Vet Visit Decline and Impact on Guidance
Q: Can you elaborate on the softer clinical visits and impact on guidance?
A: Management acknowledged that U.S. clinical visits were down 1.5% in Q1 compared to the prior year, which was softer than expected. They had anticipated flattening trends to emerge but noted ongoing staffing and capacity challenges in practices, as well as potential broader consumer impacts affecting demand. Internationally, they saw strong performance. For Q2, they are assuming similar clinical visit trends as in March (-1.5%) and expect organic growth of 6% to 8.5%. The midpoint outlook implies approximately 7% organic growth in the first half and 9% in the second half, supported by factors like better lapping dynamics and higher software growth.

Strategies if Vet Visit Trends Persist
Q: What levers can you pull if declining vet visits continue?
A: Management highlighted their strong innovation agenda, including the planned Q4 launch of inVue, which they believe will have both direct and indirect positive impacts on the business. They emphasized their ability to advance growth initiatives and deliver solid financial results even amid macro challenges. They expect approximately 5% price improvement this year, aligning pricing with the value delivered and inflationary dynamics.

Pricing Sensitivity Among Pet Owners
Q: Are you seeing increased price sensitivity among pet owners?
A: While acknowledging that cumulative macro impacts may be affecting pet owners at the margin, management noted that pricing decisions to pet owners are made by veterinary practices. Practices are investing in staff and technology, which is supported by their pricing strategies. From IDEXX's standpoint, they aim to maintain a good equilibrium of value and have an outlook of approximately 5% net price realization globally for 2024.

Gross Margin Strength and Outlook
Q: Can you comment on gross margin strength and sustainability?
A: Management expressed confidence in their profit and gross margin performance in Q1, noting that instrument costs were lower due to alleviating supply chain impacts—a benefit that was more pronounced in Q1 than expected over the year. They maintained their operating margin guidance despite adjusting the high-end organic growth outlook, reinforcing their expectation of solid operating margin gains for the year.

Competitive Landscape and Market Share Gains
Q: Are there opportunities for meaningful market share gains amid industry disruptions?
A: Management believes the competitive landscape remains dynamic globally and focuses on supporting customers with an integrated suite of products and services, including point-of-care diagnostics, reference labs, and software. They are pleased with progress in advancing solutions and highlight their client engagement application, Vello, which helps practices interact with pet owners. New practice formation is an area of focus, and they continue to perform well both in the U.S. and internationally.

inVue Product Launch and Feedback
Q: What is the feedback on inVue, and how does it fit into your strategy?
A: Customers are enthusiastic about inVue, appreciating its ability to address high-volume, time-consuming use cases like cytology and blood morphology. The product is expected to integrate well with existing IDEXX VetLab suites and enhance workflow. Management plans to begin shipping in Q4 and believes inVue will contribute directly and have multiplier benefits to the business.

Staffing Challenges and Productivity Solutions
Q: How is the industry addressing staffing shortages and enhancing productivity?
A: Staffing churn has largely stabilized as practices have increased salaries, benefits, and invested in training programs. Practices are more receptive to technology, software, and equipment that help save time, such as utilizing reference labs, which can cumulatively save significant time per procedure.

Long-term Diagnostic Utilization Trends
Q: When will higher diagnostic utilization from pet population growth be realized?
A: Diagnostic utilization increases as pets age, with more significant growth as they become adults and seniors. Management focuses on accelerating diagnostic use across all life stages, including young adult pets, through wellness testing and exams.