IDXX
#Yes, thank you.
It's actually, first of all, we do have several new product launches that we've talked about in the last few weeks, all which will benefit the second half.
As we've mentioned, the T4 slide to our Dx install base, the SNAP Lepto, and the full launch of SDMA in our reference labs.
In addition, we have some favorable compares in the second half with regard to some Q4 marketing programs that we had in the US in 2014 that's associated with our go-direct and a little bit more favorable compare in our livestock and poultry business.
Yes.
So our rapid assay modality overall tracked our expectations, obviously, of 4Dx, which is by far the largest product in that category.
It has to be a contributing factor there.
Our volume, actually, in the first half of the year on 4Dx has grown.
Sometimes customers use the 4Dx in the lab, and sometimes they use it in clinics.
Sometimes they switch.
And so when we look at the volumes across the two modalities, we've seen growth.
And I think we've made a lot of progress in understanding the relative performance of our assays in the critical dimension of sensitivity which, of course, is the dimension.
That's the reason why customers purchase these rapid-assay tests is to determine whether a patient has contracted the infectious disease.
We've seen some customers in some regions, such as those that are more Ehrlichia endemic, temporarily switch to a competitive offering for Ehrlichia.
But when they are informed of the difference, of the pretty dramatic difference in sensitivity, we get them back.
And so that's a constant process.
There are a lot of customers out there that we've got to talk to, and we've got new assets that are available to us as a result of the work we've done over the last quarter that is now in the hands of our sales organization.
It's always been a competitive market, and we sell on, really, what is a lower-cost system solution when you take all factors into consideration.
Our sales force, which was greatly expanded before the beginning of the year, is getting better and better at not only the customer relationships but being able to have that conversation.
We are pleased with the premium instrument placement growth we saw in the US in the second quarter over the first quarter.
Of course, that doesn't even speak to the extraordinary performance we had on a global basis on instrument placements.
And there's really, there's no difference in the economics of our programs, as was asked in a previous question.
And we've got the most complete product line when you look at our full instrument product line and, of course, our reference labs, and when we can do multi-modal profiles we talked about on an in-house chemistry with a send-out SDMA result.
And the T4 is a wonderful addition, not only to, of course, we've had it on this Catalyst One for the Dx, which builds for the differentiated value.
We believe we continue to be unique in the ability to do two-way integration with the vast majority of practice management software that is in practice because it was built into that practice management software over many years.
And the performance of our analyzers is uniquely designed for real-time care, with quick turnaround time and minimum tech involvement.
And so that, with continued advancements in VetConnect Plus, for example, where we had, I think, 100% growth in utilization, VetConnect Plus, year over year, in the US market.
Really, that combined and a maturing commercial capability with an unprecedented product line, really, we feel quite comfortable in this competitive environment.
I'd also just build on <UNK>'s comments just to highlight that, of course, we noted that we had a very strong premium instrument placement quarter in the US with the high-water mark for the percentage going into competitive and greenfield accounts.
And of note, we are expanding, and noted in our comments that we're expanding our instrument base in chemistry and hematology in the US.
Each quarter.
So it is expanding.
And that's net of customers who stopped using us.
So it's a net expansion.
It's just the methodology we use for where we record it in segment reporting.
For simplicity for internal management, we use a standard cost for the business areas in terms of how they record their profit performance.
And if there's variances to performance and they get capitalized into inventory before they get recognized through the P&L, we capture that in the unallocated portion, just as a way to limit some of the noise on the internal management of the business.
Yes, our internal management responsibility accounting is based on standard costs, as you would expect.
And then our global worldwide operations folks are the ones who are doing quite a good job beating those standard costs.
And so the numbers were beneficial, and that's what you see flowing through.
And they're somewhat larger than they had been in the past, but it's reflective of good underlying business performance and strong volumes.
And so that it's a real benefit, and that is supporting improved CAG recurring diagnostic gross margins.
Yes.
We're obviously trying to give you an overall calibration, so the net benefit is about 3% on growth versus the original 3.5% overall.
When you get down to the modality level, we really have this fully integrated in our business now.
So trying to parse the discrete impacts of adjustments we might be making across modalities related to the change ---+ it's not how we're measuring the business.
We're obviously measuring ourselves on our current revenues.
And it is becoming just harder to estimate that with precision.
So we've given directional indications in the past on the benefit by modality, and it was directionally consistent.
And obviously, we've updated the overall number.
But we're trying to move to a zone where we're talking about the revenues that we're measuring ourselves on and the revenues that drive our profitability performance.
And that's why we're moving away from this with-and-without calculation.
Yes, that is correct.
It's predominantly volume led.
Yes, I think that's directionally direct and also consistent with our calibration of the business last quarter and the expectations that we've set.
So I think it's entirely in line with expectations.
What we are pleased about is the new assets and appreciation we have for the differences in our products in the critical area of test sensitivity.
And we now have those recently ---+ obviously, this is all very recent ---+ we have those resources in the field to be able to have those conversations.
So that's, I think, a positive development from a marketing perspective.
But with regard to volumes, the volumes were consistent with the expectations that we had set in our April call.
It is 1% to 2% improvement in the normalized organic growth rate.
Keep in mind we'll have a favorable normalization benefit related to prior-year distributor inventory changes that factors into that.
But it is an improvement, and we do expect improvement in the fourth quarter as well, building momentum as we're rolling out the new product introductions.
And that's built into the full-year growth outlook.
You did.
<UNK>, thank you for the question.
Really, as a result of years of work, including with the key opinion leaders and six months of preparing the market since we announced SDMA would be part of the core chemistry panel, we concluded a flawless launch earlier this month.
And, of course, it's all in Q3; it's not reflected in our Q2 numbers.
And really, the excitement and the adoption rate is just quite gratifying.
SDMA will drive our growth on a number of dimensions ---+ higher loyalty with our current reference lab customers; greater utilization in preventive care; the ability to have greater price realization when we're faced with a loyal customer who's faced with a competitive offer that does not include SDMA; of course, winning new accounts who want to, instead of just sending us their ---+ splitting their samples and sending their core to someone else and their SDMA to us and increasing their costs significantly as a result, just sending the entire chemistry panel to us.
We have customers who routinely split their business between us and someone else who will, as they understand ---+ quickly ---+ and adopt SDMA, will be predisposed to sending their chemistry panels to us if they haven't before.
And then finally, incremental revenue from the $19.95 SDMA-only results.
To your question about dimensionalizing that, we look forward to doing that next week at our analyst meeting.
That is our intent, and I think we'll be able to fully satisfy your question in that regard at that time.
Thank you, Allison.
I want to thank everybody who's been on the call.
I know we also have a number IDEXXers who are on the call or who will subsequently listen, and I just want to congratulate our organization here for some extraordinary accomplishments in Q2.
It really was an extraordinary quarter for the instrument business on a global basis.
Sometimes we have to remind ourselves and everybody else that we are a global organization, and Catalyst One is really just a blockbuster instrument.
The flawless SDMA launch, which we had in Q3, a wave of innovations that we're bringing to the market beyond those two products in terms of T4 on a slide, SDMA.
We just introduced images for histo and cyto pathologies that are available on VetConnect Plus, which is a wonderful advancement in the VetConnect Plus form of receiving results and unique to IDEXX.
And I think we've seen great success in getting a better appreciation for the differentiation of our infectious disease assays, and an organization globally that is really quite engaged.
So my gratitude to everyone at IDEXX who helps deliver these results, and we look forward to the Analyst Day next week.
We will be broadcasting that in our Reg FB form for all investors to hear and look forward to detailing the long-term organic growth, double digit, that we think will come out of our innovations and our comments on margin expansion over the long term, and then going into some detail in some of our strategies.
So with that, we will conclude the call.
