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    IDEXX Laboratories Inc (IDXX)

    Q3 2024 Earnings Summary

    Reported on Jan 31, 2025 (Before Market Open)
    Pre-Earnings Price$451.08Last close (Oct 30, 2024)
    Post-Earnings Price$430.00Open (Oct 31, 2024)
    Price Change
    $-21.08(-4.67%)
    MetricPeriodGuidanceActualPerformance
    Revenue Growth
    Q3 2024
    6% to 8% reported revenue growth net of ~1% FX headwind
    6.6% YoY (915.53MIn Q3 2023 → 975.54MIn Q3 2024)
    Met
    Operating Margin
    Q3 2024
    29.5% to 30.0% reported operating margin
    31.2% (303.89MOperating income ÷ 975.54MRevenue)
    Beat
    1. Outlook Reduction and Q4 Guidance
      Q: What are the drivers behind the reduced outlook and Q4 step down?
      A: The company highlighted an outlook for organic growth of about 3% and CAG Diagnostic recurring revenue growth of 3.5% to 4% for Q4, net of an estimated 0.5% impact from hurricanes. Normalized for weather, this is 4% to 4.5%, aligning with their price benefit outlook. In Q4, they expect relatively flat volume, similar to Q3 trends. The pressure on in-clinic demand and near-term macroeconomic factors are contributing to the reduced outlook. However, they observe sustaining frequency in clinic visits, with growth in diagnostics for pets coming in. They believe these are near-term impacts and expect normalization over time.

    2. Reference Lab Weakness and Price Impact
      Q: Why did the Reference Lab numbers come in weak this quarter?
      A: The Reference Labs showed 2.4% organic growth, normalized to roughly 3% after adjusting for shipping days. Volume growth was positive, but price realization was impacted by three major new customer agreements, which moderated price gains but will benefit the company through long-term volume growth. Reference Labs are more indexed to wellness testing, which declined 3.4% in the U.S., adding pressure. Despite this, execution remains strong, with new business gains and high customer retention. They are optimistic about innovation positioning Reference Labs for differentiation.

    3. Price Trends and Normalization
      Q: Are price increases normalizing back to historical levels?
      A: The company reinforced a 5% full-year price outlook, with some moderation in Q4 due to new business effects, not due to a lapping effect. They are confident in delivering value through innovation and anticipate pricing to be a positive driver in the near and long term. While elevated in recent years, they did not state a return to historical 2%-3% levels but will provide more guidance with the 2025 outlook.

    4. Guidance Step-Down and InVue Shipments
      Q: What's causing the step-down in 2024 guidance, and any color on inVue ASP?
      A: The guidance reduction incorporates softer Q3 results in areas like LPD and instrument revenue effects. Strong inVue advanced orders have impacted overall order generation. The primary driver is the calibration on CAG Diagnostic recurring revenue. For inVue pricing, they estimate instrument price realization in the low teens. Shipments are starting in a controlled fashion to ensure a positive customer experience, with larger volumes expected in 2025. There were no challenges; this is their standard launch approach.

    5. Corporate Renewals and Impact
      Q: How are corporate renewals affecting pricing and volume?
      A: They have successfully secured corporate customer extensions and expansions. Corporates are focusing more on organic growth and partnering with IDEXX for technology solutions, including point-of-care and software integration. While new agreements have moderated price gains in Reference Labs, they expect long-term volume benefits. The pricing headwind from these agreements will impact the next few quarters but will be offset by volume growth over time.

    6. Cancer Diagnostics Update
      Q: What's the timeline and feedback on cancer diagnostics rollout?
      A: Progress continues on IDEXX cancer diagnostics for lymphoma, targeting a 2025 launch. It's seen as suitable for wellness screening, targeting younger at-risk and older dogs. Feedback from key opinion leaders and oncologists has been excellent. They are finalizing development, validating testing platforms, and collecting data, aiming to address early cancer detection in pets.

    7. Strategies to Improve Utilization
      Q: How will you improve frequency and utilization amid weaker visits?
      A: They plan to drive frequency and utilization through innovation and their commercial model. Products like inVue will increase consumable usage. Marketing programs and instrument placements through IDEXX 360 encourage use of Reference Labs, Rapid Assay, and software services. Historically, innovations that solve clinical and business problems lead veterinarians to increase diagnostics usage, which is foundational for medical services in clinics.

    8. Pain Medication Visits' Impact on Diagnostics
      Q: How are pain medication visits affecting diagnostic utilization?
      A: Increased visits for pain medication administration, especially in older dogs, contribute to visit growth but don't drive diagnostics. Adjusting for these, the decline in visits affecting diagnostics is more pronounced. They haven't seen an impact on diagnostic use from these visits and don't anticipate a substitution effect or increased diagnostics in these cases.