We're ready to get started here. My name is Erin Wright. I'm the healthcare services analyst at Morgan Stanley. We're happy to have with us today IDEXX Laboratories, the CEO Jay Mazelski, as well as CFO Brian McKeon. Thank you so much for coming, especially hot off their Investor Day last month as well. Before we get started, I do have some disclosures. For important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative. With that, we will get started with Q&A. A bigger picture question here, and coming off of that Investor Day that I was mentioning up in Maine, which was beautiful. Highlighting a bunch of the new innovation drivers was one of the key areas of focus. You reaffirmed your long-term growth goals, calling for 10% top line organic growth, 15%-20% EPS growth. Can you talk about some of those moving pieces to get there in terms of that long-term growth profile and some of those key drivers, especially when it comes to innovation, and especially as the industry is recovering here from a vet office visit perspective? Sure. Thank you. Thank you for hosting us and having us, Erin. Much, much appreciated. Let me address the innovation piece, and then I'll ask Brian to talk a little bit about the growth algorithm and the buildup connected with that. W e're at a, I think, a next big wave of innovation as a company. If you take a look at the approach, it's really across the board in our point of care business with new platforms and extension to existing platforms, and I'll provide some specifics on that. Our reference laboratory business and our software and data business. It has come at a great time for customers. I think they have a hunger for technology that helps them run their practices better and differently, and in a sense, in a more professional way. Let me talk about each in turn, because I think it deserves some mention. If you take a look at our point-of-care business, these are really N-of-One laboratory suites within the clinic itself. They consist of existing point of care platforms, and we call it Technology for Life, but it's the ability to really keep technology current in our chemistry platform, which is really chemistry, electrolytes, and immunoassays. We announced Catalyst Pancreatic Lipase test, as well as a SmartQC test. These represent, I think, very important clinical innovations in and of themselves, as well as our InVue Dx, which is a completely new platform, which enables practices without a slide to be able to do ear cytology, blood morphology. Another thing we announced was FNA for lumps and bumps testing in two thousand and twenty-five. In our reference lab business, a lot of innovation, really geared or focused on disease franchises. In the case of our renal disease franchise, Cystatin B, fecal, we announced over the last couple of years an extension with tapeworms and Cystoisospora, and really continuing to build out our network on a global basis, now more than 80 reference labs. And then in software, really continuing to provide a full cloud-based application suite, not just PIMS, but client engagement applications. We call it Vello. It enables practices to connect digitally with our customers. T hen putting that together in a very integrated, seamless way that helps really drive a better medical care, staff productivity, workflow optimization, all the things practices are hungry for. That's a big picture. Brian, can you talk a little bit about the growth algorithm and how innovation supports the growth algorithm? Yeah. We highlighted our long-term growth algorithm for the company. As Erin mentioned, we see the potential for 10% plus long-term organic revenue growth. The biggest driver of that is our CAG diagnostic recurring revenues, which is about 80% of our overall revenue base, and we have a long-term goal there of 11%-14% growth, which is consistent with the long-term potential we've highlighted over time in the last few years. I n terms of the building blocks, a key building block is what Jay was just highlighting, the benefit that we expect to get from IDEXX innovation, as well as from ongoing improvement and increases in diagnostic utilization. A key metric we look at in the company is the percentage of visits that have blood work included, as part of a diagnostic testing profile that's grown consistently over time. We believe we can continue to grow that, and we believe we can get 2% plus growth from new innovations that we'll be bringing to the sector. I n terms of building blocks, that's 3.5-4% of the overall growth algorithm that we see. We anticipate continuing to get benefits from new business gains and expansion of our core premium instrument install base that can contribute 2.5-3% to growth over time. The premium base opportunity is substantial. It's two hundred and forty thousand global placement opportunities that are three X our current install base level. W e have very long-term runway on growing our premium install base, particularly in international regions, and new platforms will add to that. W e think that supports a long-term view of 10% plus growth in our instrument install base annually. T hat'll obviously be a foundational supporting element of being able to grow our overall revenues. I n terms of execution drivers, we also anticipate solid net price realization, which we've been able to achieve over time, aligned with the value that we deliver to our customers and our longer-term view, and that is 2.5%- 4% annually. Those are the execution drivers that we see contributing 8.5%-11% to the long-term growth algorithm, and that will build on what we anticipate will be positive clinical visit growth over time. That's been really the key headwind that we've been working through in this post-pandemic period. After we saw a rapid acceleration in the business, there's been a calibration of that in terms of vet clinic capacity and more recently, some macro impacts. But as we look at the longer-term potential for clinical visit growth, there's been a 10% expansion in the pet population. People are more connected to pets than they've ever been, reaffirming the importance of pet healthcare as an area that they prioritize in their spending. We anticipate all that will support, as we've seen historically, solid, positive growth for clinical visit growth, clinical visits. R eaffirms our confidence in our business. We feel like Jay can reinforce this, I think, as confident as we've ever been in terms of the innovation that we're bringing to the sector and our competitive positioning, the value that we're adding to our customers, and that all supports the high growth potential that we continue to see for the business. Taking a look at some of the fundamentals across vet office visit trends and what's incorporated into your guidance for the second half of the year, you took down guidance mainly because we're still seeing lackluster vet office visit trends. I think implied is about negative 2% growth in the second half. I guess, is that right in terms of what's contemplated? How are trends to date relative to your expectations on that front? When do you think we do get back to flat to even low single digit growth from a vet office visit standpoint, and what are some of the factors contributing? Maybe I can set the analytical foundation and have Jay talk to the long-term view. W e entered the year with an outlook for 7%-9% growth, and that when we started the year, we anticipated relatively flat U.S. clinical visit trends. W hat we saw in the first half was basically -2%, and that was the principal adjustment that we made. Our updated outlook that we shared on our most recent call is at the lower end of the original guidance range, and it's driven entirely by the clinical visit headwinds, which we believe reflect a level of macro impact in the near term that we'll continue to work through, and that was captured in our second half and implied second half outlook as well. Yeah. Just in terms of the overall, industry. What we see is when pet owners visit the practice, veterinarians are still using and prescribing diagnostics. We've seen an increase in diagnostics utilization as part of wellness visits. We've seen nice increases in overall utilization. The mix has been more weighted towards price recently. I think it speaks to the underlying role that diagnostics plays in the overall care equation. You can't treat unless you diagnose. You can't treat a chronic condition unless you provide follow-up monitoring. You can't assess the basic baseline health status of a patient without doing some level of diagnostics. I t really drives the entire medical services envelope. Obviously, there's been some headwinds, specifically related to patient traffic within the practices. What we see is that there's a couple of factors that give us confidence that this is being worked through. That the underlying demand is still there. We shared some data from Investor Day, that when veterinarians recommend diagnostics, pet owners are receptive across all demographics. The challenge is sometimes veterinarians there's a bias in terms of whether or not they recommend the diagnostics. They're tiering pet owners by whether or not they think that you're able to pay or want to pay. T hat's a challenge, and that's more an awareness and education challenge. Pet owners themselves, all the research, all the indications are that pet owners haven't walked away from really prioritizing pet healthcare and pet healthcare spend. Vis-a-vis other discretionary categories, this is a priority for them. Clearly, the cumulative, I think, impacts of price, at the margin are impacting the practice and practice visits. Our strategy is to be able to continue to provide practices and the profession with technology and tools that help them really drive the productivity and patient traffic within their environment. For example, we talked a lot about our software and data business at Investor Day, and we have moved from more of a PIMS-based strategy, cloud-based, to more of an application suite to include pet owner engagement applications like Vello. It's early days, but very interesting. We've seen on a smaller data set a significant reduction in patient no-shows, a significant increase in the number of clinical visits, 2%, as a result of just using this application. If you think about it, if as a pet owner, you have an appointment for two o'clock on Thursday and you don't show up, the veterinarian and her staff have essentially nothing to do. It's non-productive time. T he ability to bring the type of tools that we see in the dental industry, in our own personal experience, to the veterinary practices has the ability to really, I think, move the needle. That there's time and distance obviously connected with some of these changes. I think there hasn't been a slowdown in terms of the investment profile of customers, whether it's in clinic instrumentation or software. If anything we've had some record quarters. W e have a lot of confidence that demand and supply will balance out over time. Talking about price a little bit here, historically, 3-4% or around 3%, in terms of price realization annually, you're at about 5% this year, 5-5.5% this year. Last year was high single digits. What's, what's your ability and what's the durability of price realization as we head going forward into 2025? A re you seeing any pushback from customers? Are you doing more promotional activity just in response to that? J ust how sustainable are the price increases that you're seeing, and where are you competing for wallet share, I guess? I'll say just a couple things about price. We don't set end market pricing. O ur customers do that. That's in that. There's 30,000 clinics in the U.S., and there probably are 30,000 variations in terms of how they price their services. I n terms of 2025, we don't disclose that in advance. We'll communicate what our expectations are when we provide some guidance. What I would say with regard to prices, we work hard to keep the value equation in balance between innovation and what we charge our customers. I n many cases, and I don't think this is completely appreciated we deliver a lot of biomarkers, do assays, at no additional charge to our customers. Let me give you a couple of examples. If you're an IDEXX customer, you use Fecal Antigen, and we've come out with tapes and Cystoisospora over the last couple of years. You get that just as part of the Fecal Antigen panel. Cystatin B is part of a, an acute kidney injury marker, was included as part of a urine panel at no additional cost. VetConnect Plus, what it includes, DecisionIQ, which is our decision support system, that's we give that away. That's free to customers who use our diagnostics. T here's a lot of instances where we just continue to provide an uplift from a value standpoint, and some of that obviously gets captured as part of an annual pricing increase, but we look to be able to really keep that value equation on the right side. Do offerings like Vello, for instance, offer upfront pricing to help with that patient engagement, where there is potential pushback from a pricing perspective? We price Vello because it's cloud-based and it's software as a service. There's a monthly fee that customers pay for Vello. Now, that can be when they... Typically, they would buy that upfront when they buy a PIM system, so because Vello has come when it has, we have a large installed base of customers. We'll go back and sell into. I t's priced and charged as a software as a service model. I guess what I was asking more so from the patient perspective, like from the pet owner perspective, as they think about pricing visibility before they walk into the vet clinic. Does Vello offer some engagement? Yes, we have the ability to pre-position with the pet owner the visit, the purpose of the visit, the role of diagnostics. O ver time, it's up to the veterinarian whether or not they choose to communicate the price connected with those services, including diagnostics. T hey have the ability to do that. Then, switching to innovation, and at your Investor Day, you announced the upcoming launch of Cancer DX platform through your reference laboratory offering. Can you remind us of the size of the opportunity there in oncology? T hen, what lessons have you learned from other oncology diagnostic offerings that have been out in the market previously and that you've even partnered with? H ow are you approaching this differently? It is part of a broader panel. It'll be priced differently. It'll be a premium wellness panel, presumably. How are you approaching this a little differently? T he size of the market. Lots of questions I n there. L et me unpack this in a sequential way. W e think that this is a very compelling opportunity, and we've pegged it at about $2.5 billion disease franchise opportunity. W e think about disease franchises as a collection of tests, and I provided some examples at Investor Day, whether it's vector-borne disease, fecal, and oncology, now it's renal, also, where we've developed over time a set of tests. If you think about cancer testing today, cancer is the single biggest disease and cause of mortality in dogs by a factor of 3X over the next largest cause. I t's very, very significant with a high prevalence rate. I n fact, certain breeds, and there's probably 2025 breeds, have even an outsized rate of cancer. I have a Labradoodle, and that happens to be one of the breeds itself. The challenge today, just to set the landscape. The challenge today is that by the time a patient is symptomatic, clinically symptomatic, and they come into the practice, and the veterinarian has to go through a workup because it, it's not specific. The symptoms of cancer, whether it's lethargy or, abdomen pain or shortness of breath, could be cancer, but it may be any number of other clinical conditions or use cases. T hey go through an elaborate workup, and by the time the patient is clinically visible with these symptoms, it's typically Stage III, Stage IV cancer. Unfortunately, at that point the outcomes are rather limited, and very often, more often than not, it's more of a palliative approach the veterinarian and pet owner pursues. Now, we get about 1.5 million cancer tests on an annual basis that are sent to our reference labs. It's primarily pathology, histopathology. There's some cytology, and teleradiology, looking at images of tumors. The unmet need in the sector was to really diagnose and screen earlier, because when you catch it earlier, you can do something about it, whether it's surgery or chemotherapy or therapeutic drugs or just monitoring. The tests currently on the marketplace are nonspecific. What I mean nonspecific, it could be cancer, but it doesn't tell you. It doesn't classify the type of cancer. It's not distinguishing between lymphoma, osteosarcoma, hemangiosarcoma, mast cell. It's not making that classification distinction. I t may be, in just as many cases, inflammation, 'cause if you're... Depending upon what you're detecting, it's nonspecific. I t doesn't classify, and it's nonspecific. W e believed, and we've believed for a long time, that there is a very significant unmet need in cancer screening and diagnostics. W e set about, and we've been working on this a very long time, both on detection, platform technology, on biomarkers, on really understanding, different clinical classification and use cases, that have developed, I think, a very compelling approach, where that from a price and performance standpoint, it, let me talk about economics first. That it can be inclusive to a wellness screen or a wellness panel. S ome of the tests that are on the market today, $400-$500. In the case of human tests, where they're using sequencing, like GRAIL, it's $900-$1,000. Very expensive, so that's not appropriate for the veterinary animal health marketplace, unfortunately. T he ability to get the economics right, the ability to have the performance characteristics, sensitivity, when it's there, you're picking it up, specificity, there aren't false positives, and to classify a cancer type, one from another, very, very, very important. W hat we said is, in 2025, we're gonna come out with our first cancer screen for lymphoma, and that within a period of three years, we would have six tests that represent the majority, 50% or more, of all cancers that impact canines. Okay. A s we think about the ramp-up, first of all, will this be January one launch or VMX type of launch? A s we think about the ramp-up of an add-on to a wellness panel versus the ramp-up you would see for, like, launching a new box, how do we think about that, and are there any comparisons in your innovation history that you can point to that would be similar? Couple things. R ight now, all we've specified is 2025. M ore to come as we get closer. I n terms of the benefit of a screen is that you can include it as part of a wellness panel. Call it a premium wellness panel if you will. Y ou have the ability to plug and play. If a pet owner who may be worried about cancer for their dog, typically today is doing a screening panel, chemistry, hematology, and in the future, would also do cancer, especially if they have a breed, one of the 25 breeds that are prone to cancer. T his speaks to the enablement capability we have with our software and data business. The ability to identify which breeds at which ages would benefit from cancer means that, excuse me, veterinarians won't have to wait, and pet owners won't have to wait until the adult senior dog or geriatric dog is coming in for a screen. That the four-year-old Bernese Mountain Dog or my four-year now 12 years old, but my four-year-old Labradoodle could have been and should have been screened early on. So the ability to get the economics right, to get the breed and age, and really drive appropriate screening, I think is a major, major differentiator. You haven't discussed, price point for that in terms of what relative premium this will be offered at in terms of the wellness panel, but presumably it'll be priced appropriately, and then will this be material in terms of contributions in twenty twenty-five? What all we've said is, from a pricing and economic standpoint, it will be priced and positioned so that it's appropriate for a wellness screen. W e'll, as part of our 2025 guidance, Brian will provide some insight in terms of what the various components are. W e tend to include the innovations as part of our broader guidance range. Since you mentioned it, will you be providing 2025 guidance on the third quarter conference call, or? Fourth quarter. Okay. Just curious. You've done that in the past. You'll have to be patient on that one. It is. To Jay's point, these innovations are all captured in that 2% plus incremental growth potential we talked about. They'll obviously build over time, but we're very excited with the opportunities that we have on that front. A lso on innovation, InVue. What is the feedback on the pilot program so far? Are you piloting all the indications right now in terms of what you've announced, in terms of the ear and blood morphology as well as the FNA? Are you piloting all of those now? FNA, I guess, is slated for 2025. What is the feedback there? The feedback has been outstanding, both from. We trained our entire North American field organization in July. T he feedback from both our field and the confidence and conviction they have, as well as from customers, has been outstanding. It really hits the sweet spot. The product is in what we call customer experience trials. This is the last stage of a product development effort. W hen we deliver the product, it works out of the gate, it works at a very high level. This is a tried and true product development process that as a company, we've really perfected over time. InVue itself is a product of a number of discrete breakthroughs, technical breakthroughs, use model breakthroughs. Let me just quickly describe it. It uses an advanced optics module that interrogates cells within their natural state, 3D state. We've taken 10 million plus images that have been interpreted by our global pathology organization in a slide-free format, using this AI algorithm, produces results. B oth ear cytology and blood morphology are very high volume, clinically well understood or well characterized use cases within the practice. W e think it really hits a sweet spot of what customers are looking for. Okay, and why is twenty thousand the right number in terms of InVue placements by year five? How did you get to that number? D id you leverage your experience from SediVue, for instance, and that's how you got to that number- We did. I mean, it's just the classic. I t's been our- it's been, from an experience standpoint, the classic curve of building an installed base. W e'll be able to provide- we'll get some insights at launch in terms of what the customer receptivity, has been. I think it's a good starting point. Then switching gears a little bit, you launched Catalyst Dx in 2008. You launched Catalyst One in 2024. Yep. What would you consider the life cycle of core chemistry right now? This is more of an upgrade cycle type of opportunity, potentially for you. I remember when you launched Catalyst Dx back in the day, that you saw a tremendous uplift in consumables volume. When you saw those customers adopt. W hat is the next replacement cycle opportunity for you across the chemistry install base, where you have a meaningful share position that you can leverage, and then also bundle in InVue, bundle in your Cancer DX offering and your reference lab, broader reference lab offering as well? How do you think about the opportunity there, in terms of launching a new box? From a chemistry standpoint, one of the—I think one of the very significant design breakthroughs that we achieved, we call it Technology for Life. But essentially, it's the ability to keep feature and capability of the chemistry analyzer current. L et's say you're a veterinary customer, you purchased a Catalyst last week. You have the exact same feature and functionality as the customer who invested in an IDEXX Catalyst Analyzer from six, seven, eight years ago. T here's been 12 new slides over the last 10 years, and I think it. I'm sorry, 10 slides over the last 12 years. F rom a capability, whether it's progesterone or Total T4 or SDMA or pancreatic lipase that we introduced. Y ou're current. You have the best and most current features and capabilities as there are on the marketplace, from us or from anybody else. So the ability to really ride that platform without sacrificing performance, I think, is something that differentiates us in the overall sector itself. You do have another box, though, that you're working on, that doesn't cannibalize existing platforms. That's correct. What is the timeline there? Is that still in the pipeline for you? Any details you could give us? We do have a fifth premium instrument box that we're working on. It's, fully staffed. We're working it hard. We think it represents an excellent, very compelling opportunity, and it doesn't. As we've indicated in the past, it doesn't cannibalize our existing business. Let's talk a little bit about margin levers across your business. I thought what you've been able to do thus far in a very difficult backdrop has been impressive, and your ability to get to EPS numbers. There does tend to be a lot of focus on the top line, and vet office visits are, a big swing factor for you. Y ou do have a lot of levers from a margin perspective. Can you talk a little bit about where there's the biggest opportunity near term that gets you to that long-term, 50-100 basis points of margin expansion? We've had a very good long-term track record in terms of expanding our operating margin sector over the last eight years. We increased them twelve hundred basis points on a comparable basis, and that was balanced across gross margin enhancement and OpEx leverage. We see gross margin expansion as an ongoing area of opportunity, very much aligned with our focus on innovation as a business. As we grow our CAG diagnostic recurring revenues, which I mentioned before, the biggest part of our revenues and our key financial driver, they have very high incremental margin flow-through. We have ongoing opportunities to improve productivity in our operations, in our laboratory business. That's been a key gross margin driver for us. As well as, more recently, we're getting benefits from our growing software business and the cloud benefits from the cloud-based focus of our strategy there. So I think gross margin should be a continuing area of opportunity for us, and we intend to leverage OpEx as well in areas like G&A, as we reinvest towards the long-term growth potential we see for IDEXX. We anticipate continuing to support our innovation, R&D investments, and high return investments in expanding our commercial capability globally. As a company, I think we've benefited over time from a consistent strategic focus and a focus on executing very well that enables us to deliver good financial performance, to prioritize investments as we grow, and make sure we continue to deliver strong financial results as we pursue the long opportunity that we see for IDEXX. Across Reference Laboratory, in particular, there's always an area that you can focus on from a margin leverage standpoint. What changes are you making there? We've heard changes in turnaround times, changes in overnight testing. W hat was the impetus of some of those? Is that driving savings across that business as well? If you take a look at our reference lab business, we've built, really over thirty years, a global network that's now more than eighty reference labs, both core regional as well as day labs. I t's a business that has a number of drivers. It's a science medicine driver around innovation and menu, and we've talked a bit about that today. There's also a customer experience driver, which is super important to us and the investments that we make. A lot of the margin improvement that we've seen is really being able to automate and digitize, to enable a better customer experience, and we've been very successful at doing that. That was the impetus, by the way, behind t he original impetus behind VetConnect Plus to be able to provide trended test results, and that'll continue to be an area of emphasis going forward. The way we look at and hold ourselves accountable from a customer experience standpoint is obviously customer retention, which is in the high 90s for our reference lab business, and net promoter score, where we have a 15-plus% advantage over our next largest competitor, so we think it's working pretty well. It's an area of opportunity for continued margin expansion as we thoughtfully execute the plan. Then can you talk a little bit more about, I guess, your ability to take even increments than, than where you're at today? C ould this accelerate with the new innovation and new potential disruption at competitors as well? H ow would you characterize your overall relationship with corporate accounts? Anything coming up for renewal, that we should be aware of? Let me start with the second half of your question, and I'll go to the competitive landscape. W e have an excellent relationship with the corporate accounts. Some in some cases, we're both. I wouldn't say enemies, but competitors and partners with them. I think depending upon what businesses they're in, I think they value, our overall solutions. From a corporate account standpoint, I think what corporates appreciate is that the scale of our offering, the ability to follow them wherever they are, the ability to service a broad set of needs, and I think we do that in a, very compelling way. From a competitive landscape standpoint, if you look at the growth algorithm that Brian described as part of his opening remarks, most of the growth actually comes from really growing testing utilization with existing customers, sometimes through innovation, sometimes through geographic expansion. W e do very well when it comes to penetrating competitive accounts. We're pretty transparent in the data that we provide in terms of competitive chemistry placements, for example. T he sector itself provides opportunities for, I think, broad participation beyond our own success. W e like what we're doing, and we think our innovations that we've talked about will continue to allow us to advance. We're excited for what's to come. Thank you so much. I appreciate the time today. Thank you so much, Erin. Appreciate it.