IDXX

Good morning, welcome to the IDEXX Laboratories first quarter 2026 earnings conference call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer, Michael Erickson, Executive Vice President and Incoming Chief Executive Officer, Andrew Emerson, Chief Financial Officer, John Ravis, Vice President, Investor Relations. IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.

Additional information regarding these risks and uncertainties is available under the forward-looking statements notice in our press release issued this morning, as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the investor relations section of our website, idexx.com. During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles, or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the investor relations section of our website. In reviewing our first quarter 2026 results and 2026 financial outlook, please note all references to growth, organic growth, and comparable growth refer to growth compared to the equivalent prior year period, unless otherwise noted.

To allow broad participation in the Q&A, we ask that each participant limit their questions to one with one follow-up as necessary. We appreciate you may have additional questions, so please feel free to get back into the queue, and if time permits, we'll take your additional questions. Today's prepared remarks will be posted to the investor relations section of our website after the earnings conference call concludes. I would now like to turn the call over to Andrew Emerson.

Good morning. I'm pleased to take you through our first quarter results and provide an updated outlook for our full-year 2026 financial expectations. During the first quarter, IDEXX delivered exceptional financial results through continued execution in our companion animal business with benefits from IDEXX Innovations. Revenue increased 14% as reported and 11% organically, supported by over 11% organic growth in CAG Diagnostics recurring revenues, reflecting nearly 11% gains in the U.S. and approximately 12% growth in international regions. CAG Diagnostics recurring revenue growth in Q1 was negatively impacted by declines in U.S. same-store clinical visits of approximately 1%, with slightly positive growth in non-well visits more than offset by pressure on wellness visits. Strong premium instrument placements in the quarter resulted in 28% organic growth of CAG instrument revenues and included 1,100 IDEXX InViewDX analyzers.

IDEXX's operating performance was also excellent, with comparable operating margin gains of 100 basis points supported by gross margin expansion, which benefited from strong recurring revenue growth. Strong operating profit gains enabled earnings per share of $3.47 in the quarter, resulting in EPS growth of 15% on a comparable basis. Performance during the first quarter builds confidence to increase our full-year revenue range to between $4.675 billion-$4.76 billion, an increase of $42 million at midpoint or an outlook for overall reported revenue growth of 8.6%-10.6%. Our updated full-year overall organic revenue growth outlook is for 7.7%-9.7%, with an organic CAG Diagnostics recurring revenue growth of 8.7%-10.7%.

These organic growth ranges represent approximately 70 basis point increase at midpoint to our previous guidance, supported by strong global execution and modest improvement in our sector outlook for the CAG business. We're also updating our full-year EPS outlook to $14.45-$14.90 per share, an increase of $0.13 per share at midpoint, net of a $0.05 negative impact from a loss on an equity investment in Q1, reflecting 11%-15% comparable EPS growth. We'll provide further details on our updated 2026 financial expectations later in my comments. Let's begin with a review of the first quarter results. First quarter organic revenue growth of 11% was driven by 12% CAG revenue gains and 7% growth in both our water and LPD businesses.

Strong CAG results were supported by CAG Diagnostics recurring revenue growth of 11% organically, including approximately 50 basis point benefit related to equivalent days and average global net price improvement of approximately 4%. CAG Diagnostics instrument revenue increased 28% organically, with another strong quarter of InViewDX analyzer placements aligned with our expectations. U.S. organic CAG Diagnostics recurring revenues grew nearly 11% in Q1, including strong volume gains and net price realization aligned with full-year expectations. U.S. same-store clinical visits declined minus 1% in the quarter, reflecting an IDEXX U.S. CAG Diagnostics recurring revenue growth premium to U.S. clinical visits of approximately 1,100 basis points, highlighting outstanding performance by the IDEXX commercial teams. During the quarter, the industry continued to see green shoots from aging pets, with growth in clinical visits for pets 5+ years old.

Non-well visits also continued to show signs of improvement, increasing 20 basis points year-over-year, while wellness visits declined -3%. IDEXX benefited from overall quality of clinical visits with increased diagnostic frequency and utilization per visit, demonstrating expansion of diagnostics and care protocols. International CAG Diagnostics reoccurring revenues grew 12% organically in Q1, with revenue performance driven by volume gains, including benefits of net new customers and same-store utilization. International regions performed incredibly well with steady growth of CAG Diagnostics reoccurring revenues through ongoing engagement with customers and expansion of IDEXX innovations. While we see similar macro pressures affecting visits in most geographies. IDEXX also delivered strong organic revenue gains in major global testing modalities in the first quarter. IDEXX VetLab consumable revenues increased 15% on an organic basis, reflecting double-digit growth in both U.S. and international regions.

Consumable revenue growth included double-digit volume expansion driven by net new customer gains and our premium instrument install base and expanded testing utilization, including benefits from innovations. InViewDX utilization continues to track well to our recurring revenue estimates previously provided, and progression of our controlled rollout of FNA is in line with our expectations. CAG premium instrument placements reached 4,650 units during the first quarter, an increase of 12% year-over-year, and the quality of placements remains superb, reflected in over 1,000 global new and competitive Catalyst placements, including nearly 320 in North America. Globally, we placed 1,100 IDEXX InViewDX instruments as we track to our full-year expectations for 5,500 placements.

Our success in placing instruments while maintaining high customer retention levels supported the 12% year-over-year growth in our premium instrument install base in the quarter. IDEXX Global Reference Lab revenues increased 10% organically in Q1, driven by solid volume growth across regions with benefits from both net customer gains and same-store utilization, each doubling from prior year levels. IDEXX Cancer Dx has continued to support these categories, attracting new customers and broadening the use of diagnostics in both sick and wellness panels. As an example, approximately 20% of Cancer Dx customers are non-primary IDEXX Reference Lab accounts. Global rapid assay revenues were flat organically. Rapid assay results continue to be impacted by customers shifting pancreatic lipase testing to our Catalyst instrument platform, which we estimate to be an approximately 2% headwind to Q1 revenue growth.

Veterinary software and diagnostic imaging organic revenues increased 11%, driven by reoccurring revenue growth of 11% during the quarter and strong non-reoccurring growth from placements of diagnostic imaging systems, setting a record with approximately 330 installations benefiting from the launch of DR50 Plus platform. Veterinary software expanded double-digits supported by cloud-based PIMS installations and adoption of related reoccurring services. Water revenues increased 7% organically in Q1, with strong growth in the U.S. and low-single-digit growth in international regions. International growth in the business was impacted by supply chain dynamics in the Middle East. Livestock, poultry, and dairy revenues increased 7% organically in the quarter with solid gains across regions. Turning to the P&L, strong reoccurring revenue growth enabled 15% comparable operating profit gains in the quarter.

Gross profit increased 16% in the quarter as reported, and 13% on a comparable basis. Gross margins were 63.4%, up approximately 90 basis points on a comparable basis. These gains reflect benefits from strong recurring revenue growth in IDEXX VetLab consumables and reference lab volumes, along with operational productivity. Pricing benefits offset inflationary cost pressures and foreign exchange. Net of our hedge positions had a negligible impact on reported gross margins in the period. On a reported basis, operating expenses increased 17% year-over-year, including both lapping a discrete Q1 2025 expense for a concluded litigation matter, as well as a $5 million loss on an equity investment in the current period. Comparable operating expenses increased 11% year-over-year as we advance investments in our global commercial and innovation capabilities.

Q1 EPS was $3.47 per share, reflecting a comparable EPS increase of 15%. EPS in the quarter included $7 million or $0.09 per share benefit related to share-based compensation activity and a $0.05 negative impact related to a loss on an equity investment. Foreign exchange added $14 million to operating profit and $0.14 to EPS in Q1 net of hedge effects. Free cash flow was $234 million in Q1, reflecting normal seasonality. On a trailing 12 month basis, the net income to free cash flow conversion rate achieved 99%. For a full-year, we're maintaining our outlook for free cash flow conversion of 85%-95% of net income, including full-year capital spending of approximately $180 million.

We finished the period with leverage ratios of 0.6x gross and 0.5x net of cash and continued to deploy capital towards share repurchases, allocating $361 million during the first quarter, supporting a 2.1% year-over-year reduction in diluted shares outstanding through Q1. Turning to our full-year 2026, as noted, we're increasing our outlook for overall revenue to $4,675 billion-$4,760 billion. At midpoint, this reflects approximately $32 million in constant currency improvement from our initial guidance, building on strong first quarter performance, including CAG Diagnostic recurring revenue expansion and a modestly improved industry outlook. Our updated reported revenue outlook includes $10 million or approximately 20 basis points growth benefit related to foreign currency changes compared to our prior estimates.

This reflects a revenue growth outlook for 8.6%-10.6% as reported, including approximately 90 basis points for full-year growth benefit from foreign exchange at the rates outlined in our press release. As a sensitivity, a 1% strengthening of the U.S. dollar would reduce revenue by approximately $12 million and EPS by $0.04 for the remainder of the year. Our updated overall organic revenue growth outlook of 7.7%-9.7% includes an organic growth range of 8.7%-10.7% for CAG Diagnostics' recurring revenue, including approximately a 4% benefit of global net price realization. At midpoint, we're updating our estimate for U.S. clinical visits to a decline of -1.5% after a third sequential quarter of clinical visits trending between -1% to -2% and aligned with the trailing 12 month average.

In terms of key financial metrics, we're updating our reported operating margin outlook to 32.1%-32.5% for 2026, reflecting increased expectations of 50 basis points-90 basis points of full-year comparable operating margin improvement. Operating margin was impacted by a 30 basis-point headwind related to a discrete litigation expense from 2025 and the current year loss on an equity investment. These were offset by a 30 basis-point benefit from foreign exchange effects. Our updated full-year EPS outlook is $14.45-$14.90 per share, an increase of $0.13 per share at midpoint.

Our EPS outlook incorporates increased projections for operational performance of $0.13 per share at midpoint compared to our prior guide, as well as a $0.05 negative impact from a loss on an equity investment and a $0.05 benefit from updated foreign exchange rates outlined in our press release. For the second quarter, we're planning for reported revenue growth of 7.3%-9.3%, including approximately 60 basis point growth benefit from foreign exchange impacts. This operational outlook aligns with an overall organic revenue growth range of 6.7%-8.7% and CAG Diagnostics' recurring revenue growth of 8.5%-10.5%. Organic revenue includes a negative 50 basis point impact from equivalent days in the second quarter, and at midpoint, we're planning for the U.S. clinical visit growth in line with the full-year estimate.

Overall organic revenue growth is impacted by expectations for declines in CAG instrument revenues as we begin lapping significant placements of InViewDX during 2025 and modest revenue pressure from regional and placement mix. Second quarter reported operating margins are expected to be at 33.9%-34.3%, reflecting expansion of 10 basis points-50 basis points on a comparable basis as we expect increased spending during Q2 related to timing of projects. That concludes our financial review. I'll now turn the call over to Jay for his comments.

Thank you, Andrew. Good morning. IDEXX delivered an exceptional start to 2026, with first quarter results reflecting disciplined commercial execution, continued benefits from innovation and expanded diagnostics utilization across our global customer base. These results were achieved despite headwinds from clinical wellness visits, underscoring the durability of our growth model and the importance of diagnostics to excellent veterinary care. The quarter also highlights the strong foundation we have built with strong customer relationships, where commercial partnership is central to advancing our mission and supporting practice success. The economic value of instruments placed in the quarter, for example, grew double-digits year-over-year, reinforcing the long-term value we are creating through our installed base growth. More broadly, companion animals are seen as members of the family, and a large majority of pet owners prioritize their pet's health and happiness, creating pull for higher quality healthcare.

This commitment is reflected in the continued expansion of diagnostics frequency during both well and non-well visits. Customer retention remains in the high nineties, reflecting the trust veterinarians place in IDEXX as both a diagnostics provider and long-term partner. This loyalty underscores the strength of our integrated model, combining diagnostics, software, and medical support. We work alongside veterinarians and practice teams to better integrate diagnostics into everyday care protocols, supporting workflow optimization, increasing clinical confidence, and demonstrating the economic value of diagnostics. When practices engage at this level, diagnostics utilization increases. Testing becomes more seamlessly embedded in care protocols, technicians gain confidence running diagnostics during the visit, and clinicians make faster, more informed decisions, driving greater productivity across the practice.

All four country expansions announced last year were in place at the start of Q1, and as a result of a well-established approach to training and new hire support, we saw initial contributions in line with expected productivity. Momentum with IDEXX InViewDX continues with another solid placement quarter, well on our way to our target of 5,500 placements for the year. Internationally, we are seeing a solid ramp in the installed base and adoption as awareness builds and commercial teams support integration into practice workflow. Customer feedback remains highly consistent across regions, with veterinarians highlighting consistent performance, easy use, and workflow productivity gains as key benefits. Utilization across ear cytology and blood morphology remains aligned with expectations, reinforcing the everyday clinical value of the platform. We continue to engage with customers to drive further adoption of these important testing categories through our professional service veterinarians and clinical staff trainings.

At the same time, we are advancing the InViewDX algorithm with monthly software updates to our installed base, enhancing performance and improved time to results. Just another part of our technology for life promise. For example, the menu advance in Q1 for blood morphology with the ability to detect and report acanthocytes. These are red blood cells associated with severe underlying diseases, such as with liver, splenic, or kidney disease. We're also pleased with the solid progress of our controlled rollout of FNA. Early customer response to FNA remains very encouraging. Practices are seeing the value of evaluating lumps and bumps during the patient visit with rapid cytology insights supported by AI analysis and optional expert pathologist review available with a single click. This workflow enables clinicians to evaluate more lumps and bumps by reducing clinical effort and cost to the consumer.

We continue to gain insights on customer behavior and experience during the controlled launch. Early adopters are very pleased with the high-quality training experience and follow-up support. These learnings and positive experiences support further broadening of the launch in Q2 as we ramp volume and anticipate full volume ramp in the second half. Overall, FNA utilization is tracking to our planning assumptions, and we remain excited about the potential of FNA as a platform capability that can expand over time beyond mast cell tumor detection. Turning to IDEXX Cancer Dx. Momentum continues to build behind this important innovation as veterinarians increasingly incorporate it into both diagnostics and screening workflows. During Q1 in North America, nearly 70% of Cancer Dx tests were run as part of a panel reflecting the growing clinical relevance of this test.

Now, with over 7,500 practices ordering since launch, Cancer Dx is a major differentiator for our reference lab business, and we believe it is one of the many elements driving competitive lab transitions to IDEXX. A major milestone this quarter was the international launch of Cancer Dx for canine lymphoma in Europe and Australia. This represents an important next step in expanding access to early cancer detection globally and builds on the strong adoption we have seen in North America. Early international interest has been strong and reinforces the global need for accessible oncology diagnostics. Our global field teams are partnering with customers, both independent and corporate, to develop wellness protocols. As an example, a large corporate group in Australia recently announced the inclusion of Cancer Dx within their senior wellness plan at no additional charge for their members.

We're also seeing continued use in monitoring applications, particularly in cases where serial testing can support treatment decisions. With the addition of mass cell tumor detection for later this year and a third test by the end of 2026, cancer diagnostics will continue to expand its clinical relevance and reinforce IDEXX's leadership in veterinary oncology diagnostics. We continue to expand our Catalyst customer base, adding over 1,000 new and competitive customers in a quarter. Each one of the now nearly 79,000 Catalyst customers have access to our new and expanded menu, such as Catalyst Pancreatic Lipase and Catalyst Cortisol. We continue to see strong adoption and utilization of both these tests as practices incorporate the test into routine real-time workflows to support pancreatitis and endocrine disorder diagnoses. Our software and diagnostic imaging businesses also delivered solid performance in Q1.

Our cloud-native PIMS platforms installed base grew double-digits in a quarter as we continue to see strong interest with virtually all placements now cloud-based. Practices are looking to software solutions to realize workflow optimization, staff productivity, and digital client communications. Vello, IDEXX's pet owner engagement application, continues to gain traction, growing double-digits from last quarter as practices recognize the importance of driving client appointments. Clinics using Vello report improved compliance with recommended diagnostics and treatments, reinforcing the connection between engagement and medical outcomes. In our diagnostic imaging business, we launched our newest digital radiography system in January, the ImageVue DR50 Plus, combining high definition AI-powered imaging with up to 60% lower dose than premium competitors. Strong customer reception to the DR50 Plus, coupled with excellent commercial execution, led to an all-time record imaging systems placements for the quarter, the fifth consecutive quarterly placement record.

IDEXX telemedicine also delivered very strong volume growth, supported by modernized integration with IDEXX Web PACS that reduces submission clicks by almost 50%, saving time for clinical teams and delivering board-certified expert interpretation directly inside Web PACS. Software is a powerful enabler of diagnostics growth, helping practices translate clinical insight into action. Customers who use all of our diagnostic software and imaging solutions experience faster clinical revenue growth and diagnostics usage. This will be my final earnings call as CEO before I transition to the executive chair role following our annual meeting next week. As I reflect on my experience as CEO and the state of the company today, I remain incredibly optimistic about the future of IDEXX. The multi-decade opportunity ahead for the company. The fundamental drivers of this industry have never been stronger. The human-animal bond continues to deepen.

That bond drives sustained commitment from pet owners to seek high-quality care, earlier diagnosis, and better outcomes for the pets they love. Diagnostics is the foundation of this evolution. As medicine continues to advance, the need for clinical insights to guide care decisions will only grow, reinforcing the long runway ahead for diagnostics innovation and utilization. IDEXX is in a position of strength with a clear strategy, a powerful innovation pipeline, and exceptional people. I believe the company's best days lay ahead. I'm excited for the next chapter of IDEXX's growth to unfold. I would be remiss if I didn't highlight the role that our people play in the company's success. Our approximately 11,000 IDEXX employees around the world are purpose-driven, and our talent fuels the company's growth. IDEXX is deeply committed to innovation, our customers and their success, and operating the company as if it were their own.

It has been an honor to lead IDEXX, and I want to thank all employees, past and present, for their commitment to improving the lives of pets across the world. Before I turn it over for Q&A, I'd like to give Mike Erickson the chance to say a few words. I've worked with Mike for a long time, and I have tremendous confidence in him as he steps into the CEO role. He brings deep experience, strong leadership, and a clear commitment to our purpose and strategy. With that, I'll turn it over to Mike.

Thank you, Jay. Good morning, everyone. I'm humbled by the opportunity to lead IDEXX at such an exciting time in our company's history. As Jay mentioned, the sector remains highly attractive. I see a meaningful opportunity ahead to further accelerate our innovation-driven platform growth strategy. We will continue to focus on diagnostics and software, where our platforms empower customers to see more and do more in their practices, uncovering deeper patient insights and driving next-level productivity. We will also continue to advance commercial reach through investments to expand our field-based presence in key geographies around the world. This enables our talented commercial team to work even more closely with customers side by side, supporting accelerated adoption of innovations that expand care while driving a reliable return on investment. Another priority for us is AI.

We have a well-established AI capability at IDEXX, with AI embedded in platforms such as InViewDX and our ezyVet software. Looking forward, I see advancements in AI as incredibly promising to further accelerate our innovation, expand testing access and utilization, and drive deeper patient-level insights. I plan to share more on this at our upcoming August Investor Day. Across these priorities, we're fortunate to have a talented team of IDEXXers globally that wake up every day focused on our customers and shaping the future of diagnostics, software, and AI in animal health. I wanna close by thanking Jay for his leadership and service to IDEXX over the past 14 years.

Under Jay's leadership, the organization has accelerated the innovation agenda, launching valuable new platforms like Cancer Dx and InViewDX, growing our cloud-native software platform offerings, significantly expanded customer reach internationally, and delivered strong results and shareholder value, all while positioning IDEXX for sustainable long-term growth, supported by a robust future innovation pipeline. I am grateful to have worked with Jay, and I look forward to his continued support as he transitions to Executive Chair of IDEXX's Board. I'll now turn it over to the operator for Q&A.

Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. We ask that you limit yourself to one question and one follow-up. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal reach our equipment. Again, press star one to ask a question. We'll go first to Michael Ryskin of Bank of America.

Hi, hopefully you can hear me. Congrats on the quarter, and I wanna mirror the comments. Jay, congrats. Been a pleasure. I wanna kick things off on InView. You know, you had a lot of comments and prepared remarks on strong performance, but just that placement number, 1,099, you know, you reiterated the 5,500 for the year, but we would've expected you to do a little bit more in the first quarter. Is there just some pacing dynamics there to think of? Maybe the first quarter tends to be a little bit slower. Is there anything in the funnel you can talk about just to give us confidence that the placements will be there for the full-year? Thanks.

Yeah. Good morning, Michael. You know, we keep in mind, we came off a very strong year in 2025 and in Q4. We have a high degree of confidence in the 5,500 number. It tends to be, you know, you get some choppiness quarter-to-quarter just based on customer mix of independents versus corporates, but the receptivity we see in the market amongst customers is very strong. We have a lot of confidence in the overall 5,500 projection for the year.

Okay, great. For my follow-up on just sort of underlying market assumptions and what you've seen. You know, you had about 2% visit decline in the first quarter, which is expected in light of expectations. You talked about, I think in your prepared remarks, you know, modestly improved industry outlook. Just would be great to dive into that a little bit more. Is that, you know, US or OUS? Is that something you're seeing now, just expectations as you go through the year? Just parse that apart a little bit more. Thanks.

Good morning, Michael. This is Andrew. Yeah. From a clinical visit perspective, we highlighted a -1% in the first quarter. That's about a one point better than, you know, what our initial guide had laid out, you know, from that standpoint. We continue to see, you know, positive momentum from the aging pet population. You know, the pets that are 5+ years and older, continue to, you know, add some positive momentum just to the overall industry. I think what we're trying to do is capture, you know, the multi-quarter perspective that we've, you know, started to see the green shoots in that area, into our outlook here more directly.

I think if you look at the past, you know, trailing 12 months, you know, the average is now, you know, very similar to what we're anticipating for the full-year, which is about a -1.5% decline in clinical visits. A lot of that is really, you know, from the wellness visit area and, you know, areas like the discretionary types of categories. We continue to see pressure, you know, related to, you know, the macro, you know, dynamics and consumers making trade-offs, whether they come into the clinic. The positive side of that is, you know, when they are coming into the clinic, we're seeing really strong quality of care, you know, within those visits. Diagnostic frequency and utilization continue to expand at really healthy rates.

You're seeing the diagnostic care protocols really continue to play out positively from that perspective. We feel like we've kind of captured, you know, the range of outcomes here on the industry, but it is a little bit better than we had anticipated, you know, for the full-year.

Yeah. Maybe just one comment on that, those pets five years and older. It is modestly positive. This is now the third quarter that we've seen that, so that's very encouraging. The other thing is, it's been positive across both non-well and wellness visits. You know, that cohort of pets, and we know it's a very large cohort, are coming into the practice, not just for sick visits, but also for well visits.

Great. Thanks so much. Appreciate it.

We'll take our next question from Chris Schott of JPMorgan.

Great. Thanks so much for the questions, and Jay and Mike, congrats on the new roles. Just maybe just two for me. First, on ex U.S. dynamics, another very strong quarter there. I'm just interested, how much of this is commercial execution on IDEXX's part versus just maybe healthier broader market trends, and just how you're thinking about kind of the directional growth for the ex U.S. business? Maybe the second one for me is just coming back to InViewDX and the FNA rollout. I know you made some comments in the prepared remarks, just elaborate a little bit more on how that initial utilization and uptake has ramped relative to your expectations and just how we should be thinking about the broader rollout of that offering as we move through this year. Thank you.

Sure. Good morning, Chris. I'll take the international market comment, then I'll ask Mike to handle the FNA, you know, rollout and how we think about that. You know, the international markets, just from a overall macro impact and performance side, you know, we don't see broad differences between international and our domestic, you know, market. There's some macro impact, obviously, on wellness. As a whole, wellness is less dominant or less, it's at a much lower rate than typically what we see in the U.S., just from a development, you know, standpoint. The really solid growth we're seeing in CAG recurring revenue instrument placements internationally is a function of long-term investments that as a company we've made. It's not just in terms of commercial expansions. That's an important part of that.

We've done, you know, double-digit expansions over the last five years or so. It's building out our reference lab business. It's localizing software solutions like VetConnect PLUS. It's really building out the entire IDEXX ecosystem so that we can serve our customers at the level of experience, customer experience that they desire, but also making sure that they have full solutions. You know, if you look at our product roadmap and what we've rolled out over the last couple years, a lot of our, you know, a lot of our solutions have been, from a design and development standpoint, targeted at these international customers. ProCyte One, for example, though it's been extremely successful in the U.S., initially, you know, we saw the opportunity, footprint, cost, and performance to go more from a value standpoint.

You know, I think on the rapid assay business, Leishmania is another example of really tailoring solutions for some of our international markets. We're realizing, I think, the success of all those efforts combined, and we've seen sustainable double-digit growth. We're very optimistic about the long-term opportunity in these international geographies. Diagnostics utilization is just at an earlier state, and that our experience has been with the right approach, creating awareness and education and working with customers in a tight partnership model, that there's a lot of runway in front of us. We feel like from a playbook standpoint, we really have a very successful and effective playbook we're executing. I'll hand it over to Michael to talk about FNA and controlled rollout.

Yeah, good morning, Chris. Thanks for the question. We're very happy with controlled launch process for FNA. It's on track. In fact, we're broadening it as we head into the second quarter here, as we also would move to a more of an unconstrained launch posture later this year. Keep in mind, I mean, we've successfully been launching instrument platforms for many years here at IDEXX. We've done four of these just in my time, this staged control launch process is what enables us to ensure we deliver the kind of outstanding experience that our customers expect from us, not just from the instrument, but from all aspects, end-to-end implementation, training, and all of those things.

You know, FNA, as Jay mentioned, it's really a very exciting platform within a platform, not just what it can do on the instrument with AI and detection of mast cell, tumor cells, but also the one-click workflow if a customer wants added interpretation from an IDEXX board-certified pathologist. We're seeing our controlled launch customers give us great feedback and really make use of all of that functionality. The final thing I'll just say here is that, as you know, these products have very long tails. We wanna get it right up front because we know that the value creation really comes over time as we continue to expand what the platforms can do, and that's what customers really love about the solutions that we provide them.

We'll go next to Erin Wright with Morgan Stanley.

Great. Thanks. The consumables momentum was strong. It accelerated from the fourth quarter. I guess, can you remind us, kind of unpack that a little bit for us? I guess, remind us what actually would be InViewDX related or directly associated with InViewDX consumables. Is that really moving the needle yet, or is this really about you locking in those customers into those IDEXX 360 contracts and having that sort of indirect impact from the InViewDX launch? And just when should we think about kind of InViewDX, I guess, moving the needle from a consumables perspective? Like, what are you seeing in terms of the consumables flow through so far relative to your expectations? Thanks.

Good morning, Erin. The InViewDX consumables is definitely contributing to the you know, strong growth and momentum we see in the VetLab consumables portfolio. You know, with the ear cytology, blood morphology, we've communicated this before. It's well within, you know, expectations. You know, customers are enjoying it. It represents, you know, 100%, you know, new growth in the consumables area that we didn't have before. We think that with FNA, we'll continue to build off that and, you know, can help sustain good momentum in that part of the portfolio.

The other thing to keep in mind is because we've had very successful, you know, high-single-digit, double-digit installed base growth across all the premium instruments, every time we come out with a new slide, in the case of Catalyst, for example, with pancreatic lipase or cortisol, we're able to market that into a very large installed base. Customers have grown to, you know, trust our solutions and the performance of the solutions and workflow of it is really load and go. What we're seeing is, you know, rapid uptake of these innovations across a large installed base globally. These are, you know, in the case of lipase, pancreatic lipase and cortisol, these are measurements or parameters that customers have been asking for.

They see every day, you know, dogs, cats coming into their practices that require these type of measurements. You know, the same really is true, you know, across the portfolio. We've seen nice, I think, build in SediVue, for example, internationally, which started a little bit, you know, later than when we introduced it in the U.S. Hematology is, you know, typically sold as part of a chemistry and hematology suite. We're benefiting from that focus on placing instruments, creating a seamless experience, and continuing to evolve the menu through a technology for life approach.

Okay. Great. Just on FNA again, and just on kind of the building our broader launch there, I guess, do you have a backlog or pre-orders to speak of on that front that customers are waiting for FNA? Like, what do you hear from the field, as kind of you more broadly launch that throughout the year? You know, what is your expectation or when should we hear more on the next menu expansion for InViewDX and how meaningful, full that could be to the platform? Also just to know, kind of thanks, Jay. It's been also great working with you, and thanks for the support over the past few years. Thanks.

Yeah. Thanks, Erin. Why don't I take the commercial aspect of it and then maybe have Mike talk a little bit about the FNA and why we think virtually, you know, all customers would be interested, you know, in it. You know, from a commercial standpoint, what we launched, and what customers, I think, focused on was obviously the ear cytology and blood morphology and felt like from a menu standpoint, that offered a degree of, you know, completeness that supported the placement of the instrument and overall utilization. That certainly played out.

They-- Of course, we communicated the fact that we weren't going to stop at that from a menu standpoint, that it was going to broaden it to FNA, first on MassCell, and then, you know, over time, continue to expand the menu because the architecture and the technology enables us to do that. I think we've communicated at one of our last Investor Day that there is over 100 million, 150 million cytologies done on a global basis manually. There is a very, very sizable opportunity, you know, still in front of us. Michael Erickson, why don't you talk a little bit about the FNA and how customers think about that?

Thanks, Jay. Good morning, Erin. I mean, FNA, just like blood morphology and ear cytology, I mean, these are all complementary care episodes, applications, if you will, on the InViewDX platform. Really every practice that you see is doing all of these things. We know there's a lot of excitement out there with fine needle aspirate. It's very common for practices to have pets coming in on a weekly or daily basis, dogs with lumps and bumps that are suspicious. We know today there are around 12 million of these FNAs being done, we know that 90% or more of the masses that come in actually don't get investigated because it just takes a lot of work to do it manually with cytology. Frankly, it's pretty expensive.

We're really excited about FNA on InViewDX as an opportunity to not only elevate the standard of care, but also expand access to needed care. We see a long runway for doing that. As Jay shared, and as I shared previously at our Investor Days, we see 100 million cytologies beyond what we're talking about already around the world. We see a long roadmap, a very exciting roadmap ahead on InViewDX, and we'll continue to share more about that as we move forward.

We'll go next to Jonathan Block with Stifel.

Thanks, guys. Good morning. When I factor in the 2Q 2026 guide, you know, the first half CAGDX recurring looks like it's expected to be about 10.25%. That's the calc I arrive at. The midpoint for CAGDX recurring for the year is now, you know, after the raise, 9.7%. You know, slightly below the one-ish 10.25%, but the comps get much more difficult in 2H, and it doesn't look like you're assuming the visits improve, you know, off the 1Q number. You know, Jay or Andrew, can you just lay out the drivers that allow the CAGDX recurring, call it, you know, two year stacks, to accelerate into the back part of the year again?

It doesn't seem like there's a big uplift at least embedded in the visits from the 1Q number. Thanks.

Yeah. Good morning, Jon. I think, you know, from an overall perspective, if you look at the full-year guide, you know, we're really planning for solid growth and, you know, we've actually increased the outlook both at midpoint and the overall range on an organic basis by about 70 basis points. You know, that confidence really stems from the continued execution that we see on a global basis. You know, our commercial teams continue to support our customers, you know, exceptionally well. We've also, you know, seen really strong and solid benefits from the new innovations that we've launched in recent years. Jay highlighted some of those earlier on the call. You know, the contribution between InViewDX as well as, you know, some of the new menu that we've added to our Catalyst platform.

You know, we've certainly seen expanded utilization as well, you know, both in terms of the industry metrics, as you highlighted. You know, we are, you know, thinking that clinical visits are slightly improved from our initial guide, which is partly playing a role in there. We continue to see really strong quality of visits and, yeah, I think that diagnostic frequency and utilization, you know, certainly benefits the overall growth rate that we have, you know, outlined as part of our long-term guide. You know, keep in mind, guidance, you know, continues to be a range. You know, I think if you look at the upper bound of, you know, the guidance range, you know, it's certainly more consistent trends with what we have now.

Again, I think that comes back to confidence in our business execution and, you know, continuing to maintain strong relationships with our customers. You know, placement trends on instruments are really positive. We've seen, you know, growing benefits from, you know, utilization, you know, across our key modalities, you know, from a business standpoint. I think we've really captured, you know, kind of a range that we feel confident with going forward here. Maybe I'll let Jay talk to a couple of the specifics, you know, just from a broader business perspective.

Yeah. Good morning, Jon. One thing we haven't spent a lot of time talking about is the momentum also in the reference lab business. You know, it's been very strong. We've seen that globally. Part of it, you know, comes down to a lot of differentiation. You know, Cancer Dx has given us obviously something to go in and talk to customers about. Leveraging that to talk about the broader differentiated portfolio and reference labs, not just from a menu standpoint, but from a service standpoint and being able to serve all of our customer needs. What we've seen, we've been able to grow successfully the entire IDEXX portfolio, point of care, reference lab, software, the integration that, you know, provides.

The business just has a lot of momentum because of that. We've been, I think, transparent with customers in terms of the innovation agenda around what's coming, the expansion of IDEXX Cancer Dx, as an example, continued to build, you know, into more of a full volume posture. With InViewDX FNA in the second half of the year, I think that gives us a lot of confidence in terms of, you know, being able to, you know, sustain good momentum in the business.

Okay. That's helpful. Maybe just a quick follow-up. You know, for InViewDX, the way you guys frame it makes it seem like you're not yet in that $3,500-$5,500 revenue per box band yet. I guess, you know, maybe a couple parts of the question. One, is that an accurate statement? You're not there yet. You're, I guess, you know, trending to it or however some of the verbiage is laid out. When do you expect to be in that band? You know, do you need sort of that full launch, unrestricted launch of FNA to get there? Thanks for the time, guys.

Yeah, thanks, Jon. Maybe I'll start and then Mike can add in here. You know, just from a recurring revenue perspective and utilization of the instrument, yeah, I think what we are seeing is, you know, very much in line with what we had anticipated, you know, as part of our build. Certainly the range that we've given, again, is a range. You know, I think it wasn't a precise number. It did include the launch of FNA, which we've started. While that's in a controlled basis, you know, we continue to ramp. You know, we're within the band that, you know, we've highlighted here, you know, on a per instrument placement perspective. I think, you know, again, we'll continue to provide more insights and updates.

You know, we would like to see us more broaden out the FNA launch and, you know, then we can, you know, continue to identify exactly how that's playing out over time. Yeah, I think we're within that band, and we feel confident about the range that we provided.

Yeah, Jon, good morning. Mike here. I'll just underscore, we're well within the range that we've communicated. We're happy with that, and that's really before moving to an unconstrained launch position with FNA. We see more opportunity ahead, and as I mentioned earlier, only 10% of the masses that come in today get looked at. We see, if you look at it, kind of the TAM for FNA, if you will, is very, very large. We see lots of opportunity ahead of us there.

We'll go next to Daniel Clark with Leerink Partners.

Great. Thanks. Good morning. Just wanted to ask on the updated visit guide, what are you thinking in terms of the macro and in terms of fuel prices? Do you assume sort of no change in that dynamic going forward through the rest of the year? I'll ask my follow-up upfront as well. When we think about performance in the first quarter, were there any changes in either, you know, visits or diagnostic frequency, between, you know, January and February and March when we saw fuel prices tick up? Thank you.

Yeah, good morning. Thanks, Dan, for the questions. Maybe I'll start on this one. From a visit guide perspective, you know, certainly, you know, fuel could have, you know, kind of an impact on, you know, consumers. Yeah, I think, you know, obviously the range that we provide, again, is a bit of a range. The lower end, you may assume that, you know, again, you see continued constraints on the consumer demand side. You know, yeah, I think overall, you know, what we know now is it's a pretty volatile and, you know, evolving dynamic, you know, in the Middle East and, you know, how fuel prices are gonna play out and energy costs are gonna impact, you know, the consumer.

A little bit hard to predict that piece of it, but I think, you know, from a longer-term trend perspective, we're calibrated more on, you know, what we've seen here over the last recent quarters on visits. Certainly the wellness category and discretionary categories are the predominant driver of declines that we're seeing at this point. In the last three quarters, we've been relatively flat on non-well visits, meaning that as pets, you know, experience issues that they need to be dealing with, consumers are willing to, you know, prioritize that spending. What we have seen, though, is that trade-off of consumers maybe not coming in, you know, for wellness or discretionary visits that have been more impacting, you know, just their overall decision-making here.

Again, I think it's a bit dynamic on the fuel side. We'll see how that plays out, but I think we've captured, you know, what we believe is good range at this point.

Yeah. Just the one thing I would add, you know, to Andrew's comments is we've seen very consistent international growth, you know, for a long time now. You know, that's been through, obviously, you know, there's been a war in Europe and there's been inflation and macro pressures. We've been able to out execute that through innovation and commercial partnership with customers and commercial expansion. We've got a lot of confidence in the health of the business and our ability to continue to bring innovations to our customers.

Then maybe the second part of your question, just in terms of Q1 performance. We don't typically break out, you know, the monthly dynamics, you know, just relative to visits. It can be really noisy. There's a lot of factors including things like day counts, et cetera, that, you know, can play out in a month. We just see a lot more variability, you know, on a week-to-week or month-to-month, you know, basis. You know, not something that we give too much, you know, stock in from that perspective.

Certainly the quarter at a -1% decline, majority of that being the wellness side, you know, I think is pretty consistent with what we would have expected on the wellness side and a little bit better on the non-well side just in terms of the quarterly results. You know, again, we're guiding to a -1.5% for overall clinical visits for the year. I think we've captured, you know, expectations for continued pressure in those areas.

We'll go next to Ryan Daniels with William Blair.

Yeah, guys, congrats on the leadership changes. Thanks for taking the question. Maybe another one just on what we're seeing in the end market. It's interesting, as you said, we've seen somewhat of an inflection towards positive non-wellness visits. I'm curious if you've dug into that any deeper. Does it, you know, really relate to this aging pet population? Is it, you know, anything with maybe some pent-up care demands because of the lack of wellness volume? Just anything you see there and how sustainable that might be, would be helpful. Thanks.

Sure. Good morning. We have seen, you know, if we break it out through different age cohorts. You know, initially, if you go back some quarters, we have seen it in, you know, that 5 to 7-year cohort. These are pet adoptions that largely occurred during the, you know, pandemic, where we had that huge step up. What we've seen in terms of the type of breeds that were adopted during pandemic is they're more heavily medicalized. You know, the Doodles, for example, Frenchies, you know, dogs that just require, you know, more care. That's been true in talking to customers, especially the corporate customers who track that sort of thing.

They've also validated that that's a, you know, that's a real thing that we're beginning to to see the front end of that very big pandemic adoption boom that we've seen. We think that's sustainable.

Okay, that's helpful. One just clarification. You mentioned some supply chain disruption impacting, I think, international growth. Maybe a multi-fold question there. Can you go into that? Was it for CAG or for, you know, water and LPD? Has that abated or how is that incorporated in your guidance looking forward? Thanks.

Yeah. Thanks for the question. Really, that was related to the water business, specifically, and that was related to the Middle East. The Middle East, you know, region, you know, certainly has seen some, you know, dynamics going on where supply chain has gotten disrupted. You know, we continue to work through that, but it was modest pressure in the water business that, you know, we factored into our outlook here.

Our last question will come from Daniel Grosslight of Citi.

Hi, guys. Thanks for taking the question. Let me go back to the improved CAG Diagnostics revenue outlook for this year. Something you can maybe bifurcate a little bit more or force rank the contribution from volume, price, and innovation on the improved outlook. As we look to the bottom and top end of the range now, what's the biggest swing factor between those three contributors, volume, pricing, innovation? Thanks.

Yeah. Good morning, Dan. We haven't actually updated anything from a pricing perspective at this point. What we highlighted on our initial guide and certainly in this outlook is approximately 4% net price realization for our CAG Diagnostics recurring revenues. In the U.S., that's modestly lower that we've highlighted before as well. There's nothing new there in terms of change. This is all volume driven. I think the positive news here is we continue to see an outlook for expanded volumes, and that's largely the 70 basis points.

That is a combination just of our overall business performance, the execution against, you know, some of the new innovations and our ability to continue to partner with customers to grow the use of diagnostics. We see, again, the diagnostic frequency or blood work inclusion, you know, continue to expand, which benefits the business, as well as, you know, modest improvement in the declines that we expected, you know, associated with the clinical visit flow through. Those are the components that we've highlighted specifically here. A lot of this comes back to, you know, the volume that we're able to drive as an organization for CAG Diagnostics recurring revenues.

Yeah, just to build off that, it really is a volume-driven growth trend. You know, on the point-to-care side, we note that we've been able to grow double digits on installed base over a period of time. That's the flywheel in which, you know, customers drive utilization. Our reference lab business is very healthy. All the investments that we've made, cancer, IDEXX Cancer Dx, I think, has put some additional visibility to that business. The ability to really, I think, continue to support double-digit international growth as a result of the investments made in that area, as well as commercial expansions, I think give us confidence that, you know, it's a, we're in an attractive part of the market with good momentum. With that, thank you for your questions.

We'll now conclude the Q&A portion of the call. It's been a pleasure to share how IDEXX executed against our organic growth strategy while delivering strong financial results in the first quarter. Thank you for your participation and engagement this morning, and we'll now conclude the call.