IDXX
#Thank you for the question.
I think you are probably referring to the instrument and consumables utilization there.
We're seeing really nice consumable growth that is coming out of that augmented rate of placements.
So the accounts outside of the US are smaller than the US, generally speaking.
So the utilization per account is lower.
There is still a very significant install base of tests that we are upgrading, although we continue ---+ none of those numbers include a VetTest placements.
We continue to place VetTests in some markets too, expanding our overall chemistry base, which is now over 40,000 active customers globally.
But the rate of placements is really quite good in what are generally speaking haven't always been smaller accounts.
I think Catalyst One is just a phenomenal instrument because of all of the things it brings.
Complete menu, unique menu with things like T4 integrated, ease-of-use.
Using whole blood with no issues, the footprint, the integration.
the VetConnect PLUS.
These are all unique aspects of Catalyst ONE that may get very attractive for these smaller practices outside the US, let alone practices in the US where if they need the capacity it' s very economical to add another Catalyst One to the same IDEXX VetLab station.
It is a very flexible analyzer that works in big practices and the types of practices that we see internationally, combined with a phenomenal and experienced commercial organization.
We have a very experienced set of country managers.
Many of our ---+ some of our country managers have been in their roles over a decade.
They have grown with IDEXX.
They know their markets inside out.
We are fully direct in most developed countries now.
It is been a systematic process that we have been putting in place over the last several years.
And I think we're seeing the benefits of that.
And then when you talk about utilization, the thing is that things like preventive care, or just things that are actually doing a full panel on a sick pet, it's surprising how little that is done today.
So part of what we are doing is we're growing the market.
We are expanding the market through education and providing them the tools with things like Catalyst One and reference lab to be able to do that.
So a lot of this is market development.
I really don't see any end in sight in the opportunity to develop the market in these ---+ in what some people refer to as mature developed economies.
Well, they are not mature and developed to us, let alone the kind of growth we're seeing in markets like Brazil and China.
First of all, it is a very attractive market.
And I think that you can see that from our visit data and same-store sales practice data that <UNK> quarter of 9.2% in the first quarter.
That was a very, very strong underlying market that we were seeing.
We can really speak to what we are seeing.
But the other thing we're seeing is volume growth in existing customers that is not just things like existing panels but adoption of our advanced menu.
Things like fecal or molecular diagnostics, or some of our other specialty test categories.
So what we have seen is a growing utilization of things that only the reference lab can provide.
But we're still seeing strong growth in the in-house modalities in chemistry in-house.
I think testing begets testing.
I don't think there's any kind of fundamental shift happening between one and the other.
They just have their own growth dynamics.
Thank you.
Mentioned that the constant currency change year on year was 70 basis points down.
So taking out the currency hedge gain impacts, and it was really two dynamics.
It was the ---+ part of this was the compare to ---+ we had some favorable capitalized variances last year in terms of, particularly in our LPD business that just had a high volume rates that flowed into lower product costs.
And we had a ---+ you can see that in our reporting last year that we highlighted.
And that was a key part of it.
And the other piece of this is the instrument revenues and the instrument mix.
Say that comparable margins in our business are quite good.
We are improving gross margin in labs.
Our margins in our core instrument businesses and things like that are doing quite well.
So net/net we think we're right on track relative to where our gross margin goals.
We knew we had some of the compare issues and FX heading into the year.
But we are reinforcing the operating margin outlook, which was (inaudible) sustained gross margins this year, constant currency and some OpEx leverage.
And we're right on track for that.
I also, Nick, want to reinforce that we see the opportunity over time, over the next several years for gross margin expansion driven by our reference lab business around the world, as well as the instrument and consumable business and also to a smaller degree, because it is a smaller business, our information management business as we shift to the cloud.
So these are all long-term trends we think that will support our overall margin expansion strategy.
There are a couple of factors in Q1 that we did highlight.
I think the extra day was about 1 point and it is tough to parse weather, but clearly we had some favorable US weather compares.
And so let's say that was about 1 point.
It's again, hard to estimate.
But net/net that is in line with what we said we were going to do this year, net of those effects.
We feel very good about the trends in the business.
We have obviously raised our guidance reflecting that.
So we're not projecting ---+ it is not reflective of an expected deceleration in the business.
It is more reflecting a couple of the unique factors to Q1.
I think <UNK> did appropriate call-outs some special factors in Q1, which is embedded in our guidance.
Certainly we don't see a deceleration.
Our crystal ball isn't any better than anybody else's with regard to the general economy.
But what I will say is that what happens is over time as consumer confidence remains okay, maybe not fabulous but okay, then they add pets to their household and then they need to take care of them.
I think the fundamental underlying environment that we have been in, that's built up over the last couple of years of consumers feeling okay or reasonably confident, or having moved further away from the financial crisis, really means that the trends in pet healthcare growth are pretty solid.
It takes a lot to change those trends, because people love their pets and they are going to make sure that their pets are taken care of, even if they get pressed in other areas of their wallet.
They may not always replace their pet if they face a Great Recession like they did in 2019 (sic), and that moderated the growth for a couple of years, 2010, 2011.
But now we're kind of come back out of that.
And I think we have seen generally a very, very good market.
And of course the level of care that can be provided now by veterinarians is ever-expanding.
We are blessed by serving an important, growing secular growth markets.
Thank you.
I just want to thank everybody for signing on the call.
We are also just want my huge congratulations to the work that has been done by IDEXX around the globe, across all of the functions.
We have done a lot of work to reposition the Company over the last couple of years and I think now we're in a place where we can perfect our new model.
We're not making any big model changes like we have had in the past.
And it is very, very gratifying that we can see the result of the hard work, including innovation and customer contact and supporting organizations.
So I just want to really thank our organization for that.
We recognize that we are here to create shareholder value and that is part of our job, part of our model, part of our purpose.
And we are very focused on continuing to grow the Company in a way which will generate, and continue to generate attractive returns on invested capital.
So with that, we will conclude the call.
