IDEXX Laboratories, Inc. (IDXX)
Q2 2012 Earnings Call
July 20, 2012 09:00 am ET
Jon Ayers – Chairman, President & Chief Executive Officer
Merilee Raines – Corporate Vice President, Chief Financial Officer & Treasurer
Pete Levine – Director, Investor Relations
Ryan Daniels – William Blair
David Clair – Piper Jaffray
Erin Wilson – Bank of America Merrill Lynch
Ross Taylor – CL King & Associates
Nicholas Jansen – Raymond James and Associates
[Del Hader – Salestel and Company]
Mitra Ramgopal – Sidoti & Company
Previous Statements by IDXX
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Good morning, everyone, and welcome to the IDEXX Laboratories’ Q2 2012 Earnings Conference Call. As a reminder, today’s conference is being recorded. Participating in the call this morning are Jon Ayers, Chief Executive Officer; Merilee Raines, Chief Financial Officer; and Pete Levine, Director, Investor Relations.
IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that statements that members of IDEXX management may make on this call regarding management’s future expectations and plans, and IDEXX’s future prospects constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” and similar words and expressions. Such statements include but are not limited to statements regarding management’s expectations for financial results for future periods. Listeners are reminded that actual results could differ materially from management’s expectations. Factors that could cause or contribute to such differences are described in IDEXX’s quarterly report on Form 10(q) for the quarter ended March 31, 2012, in the section captioned “Risk Factors,” which are on file with the SEC and also available on IDEXX ‘s website at
In addition, any forward-looking statements represent IDEXX ‘s estimates only as of today and should not be relied upon as representing the company’s estimates as of any subsequent date. The company disclaims any obligation to update or revise any forward-looking statements in the future even if its estimates or expectations change. Also during this call we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A definition of these non-GAAP financial measures is provided in our earnings release which can be found on our website at
Finally, we plan to end today’s call by 10:00 AM Eastern. In order to allow broad participation in the Q&A, we ask that each participant limit his or her questions to one with one follow-up as necessary. We do appreciate you may have additional questions so please feel free to get back into the queue, and if time permits we’ll be more than happy to take your additional questions. I would now like to turn the conference over to Merilee Raines. Please go ahead.
Good morning, and thank you for joining our call today. As we reported in our press release this morning, our Q2 revenues were $335.6 million yielding organic growth of 7%; and diluted earnings per share were $0.91, a year-to-year increase of 10%. Revenues were slightly below our thinking at the time of our April call, the result of a few factors; first, unfavorable changes in currency rates relative to our thinking in April resulted in about $2 million of lower revenues. Post currency input, somewhat lower growth in reference lab revenues currently offset by stronger growth in instrument consumables revenue in North America, were the primary factors netting to organic revenue growth that was about 1% lower than our expectations.
Earnings per share for Q2 were in line with our thinking in April. The impact of lower revenues was offset by lower-than-anticipated spending on operating expenses, in part due to discretionary spend and in part due to timing. While actual currency rates versus expectation yielded a modest unfavorable impact on revenues for the quarter the impact to EPS was immaterial.
As a backdrop to the discussion of our Q2 performance in our companion animal group, the following is what we are seeing in the US veterinary market based on a subset of roughly 500 practices using our Cornerstone Practice Management System. In Q2, patient visits grew by 4% and practice revenues grew by just over 5.5%. While both metrics continue to be favorable to the growth rates seen throughout 2011 when patient visits were flat and practice revenues were up 2.5%, they were slightly lower than the Q1 metrics of 5% patient visit growth and 7% practice revenue growth. Further, the growth rates for both metrics decelerated somewhat over the course of Q2. We believe this trend indicates that some of the strong pickup in Q1 was due to the mild weather experienced over much of the US.
In Europe overall we saw stabilization of organic growth for our companion animal group segment at 5%. This is consistent with the growth in Q1 which had seen a step down from 8% in Q4 2011. As was the case last quarter, the growth rates for this region varied by product and service line and by country. All in all these data reaffirm our thinking that given the continued challenges to consumer confidence in both the US and Europe, we will see only a modest benefit from the macro environment to volume growth in 2012 over 2011, and the pace of improvement may not necessarily be steady.