Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IDEXX Laboratories Inc (IDXX, Financial) reported a solid 6% organic revenue growth in Q3 2024, driven by 7% growth in CAG Diagnostic recurring revenues and 13% growth in the water business.
- The company achieved strong profit performance with an EPS of $2.80 per share, up 11% as reported and 12% on a comparable basis.
- IDEXX secured nearly 700 orders for its new inVue analyzer, indicating strong market interest and potential future revenue growth.
- The company maintained high customer retention rates over 97% and achieved double-digit growth in its premium instrument install base.
- IDEXX's international CAG Diagnostic recurring revenue grew by 10% organically, supported by strong new business gains and high premium instrument placements.
Negative Points
- CAG Diagnostic recurring revenue growth in the US was constrained by near-term macroeconomic pressures and sector headwinds, leading to a reduction in full-year organic revenue growth guidance.
- The company experienced a 2% organic decline in Livestock, Poultry, and Dairy (LPD) revenues, impacted by lower Asia swine testing and herd health screening revenues.
- IDEXX's reference lab revenue growth was modest, affected by price realization impacts from major new customer agreements.
- US clinical visit growth declined by 2.1%, with a higher 3.4% decline in discretionary wellness visits, impacting diagnostic revenue growth.
- The company faced challenges from severe weather events, which negatively impacted Q4 revenue growth expectations.
Q & A Highlights
Q: Can you elaborate on the drivers of the reduction in the outlook and the step down in Q4? What's the split between weather impacts and the underlying US macro environment?
A: Brian McKeon, CFO, explained that the Q4 outlook for organic growth is about 3%, with CAG Diagnostic recurring revenue growth of 3.5% to 4%, net of a 0.5% impact from hurricanes. Normalizing for weather, the growth aligns with price benefits, indicating flat volume trends similar to Q3. The main difference in Q3 was more pressure on in-clinic demand, but interest in diagnostics remains strong for pets visiting clinics.
Q: The reference lab numbers were weaker than expected. Can you expand on the impact of major customer agreements on pricing?
A: Brian McKeon noted that organic growth was 2.4%, with a day's headwind effect. Volume growth was positive, but price realization was affected by major customer agreements, which will benefit long-term volume growth. Jay Mazelsky, CEO, added that execution drivers remain strong, with modest volume growth and high customer retention, despite pressures on wellness testing.
Q: How do you view pricing trends going forward, given recent elevated levels?
A: Brian McKeon confirmed a 5% full-year outlook, with some moderation in Q4 due to new business effects. IDEXX plans to communicate price increases for next year, emphasizing the value delivered through innovation. Jay Mazelsky added that pricing reflects added value from new products and expanded features.
Q: Can you discuss the impact of industry innovation in the affordability space, such as payment plans and IDEXX credit cards, on mitigating lower visits?
A: Jay Mazelsky explained that IDEXX's programs typically involve volume commitments over time, reducing cash constraints for practices. The focus is on providing technology and tools to optimize workflow and support staff productivity, with Vello aiding client communication.
Q: Could you provide an update on the IDEXX Cancer Diagnostic Screening Panel, including timeline and pricing?
A: Jay Mazelsky stated that the IDEXX Cancer Diagnostic Panel is on track for a 2025 launch, targeting wellness screening for at-risk dogs. Feedback from key opinion leaders and oncologists has been positive, with the goal of detecting cancer earlier to improve therapeutic options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
