IDEXX Laboratories, Inc. Q3 FY2025 earnings call

• IDEXX delivered strong financial results supported by commercial execution in Companion Animal, with innovations like InVue Dx. - Recurring revenues in CAG Diagnostics grew across regions, driven by premium installed base growth, net price realization, and software adoption. - Innovation was a key driver, with strong placements of InVue Dx, growth in Cancer Dx adoption, and expansion of the Catalyst menu (e.g., Catalyst Cortisol). - International CAG Diagnostics recurring revenue grew 14% organically, with sustained strong growth on a days-adjusted basis for 10 quarters. - Veterinary software and diagnostic imaging organic revenues increased 11%, driven by cloud-based PIMS installations and Vello platform expansion.

IDEXX's segments showed strong performance. The Companion Animal (CAG) Diagnostics segment had organic revenue growth of 12%. CAG Diagnostics recurring revenues grew 10% organically, with U.S. up 8% and international regions double-digit. CAG instrument revenues had 71% organic growth due to over 1,750 IDEXX InVue Dx analyzers placed. VetLab consumable revenues increased 16% organically. Global Reference Lab revenues grew 9% organically. The Water business had 7% organic growth, and Livestock, Poultry and Dairy (LPD) had 14% organic growth. Revenue contribution details: CAG Diagnostics was a key driver with significant recurring and instrument revenue growth.

• Updated full year revenue outlook to $4.270 billion to $4.300 billion, with reported revenue growth of 9.6% to 10.3% and organic revenue growth of 8.8% to 9.5%. - Organic CAG Diagnostics recurring revenue growth outlook is 7.5% to 8.2%. - Full year EPS outlook raised to $12.81 to $13.01 per share. - Increased InVue Dx placements outlook to approximately 6,000 during 2025, with instrument revenues over $65 million.

• Macro and sector pressures impacted U.S. same-store clinical visits for CAG Diagnostics recurring revenue. - General risks associated with forward-looking statements and potential differences between actual results and discussed figures as outlined in SEC filings.

Q: Unpack the strength of consumables in the quarter and sustainability, specifically regarding InVue consumables and new contracting terms.

A: Jay Mazelsky said consumables growth is broad-based, with high-quality placements and contributions from specialty tests like Pancreatic Lipase, SmartQC, and Cortisol. InVue is in early stages but proceeding well, with its installed base expected to contribute more in the future.

Q: On track with FNA launch and pilot program feedback for InVue.

A: Jay Mazelsky stated they are on track, and InVue customers use multiple testing use cases, with most expected to use FNA testing for mast cell tumors.

Q: Follow-up on end market business trending better, investment priorities.

A: Andrew Emerson mentioned operating expenses grew 12% year-over-year, with investments in innovation and commercial capabilities. Jay Mazelsky discussed investments in commercial sales force expansion in international and U.S. markets, and ongoing R&D for new instruments and software.

Q: InVue placement guidance for 2025 and longer-term goals.

A: Andrew Emerson said they aim for 6,000 InVue placements in 2025, well above initial guidance, and remain focused on the longer-term goal of 20,000 placements over 5 years.

Q: International CAG Diagnostic recurring revenue growth and drivers.

A: Jay Mazelsky noted international growth is due to sales rollout, investment in sales force, Reference Lab network, and software localizations. Andrew Emerson highlighted about 100 basis points benefit related to equivalent days in international business.

Q: Aging pet commentary and international visit trends.

A: Jay Mazelsky said non-wellness visits for aging pets were flat, with adult dogs coming for more non-wellness visits. Internationally, clinical visit trends are stable with market research indicating stabilization, and the company is executing against an improving environment.

Q: International CAG recurring revenue growth potential.

A: Jay Mazelsky said growth potential comes from continued sales rollout, investment in sales force, Reference Lab network, and software localizations, with confidence in achieving 13%-16% growth rate.

Q: Impact of prior year pain medicine launch on headline visit numbers.

A: Andrew Emerson said there's no specific impact on IDEXX business in Q3 related to that prior year launch.

Q: Using Cancer Dx to take share in Reference Lab market.

A: Jay Mazelsky mentioned Cancer Dx is a point of differentiation, with about 17% of test submissions from competitive Reference Lab customers, providing an opportunity to reintroduce IDEXX and its Reference Lab to these customers.

Q: Cancer Dx adoption and screening panel.

A: Jay Mazelsky explained Cancer Dx has two use cases: aid in diagnosis and screening. It's more compelling as a screening test with panel expansion, and will flip to be more of a screening test over time, with a third cancer screen planned for 2026.