And we're I staff it's facing. the for. manage to attention ongoing so we this to think of But it's appropriately is ability We're from

Christopher Schott

question kind happening global Can just what's And international. of about you second bit U.S. was the visit this mentioned update more in versus just of a noticeable just markets? you I you seeing little versus Great. in some U.S. think is your impact international? international a in part of of -- Okay. differences kind a of bigger just this terms terms are picture, skewing is that, Or slowdowns? of assuming as And U.S. versus guidance

Brian McKeon

our the now We're impact more We've helps doing for We of expansion, really trends. rate. base instrument of quite growth say starting has an that, more the normalized and internationally macro end -- line done relatively benefiting is that at U.S. saw installed with in our XXXX. definitely well so really pressures time over internationally. premium from And I would that

And actually trends. we've the improvement volume we few seen highlighted quarter, for a relative in this quarters now

and more pressures So the some recently, I I of what it's in -- with seeing think U.S. relatively normalizing and does be seem to of think, sort more we're the line, improving. it

the You our reference QX. like can see that in metrics, international improved growth lab things in some was of

So that's And realistic appropriately. being that and planning the we're about a trend. macro facing we're backdrop positive just

Jay Mazelsky

from rollout sectors, And keep a sick patient or tends in characteristics. a to It of veterinary standpoint. overall its approach a of mind, practice different the testing in more just international bit terms be

macro you area that an less in to a may of some see environment. that's richer It's spend obviously, area -- the an diagnostics of usage. the difficult sensitive discretionary So

that our opportunity executing So team is substantial. we're improve. the progress. over think happy as said, well time the Brian It very is We to continues and with extremely

Operator

Jon to Stifel. Block next go with We'll

Jonathan Block

Q-over-Q. expense decline that And X% like maybe guys commercial Brian, up got flat to XQ. sales despite increases slightly have start investment. you this XQ I've to with year's to XX was called ongoing down was just roughly marketing out and you. on it to the X% usually The XQ

played that take of what be light of Q-over-Q I'm you in this a year on lean were or causes a that even year. in do know, don't the to to seem able I So FX the XXXX. role may what out bit decline, highlight drove on ongoing side to the anything little in through guessing have investments But were S&M sequential you to of end commercial the the able

Brian McKeon

it's had costs. some relatively We year, personally dynamic. sales higher a and last Jon, beating -- Yes, lapping QX in

Specifically, side we're were both some on marketing lapping. costs the R&D that sales discrete the and and there

noted QX. so in growth it we're OpEx of expecting our in I level And -- outlook, a higher relatively as

year-on-year So specific it's this related more dynamic. to factor

Jonathan Block

Okay.

Sorry.

my Just not was question sequentially, year-over-year.

So X% up down usually X%. my XQ to apologies, was to it's the XQ And X%.

making marketing revenue scaled trying exceeding the there what getting bit the You're is of the I bottom you term the little at EPS a ] in in like [ that investments. in near EPS Q-over-Q. Again, number. I'm light to to get back and lighter and commercial the managing anything line Were sales on number? guess or

Brian McKeon

quarter-to-quarter typically unrelated things No, staffing. you variation have cost in -- are there's to like some that

scaled on haven't back So we anything.

Jonathan Block

trademark, age I then about Okay. that's us, quarters to to you to you going consumable And revenue in and as how SediVue. I that to per the think eventually SediVue. to revs it the how to that which on shook like shift about forecast just to came probably of any out to X,XXX cycle maybe system. matured? Initially, the the on VMX IDEXX X,XXX And just -- can it -- in X,XXX maybe seems my back think view on analyzer get per product then box I'm a comments then hit to and talk last week, new was guys question, show your down flash X,XXX couple box second that expected on in

Brian McKeon

So in what if the I much very on per line placement your question quite expected. right, SediVue, got played utilization we with actually out

So in tracked we I think sustained that was bit. haven't think our time. that, I for a updated and over But that with original estimates line consistently

that, track So has I think our that to been on estimates.

and these the sharing that -- you they Really, on platforms that for the conversation with their of opened innovations adopt us to to premature over these the in them it's build forward launch. next effects types get from We veterinarians about look biggest the as specifics to instrument and more on just know, new year, And them technology for time. into IDEXX are reinforce talk door practice.

ProCyte moving year. next to with very into the deepen help on we had excited innovations customers, we'll we the about our our get as new from relationships continue we're faster, on those share and so momentum One them more grow and to specifics dialogues related And

Jay Mazelsky

impacts is out the to data life that presented time. I overall Mike our the -- approach generated, reference introduced continue we when labs. product. add would economics through other all and more the Obviously, add to that menu time. to the and platforms, the thing for that Ericsson more we and how over we John, shared evolution And our menu think marketplace. through installed we of But We technology to are I as able value Yes. including economic improve come some demonstrate the revenue, grows to where that, that on base come over been we've the

Operator

next Basquet Blair. [ to Brandon William ] And with move we'll

Unknown Analyst

the ask is, I the headwinds are and wanted of those bit X we we trying go first going labor. little ask I guess headwinds question much with a different. Are increasing to bit? those wellness of on as I'm want things some are just a in into getting deteriorating? they are a There's to are there's thought up, year? slightly those of quarter I little kind as of into The as maybe follow to clarification, ask -- the just the improving stable, for end or not little worsening we maybe dynamics year-end

Brian McKeon

the what expected looking happen U.S., in was to visit in flattening came in we we were the to relative and for at trends quarter X%. here change key minus they the think I

different So you if what go that's it. than fundamentally expected, what's we

was and play hoped. to way had going the we execution strong our I those that out all think dimensions

X% a similar. clinical QX X% minus pretty X-year basis, visit in in trends U.S. The on QX were they're and minus

I weaker some more -- relative softening think trends relatively at through some it's margin. quarter, clinical we wellness did see the the visit

pullback bigger had some normalization the dynamics. effects still had of management And there. we capacity, some worked I was here through hoped I through think we're think that the working on story the see and we

balance in very that is our much outlook. year So reflected

reinforcing I our we're think appropriately that while profit delivery. we've calibrated for

into we've year to in So new and that are that teams we're And positioning delivering executing a a very manage going to market. well relative able and and next solid look and things to excited continue innovation growth about to as the number company got forward again, our that context. bringing of well,

Jay Mazelsky

very keep in Pet has expanded substantial. very, been population the And mind, Yes.

lot There's there. we So demand customer end know is the a of that interest.

the there. I think we unserved through that at that demand to out work capacity Brian's there's point, level, unmet clinic as

Unknown Analyst

in maybe expectations? get you does the guys follow-up, take now year as a U.S. probably long to force them into innovative you How go next You'll new Okay. that track expanding have we 'XX. about talk those it reps the also product And system. Can as on seems Great. sales new are just a trained? for

So leverage time benefits to from of line kind force? what's the kind the start margin seeing of and expanded sales sales both

Jay Mazelsky

doing for been we've a that something is time. This long

I In think terms we America, North and expand have time a footprint. ecosystem very it to of relatively a commercial in short we successful ramp. overall the formula tends how to be

think, I they're system, have, bring quarters. We when effective into training within we speed the and new well And their to approach. folks really up trained, they come

the support representatives, they service over entire to more get service and become support them. is field the vets ecosystem time, through they continue professional of lot a but there productive Now to

We'll portion call. this Okay. Q&A for your our conclude morning's questions. of now Thank you

end today's to our like for XX,XXX strategy. nearly delivering my call, against we Before organic execution extend colleagues another to I'd of the IDEXX quarter strong thanks growth

sector our on animals, people to third your continue has deliver but our sector and for our delivered us steadfast commitment well helped providing very future. strong customers the to maintain Not and and Our to a dynamic remains better efforts quarter, future into day position you momentum planet the the in well your results. develop have support only us

the the you of enhancing health your continued people management team, on focus on well-being thank and for So and pets, behalf livestock.

conclude the Thank call. we'll now So you.

Operator

does conclude for you today's and thank gentlemen, your participation. you. call. We that Ladies Thank

at time. may this You disconnect

IDEXX Laboratories (IDXX) 1 Nov 232023 Q3 Earnings call transcript