IDEXX Laboratories Q4 2024 Earnings Report

IDEXX Laboratories EPS Results

• Actual EPS: $2.62
• Consensus EPS: $2.40
• Beat/Miss: Beat by +$0.22
• One Year Ago EPS: $2.32

IDEXX Laboratories Revenue Results

• Actual Revenue: $954.30 million
• Expected Revenue: $933.46 million
• Beat/Miss: Beat by +$20.84 million
• YoY Revenue Growth: +5.80%

IDEXX Laboratories Announcement Details

• Quarter: Q4 2024
• Date: 2/3/2025
• Time: Before Market Opens
• Conference Call Date: Monday, February 3, 2025
• Conference Call Time: 8:30AM ET

IDEXX Laboratories (NASDAQ:IDXX) is a global leader in the development, manufacturing and distribution of diagnostic and information technology solutions for animal health, water testing and dairy markets. The company’s core business activities center on providing veterinarians and farmers with rapid, accurate diagnostic tools and services to improve animal care and productivity. IDEXX’s offerings span in-clinic diagnostic systems, reference laboratory testing, and software solutions that streamline practice management and enhance decision-making.

The company’s product portfolio includes immunoassay analyzers, hematology instruments, chemistry systems and consumables designed for use in companion animal and livestock settings. Point‐of‐care tests for infectious diseases, endocrine disorders and more enable veterinarians to receive results during patient visits. IDEXX Reference Laboratories complement in-clinic diagnostics with advanced testing services covering genetics, pathology and microbiology. In addition, IDEXX offers digital imaging, telehealth and practice management software to optimize workflow and support clinical excellence.

Founded in 1983 and headquartered in Westbrook, Maine, IDEXX has grown into a multinational enterprise serving customers in more than 175 countries. The company maintains a network of regional offices, manufacturing facilities and reference labs across North America, Europe, Asia-Pacific, Latin America and emerging markets. IDEXX’s global footprint is supported by ongoing investment in research and development, aimed at expanding diagnostic capabilities and enhancing connectivity across veterinary practices.

Under the leadership of Chairman, President and Chief Executive Officer Jonathan W. Ayers, IDEXX continues to pursue innovation in animal health diagnostics and data-driven practice management. The company’s emphasis on science-driven solutions and customer support has established it as a trusted partner for veterinarians, livestock producers and water quality experts worldwide.

IDEXX Laboratories Q4 2024 Earnings Call Transcript

Key Takeaways

• IDEXX reported 6% organic revenue growth in Q4 2024 and 8% comparable operating profit growth, driven by strong consumable and diagnostic recurring revenue gains.
• For full-year 2024, the company achieved 7% organic growth in CAG Diagnostic recurring revenues, a 9% increase in its global premium instrument installed base, 11% growth in software and digital imaging revenues, and generated $808 million in free cash flow, enabling $859 million in share repurchases.
• IDEXX’s 2025 guidance projects $4.055–4.17 billion in revenue (6–9% organic growth) and $11.74–12.24 in EPS (8–12% comparable growth), underpinned by pricing improvements, volume gains, and 4,500 planned placements of its new InViewDx analyzer.
• Ongoing pressure on U.S. same-store veterinary visits (down ~3% in Q4 and 2% for FY 2024) remains a primary growth constraint, with IDEXX expecting similar mid-single-digit declines in 2025.
• The rollout of the slide-free InViewDx cytology and blood morphology analyzer and the CancerDx oncology screening panel, along with expansion of cloud software like Velo, drives IDEXX’s innovation agenda but increases R&D spending and capital investment.

Presentation

[Moderator]

Good morning, and welcome to the IDEXX Laboratories 4th Quarter 2024 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jay Mizelski, President and Chief Executive Officer Brian McKeon, Chief Financial Officer Andrew Emerson, Senior Vice President, Corporate and Companion Animal Group Finance 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.

[Moderator]

Additional information regarding these risks and uncertainties is available under the forward looking statements noticed in our press release issued this morning as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website, idex.com. During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non GAAP financial measures to the directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the Investor Relations section of our website. In reviewing our Q4 2024 results and initial 2025 guidance, please note all references to growth, organic growth and comparable growth refer to growth compared to the equivalent prior year period unless otherwise noted. To allow broad participation in the Q and A, we ask that each participant limit their questions to 1 with one follow-up as necessary.

[Moderator]

We appreciate you may have additional questions, so please feel free to get back in the queue, and if time permits, we'll take your additional questions. Today's prepared remarks will be posted to the Investor Relations section of our website after the earnings call concludes. I would now like to turn the call over to Brian McKeon.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Good morning, everyone, and welcome to our Q4 earnings call. Today, I'm pleased to review our Q4 and full year 2024 financial results. Andrew Emerson, who will be assuming responsibility as IDEXX's CFO on March 1, will take you through the details of the company's outlook for 2025. IDEXX had a solid finish to 2024, reflecting 4th quarter performance ahead of our expectations. Revenue increased 6% organically supported by 7% organic gains in CAG Diagnostic recurring revenues.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Operating profits increased 7% as reported and 8% on a comparable basis, benefiting from solid gross margin gains, which supported operating margin performance at the high end of our guidance range. We also saw positive impacts from increased stock based compensation activity, which benefited our effective tax rate. These factors supported delivery of $2.62 in EPS in Q4, up 10% on a comparable basis. IDEXX execution drove solid expansion of our business for the full year 2024. This is reflected in 7% full year organic growth in CAG Diagnostic recurring revenues, 9% growth in our global premium instrument installed base, 11% organic gains in recurring software and digital imaging revenues and 11% organic growth in our Water business.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

We delivered excellent full year financial performance in 2024 supported by comparable operating margin gains at the high end of our long term annual improvement goals. Full year EPS of $10.67 per share, which includes $0.56 per share of negative impact related to a discrete litigation expense accrual increased 12% on a comparable basis, including 2% of negative growth impact from the lapping of a 2023 customer contract resolution payment. These results were achieved as we successfully advanced our innovation driven growth strategy and work through greater than expected sector and macro headwinds. As Andrew will discuss, this performance sets a solid foundation for our business to build upon as we enter 2025. Let's begin with a review of our 2024 results.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

4th quarter organic revenue growth of 6% reflected solid gains across IDEXX's major business segments, including 6% organic growth in CAG, 7% organic gains in LPD and 9% organic growth in Water. Worldwide CAG Diagnostic recurring revenue increased 7% organically in Q4, including benefits from improved volume growth trends. Results were supported by average global net price improvement of 4% to 4.5% with U. S. Net price realization of approximately 3.5%.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

As noted in our last earnings call, U. S. Net price realization includes impacts from the successful extension and expansion of 3 major customer agreements in 2024, which will provide long term incremental volume growth benefits for IDEXX. U. S.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

CAG Diagnostic recurring revenue increased 4% organically in Q4, net of a 1% negative growth impact from fewer equivalent selling days. IDEXX execution drove approximately 2% U. S. Volume growth in the quarter normalized for equivalent days. These results were supported by sustained solid new business gains, high customer retention levels and relatively higher gains in diagnostic frequency and volume utilization per clinical visit.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

IDEXX achieved a solid 800 basis point normalized growth premium compared to U. S. Clinical visit growth levels in the 4th quarter. We continue to work through pressure on U. S.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Same store clinical visit levels, which declined nearly 3% in Q4 and 2% for the full year in 2024. This has been the primary constraint on IDEXX's recent growth, reflecting transitional sector macro impacts following the accelerated expansion of pet healthcare during the pandemic. International CAG Diagnostic recurring revenue growth was 12% in Q4, including a 1% benefit from equivalent days effects. Strong Q4 international results benefited from net price gains and improved volume growth, supported by new business expansion reflected in double digit year on year growth in our international premium instrument installed base. IDEXX's 4th quarter performance was supported by strong global growth and consumable revenues.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

IDEXX VetLab consumable revenues increased 12% organically reflecting double digit gains in U. S. And international regions normalized for equivalent days of post. Consumable gains were supported by a 9% increase in our global premium instrument installed base in 2024, reflecting solid gains across our Catalyst Premium Hematology and SediVue platforms. For the full year 2024, we achieved approximately 18,500 premium instrument placements with excellent quality reflected in sustained high new and competitive Catalyst placements.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

In the Q4, we placed 4,625 premium instruments, down 12% from high prior year levels. Overall CAG instrument revenues also declined 12% organically in Q4. Quarterly placement results were supported by strong gains in SediVue and continued expansion of ProSight 1. We also initiated shipments of IDEXX InView DX in the quarter, supporting strong comparable EBI gains, including the projected value of in view preorders. Rapid assay revenue was flat on an organic basis in Q4.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Rapid assay results were constrained by pressure on U. S. Wellness visits as well as by the addition of the pancreatic lipase slide to our Catalyst menu, which we estimated to be a 4% headwind to Q4 revenue growth. Global lab revenues expanded 4% organically in Q4. Reference Lab results in the quarter were supported by solid normalized volume growth in U.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

S. And international regions and net price gains. Reference Lab net price gains were moderated in Q4 by near term impacts from major new customer agreements, which will benefit long term reference lab growth. CAG Veterinary Software Services and Diagnostic Imaging revenues increased 7% organically in Q4 compared to strong prior year levels. Results continue to be supported by solid growth in recurring revenues and ongoing momentum in cloud based software placements.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

In other business segments, water revenues increased 9% organically in Q4 compared to strong prior year levels, driven by continued solid gains in the U. S. And Europe. Livestock, poultry and dairy revenues increased 7% organically in Q4, supported by solid gains in our U. S, Europe and Latin America regions.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Turning to the P and L, Q4 operating profits increased 7% as reported and 8% on a comparable basis supported by gross margin gains. Gross profit increased to 8% as reported and 9% on a comparable basis. Gross margins were 59.8%, up 130 basis points on a comparable basis adjusting for approximately 10 basis points of positive FX impact. Gross margin gains reflected favorable business mix supported by strong consumable growth, benefits from net price improvement and higher water gross margins. Operating expenses were up 10% as reported and 9% on a comparable basis in the quarter, reflecting increases in R and D spending aligned with advancing our innovation initiatives, including our new instrument platforms.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

For the full year 2024, operating margins were 29%, an increase of 60 basis points on a comparable basis, including an approximately 40 basis point negative impact from lapping a customer contract resolution payment in 2023. Full year operating margins included 160 basis points of negative impact related to discrete litigation expense accrual recorded in the Q2. Q4 EPS was $2.62 per share, up 10% on a comparable basis. In Q4, EPS benefited from a lower effective tax rate, including $0.13 per share in tax benefits from share based compensation activity and $0.06 per share benefit from a non recurring tax reserve release related to lapping of an applicable statute of limitations. Foreign exchange drove a $0.03 per share EPS headwind in the quarter, net of approximately $3,000,000 in hedge gains.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Full year EPS was $10.67 per share, an increase of 6 percent on a reported basis and 12% on a comparable basis, including a 2% negative EPS growth impact related to lapping a customer contract resolution payment. 20 24 full year EPS include $0.56 of negative impact from a discrete expense accrual related to an ongoing litigation matter, dollars 0.05 of negative impact from currency changes and $0.24 in tax benefits from share based compensation activity. Foreign exchange had limited impact on Q4 and full year revenue growth. For the full year, foreign exchange reduced operating profits by $5,000,000 and EPS by $0.05 per share, net of $6,000,000 in hedge gains. Free cash flow was $808,000,000 for 2024 or 91 percent of net income aligned with our guidance and long term goals.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Capital spending was $121,000,000 for the full year or approximately 3% of revenue. We allocated $249,000,000 to repurchase 564,000 shares in the Q4. For the full year, we allocated $859,000,000 to repurchase 1,760,000 shares. Our balance sheet is in a strong position. We ended 2024 with leverage ratios of 0.7 times gross and 0.4 times net of cash.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

That concludes our financial review. Andrew will now walk you through our initial 2025 financial outlook.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Thank you, Brian. Turning to our 2025 full year outlook, IDEXX is planning to deliver solid organic revenue growth and profit gains led by strong execution and benefits from new innovation. We're providing initial guidance for revenue of $4,055,000,000 to $4,170,000,000 an increase of 4% to 7% on a reported basis. On an organic basis, this reflects a growth range of 6% to 9% overall supported by 5% to 8% organic growth in CAG Diagnostic recurring revenues. At current exchange rates, we expect foreign exchange to have a 2% negative impact on full year revenue growth.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

In terms of key drivers for our 2025 organic growth outlook, the midpoint of our CAG Diagnostic recurring revenue growth range incorporates expectations for global net price realization of 4% to 4.5% and volume gains of approximately 2%. The outlook includes assumptions for declines in U. S. Same store clinical visit growth levels with the midpoint reflecting a similar rate of a decline seen in 2024. These targets incorporate continued solid global growth benefits from IDEXX execution drivers, including new customer gains and increases in testing utilization supported by IDEXX innovations.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

The higher end of our CAG Diagnostic recurring revenue growth outlook captures the potential for improved sector visit and same store growth trends, while the lower end of the range calibrates for further potential effects of macroeconomic conditions. Our revenue growth outlook includes approximately $50,000,000 of projected IDEXX InViewDX instrument revenue aligned with 4,500 placements. Jay will discuss progress against our InViewDX launch in his comments. Our reported operating margin outlook for the full year 2025 is 31% to 31.5%. On a comparable basis, this reflects an outlook of 30 to 80 basis points of improvement year over year, net of 160 basis point operating margin benefit related to the lapping of the discrete litigation expense recorded in the Q2 of 2024.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

We're planning for solid gross margin gains on a comparable basis in 2025, supported by growth in CAG Diagnostic recurring revenues, benefits from lab productivity initiatives and expansion of our high margin cloud based software business. This is partially offset by unfavorable business mix planned from higher levels of CAG Diagnostic instrument revenue gains and preliminary estimates for tariff risk on internationally sourced materials. Our 2025 EPS outlook is $11.74 to $12.24 per share. This reflects an increase of 8% to 12% on a comparable basis, net of a 6% EPS growth benefit from the lapping of the Q2 twenty twenty four discrete litigation expense and includes a $0.06 per share headwind from higher taxes related to a non recurring tax reserve release during the Q4 of 2024. Our EPS outlook also includes $42,000,000 of net interest expense at prevailing rates.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Foreign exchange is expected to have a negative impact of $0.21 year over year at the rates disclosed in our press release net of established hedge positions. In terms of sensitivities to changes in foreign exchange rates, we project a 1% change in the value of the U. S. Dollar would impact the full year reported revenue by $15,000,000 and operating income by $5,000,000 net of hedge positions. Our 2025 free cash flow outlook is for net income to free cash flow conversion ratio of 85% to 90% aligned with our long term goals.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

This reflects estimated capital spending of approximately 160,000,000 or about 4% of revenues. The outlook incorporates increased capital deployment aligned with $1,500,000,000 towards share repurchases or approximately 4% of our current equity market capitalization. This reflects our high confidence in IDEXX growth potential including continued strong execution and advancement of our innovation agenda. Regarding our Q1 outlook, we're planning for overall organic revenue growth of 4% to 6% with similar gains in CAG Diagnostic recurring revenue net of a 1% to 1.5% days headwind. This factors in U.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

S. Clinic visit trends more aligned with Q4 2024 and pricing benefits at the low end of our full year price realization range as we work through the major customer agreements noted by Brian. Reported revenue growth of 2% to 4% includes approximately 2% negative impact from foreign exchange at current rates. Our Q1 reported operating margins are planned for 30.2% to 30.6%. This reflects moderate compression in comparable margins in the quarter compared to high prior year levels and reflects investments to support recent and upcoming product launches.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Overall, we're well positioned to build on our solid 2024 financial performance with continued strong execution and robust set of new product launches during 2025. This concludes our guidance update and I will now turn the call over to Jay for his comments.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Good morning and thank you, Andrew. IDEXX delivered another strong quarter to close out 2024 capped with the initial placements of IDEXX, InViewDx. Our results this quarter exemplified the resilience of our business model, built on the foundation of customer centric innovation, high touch commercial execution and a steadfast commitment to growth by advancing the standard of care in veterinary medicine. This year, we celebrated significant milestones, including the highly anticipated launch of IDEXX imbuedx, a groundbreaking cellular analyzer redefining slide free point of care testing. We recently announced the launch of IDEXX CancerDx with canine lymphoma, a transformative oncology screening and aid in diagnosis panel that will expand over time to address the most common canine cancers.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

We're also concurrently commercializing 3 new products and services as part of our Catalyst Technology for Life platform and test menu and enabling software. Introductions include pancreatic lipase testing, a single slide solution already embraced by thousands of clinics. SmartQC, which enables very easy monthly calibration on our chemistry platform and an updated IDEXX VetLab Station with a more modern intuitive interface supporting workflow efficiencies. IDEXX commercial teams continue to operate at a high level this year, supporting new business gains, solid net price realization, high 90s percent customer retention levels across major testing modalities and sustained adoption levels of diagnostic testing utilization near post pandemic highs. High placement levels across our core premium instrument platforms drove a 9% growth in our premium instrument installed base.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

The team also delivered very strong year on year EVI gains when incorporating benefits from nearly 1600 global preorders for IDEXX in VUE Dx, which will benefit our business over the coming year. 2024 also saw the extension and expansion of 3 major customer agreements, which will provide solid volume gains for our reference lab business. These important contractual renewals highlight the value IDEXX solutions bring to our customers, supporting their practice revenue growth through highly important diagnostic testing categories. 2024 was also a pivotal year for our software business with double digit growth in our cloud native pins placements and the launch of our pet owner engagement solution Velo, we're helping clinics bridge the gap between patient care and operational efficiency. Velo, now adopted by nearly 600 practices, has enhanced pet owner engagement by streamlining communication and driving increased clinical visits and diagnostic frequency.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

These advancements highlight the expanding role of software and unlocking the full potential of diagnostics, while delivering a seamless experience for veterinarians and pet owners alike. The strong execution was delivered into dynamic, macroeconomic and sector environment. We saw continued pressure in clinical visits. For pets visiting U. S.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Clinics, pet owners continue to demonstrate interest in a higher standard of care, reflecting the strength of the pet owner bond and the prioritization of pet health. Diagnostics play a key central role in enabling better medical outcomes as nearly half of clinical visits include some form of diagnostic testing. The growth in the use of blood work in preventive screening highlights the value pet parents place on proactive care, driven by advancements in technology and awareness of health benefits. Our commercial strategy is to support this positive trend through the use of preventive care marketing programs like Simple Start and testing innovations such as IDEXX CancerDx, which will be included at attractive prices to inspire pull through. IDEXX's commercial execution continues to be a cornerstone of our success, reflecting the deep expertise, commitment and customer focus of our teams around the globe.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Our partnership approach has yielded exceptional customer retention rates of over 97%, ensuring that practices continue to see IDEXX as an indispensable partner in their growth and efficiency goals. Customers trust IDEXX to help them navigate challenges of staffing and visit trends. Our nearly double digit premium instrument installed base growth is driven by robust new placements across chemistry, hematology and SediVue platforms, as well as the first placements of IDEXX in VUE Dx. We also continue to make strong progress in placing our IDEXX VetLab Suites in competitive and greenfield accounts, a focus area since we get the full growth benefit of consumables usage. Customers are hungry for point of care technology that supports their medical mission with fast real time results while minimizing workflow bottlenecks with innovations such as load and go capability, a common easy to use interface and instrument uptime measured in years.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

An additional benefit is that our large rapidly growing installed base of over 74,000 chemistry analyzers, for example, allow for rapid global adoption of new testing innovations such as pancreatic lipase to 10th such menu extension in a bit over 12 years. Menu extensions such as pancreatic lipase help support healthy volume premium to the clinic visit baseline. Our international region showcased strong performance in 2024, contributing significantly to our growth story. Double digit expansion of our premium installed base outside the U. S.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Underscored the benefits of our targeted global commercial investments over the past 3 years. Our maturing international sales organization has not only secured high quality placements, but also driven consistent diagnostic utilization gains, particularly in the Europe and Asia Pacific regions, where we continue to see untapped potential. Spotlighting our European region's very strong performance, we saw the 7th consecutive quarter of double digit CAG Diagnostics recurring revenue growth with IDEXX vent lag consumables growth in the high teens. Customer satisfaction remains at the heart of our commercial strategy, supported by sustained sector leading levels of engagement and trust. IDEXX's investment in areas such as VetConnect plus feature expansion that now gives the customer the ability to access reference lab sample turnaround time and order status information.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

This is part of our strategy to not only provide subject matter expertise, a complementary testing support through our medical consulting organization, but workflow optimization that help clinics navigate the complexities of modern veterinary care. This focus on customer success not only drives loyalty, but also ensures that IDEXX remains the go to partner for diagnostic solutions. The launch of IDEXX in BeautyX has been one of the most exciting developments of 2024, marking a new era in point of care diagnostics. Designed as a technology for life platform, InViewDx combines advanced optics, artificial intelligence and a slide free workflow to deliver transformative diagnostic insights with unparalleled easy use. The initial menu focuses on your cytology and blood morphology taps into 2 clinically well understood high volume use cases that benefit from automation and a step up in testing consistency and performance.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Customer interest for IDEXX and VUE Dx continues to be exceptionally strong with nearly 1600 preorders globally by the end of Q4, reflecting the high demand for this next generation platform. International interest has been similarly robust as we begin taking orders in select geographies in Q4. So like the U. S, we have placed some limits on the number of preorders our account managers take. This level of enthusiasm underscores the transformative potential of InVueDX in clinics worldwide.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

As I mentioned previously, we initiated a controlled launch of IDEXX InVueDX in Q4. And to ensure a best in class customer experience, we will gradually ramp up placements through 2025. Early feedback from customers, both in the customer experience trials and for the initial placements have been exceptionally positive. Customers are simply amazed with how easy the analyzer is to use, eliminating the need for complex slide preparation or interpretation with results in minutes. Underpinning the financial guidance, Andrew shared is a placement target for 4,500 plus in view placements over the course of the year, as we march towards our 20,000 placement goal over 5 years.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

IDEXX operations and supply chain teams have made outstanding progress ramping manufacturing to support this level of placements, while our field service representative team has been expanded and trained to provide critical installation capacity to support both the Inuvue ramp and continued growth of our core instrument platforms. The moment is upon us to bring this transformative analyzer to our global customer base. Looking ahead, we remain on track to expand IDEXX EWDX's capabilities further with the addition of fine needle aspirate or FNA testing for lumps and bumps later in 2025, unlocking significant opportunity in oncology diagnostics. We're excited to have announced the BMX, the March launch of IDEXX CancerDx panel with lymphoma, a pioneering advancement in veterinary oncology. Innovative screening solution represents a significant step forward in companion animal healthcare, addressing a critical need for early cancer detection and as an aid in diagnosis in canine patients.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

The Addex CancerDx panel has breakthrough cost, performance and turnaround time attributes for early stage cancer diagnostic screening and as an aid in diagnosis test, priced for as little as $15 per test when included as part of select diagnostic panels. This will change how and when canine cancer is detected and its early diagnosis will likely change how cancer care is managed with positive patient implications for the support of longer healthier lives. Given the performance, cost and turnaround time attributes of the CancerDx panel, the opportunity is to inspire a much broader inclusion of cancer screening as an essential part of the preventive care blood work. The CancerDx panel will initially launch with lymphoma detection, one of the most common and treatable cancers in dogs. Over the next 3 years, the panel will expand to include the 6 most prevalent canine cancers, which collectively account for over 50% of cancer cases in dogs.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

This expanded menu will tap into an estimated $1,100,000,000 addressable opportunity, underscoring the potential of this diagnostic innovation. Our software ecosystem plays a pivotal role in supporting veterinarians by enhancing clinic efficiency, optimizing workflows and fostering deeper connections with practices and pet owners. With double digit growth in cloud data placements, software remains a critical enabler of diagnostic adoption and practice success, reinforcing our position as a leader in vertical SaaS offerings tailored to veterinary needs. 1 of the year's standout achievements was the expansion of Velle, our pet owner engagement application, Designed to address the growing demand for seamless communication and improved visit outcomes, Velle has been embraced by nearly 600 practices at year end, doubling its user base since Q3. Early results from the app's deployment have been highly encouraging, with participating clinics reporting increased clinical visits, higher diagnostic usage and improved revenue.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

This underscores Vevela's ability to address critical workflow pain points while fostering stronger relationships between veterinarians and pet owners. We have meaningfully increased development resources and investment in Velo through 2024 and now in 2025. Looking ahead, Velo's development roadmap promises even greater value with upcoming enhancements focused on streamlining communications, expanding engagement tools, including the ability to personalize messaging and integrating advanced analytics. Customers appreciate our commitment to an integrated diagnostics and software suite in a way it unlocks new opportunities for growth. Beyond Velo, we continue to expand our broader software portfolio.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

We placed a record number of cloud native PIMs, expanding that installed base by 20% year over year as our offerings remain a top choice for clinics seeking modern scalable solutions. We finished the year with 60% of our PIMS installed base in the cloud, ahead of our estimates shared at Investor Day in August. IDEXX Web PACS, our cloud native imaging workflow engine, also experienced double digit subscriber growth, demonstrating its relevance and addressing key pain points such as dental imaging workflows. These advancements not only simplify complex processes, but also allow clinicians to spend more time focusing on patient care. The integration of diagnostics and software remains a cornerstone of IDEXX's value proposition.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

By providing intuitive, efficient and comprehensive tools, we empower clinics to unlock new levels of performance while delivering superior care to their patients. As we move into 2025, our focus on software innovation will continue to drive recurring revenue growth and deepen our partnerships with veterinary practices worldwide. As we turn the page on 2024, IDEXX remains steadfast in its purpose to create exceptional long term value for our customers, employees and shareholders by enhancing the health and well-being of pets, people and livestock. I extend my deepest gratitude to our dearly 11,000 employees whose dedication and hard work have made these accomplishments possible. Together, we have delivered robust financial results while setting the stage for a promising 2025 and beyond supported by a new wave of IDEXX innovation.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

I'd like to thank Brian McKean for the exceptional contributions he has made over a 20 year IDEXX career, spanning both as a member of our Board and over the last 11 years as IDEXX's CFO. As previously announced, Brian will be stepping down from the role as CFO as of March 1. One of Brian's many contributions has been to build a world class finance team and develop future leadership talent. It's my great pleasure to welcome Andrew Emerson, who will become our new CFO as of March 1. Andrew brings more than 20 years of finance experience to the healthcare industry in roles of increasing responsibility, including over 9 years at IDEX working side by side with Brian throughout this time.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

He is well versed in our business, our sector and our strategy, and he is set to contribute on day 1. Brian will remain with IDEX in a senior advisory capacity until his retirement date of June 1 in order to help ensure a smooth and seamless transition for Andrew. With that, I'll turn it back over for Q and A. Thank you.

[Operator]

Thank The first question is from Erin Wright with Morgan Stanley.

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

Great. Thanks. And Brian, it's been great working with you over the years and congrats on your retirement and looking forward to working with you too, Andrew, as we kind of move forward. But in terms of my questions, I'll start with innovation. So I guess, can you speak to what guidance assumes now in terms of the innovation contribution in 2025?

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

Is that adding about a point to CAG recurring growth assumptions for you? And I just wanted to get an update on in view on that front. I guess, why are you limiting preorders in the U. S. And there are placements, I guess, of 10, but preorders of 1600.

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

So I guess, why is there such a backlog there? Is there more AI training needed? Is there necessary adjustments to the offering or timing of the rollout or anything like that or practitioners just waiting for FNA? I guess when do you expect FNA to launch as well and what is guidance assumed on that front? Thanks.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Good morning, Aaron. This is Andrew. Happy to kick us off with what's included in the guidance and then I'll hand it over to Jay to talk a bit about in view. Just in terms of what we've provided, we initially get benefits from the instrument revenues as we launch a platform like inview. What we noted in the prepared remarks is approximately $50,000,000 and 4,500 placements on the innovation launch of the InViewDx platform.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

So we feel good about that, that that's captured in our overall guidance. We haven't necessarily broken out the other innovation areas, but we do expect benefits from PL and cancer as Jay highlighted in his remarks. They're going to allow us to continue to build momentum both domestically and internationally, but we haven't broken those out. We just have included that and we feel good about the guidance that we've provided at this point.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Yes. So I'll take it from there. Good morning, Aaron. So as disclosed, we began shipping in Q4. I'd say that customer interest has been very high and that's reflected in close to the 1600 preorders that I indicated.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

For about customer blends, what customers are responding to is some of the things that we've been talking about, the key attributes of the system, starting with the menu, your cytology and blood morphology and then F and A later in 2025. What the way customers see these clinical use cases, very high volume, well understood and well integrated into the workflow of how they practice. They also like the Slide 3 operation. They see preparing slides as really an intensive bottleneck, sometimes 15, 20 minutes. And of course, at the end of the day, what they want is consistent, highly accurate results. And they see in view as being able to deliver that. In terms of the actual launch and approach, we follow a very tried and true controlled launch process for all our analyzers.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

In fact, this is my 4th premium instrument launch since being at IDEXX. And it starts with the aim of delivering an exceptional customer experience. It's what they expect of us. They know we have a world class product development organization. There's always tweaks that come up as part of any launch.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

What I would say is we're making excellent progress. We plan to deliver the 4,500 plus in 2025, as I indicated, and that will ramp over the year. Manufacturing and installation capacity are ahead of plan, and that puts us in a strong position to achieve the plan and customers aren't waiting to answer your specific question around are they waiting for F and A to take delivery they're not.

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

Okay. Okay, great. That's helpful. And then, does your guidance assume any sort of notable changes from a customer account standpoint at point of care or RefLab? I just Presumably you're still lapping through some of that repricing action taken, I guess, in 2024.

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

I guess, can you remind us when you fully lap that? And can you help us quantify how that headwind lingers into 2025? Is it an incremental headwind net net or less of a headwind in 2025?

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Thanks. Thanks, Aaron. So just on pricing, what we noted was 4% to 4.5% for the full year. In Q1 specifically, we did remark that we expect to be on the lower end of that range, just given the 3 large customer lapping that Brian had captured in his commentary in our Q4 results. So we will continue to lap that throughout the year, but I think we've captured that in our guidance.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

And again, we feel good that we have strong momentum in terms of our ability to continue to work with our customers and expand our installed base both internationally where we saw double digit growth as well as globally where we had a 9% installed base expansion for 2024.

[Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley]

Okay, great. Thank you.

[Operator]

The next question is from Chris Schott with JPMorgan.

[Chris Schott, Managing Director at JP Morgan]

Great. Thanks so much for the questions. Just 2 on the 2025 guidance. First, can you just elaborate on the vet visit trajectory you expect from here? It sounds like I think from the prepared remarks down 3% or so in 1Q.

[Chris Schott, Managing Director at JP Morgan]

But can you just talk about the recovery and confidence in recovery from there? And the second question was just on U. S. Versus ex U. S.

[Chris Schott, Managing Director at JP Morgan]

Growth this year. Any notable kind of differences or trends that you're expecting as we think about the regions? Thank you.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Good morning, Chris. So just to talk about the vet visits, in terms of what we've included in the guide for the U. S, we signaled it was similar to the decline that we intended for 2024. So that would represent approximately 2% as Brian highlighted. When we think about Q1, we are anticipating that we saw similar trends as we exited the year.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Q4 was about a 3% decline on clinical visits overall. And just as we saw in Q4, we saw some modest differences by quarter, but ultimately again, we're anticipating about a 2% decline in clinical visits for 2025. So not really an improvement as we head into the year, and that could bounce around a little bit by quarter and we'll provide more information as the year goes on.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Good morning, Chris. Maybe just to spotlight our international performance. We've, as you know, invested fairly heavily in expanding our international commercial footprint over the last 3 plus years. And we've seen really nice growth in terms of overall installed base of our premium instruments and associated consumable stream. In ADARPU, in fact, we've seen last 7 quarters of double digit growth from a consumable standpoint in the high teens.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

And I think that's just a reflection of really strong execution, longer tenure in seed and customer response to innovations like ProSciONE and other solutions that help them practice good medicine.

[Chris Schott, Managing Director at JP Morgan]

Great. Thanks so much.

[Operator]

The next question is from Michael Ryskin with Bank of America.

[Michael Ryskin, Analyst at Bank of America]

Great. Thanks for taking the question. I have a couple of quick ones, hopefully guys. The first on the just going back to the business dynamics, you talked through your assumptions for 2025. I just want to dig into 4Q a little bit.

[Michael Ryskin, Analyst at Bank of America]

I know we probably shouldn't look into quarter to quarter trends and these things are volatile, I understand all that. But just the dispersion here between wellness and non wellness is what really struck me. It seems like it sort of accelerated through the course of 2024 and sort of reached its broadest dispersion in the Q4. You really saw wellness drop off pretty sharply relative to total clinical visits or non wellness visits. Just wondering what you're seeing on the ground, what the feedback is you're getting that.

[Michael Ryskin, Analyst at Bank of America]

Obviously, there's a lot of concern that that's driven by demand elasticity, price, weak consumer environment, people just sort of backing away from some of those more discretionary visits. I know you've talked in prior quarters about potentially the impact on visit trends from some therapeutic options including injectable drugs. Just any color you can provide on wellness specifically and why you see that deteriorate over the course of 2024?

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Sure. Let me provide some insight on that Mike. We do think at the margin there was probably the impacts from the consumer and the overall macro environment. But the interesting thing about wellness is the inclusion of diagnostics actually went up. So we saw a really nice premium growth.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Our belief is that the quality of these visits went up. The pet owner in veterinarian really used higher intensity of diagnostics. So though there's probably some marginal pet owners dropping off, potentially deferring or delaying some of those visits, the ones that came in, very high quality. And we benefited from that. And we think with our IDEXX cancer diagnostics panel included in wellness visits, we'll continue to inspire potentially pull through on that end too.

[Michael Ryskin, Analyst at Bank of America]

Okay. All right. And then for my follow-up question, I don't think you really called this out in the prepared remarks, but I noticed that for the guide for 2025, Brian or Andrew, you guys are assuming a little bit more share buyback. I think you said 2% to 3% reduction in shares. I think you've most years you've sort of been in that 1% reduction.

[Michael Ryskin, Analyst at Bank of America]

Just any additional color there in terms of the rationale for that? Thanks.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Yes, Mike. So just in terms of kind of a rationale, we have high confidence in the company's potential growth model here. We've executed exceptionally well and I think we're really on the cusp of that new wave of innovation, which Jay has highlighted several times. This really reflects strong free cash flow generation. We have a really healthy balance sheet with high liquidity.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Brian mentioned on the call in terms of Q4, our gross leverage was about 0.7 times and this largely sustains those levels at a higher deployment rate. So it does achieve that 2% to 3% reduction in average shares. And again, we look at this as a positive momentum for the long term.

[Michael Ryskin, Analyst at Bank of America]

All right. Thanks.

[Operator]

The next question is from Jon Block with Stifel.

[Jonathan Block, Managing Director at Stifel Financial Corp]

Thanks, guys. Good morning. It looks like the IDEX premium for the quarter, so in other words, 4,224,000,000 was the strongest for the year. That was before the rollout of CancerDx and I mean essentially before Envue for the most part. So can you just talk about what led to the uptick for the premium in the quarter, allowed you to arguably offset the down whatever it was 29 in clinical and still put up some pretty good CAG DX recurring?

[Jonathan Block, Managing Director at Stifel Financial Corp]

That's specific to the Q4 'twenty four question. Then I'll ask the follow-up.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

Hey, John, it's Brian. As you pointed out, it was a very good quarter. Our best volume growth quarter of the year when you normalize for days, we saw very strong consumable growth. I think that that's reflective of the progress that we've made on instrument placements growing the installed base during the year. Some benefit from innovation, the pancreas like the pancreas like base slide is helpful on that front and globally just real good international momentum.

[Brian McKeon, Executive VP & CFO at IDEXX Laboratories]

So I think it's reflective of the strong execution that we've seen throughout the year that has enabled us to grow at a faster rate than the sector. And as the team has pointed out, I think the company is really well positioned to build on that heading into 2025 with the new innovations that will be coming.

[Jonathan Block, Managing Director at Stifel Financial Corp]

Got it. Helpful. And then maybe second question on price. So I think it's I think you called out 3.5% in the U. S.

[Jonathan Block, Managing Director at Stifel Financial Corp]

It sort of implies, I don't know, 5% and change in the international markets. Jay, can you just talk about your comfort in these pricing levels that the consumer can absorb the likely increases? I think you're going to say we don't dictate price to the consumer, but you sort of do because the vet's not going to take it all on the margin on their margin. And to Mike's previous question, do you think this higher pricing environment while providing a temporary fix is acting as a headwind as we continue to see this wellness slide and hence the pet owner avoid wanting to come in for that wellness sticker shock? And then Part B, of a very disparate question is the $42,000,000 in interest expense, can you just reconcile that?

[Jonathan Block, Managing Director at Stifel Financial Corp]

It just looks pretty high considering where we were in 2024. Thanks guys.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Yes. Let me talk about pricing and I'll interpret Andrew to talk about the interest expense. Of course, I'm going to caveat it and say our customers determine in sector pricing. Keep in mind, wellness versus non wellness pricing are different things. Typically for a wellness visit, the veterinarian doesn't spend more than 5, 7, 10 minutes with the pet owners.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

So they price it differently. And we offer a number of programs like compliance based pricing, which I think is positions it positions those panels very advantageously. I would say that the we are very mindful of the need to be in front of the differentiation that we offer through innovations. A lot of what we offer, for example, is complementary to the customer, whether it's VetConnect Plus, whether we add in tapes and cystitis phosphor for fecal antigen. I think CancerDx is a great example of really keeping that price very moderate at $15 plus per select panels. So overall, we're comfortable in terms of where we've priced. We've seen an increase, as I just indicated, in the inclusion of diagnostics and wellness panels, in fact, a very strong increase in Q4.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

So the quality of the visits and the quality of diagnostics inclusion has been growing fairly strongly. Andrew, do you want to address the?

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Yes. John, just in terms of the $42,000,000 on interest that does align with the step up in terms of our planned buybacks of $1,500,000,000 So again, we've calibrated that based off of current rates. As Brian noted, we did just about $850,000,000 in 2024. So there's an increased level there and we've captured that in our interest expense costs.

[Operator]

The next question is from Daniel Clark with Leerink Partners.

[Daniel Clark, VP - Equity Research at Leerink Partners]

Yes. Thank you. I just had a quick clarification on in view. Are you still limiting preorders? Or are you fully allowing those now?

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Yes. So we generally, we've opened the funnel in terms of what our field organizations can take in North America. I would say internationally, it's more limited and we'll continue to just offer it in select countries. And throughout the year, we'll revisit that.

[Daniel Clark, VP - Equity Research at Leerink Partners]

Okay. Got it. Thank you. And then just a separate question. Was there any impact from weather that's worth calling out in terms of visit trends for 4Q or how you're thinking about 1Q? Thanks.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Good morning, Dan. So just in the Q4, I think we had signaled on the last call that we anticipated about 50 basis points of weather associated with what we saw in early October. Yes, as we head into Q1, certainly we've seen some weather types of impacts. But at the end of the day, we've captured those in our outlook and again feel good about the guide that we presented today.

[Operator]

The next question is from the Navane Thi with BNP Paribas Exane.

[Navann Ty Dietschi, Lead Analyst at BNP Paribas]

Hi, good morning. First on the vet visits, if you can discuss further the underlying factors embedded in the 2% decline, expected midpoint in terms of macro impact and time to replenish vet and vet techs graduate? And do you expect potential improvement in 2026? And then in terms of margin, shall we still expect 2025 margin expansion to be still gross margin led? And can you discuss the SG and A and R and D this year with the InVue and cancer diagnostics launches and expansions? Thank you.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Yes. Just to provide some I'll cover the clinical visit trends. Just to provide some additional color on that, we still think capacity constraints are a challenge for practices less around just absolute employment levels and maybe more related to number of hours work in talking to number of the corporate or enterprise accounts. They continue to speak to the desire to hide more, hire more veterinarians and staff as they become available. And in that sense, supply can drive demand.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Probably the more primary factor is the macroeconomic environment, cumulative impacts of inflation and some moderation as a result of that.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

Yes. And Navin, just on the gross margin and breakout of OpEx, we didn't provide any explicit detail here. But overall, what we're planning for is an operating margin improvement of 30 to 80 basis points on a comparable basis year over year, the midpoint being about 50 basis points. I think you'll expect most of that to be gross margin led as we reinvest back into the business. Certainly, again, we feel good about the innovation cycle we have here and the potential for growth over time.

[Andrew Emerson, Senior VP - Corporate & CAG Finance at IDEXX Laboratories]

We want to make sure we're making investments in the right areas in order to support that ultimately.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

Okay.

[Jay Mazelsky, President and CEO at IDEXX Laboratories]

I'd like to thank everybody for their questions this morning. We're now going to conclude our Q and A portion of this morning's call. It's been a pleasure to review another quarter and full year of strong IDEXX results. So thank you again for your participation this morning and we'll conclude the call.

[Operator]

Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Brian McKeon, Executive VP & CFO
• Andrew Emerson, Senior VP - Corporate & CAG Finance
• Jay Mazelsky, President and CEO

Analysts

• Moderator
• Erin Wright., Senior Healthcare Equity Research Analyst at Morgan Stanley
• Chris Schott, Managing Director at JP Morgan
• Michael Ryskin, Analyst at Bank of America
• Jonathan Block, Managing Director at Stifel Financial Corp
• Daniel Clark, VP - Equity Research at Leerink Partners
• Navann Ty Dietschi, Lead Analyst at BNP Paribas