IDEXX Laboratories, Inc. (IDXX)

Q1 2012 Earnings Conference Call

April 20, 2012 9:00 AM ET


Jonathan Ayers - Chairman, President & CEO

Merilee Raines - Corporate VP, CFO & Treasurer

Pete Levine - Director, Investor Relations.


David Clair - Piper Jaffray

Kristina Blaschek - William Blair & Company

Miroslava Minkova - Leerink Swann

Ross Taylor - C.L. King & Associates, Inc

Jonathan Block – SunTrust Robinson Humphrey

Erin Wilson - Bank of America-Merrill Lynch

Nicholas Jansen - Raymond James & Associates

Ben Haynor - Feltl and Company

Mitra Ramgopal - Sidoti & Company LLC



Welcome to the IDEXX Laboratories First Quarter 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 prefix 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, plan, 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 annual report on Form 10-K for the year ended December 31, 2011in the section captioned risk factors which are on file with the SEC and also available on IDEXX’s website 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

Finally, we plan to end today’s call by 10 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 free to back into the queue and if time permits we will be more than happy to take your additional questions.

I’d now like to turn the conference over to Merilee Raines. Please go ahead.

Merilee Raines

Good morning and thanks very much for joining our call today. As reported in our earnings release this morning, our first quarter revenues were $322.7 million, yielding organic growth of 10%. And diluted earnings per share were $0.72, a year-to-year increase of 16%.

Overall, this was in line quarter for us with financial results generally on par with our thinking at the time of our January earnings call. While actual currency rates for the quarter versus our forecasted rates in January contributed about $3.5 million to reported revenues. The impact to earnings per share was immaterial.

Taking a quick look at the economic backdrop, the economic environment is a backdrop for our Companion Animal first quarter performance. First, starting with the U.S. Q1 patient visit growth from a subset of nearly 500 practices using our Cornerstone Practice Management System, was roughly 5%. Practice revenues grew by roughly 7%. Both of these metrics show a meaningful increase over the fourth quarter growth in patient visits of 1% and practice revenues of about 3.5%.

Well, some of this increase maybe due to the mild weather experienced over good portion of the country, we are encouraged that the improving trend we saw over the back half of 2011 continues into 2012, even if the growth rates do not sustain at the levels experienced in the first quarter. In contrast to the improving U.S. environment, in Europe we saw the organic growth rate for our Companion Animal businesses decreased to 5% as compared to 8% growth experienced in the fourth quarter last year.

Performance varies widely in the region with countries such as Germany and France showing strong performance and performance in countries such as Italy and Spain, reflecting the impact of their challenging fiscal situation. On balance we continue to believe that our businesses will benefit modestly from an improvement in the macro environment over the course of 2012 with 1% to 2% volume growth attributable to a more robust economy.

Now for some further detail on first quarter revenue performance of some of our businesses. VetLab Instrument and Consumable revenue of a $102 million, grew 9% organically. Sales of instruments were $20.5 million, also 9% organic growth. Our worldwide chemistry placements were up 20%, with solid performance by both Catalyst and VetTest.

This quarter’s growth is aided by the relatively easy compare we had versus the placements in the first quarter of 2011, prior to the launch of our protocol based rebate programs in the U.S., in the third quarter of 2011. As you recall, we saw an acceleration in the rate of placements in the U.S. in the back half of the year, due to the success of this marketing program.

We also saw strong performance in our hematology placements with a combined placement growth of 25%. ProCyte remains an attractive choice for our larger customers and sales of new and recertified LaserCytes are continuing to do well in accounts with lower volumes.

Our Asia Pacific region had over 30% growth in total instrument placements across the VetLab suite in the first quarter. And we believe the region presents an opportunity for both Catalysts and ProCyte. In Japan we placed our first ProCyte unit in Q1, a quarter ahead of our expected launch schedule.

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