The paragraph is the introduction of the IDEXX Laboratories' First Quarter 2025 Earnings Conference Call. Presenters include Jay Mazelsky, President and CEO, Andrew Emerson, CFO, and John Ravis, VP of Investor Relations. The call will discuss forward-looking statements that involve risks and uncertainties, as noted in their press release and SEC filings. Non-GAAP financial measures will be mentioned, with reconciliations available in the earnings release on the company's website. References to growth refer to comparisons with the prior year. Participants are encouraged to limit questions to allow broad participation during the Q&A session.

The paragraph discusses IDEXX's first-quarter earnings call, highlighting key financial performances and updates. The company reported a 5% organic revenue increase, with a 4.5% growth in CAG Diagnostic recurring revenues despite some headwinds. The quarter also saw strong execution, notable growth in veterinary software and diagnostic imaging revenues, and an EPS of $2.96 per share. IDEXX's long-term growth potential remains strong, supported by innovation such as their IDEXX Cancer Dx launch for canine lymphoma. The 2025 financial outlook has been updated to reflect favorable foreign exchange changes and settled litigation expenses while maintaining goals for revenue growth and operating margin improvement.

In the first quarter, IDEXX experienced a 5% organic revenue growth, with notable contributions from different segments: 4.5% growth in the Companion Animal Group (CAG) business, 7% in water, and 4% in the Livestock, Poultry, and Dairy (LPD) sector. CAG growth was driven by 7% gains in veterinary software and diagnostic imaging revenues, with a significant 9% increase in recurring revenue. Although CAG instrument revenues dropped 5% organically due to high prior-year comparison levels, they benefited from new placements of the IDEXX inVue Dx. International CAG diagnostic recurring revenue saw an 8.5% organic growth, with global net price improvement averaging 4% and volume gains of approximately 2% on a days-adjusted basis. The U.S. CAG diagnostic recurring revenue grew 3% despite a decline in same-store U.S. clinic visits. Overall, IDEXX's solid growth was attributed to increased diagnostic frequency and utilization at the practice level, strong new business gains, high customer retention, and a consistent net price realization of 3.5%.

In the fourth paragraph of the article, IDEXX VetLab reported a 10% organic increase in consumable revenues, with significant growth in both the U.S. and international markets, supported by a 9% increase in the global premium instrument install base. Despite a 13% decline in CAG premium instrument placements, focus on quality placements drove growth in competitive and greenfield catalysts. The U.S. saw a 12% rise in instrument placements, while North America launched 302 IDEXX inVue Dx analyzers. Global rapid assay revenues fell 2% due to a shift in testing practices, and lab revenues grew 1% organically. Veterinary software and imaging revenues rose 9%, driven by cloud-based software, while water revenues increased 7% organically.

In the reported quarter, the company's growth was driven by strong revenue expansion in Europe and a solid performance in the U.S. Gross profit increased by 5% with gross margins improving to 62.4%, aided by business mix benefits and foreign exchange impacts. Operating expenses rose by 4%, driven by R&D and commercial spending, though partially offset by a favorable litigation expense adjustment. Earnings per share (EPS) increased by 5%, despite a $4 million foreign exchange impact. Free cash flow was $208 million, and the company's net income to free cash flow conversion ratio was 95% over the last 12 months. They project a full-year conversion rate of 80% to 85%, factoring in effects from a resolved litigation matter and tariff planning. The company maintains a healthy balance sheet with low leverage ratios.

The company aims to maintain stable full-year gross leverage ratios and has reduced diluted shares by 2.4% through share repurchases, allocating $415 million for this purpose in Q1. The 2025 guidance projects stable growth in organic revenue, operating margin, and EPS. Revenue estimates for the year have been increased due to foreign exchange changes, with an updated forecast of $4,095 million to $4,210 million. An organic growth rate of 6% to 9% is expected, bolstered by diagnostic revenues and price realization. Operating margin projections have been raised to 31.1% to 31.6%, despite accounting for a litigation expense adjustment and foreign exchange effects. The company is prepared to manage the evolving tariff landscape, updating its estimates based on current U.S. and Chinese tariff measures.

The article discusses IDEXX's financial outlook and operational plans. The company aims to ensure continuous supply to customers while minimizing tariff effects. They updated their full-year EPS forecast to $11.93 to $12.43 per share, noting increases due to foreign exchange and a positive litigation expense adjustment. They expect a negative $0.10 per share EPS impact from foreign exchange. IDEXX maintains an 8% to 12% comparable EPS growth outlook and anticipates 5% to 7.5% revenue growth in Q2, despite a 1% foreign exchange headwind. Operating margins are projected to expand. Additionally, IDEXX launched its Cancer Dx diagnostic panel for canine lymphoma and the inVue Dx cellular analyzer, expanding its innovations in veterinary diagnostics.

In Q1, IDEXX achieved strong commercial performance, driven by robust pre-order momentum leading to over 300 instrument placements and transitioning to broad availability in April. This was supported by the successful launch of new platforms, IDEXX Cancer Dx and IDEXX inVue Dx, which exemplify the company's innovation and vision for growth. The commercial team delivered solid growth and maintained high customer retention, with notable successes in premium instrument placements, particularly in the U.S. and Europe. Internationally, the company experienced double-digit growth in recurring revenue and instrument placements, aided by innovations like Catalyst Pancreatic Lipase. Overall, customer loyalty and satisfaction with IDEXX's diagnostic modalities underpinned predictable revenue and provided opportunities for further innovation.

The paragraph discusses IDEXX's successful commercial strategies, focusing on regional expansion, particularly in South Korea, where they have completed onboarding and training to support the adoption of their innovative diagnostic solutions. These solutions, which provide fast and accurate results, help veterinary practices improve efficiency and patient care. IDEXX highlights its strong commercial performance in Q1, setting a solid foundation for future growth despite dynamic macroeconomic conditions. The company emphasizes partnership, flexibility, and execution excellence in its commercial model, which supports its innovation-led growth strategy. A significant advancement is IDEXX Cancer Dx, a new diagnostic tool that simplifies complex cancer testing for general practitioners, allowing for easy integration into routine wellness visits with quick turnaround times.

The paragraph highlights IDEXX's advancements in veterinary diagnostics, offering an affordable cancer detection test for pets at $15, with over 1,000 practices ordering it. IDEXX aims to expand its oncology diagnostics to cover most canine cancers within three years. The IDEXX inVue Dx system is transforming point-of-care diagnostics, offering rapid, AI-driven slide-free cytology analysis. It has seen over 900 placements, demonstrating strong customer interest. The system integrates seamlessly with existing tools, enhancing workflows and boosting confidence in results by automating previously time-consuming tasks.

The paragraph highlights the positive utilization trends of ear cytology and blood morphology among early adopters and outlines IDEXX's strategic advancements. IDEXX is on track to meet its 2025 goal of over 4,500 placements, supported by robust manufacturing and inventory capabilities. The research and operations teams are progressing towards introducing five-needle aspirate capabilities for the IDEXX inVue platform, enhancing oncology diagnostics for dogs. IDEXX's software ecosystem, which integrates diagnostics, imaging, communication, and practice operations, is a key growth driver. The company reports strong performance in practice management systems and pet owner engagement tools, with significant placement growth in its ezyVet and Neo platforms, particularly among multi-location and corporate accounts. The Vello client engagement platform also showed a user increase of over 20% from Q4 to Q1.

The paragraph highlights that Vello users have seen improvements in communication, visit frequency, and compliance with treatment plans compared to those using other platforms. IDEXX, primarily based in the U.S., is focused on maintaining product availability and minimizing financial impacts despite challenges posed by global trade uncertainties and tariffs, particularly from China. The company has been proactive in managing these issues to meet profit goals. Despite economic uncertainty affecting clinical visits, the pet healthcare market remains resilient, with pet population growth projected at approximately 3% CAGR since 2019, surpassing historical growth rates.

The paragraph discusses IDEXX's strong position in the pet diagnostics market due to a high baseline of pet ownership and the aging pet population, which supports organic revenue growth. Diagnostics are central to pet care, and rising expectations for quality care benefit IDEXX. The CEO expresses confidence in continued growth and thanks IDEXX's 11,000 employees for their dedication. During the Q&A session, Michael Ryskin from Bank of America questions the company's observations on market visits, noting a reported decline but better-than-expected performance compared to other data. Jay Mazelsky responds, confirming consistent trends in both wellness and non-wellness visits, despite quarterly variations.

The paragraph discusses the current state of wellness visits and strategies to improve them. There is a focus on vector-borne disease screenings and optimism that clinical visit moderation has stabilized. Efforts are being made by both independent and corporate practices to reengage customers with wellness visits as a key strategy. Andrew Emerson notes that while there's a decrease in the number of pets visiting clinics, the quality and use of diagnostics during visits remain strong. Jay Mazelsky highlights the strategy to include IDEXX's lymphoma test as part of cancer screening offerings, which has been well-received, with over 1,000 practices ordering the test within a month. Michael Ryskin points out a significant increase in interviews conducted, especially in April, after certain restrictions were lifted.

The paragraph is a conversation about the feedback and progress of a product release. Jay Mazelsky confirms that while the target remains at 4,500, there is potential for higher numbers. Customer feedback has been positive, particularly due to the product's ability to streamline routine tasks like ear cytology and blood morphology, which do not require learning new practices. The product eliminates certain tasks and ensures consistent, accurate results, which resonates well with customers. The rollout was initially gradual but accelerated in April to address backlog quickly, emphasizing the importance of getting the product to customers and starting a cycle of recurring revenue. A subsequent question will be from Katerina at JP Morgan.

The speaker, Andrew Emerson, addresses questions regarding the health of pet owner demand in the U.S. amid potential economic challenges like a recession and concerns about tariffs. He notes increased pressure on clinical visits, particularly elective procedures and wellness visits, as consumers make trade-offs. Despite these constraints, Emerson feels confident in their outlook, citing ongoing partnerships with veterinary clinics and innovative products like InVue DX and Cancer Dx as key drivers sustaining their business.

The paragraph discusses the company's current position and strategy regarding tariffs and their impact on business operations. The company feels confident in its ability to manage tariff-related challenges due to its largely U.S.-based industrial footprint and minimal revenue exposure to China. They are focusing on ensuring product supply and continuity for their customers, leveraging their balance sheet to minimize tariffs' impact, and maintaining resilient supply chains. The company remains optimistic about adhering to their initial guidance for the year despite the tariff concerns.

In the paragraph, Jay Mazelsky responds to Erin Wright's question about the Cancer Dx product and its adoption among customers. He mentions that even though it's only been a month since the launch, there has been a positive initial uptake with over 1,000 unique customers placing orders, some multiple times. It is still too early to determine the trend between its use for diagnosis versus wellness purposes. The company has strategically priced the product to support its use in both areas, particularly in wellness screens, which veterinarians are finding appealing. Initial feedback indicates that pet owners and veterinarians see the product as long overdue and are eager to incorporate it into their care strategies, especially considering the higher risks some pet breeds face.

Andrew Emerson discusses the company's guidance and confidence in underlying utilization trends for the year. He mentions that clinical visits are expected to decline by approximately 2%, similar to 2024 levels. The focus is on ramping up innovations, such as inVue Dx, Cancer Dx, and menu expansions like the pancreatic lipase test, which are positively impacting the business. Additionally, the company has opportunities to gain pricing leverage and expand relationships through lapping large customer agreements and capturing volumes over time.

The paragraph features a conversation during an earnings call, where Jon Block from Stifel questions Jay Mazelsky about the company's InVue orders and several operational aspects. Block inquires about the updated order number for InVue compared to the previous quarter, FNA timing projected for the end of 2025, and the reason behind increased shipments in April. Mazelsky responds by explaining the controlled launch process of new instruments, which involves increasing the volume of products in customers' hands. The conversation suggests the company is managing various variables and is cautiously optimistic about its position and outcomes.

The paragraph discusses the process and readiness of a product launch for a company. Initially, the company undergoes a period of controlled launch to refine algorithms, improve the training and onboarding experience, and ensure they can deliver the right customer experience. Once confident, they move to a volume launch phase, where they no longer disclose backlogs or product specifics but report shipments like other products. The Cancer Dx product, involving FNA technology, is planned for 2025, aligning with the company's cancer strategy. They faced some bottlenecks during the controlled launch, such as software or manufacturing challenges, but these were seen as part of the usual process to ensure high customer experience.

In the paragraph, Andrew Emerson addresses several questions from John. He clarifies that any impact from the number of days in Q2 wasn't significant enough to be highlighted, but there should be some benefit in the second half of the year when comparing the two halves. Emerson also explains a decrease in sample size from 8,500 to 7,500 visits, suggesting it varies but didn't provide detailed reasons. On foreign exchange (FX), he mentions a planned 1% year-over-year FX headwind, estimating a 1% change equates to $11 million on the top line and $4 million in operating profit. The FX rates align with published figures, and they are staying vigilant due to recent volatility.

In the paragraph, the speaker emphasizes their commitment to transparency and discusses the planning rates and visit data trends. The visit data, consistent with previous quarters, falls within a 7,000 to 8,000 range, and while there is nothing significant to highlight, it remains an important part of the sector. In response to Brandon Vazquez's question about macro trends and wellness visits in April, Andrew Emerson notes that they don't typically discuss in-period data but highlights the positive ramp-up of inVue Dx, suggesting optimism for future growth. Despite macroeconomic noise, utilization excluding price has been strong and resilient, and Emerson appreciates the continued utilization growth, hinting at its potential durability through 2025.

The paragraph discusses the performance and expectations for CAG Diagnostic recurring revenue, forecasted to be about 6.25% for Q2, consistent with Q1 on a days-adjusted basis. The company anticipates similar clinical visit levels for Q2, aligning with the full-year outlook of an approximate 2% decline in visits. Despite macroeconomic impacts, the business remains resilient due to continuous consumer prioritization of pet health. Dan Clark from Leerink Partners inquires about macroeconomic considerations in discussions about potential inVue sales. Jay Mazelsky responds that customers, including independent and corporate practices, are eager to adopt new technology, provided it offers both clinical benefits and workflow improvements.

The paragraph discusses trends in pet adoption, noting a slight increase in cat adoptions compared to dogs. Despite the overall adoption rate stabilizing after a pandemic peak, there's still a consistent growth trend since 2019. The company sees an opportunity to enhance care for cats, as there's growing interest in improving standards of care for them, especially given the higher incidence of chronic kidney disease in cats. They are focusing on solutions tailored to cats, like SDMA, to support this trend.

The paragraph is part of a conversation during a financial discussion or earnings call involving several individuals, including David Westenberg, Jay Mazelsky, and Navann Ty. They discuss IDEXX's growth and strategy, focusing on IDEXX 360, a program for placing high-quality instruments to support cat health. Jay Mazelsky mentions that most placements occur through this program, noting strong placement figures globally driven by competitive and new market opportunities. Navann Ty asks about the company's confidence in achieving a 4-4.5% net price target and whether the expansion of the inVue product line will aid in reaching a target of 4,500 units. Andrew Emerson begins responding to Navann's questions, though his response is not included.

The paragraph outlines a company's 2025 pricing outlook, setting a midpoint of 4% to 4.5%, and confirms reaching a 4% increase in Q1. Jay Mazelsky discusses the inVue menu offerings, including ear cytology and blood morphology, with future additions planned. Current customer purchases are based on existing offerings, but there's confidence in expanding available options. The projected annual value of consumable streams, including new features, is estimated between $3,500 and $5,500. The paragraph concludes with appreciation for the company's employees and remarks about achieving organic growth and strong financial results in Q1. The operator ends the call.

This summary was generated with AI and may contain some inaccuracies.