IDEXX Laboratories Aktie

Good morning/afternoon to folks. Welcome to the Morgan Stanley Global Healthcare Conference. My name is Erin Wright. I'm the lead health care services analyst at Morgan Stanley. We're happy to have IDEXX Laboratories with us today, Chief Executive Officer, Mike Erickson; as well as Chief Financial Officer, Andrew Emerson. For more important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And with that, we'll get started with our fireside chat. Thanks so much for joining us.

Thanks for having us, Erin.

Yes. So you recently had an Investor Day in Maine that I was fortunate enough to attend. And you highlighted the innovation drivers. You reaffirmed the long-term growth targets calling for 10% plus organic growth, 15% plus kind of EPS growth. Walk us through some of those key building blocks in terms of bridging to kind of from -- in terms of today's environment and what we're seeing with vet office visit trends and then the long-term growth algorithm?

Yes. Great. So let me just start by talking a little bit about the year, and then I'll talk about the building blocks and tie back to some of those things. So we had an exceptional Q2 and really start to the year. We've got terrific momentum in the business. Erin, we talked at our Investor Day about how we're in the very early stages of this broad-based innovation cycle playing out across really multiple different platforms at the point of care in reference labs and in software, supported by what we're doing commercially to help our customers adopt these innovations. And we're seeing that flow through into double-digit growth, both in reference labs recurring revenue and in our VetLab recurring revenue.

And on that basis, in Q2, we took up our guide for the overall year, as you know, and just reflecting that momentum that we see. And when we are in this sort of dynamic period that we're all in trying to manage signals and understand where things are headed, with IDEXX, we step back and kind of look through that haze and to your point around the long-term view, it just reaffirms the conviction that we have in the strength of the sector and the long-term potential. We can see our way to the $45 billion TAM that we've talked about in diagnostics globally. And we know that diagnostics are dramatically underpenetrated around the world relative to the outsized value that diagnostics create in the practice. Pets can't speak.

It's diagnostics that give them a voice in the health care equation. And then we also know that diagnostics drives 80% of all the activity in the practice. And so our entire strategy as a company is to move that needle through what we do on the innovation front and commercially, and we've been successfully doing that now for decades. And we measure that through the building blocks that you asked about. We've seen really robust new customer growth. But really, the core of our strategy is to drive volume-based growth through innovation and utilization, and we've seen that across the sector.

And we know that customers that adopt our IDEXX innovations grow faster. Sector-wide, we're driving about a 50 basis point increase in blood work inclusion annually, and that translates to about 150 basis points of CAG diagnostic recurring revenue for IDEXX. So we build that up across new customer growth, innovation and utilization and modest price tied back to the value that we're creating in the practice.

Yes. I think just to round out the financial model, obviously, that recurring revenue growth stream really enables the rest of the P&L as well. We see high incremental gross margin drop-through when we look at the ability to continue to grow our recurring revenues. We benefit from scale. We're focused on productivity. And to Mike's point, part of our growth algorithm is price in which we're creating value through various different sources of value to our customers. Some of that's innovation, some of that's things like our software capabilities and a really keen focus on making sure that we can deliver product to them when they need it because these are medical services, and they're often looking at making sure they can manage their own patient when it comes into the clinic.

So that gives us a really nice robust ability to reinvest back in the business in R&D and our commercial efforts and be able to deliver operating margin improvement over a long period of time, ultimately to achieve that 15% plus EPS growth. So we see really significant opportunity and headroom for us, both on the revenue and top line, but also our ability to continue to expand our margin profile and EPS.

Yes, the high-margin drop-through of that recurring revenue, we always feel is underappreciated part of the story, too. But in bigger picture, you have shown the ability to grow even in a down market. So -- but it is a question that I have to ask in terms of underlying vet demand trends. I think your guidance calls for what, negative 1.5% to 2% kind of vet office visit trend this year, what gets this market to normalize longer term? How confident are you in that? Or just does it matter in light of the innovation drivers that you're seeing and the growth that you are seeing in light of that?

Yes. So to your question, we have seen this modest headwind to visit growth now playing out over multiple quarters, really more on the wellness side, as you know, Erin, which on the margin can be maybe seen as a little bit more discretionary than non-well. We have to step back on that, though, as well and maybe just again, see the kind of broader arc through the ups and downs of the pandemic and the dynamic period since then. So if we compare where we're at today to before the pandemic, we have substantially more pets in the system, 22 million more pets through that period.

And if you look at medicalized pets, also substantially more on the order of 8 million to 9 million more medicalized pets. And we have a lot more visits as well from a total visit volume standpoint. And if you take any one of those factors just on a CAGR basis, they've been growing at or above the historical norm, again, through these ups and downs and this dynamic period that we're in. So we feel good about those things. But I think the bigger point that often gets lost in the conversation around visits is really looking at care, the demand for care, the intensity and quality of care that's happening in the visits when those visits take place.

And that's, again, the core of our strategy is to drive that. On that dimension, what we've seen is this continuous expansion in blood work inclusion and wellness visits, 50 bps annually, growing inclusion, blood work inclusion and wellness visits. This overall step-up that we've seen continuously quarter-over-quarter, we reported again in Q2 in diagnostic frequency and utilization, which is a very good proxy again for the quality of those visits. And when I sit down and talk to our corporate group, our large partners, this is a big focus for them because they understand that this drives their business model, and they want to grow this, too. And so it's a natural point of alignment.

And when you kind of break down what are all the things that are driving this, IDEXX innovation is playing a big role, but there are a number of really important underlying trends also. So we have these COVID pets that were adopted and are aging. And so if you double-click into the visit growth, we actually see positive visit growth, well and non-well for pets over 5. So that's a pretty -- that's that bolus of pets coming through. And we also know that as pets age, just like people, they need more care. So they visit more, but they also need more care in those visits.

And not only that, it turns out that pets are living longer, which is incredibly profound when you look at the data. So just over the last decade, dogs and cats are living about 1.5 years, 1.5 years longer. And so that's about a 12% expansion in lifespan. But because they require more care as they age, that translates to a 16% or more increase in diagnostic lifetime value. And then on top of that, we're seeing an interesting trend around the mix of breeds coming into the practice.

And that reflects consumer choice. Consumers are opting into breeds like the doodles, for example, and golden retrievers, breeds that actually require more care. And they realize that they require more care, but this is what they want. So between the age mix, pets living longer, breed mix, all of these factors drive a higher demand for care. And so as we dive into our incredibly large data set of not just practice management data, but now consumer data, what we see is a very high resilience around demand for care across every single consumer economic cohort. So we know it's a dynamic time, and we know that people feel pressure in the broader economy. But when they have pets, they're spending on those pets, and that's true across every economic demographic.

Would you say, though, that even with an aging pet population, are you still going to see pressure on vet office visits, but it's just about the nature of the visit is just so different than it was before. How structural is this shift in terms of you're now posting high single-digit utilization metrics. Is that durable here? Or do we see things shift back to the way that vet office visits were? Like where do things shake out? And is it really just a structural shift in terms of the nature of each underlying vet office visit seeing higher utilization, greater flow-through, those dynamics?

Yes. The nature of the visit keeps improving in quality, and that's translated into that higher diagnostic frequency and utilization step-up that we've seen quarter after quarter. And the reason why we feel highly convicted that, that can keep growing is because if you just look at today, what's the average inclusion of blood work in a visit, it's about 1 out of 5 visits get blood work. Wellness visits, it's about just over 1 out of 10, 13% in the U.S., and it's less internationally, about 1/3 of that. And when you consider the incredibly outsized role that diagnostics plays in the visit, that's a low number.

So sometimes we ask, do we have a 1 out of 10 problem or do we have a 9 out of 10 opportunity? And of course, we see it as a 9 out of 10 opportunity. And so for us, the way that we focus on that every day at IDEXX with a tremendous amount of focus, wake up thinking about our innovations, things like Cancer Dx, inVue Dx, what we're doing on Catalyst, paired with a large commercial organization whose job is to support the adoption and change management of those protocols and innovations in the practice. And that's what translates into customers using IDEXX innovations grow faster, that sector-wide growth of wellness inclusion of 50 bps that I talked about. And so that's why we see this long into the future.

And given those drivers that you're calling out, without necessarily giving formal guidance, I mean you can, if you want, for 2027. But how do you think about sort of the moving pieces as we head into 2027? Should we anticipate still kind of sluggish vet office visits with durable price innovation drivers continuing? Like what would deviate from your long-term projections?

Yes. So as you highlighted, we're not providing a 2027 guidance today. And certainly, we're not updating our guidance for 2026 today either. But I think the clinical visit headwind that we have seen, we've highlighted even in our initial guidance that we expected that to be a decline in 2026. It's come in slightly better than that in the first half, and we're anticipating about 1.5% declines on clinical visits in the second half as part of our guided midpoint, and there's obviously a range around that dynamic. But what we're really continuing to benefit from is a lot of the building blocks that Mike highlighted. We've launched a number of new, both transformational innovations with inVue Dx and Cancer Dx, but we've also continued to add new menu additions to our core platforms.

We have almost 80,000 Catalyst instruments across the globe, and we've added around 5 new innovation menu to that instrument installed base over the last 3 years. So we get continued benefits of that as customers adopt these new menu benefits, whether that's cortisol or pancreatic lipase -- and we highlighted that we have proBNP coming here in October. So a number of new innovation, new elements that really benefit clinicians' understanding of the overall pet health that we see rapid adoption of in that installed base. So we have a number of innovation drivers that we really continue to be excited by that we've publicly announced, and we have a really robust menu of options there, too.

The other component that I would highlight is we've continued to invest in our commercial or our field based employees, which are really the core customer engagement engine that we have. In particular, we've seen strong double-digit growth in our international regions as we continue to broaden our customer base as well as just partnership, really changing behavior and mentality around how to use diagnostics globally, which is a key part of our overall strategy, to Mike's point, on expanding the utilization. So a number of factors that we continue to be excited about. But when time is right, we'll continue to highlight 2027.

There's really 3 ways that our innovations translate into the utilization growth that you're asking about to kind of build on what Andrew said. So we come forward with entirely new categories like Cancer Dx, completely unmet need. We'll probably talk a little bit more about it because there's 25 million dogs out there that are at risk for cancer, and there's been no solution. That's a whole new category. And when we bring through a breakthrough technology with highly accessible pricing like we've done, we basically create all that volume, both for our customers and for IDEXX.

The second type is we come into a category like cytology, where there's 150 million of these being done all around the world, and we're able to address that in a transformational way with inVue Dx starting out with blood morphology, ear cytology and now fine needle aspirate. And we can provide -- take out all the manual work, a much better quality diagnostic. And we take the volume that's being done and we enable them to do more and then we also translate that into IDEXX volume. So we're growing together there. And the third way is, as Andrew mentioned, as we keep adding new menu into our existing platforms, our customers have their existing workflow, they get the benefit, and then that grows for them and for us, too. So we can draw a straight line between the investments we're making in innovation and how that drives volume growth for our customers and for IDEXX.

So let's talk about innovation. You're rolling out FNA on inVue right now. InVue has tracked well above my expectations in terms of placement trends to date. But what I care more about is that consumables flow-through. And where do we stand now in terms of that 3,500 to 5,500 range that you initially kind of targeted. Are you within that range with your existing installed base? Or do you ramp to get there? And does that -- is that inclusive of FNA as well?

Yes. So we've been exceedingly pleased with inVue Dx, the reception to it. It's one of the most successful launches, new product introductions that we've had in the history of the company. And we focus on the quality of placement. We focus a lot on that utilization number, as you know, Aaron. And so what we're seeing is we're very comfortably within that range with the $3,500 to $5,500 per instrument in recurring revenue. And that's really at these very early stages, I should say, of fine needle aspirate FNA being rolled out, still controlled launch on track for the end of year broad availability that we talked about. And so we see headroom to that. The reception has been exceptional. It hits the mark. I mean, as I was talking about cytology, every practice around the world does cytology.

They have a microscope. They do it. It's a very manual process, very technique sensitive. InVue Dx is paradigm changing because it takes the slide out of the equation. So all that manual effort and subjectivity is gone and enables a really high-quality diagnostic. In the case of FNA, you're looking for -- generally, this is a dog coming in, let's say, with a lump or a bump. And the question on the pet owner's mind is, is this cancer? So it's a pretty high-stakes question. Is this cancer?

And today, we know that there are 12 million FNAs being done around the world, but that represents 10% or less of all of the lumps and bumps that are coming into the practice. And the reason why it's so low is because it's really hard to do these. It's hard to make a slide and do all the steps, the multiple steps to stain it and dry it. It's 25 minutes or so of work. And then you've got to read it or you send it into the lab, and that can be expensive. And with inVue Dx, it takes all that effort out. You get a real-time result right there. And what we're seeing is with the customers using FNA and inVue Dx, they're doing twice as many lumps and bumps. And by the way, at an 85% lower cost. So this is a great example, again, of our innovations are driving volume-based growth in the practice, transforming how care is done.

And as Mike did highlight, the 3,500 to 5,500, we're in that range today. But we always said that, that does include the launch menu, which was inclusive of FNA. And so we feel really good about kind of where we're at with the instrument recurring revenue. And these are really large categories that will continue to ramp over time. Yet we also know that there's a number of extensible new options that we could also put on this platform in the future. And that's the way we tend to think about these innovations. They're really platforms that we can continue to innovate on. And so there's a really large economic value associated with this platform, and we continue to see, again, a robust innovation road map ahead of us.

Yes. If you look at what we did on the Catalyst, and Erin, you know this over a decade, we expanded the economic value of the catalyst in our customers' hands and for us by 2.5-fold. And that was a combination of menu innovation, supporting utilization, all of these things. That's exactly the type of thing that we see in the future for inVue Dx as well.

I think we saw a 25% uplift in consumables volume for every upgrade for Catalyst. Significant. But the -- I think for FNA, in particular, you're already hitting the mark where I remember SediVue, I don't think we hit the mark right out of the gate in terms of hitting that consumables flow-through. But for FNA or for inVue, you already are even without that broader FNA launch. But why is it more of a measured launch still and it's still on track, I think, as you just said, for year-end broader launch. I guess, anything else to comment on in terms of the early feedback on FNA?

Yes. This is our standard launch process for any new platform. And I think maybe the one sort of nuance here to appreciate -- when we roll out, let's say, a new slide on Catalyst, customers have Catalyst, they have their workflow. Through our software, we're able to push out that new capability. They just have to order the slide and they can use it the next day, and they love that experience. Each of the applications on inVue Dx is like a new one of those platforms. You think about ear cytology, blood morphology and then the third platform within a platform now is find needle aspirate. So this year alone, we've rolled out multiple upwards of 4 new red cell morphologies within the blood morphology category in inVue Dx. And now that customers are trained on that and they're using that, we can just provide that over the software, and they love that experience and they get all that additional value. Now as we're rolling out fine needle aspirate, again, it's like a new platform.

So we want to make sure we nail that we get the customer experience right, the training right, all the components. This also has the opportunity for customers should they want because, again, high-stakes cancer, if they want one of our pathologists to look at it, they just press a button and the image is usually just sitting there already for our pathologists to take a look. So we want to make sure we nail all of those things because the long-term value creation tail on these is very, very compelling. And so just like we do, whenever we roll out a new platform, we have this controlled launch process where we make sure we nail all those details. That's what our customers expect from IDEXX. And so that's what we do.

And presumably, all the future platform additions to inVue would be in a similar format in terms of being able to quickly...

That's exactly.

And would be upside to your $100 million in consumables flow-through.

Yes. As we continue to expand the platform, we think we have a lot of headroom to grow it.

Okay. So how are you going to launch 2 boxes at the same time? So in terms of rolling out also MultiQ. So MultiQ, we don't know what it does yet. So -- but presumably, is the best way to characterize it similar to inVue that it's really replacing a lot of manual tasks. Is that the right way to think about it? And how should we think about the rollout? I think we'll hear more at VMX in January.

Yes. So we announced we're having a special event at VMX in January in Orlando. We're very excited about that, and we'll share more about MultiQ Dx and what it does in the category that it's in. So today, I won't go deeper other than just to make clear that it's in a category of diagnostics that is very important at the point of care, and it's totally complementary to today what we do with our VetLab suite, and we fully expect that it will be paradigm changing in that category. MultiQ Dx, just like inVue Dx, just like Catalyst, just like ProCyte One is designed and manufactured at our state-of-the-art facilities in Westbrook, Maine, and we'll talk more about it in VMX. I think the nature of what it replaces and all those things varies from instrument to instrument and category to category. So I'll probably put it there, and we'll talk more at VMX.

I would highlight, though, again, we have a whole suite of analyzers and reference labs and software, all designed to really work with the same customer base. So our whole commercial model and the investments that we make towards our commercial model are really designed to continue to be able to sell that whole suite. It's not one instrument or another instrument. We're really looking to bring this comprehensive package and partner with our customers across the globe.

And if you look at some of the metrics we've shared, we've done a really nice job at continuing to bridge those categories where a single customer isn't using just VetLab or reference labs, they're using both and they're using the broader suite. And so that's a key part of how we tend to think about working with our customers, having them believe in diagnostics and then helping them find ways to incorporate that into their practice on a medically relevant basis. And so a key part of our commercial model and the investments we make are really targeted around that, and it's part of what leads to the type of growth profile that we've had.

Okay. And yes, I want to get to that because like especially with Cancer Dx. But -- separate from MultiQ sort of separate, I guess, Fecal is still an in-house gap in terms of your offering. How do you think about the current reference laboratory offering? Is it sufficient for what you need today?

Well, we are -- yes, we have an incredible offering in our reference labs, Fecal Dx antigen. We just added taeniid tapeworms to that this year, and that's on a string of innovations and expansions to that platform that we've made over the years. And we know that it's superior to what's been out there in terms of fecal floats. It finds up to 2x more infections.

And because it's looking for the proteins rather than trying to find fragments of eggs and other types of debris, it's the only approach that's actually correlated back with actual infection. versus things that could be masking or masked as infection. And so it finds more, it finds it earlier in the process. And our customers really rely on that. It's one of the most adopted areas. And when you look at wellness diagnostics, we focus a lot on blood work, but incorporating Fecal testing into wellness is a well-established pattern in North America with a lot of headroom still to grow there. And then we think opportunity around the world as well.

Okay. Cancer Dx. So I think -- is it right to assume that Cancer Dx is driving meaningful market share gains across the reference lab for you? I think you gave some stats around 20% of the Cancer Dx customers are not actually primary reference lab customers at all. One, why aren't they? Like that should be, I would think, an initiative initially when you're going in there with Cancer Dx and how quickly can you convert a lot of those customers, and it seems like this could be a meaningful share gain driver for you.

Yes. I mean we're just exceptionally happy with what we're seeing with Cancer Dx. As I mentioned a little bit earlier, this has been a gaping hole in terms of the portfolio of options out there, particularly for general practitioners, also for specialists. Maybe just to kind of frame that, I mentioned 25 million dogs are at risk for cancer around the world, 1 in 4 dogs will be diagnosed with cancer. And I've lost 2 dogs in my family to cancer. In both cases, by the time we knew what was going on, it was too late to take action. And it's heartbreaking, but that is a -- it's an all too common story amongst pet owners, and there just hasn't been a tool set. But with 25 million dogs at risk, it turns out in the entire developed world, there are less than 600 board-certified veterinary oncologists.

And so there's just no way to meet the demand for care in oncology and cancer without arming general practitioners with tools like this. And so Cancer Dx is a total breakthrough from a testing platform standpoint. We rolled out with lymphoma. It can find lymphoma up to 8 months before there are any clinical signs with incredible performance, 99-plus percent specificity, 79% sensitivity, performance that matches the most sophisticated liquid biopsy test in human medicine that cost upwards of what, $1,000, $800, $900, $1,000 and take a week or 2 weeks to get results back. And this is a test that we intentionally priced at $15, 1-5, $15 and an equivalent price around the world when it's paired with a blood work panel into the IDEXX reference labs.

And so the strategy really is we want to make sure that dogs are getting access to the care they need, and then we understand the emotional pull of -- this is one of the most common questions that comes into the practice. And so the strategy is to support broader adoption of blood work with that. And that's what we're seeing happen. I mentioned at our Investor Day and on the Q2 earnings call that we had a large corporate group in Australia went all in on including Cancer Dx themselves at no additional charge as part of their senior dog wellness program, and it's driving higher enrollments and higher utilization. I'm really excited to share now that we've had another large corporate group, this one in Europe that's made the same decision to do that.

At Investor Day, we announced that we're expanding Cancer Dx from lymphoma to now be a multi-cancer panel, adding mast cell tumor and hemangiosarcoma. These are 3 of the most common and most dangerous cancers covering 40% of all the cancers in dogs. And by the end of this year, we'll have all 3 of those. And we're sticking with the $15 price point. And when I shared that recently with one of our partners, the CEO, I think his jaw hit the table when he heard that. So we're excited, and we want to make sure that we're supporting accessibility to this. And that's driving all the interest, Erin, back to your question.

So 20% of the customers on Cancer Dx are customers who have been using somebody else as their primary reference lab, but they're breaking their protocol and breaking whatever agreements they have because they are putting their patients first, and they want to have access to this innovation. And we certainly are seeing really high levels of new customer growth in the reference labs around the world that tie back to many things, the service level that we provide, things like Fecal Dx, the broader platform. But Cancer Dx is absolutely contributing to that. And 70% of the runs, by the way, are being done with blood work in the IDEXX reference lab. So the strategy of tying it to blood work pull-through, we know is working. We're in the early stages of this. We're going to make cancer history in pet care. And you can tell I'm a little passionate about this because it's personal for a lot of us, and we're really focused on this huge opportunity ahead of us.

You're making some commercial investments kind of into the second half. I guess, what exactly are those? What does that entail? And then also, when do you take a step back and think that -- I mean, obviously, you're seeing the growth to support it, but -- and just stop spending and let it drop through in terms of cash flow?

Well, we see a really, really reliable return on our investments into expanding our commercial model. So we've done something like 16 of these expansions in the last 5 years. And so to your point, we shared on our Q2 call and Investor Day that we're advancing incremental investment in the back half of this year, expanding in 4 countries, Spain, France, South Korea and also Canada as well as some targeted additions here in the U.S. And we're doing that because for 2 reasons, really, one, it supports this broad-based portfolio of innovations that we're bringing forward. But tied to that is a deep understanding that when we're in the practice, when we're present with our customers, working with them side by side, that supports higher adoption of these innovations.

It's not -- the innovation, whether it's an instrument or a test in the lab, the way it works better together, as Andrew described, ultimately comes back to incorporating that into protocols in the practice, getting the workflow right, making sure that they've thought through -- they set the price, but that they thought through it correctly and that that's all into the practice management software. And all of that has to be tied together, and that's what our commercial team does. Really, they're change management agents supporting our customers, and we see that higher level of adoption and pull-through when we're close to them. And we've done that in North America in different parts of the world. We're not yet at that kind of level of loading that we want to be at. And so we continue to find those opportunities even in North America kind of tuck in and get closer to customers. And as I mentioned, we see a very, very reliable return on these investments. And so we're going to keep doing them.

Yes. To Mike's point, I think the commercial model itself is -- really starts with the opportunity that we see in front of us. We see significant opportunity within the sector to continue to expand the use of diagnostics. And as we look at each of these individual regions, it comes back to customer proximity to spend more time with our customers and really help them understand how to use this, share best practices, incorporate it into their clinics effectively. And so we want to make these investments. It really helps support kind of the top line growth algorithm that we have, and it's reinforcing, right, where we can continue to deliver really strong operating margins while investing back in the business.

I mean this year, our guide is for over 32% operating margins on a comparable basis. And I think that alone is quite a solid number. But again, we've committed to the longer-term 50 to 100 basis points of average annual improvement over time. So it's something where we try to find this balance of continuing to invest back into the sector in an appropriate way between R&D, research and development as well as our commercial model to fuel that long-term opportunity while still delivering really strong operating margins as well as free cash flow generation that we deploy back into both our business as well as back to our shareholders.

Okay. So 2 things then kind of related to that. One, I guess, anything to think about in terms of quarterly progression that we should be aware of into the second half from a modeling perspective? And then two, just capital deployment. I mean, you're obviously investing significantly in AI. It's a force multiplier for you from a diagnostics perspective. And new technology that you're launching on that front, too. So how do we think about -- are you where you need to be from an M&A perspective in terms of do you need to go out and buy more in terms of technology assets or otherwise?

So why don't I take some of the question around technology and AI and then Andrew, you can kind of round it out and talk about capital deployment. So we see a tremendous opportunity. When we go into the practice, when I go into the practice, there's still a lot of friction, the kind of complexity of the case load, the rising demands from clients. All of those things factor into -- it's hard to do the work in the practice. And then also when we talked about things like blood work inclusion, we've seen in our own software how very, very simple things like including prompts in our pet owner engagement software, Vello prior to the visit around would you be interested in blood work in the visit and then sharing that to the doctor drive incredibly outsized improvement in inclusion and receptivity in the visit to doing those diagnostics.

So over and again and again, we see how software and configuring software and the addition of AI personalization has a really meaningful role in driving expanded care and diagnostics. Customers using our software relative to using competitive on-prem have about a 500 basis point higher level of blood work inclusion based on all those things. So we see this as still early days to do that well and with AI adding personalization, automation of workflows. We talked about our investments into clinical decision support and providing real-time intelligence tools. And we certainly are open to innovations outside IDEXX as well when they fit the mission. But our overall convergence of software and diagnostics and AI comes back to that core mission that we have of driving expanded care. And then I think we're almost out of time, but maybe you can hit that.

Yes. Just echoing what Mike highlighted, we have an ongoing active process where we're always looking outside our 4 walls for assets that really fit our themes and our principles as a company. And when we find those, we're willing to make that type of investment. But it really starts with our organic growth strategy. Those will be to help augment and continue to strengthen kind of our asset base overall. And then excess capital, we tend to redeploy back to our own shareholders through share buybacks.

And quarterly progression?

In terms of quarterly progression, again, we're not updating any guidance today. But on the Q2 call, we did highlight that we expect at midpoint, revenue is in line with the implied second half range. And from an operating margin perspective, on a comparable basis, we anticipated 20 to 50 basis points of expansion in the quarter. So that gives you a sense for how we're thinking about the progression quarterly.

Great. Thank you so much.

Thank you, Erin.

Thank you.

Good morning. Good morning, everybody, and welcome to the 2026 IDEXX Investor Day. A very warm welcome to all of you who are here in the room with me at our global headquarters in Westbrook, Maine, and also to all of you who have joined virtually on the webcast. I'm Mike Erickson, President and CEO of IDEXX, and I'm delighted to be with you here along with members of the IDEXX management team. And we have a very full agenda for you today, and so let me just walk through what we have planned.

I'm going to get us started with an overview of our innovation-driven growth strategy and the very compelling opportunity that we see ahead of us. And then following me, Julie Godon will come on stage and she'll share an update on veterinary sector trends and some of our latest insights across pets, practices and owners. After Julie, George Fennell will come on stage and George will bring to life how our commercial team partners with customers and how we're executing on our global commercial expansion playbook. We'll then have our first short break and we'll come back and we'll go a little bit deeper into our IDEXX innovation drivers.

Starting with Mike Lane. Mike will talk about our multi-modality diagnostics growth strategy across point-of-care and reference labs and he'll spotlight some really exciting innovations in the area of cancer diagnostics. And then after Mike, we'll have Pooja Pathak on stage. Pooja is a newer member of the management team, and she'll go even deeper into how we're advancing diagnostics at the point of care. After Pooja, Tracy Byers will come on stage. Tracy will talk about our software and imaging businesses powered by workflow and AI and how they act as a force multiplier for diagnostics utilization. We'll then have a second short break, and we'll come back for a very special customer conversation.

I'm delighted to have Dr. Jo Malone with us this morning. Dr. Malone is the Founder and CEO of VetPartners Europe. And she'll sit down with Michael Schreck for fireside chat on the state of the veterinary industry in Europe and how at IDEXX, we partner with large multi-hospital networks like VetPartners. And Dr. Malone is an extraordinary leader. You're passionate. Jo is passionate about high-quality care, high-performance team culture and she's someone who really inspires me, and I know all of us here at IDEXX. So Jo, thank you so much for being here. We look forward to hearing what you have to say. After that conversation, Andrew will come on stage and he'll bring us home with a review of the financials and we'll wrap with Q&A.

Now before we begin, I do want to share our safe harbor disclaimer, which you can also find on our website. So, let's begin. And I want to start here with our purpose because as a growth company, it's our purpose that motivates us and inspires our growth mindset culture and connects on a deep personal level with all of us at IDEXX all around the world. And we know that we're making a difference with our customers. When it comes to advancing the health and well-being of pets and their families. When it comes to safeguarding our water -- our quality and ensuring the safety of our protein and dairy food product supply.

Now, today, I'm going to focus my comments on our Companion Animal Group, or CAG, area. That's the largest business area at IDEXX. And when it comes to CAG, we have a direct line of sight to a very compelling opportunity ahead of us. And we measure this in decades and is a $45 billion global testing opportunity that supports the expansion of care and well-being for pets as members of our families. And we understand that realizing this opportunity requires a highly intentional time-over-target focus on sector development. And this is the combination of deep partnership with our customers and relentless innovation.

And we are in the early stages of a broad-based innovation cycle here at IDEXX across diagnostics, software and AI that's raising the bar for what's possible in the practice. And this is supported by a global commercial team that works side-by-side with our customers in their practices, helping them to incorporate these innovations into their everyday protocols. And the net result of this is long-term double-digit organic revenue growth with high ROIC, reflecting the differentiated value that we're bringing as IDEXX.

Now I stated that our purpose is personal for us at IDEXX here, and it's personal for me. So this is a picture of me with my dog Loki. And Loki has been a transformational force in my family, particularly for one of my daughters, as she was going through some really challenging moments in her life. And it's not an overstatement to say that Loki helped to save our family. And that's what pets do. It's powerful. And like most pet parents, I want the very best for Loki. But here's the challenge. Loki, dogs, cats, they can't speak. They can't tell us how they feel. They can't share how long it's hurt. It's diagnostics that give pets the voice into their health care. It's diagnostics.

And this opportunity to detect more disease through high-performing diagnostics to give pets more birthdays is motivating for me and motivating for all of us here at IDEXX. And we wake up every day focused on this mission and doing that in partnership with our customers. This singularity of focus that we have on innovations and diagnostics and software solutions. This is a very important part of our success formula here at IDEXX. And we know that people all around the world love their pets. In these uncertain times that we're living in, that we're all experiencing, the unconditional love and stability of a pet in our lives and our families is more important than it's ever been.

And we feel privileged to work in an industry and a sector with this at the core of long-term durable, attractive tailwinds that are further propelled by the fact that pets are living longer which is pretty profound when you think about that and the implications on their need for care and their need for diagnostics as part of that care. And while we know our industry isn't immune to some of the macro pressures that we talk about, we do know that it's highly resilient. And we can look back and see this in the past during prior periods of economic uncertainty. We can see things go down for a period, like pet replacements, but then they come back.

And the reason why they come back is because the vast majority of pet owners self-identify as lifelong pet parents, committed to having a pet in their lives and committed to their pet's health. Now the key point is what I said earlier, pets can't speak. It's diagnostics that give them a voice. And when you test, you discover valuable insights across all the different age brackets here. This is even for dogs and cats that's -- that come into the practice seemingly perfectly well with nothing that you could detect by eye or just observation that tells you that they're not well. And we know that in 1 out of 4 cases, if you test blood work and urinalysis, you'll find clinically meaningful abnormalities that require action -- and we know that this rate of abnormalities increases dramatically as pets age, just like for people. It's the same thing for pets.

And then if we look beyond detecting disease, diagnostics also drives the entire care envelope in the rest of the practice. We can trace 80% of all the activity in the practice back to diagnostics. I'm talking about things like medical services, therapeutics, prescription diets and so on. A good example of this is IDEXX SDMA. We know with IDEXX SDMA, you can detect kidney disease in cats as early as Stage 1. And if you get that cat onto a renal protective diet, you'll extend its life. I mean that's the kind of outcome that we get really excited about here at IDEXX.

Now diagnostics, we know also drives the economic health of the practice. It's the fastest-growing category in the practice, pound for pound, the biggest driver of practice EBITDA. And the headroom to grow diagnostics is very compelling. Today, we see significant variation across the adoption and utilization of diagnostics for sick and well visits in the U.S. On average, 13% of wellness visits get blood work today. We know that much higher standards of care much higher rates of blood work inclusion are possible because we see that. We see that happening today. You can see it up here on this chart. There's significant headroom to grow diagnostics regardless of what's happening with visit trends.

And when we look outside the U.S., blood work inclusion today is even lower. So the headroom to grow is even that much higher. This is where we come in. Innovative software and diagnostics and a commercial team that helps customers to adopt these tools to advance the medicine in their practice. Across the sector, we're driving on average, each year, around a 50 basis point increase in blood work inclusion sector-wide. And that translates to about 150 basis points of incremental IDEXX CAG diagnostic recurring revenue each year.

Now it's very important to appreciate that not all diagnostics are created equal. Customers that use more of our IDEXX innovations grow materially faster. They grow their diagnostic revenue faster, their clinical revenue, clinical visits and the question is why? Why is this happening? What's behind this? And we know, we know that our diagnostics discover more, and they discover more earlier in the disease process and in differentiated testing categories that we've built through decades of investment. And moreover, the practice of medicine is fundamentally one of workflow and we take the time to lean out all the steps of the workflow.

We take the time to lean out the preparation of the sample with things like load-and-go technology on our instruments. And we drive workflow efficiency through our software and through deep integrations. Our innovations enable our customers to see more and do more in their practices. And this deep alignment that we have and objectives with our customer, advancing medicine shared growth. This is a key driver of our own growth. When we grow our customers, we grow. Our innovations, our commercial investments and our execution with our customers. All of this translates into highly durable double-digit organic revenue growth with over 80% of company revenue, driven by CAG Diagnostics recurring revenue.

Now I want to go a little bit deeper into our strategic growth drivers, and I'm going to start with innovation. Let's go back to that question that I asked earlier around how do we drive higher diagnostics adoption and utilization. And for us, the answer begins with a multi-decade large scale and expanding investment into R&D that's focused on solving the biggest challenges that our customers face in their practices.

We're the only company in veterinary with a full stack innovation engine, spanning leading-edge biomarker discovery and assay development, purpose-built, sophisticated instrument design and manufacturing and enterprise-class software, AI, data and connectivity. It's very unusual for a company in any industry. to be world-class in all 3 of these areas. And at IDEXX, we've scaled and develop these capabilities over decades of investment. We're a company of builders. And we harness this stack to build integrated solutions across point-of-care, reference labs and software.

Our customers, they don't think in terms of modalities or point solutions in software or diagnostics. Our customers think in terms of patients and cases, and protocols and standards of care and medical outcomes and our integrated solution ecosystem addresses these real challenges that they face, and it all works better together. The result of this is high advocacy and high retention. And these outcomes are very important inputs into our own growth algorithm here at IDEXX. And we never take that for granted. We never take that for granted.

We know that we've got to show up every day with our customers and earn their trust, working side by side with them. Now we're applying this solution ecosystem approach to take on the biggest unmet need in veterinary medicine. And we you look across these categories, and we approach them through a comprehensive portfolio approach that can take up to a decade or more to fully develop. And IDEXX has played a lead role in building each of these categories through highly differentiated offerings.

I'm talking about things like our 4Dx platform available at the point of care on SNAP or in our IDEXX Reference Labs. Fecal Dx antigen which finds up to 2x more infections than fecal float. IDEXX SDMA, Cystatin B, now SDMA clips on Catalyst, cancer. The list goes on. And if we take a moment to pause and just consider the solutions that we have today from IDEXX, it's hard to imagine how some things used to get done in the practice. I want to take an example of hematology, the complete blood count or CBC. This is a standard part of blood work along with chemistry.

And you don't want to go back very far, only around 20 years and the CBC was done with the microscope, counting cells and that little hand clicker that you can see there on the table. IDEXX changed all of that with the LaserCyte, followed by ProCyte Dx, followed by ProCyte One. And ProCyte combines load and go sample technology, flow cytometry, lasers, 4-dimensional AI scatter analysis. It analyzes over 100,000 cells in just a few minutes to provide the most accurate CBC that you can get at the point of care with performance that matches the industrial scale hematology systems that we run in our reference labs. We changed the paradigm.

And no one today could imagine going back to hand clicking their way to a CBC. You couldn't imagine doing that. Now we're doing this again in cytology with inVue Dx. Let me take an example of blood smears, it takes many years to hone the skill of doing a high-quality blood smear, knowing where to look in the feathered edge with a glass slide, it takes -- once you've honed those skills, 20 minutes or more to actually do one of these and then put it on to a microscope or a slide scanner. inVue Dx changed that paradigm. It's slide-free. The sample goes on the cartridge and you insert it just like a credit card.

It's got precision-tagged fluorescence stains that illuminate different parts of the cell structure, advanced optics, sophisticated NVIDIA chips, AI that's been trained on over 60 million images. It takes 20 glass slides worth of blood smears to equal the diagnostic content of just one run on inVue Dx. We changed the paradigm. And in the future, we're going to look back and say, how is it that we did this without inVue Dx. Now today already, inVue Dx is addressing very large categories of cytology with a tremendous amount of unmet need all around the world. Ear cytology, blood morphology, fine-needle aspirate or FNA and we know we're hitting the bull's eye.

We placed through Q2 over 9,000 instruments around the world, well on track to our goal for the year, but more importantly, to our 5-year goal here. Utilization per instrument is comfortably in the range that we've talked about of $3,500 to $5,500. And that's even before we really have a lot of contribution from FNA. We know there's a tremendous amount of headroom for growth here in every one of the applications that inVue Dx supports.

I'm particularly excited about the opportunity with FNA to expand screening for lumps and bumps. So let me describe a scenario that plays out literally every day. You've got a dog owner cuddling with their dog. Maybe some of you in the room can see yourself in this story. And you feel a bump, maybe a couple of bumps. And so you bring your dog into the veterinarian and what's the question on your mind? You have one question. Is this cancer? You want to know is that cancer. And today, answering that question requires the complexity of manually making a glass slide and all the technique sensitivity associated with doing that.

And also, frankly, the cost, in most cases, is sending that out to a lab. As a consequence, less than or around 10% -- only 10% of all the lumps and bumps that are coming into the practice ever get looked at. There are 12 million of these happening all around the world, and that's only around 10% or less of what's actually coming into the practice. FNA and inVue Dx eliminates all that. Eliminates the cost and complexity of glass slides and you get an answer on mast cell tumor in real time while the pet is still in the practice, and you can do something about it.

The cost is around 85% less than sending into the lab. And what we're seeing is with customers that move on to FNA with inVue Dx, they're looking at twice as many masses, twice as many. So this is an example of IDEXX innovation, of IDEXX AI, bending the cost curve to expand care. And by the way, this is growing our reference labs. Because if you want a deeper look from one of our pathologists, you just push the button and the image is in most cases, already there for a review. Or if you find a mass that has cancer, you're going to want to cut it out and send it into histopath for a review to look at the margin. So it grows the lab also.

Now Pooja will come on stage here in a little bit and talk more about FNA and inVue Dx and the platform within a platform nature of each of these applications on the inVue Dx instrument. But let me now turn to Catalyst. Catalyst is the standard bearing platform for point-of-care chemistry, immunoassay and electrolyte testing. And we have continuously innovated on this platform with our Technology for Life drumbeat of menu expansion, adding new capabilities that our customers value, like pancreatic lipase and cortisol. And I'm very, very proud and excited this week to announce the introduction of proBNP on Catalyst, bringing quantitative cardiac testing to the point of care in the first-ever dual-species format.

And like all of these innovations on Catalyst, we can push these through the software. So, our customers just show up, and their instrument has these capabilities; they don't have to lift a finger to get access to this. Now there's significant unmet need in the area of cardiac for dogs and cats across a whole wide variety of use cases. One of the common cases is what's called the murmur moment. The murmur moment. That's when, let's say, a dog comes in, and the doctor detects a murmur. And then is faced with the difficult decision of do I just monitor or should I refer for some more expensive work up. And proBNP on Catalyst helps to answer that question. It's quantitative, and it helps the doctor decide what to do.

Now Loki had his first murmur moment in December. And as you can imagine, that introduced some anxiety into the family trying to reconcile with what does that mean? We knew it would come; it's common to his breed. But I'm grateful because Loki is getting amazing care from his doctor and from his cardiologist and we've been using IDEXX proBNP to help guide that care. Now, these examples that I'm talking about of platform innovation on Catalyst, on inVue Dx, they extend to our entire VetLab instrument suite. This combination of lab-level accuracy, load-and-go ease of use, end-to-end integration across the suite and back into the practice software, technology for life, menu expansion, unmatched reliability.

All these things together, all of these things together make the IDEXX VetLab instrument suite, the leader in point-of-care diagnostics. And next, we have Multi-Q Dx. Multi-Q Dx promises to yet again establish a new paradigm in point-of-care testing. It will address diagnostic categories that we know are highly relevant to our customers. And it's going to do that in a way that sets new standards. And it's entirely additive to what we're doing today in our VetLab suite.

Now the design and manufacturing of Multi-Q Dx all happens here, at our IDEXX facilities in Maine, USA. And I'm excited to share more about all of this with you at a very special event at VMX in January in Orlando, Florida, and I hope that you can join us for that. Now if I step back and just look across our VetLab suite, we have a line of sight to tripling our installed base with significant opportunity here in the U.S. and very significant opportunity looking abroad. Every time we place an instrument, it adds to the recurring revenue flywheel for our customers and for IDEXX. And every time we do that, it also expands the surface area of value creation as we bring forward new menu like pancreatic lipase, cortisol and proBNP.

And placing instruments also helps to support and pull through reference lab testing volume through our integrated solution approach. So, let me turn and talk a little bit about our Reference Labs. We bring over three decades of experience and innovation investment in the reference labs with over 80 labs around the world and over 65,000 customers that rely on this service every day. We built a scaled global network through deep science and transportation and logistics expertise and state-of-the-art automation with AI enablement.

And our customers, they describe their IDEXX lab experience as being like an extension of their practice accessing our testing capabilities and our expert specialist consulting with world-class service levels. And delivering this level of service at this scale is complicated. This is challenging to do, but this is what our teams do every day all around the world. And if we look beyond logistics and service levels, the other really critical part of our overall lab value proposition for customers is category creating testing platform innovation that fills big gaps in veterinary medicine.

Cancer Dx is a great example of that. Simply put, we're on a mission to make cancer history with our customers; we intend to make cancer history. It's the #1 cause of death for dogs. 1 out of 4 dogs will be diagnosed. There are 25 million dogs at risk all around the world. And there just aren't enough oncologists to even come close to meeting the demand. Now probably many of you in this room have been impacted by this. In our family, we've lost two dogs to cancer. And in both cases, by the time we had answers, it was too late to do anything. And that's a heartbreaking situation, and it's just far, far too common in veterinary medicine. Cancer Dx addresses that. It fills that gap for diagnosis, for monitoring and for screening.

It supports the work that specialists do but also it provides tools that general practitioners can use to find cancer early. It picks up those subtle signals that arise long before symptoms so that a doctor can take action and actually change the course of that pet's life. Now we started this mission with canine lymphoma, truly breakthrough performance matched by breakthrough pricing. We priced it at around $15 when paired with blood work in the IDEXX Reference Labs for most lab panels. We didn't want doctors or pet owners to be faced with this false choice. Do I run the blood work on my dog? Or do I find out if my dog has cancer? I mean that's a false choice. We're trying to inspire blood work. So we didn't want that to be the case.

We've hit an all-new milestone with Cancer Dx with well over 11,000 practices now having run Cancer Dx globally, 70% of those runs paired with a panel in the reference labs and 20% of those practices or practices that had been using a different lab provider as their primary laboratory service. You have to reflect on what that means. That's a scenario where a doctor is breaking their workflow and prioritizing their patient in order to get access to this valuable innovation from IDEXX.

Customers are -- they're captivated by this. You can see a quote up here on the screen. One customer share. 'This is changing how I practice in ways I never thought possible.' Another customer shared, 'I do not expect to have anything like this in the scope of my career.' This is what our customers are telling us. And now we're taking the next steps with Cancer Dx. With Cancer Dx expanding from a test to a multi-cancer panel, we're adding canine mast cell tumor detection in September and canine hemangiosarcoma in December. Along with lymphoma, these are two of the most common canine cancers with very poor outcomes, if not detected early.

We specifically have tuned our mast cell tumor detection for the more aggressive and more dangerous forms of the tumor. That's what our customers care most about. And then hemangiosarcoma. Hemangiosarcoma very often gets missed. It grows internally, typically within an organ. And every veterinarian's worst nightmare is a dog that comes in that's not doing well, and they start feeling around and they palpate an enlarged spleen. And as they're feeling that spleen, they can feel it just dissolve as the splenic hemangiosarcoma ruptures and the dog dies within the hour. It's that urgent and dangerous.

So as we add these two cancers to lymphoma, Cancer Dx, we'll address 40% of all canine cancers, 40%. And I am exceptionally proud that we're sticking with our $15 price point when run with blood work in the IDEXX Reference Lab, for this multi-cancer panel. Now this is one important way that we at IDEXX are doing our part to support wide access to affordable early cancer detection in a manner that also supports expanded blood work. And if we just step back and look at the performance of Cancer Dx and compare it to what we all have in human medicine. I mean its performance exceeds most of the screening tests that we can talk about, typically used in human medicine.

The exception would be the more recent innovations around liquid biopsies. The performance is on par with those liquid biopsy offerings. But those -- those offerings in human medicine cost $800, $900 up to $1,000, and they require 1 to 2 weeks to get results back. This is a tipping point. This is a tipping point in veterinary medicine when it comes to cancer and when it comes to cancer as a part of screening. Over time, we expect that multi-cancer screening with Cancer Dx will become a de facto standard for wellness screening for all at-risk dogs. And our customers, they see this opportunity too. They appreciate like we do, like probably many of you do, that cancer is an emotional topic. It creates a lot of pull. It helps to create even more demand for blood work. And we're seeing that as well.

One of our large partners in Australia, corporate group, they, on their own, added Cancer Dx into one of their senior dog wellness programs, and they're seeing higher enrollments and higher utilization. We are just at the very beginning here. We're at a tipping point. And Mike Lane in a little bit will come on stage and talk more about the road map and the path ahead in Cancer Dx.

But let me now talk about another way that we're working to close the gap in wellness bloodwork inclusion. Now as you can imagine at IDEXX, this is a topic that we're keenly interested in, and we spend a lot of time deeply studying this area. And what we consistently find is that doctors' intent to include blood work exceeds their actual inclusion by a significant margin. So doctors want to do this. So why aren't they? Why isn't this happening? Well, you could maybe ask, is this a question of belief. And that's a reasonable question. But I showed you the data for why you want to do this. And here, doctors are saying they want to do this.

So that's not the primary issue. The bigger issue is the friction in the practice associated with disparate protocols or workflows or setting the right pricing for wellness and getting all of that properly sorted in the practice management software. The care team, they've got a lot on their shoulders. They want this to be easier. And that's an opportunity that we share with them. And then when it comes to the conversation with the pet owner, sometimes doctors make assumptions about who's coming through the door. And they might shy away from making the offer. Even though we know that the majority of pet owners say, yes, when blood work is offered.

And so knowing how to position the value, knowing how to price wellness appropriately, casting a broad net with the right diagnostic panels, adding things like cancer into the panel, which creates even more value and demand. These are some of the building blocks for successfully advancing wellness programs in the practice. And these are things we understand well. And our software, our IDEXX software is a critical part of the solution for closing these gaps. Now when it comes to software at IDEXX, we apply a business system approach. We look across the entire end-to-end practice workflow. And we're working to try to reduce that cognitive load on the care team.

And we see AI embedded in the digital workflow as a critical unlock here for doing things like recommending protocols or ambient voice to action or providing clinical insights right there in the care team's fingertips when they need them. We're hard at work building to this vision with effort underway on a large-scale clinical intelligence engine that can feed insight and every step of this workflow for the care team and every one of their digital surfaces. And we're open-minded to considering innovations that are outside IDEXX as well if they can help to bolster this vision.

Now our own work in AI is powered by a tremendous amount of data. I'm talking about 35 billion full pet diagnostic records, including IDEXX differentiated biomarker insights. Over 750 million full pet lifespan medical records, over 650,000 calls into our expert specialist medical consulting service line every single year. This is just an example of some of the data that we're harnessing to advance AI innovations that can help our customers, close this gap that I'm talking about.

And some examples up here on the screen, like the AI that I talked about with inVue Dx adding AI, as we've done, into our radiology interpretation services to add quality, a whole another layer of quality to what we produce there, using AI to help build large-scale disease registries in areas like cancer or renal disease, we can bring forward new insights to the industry and this clinical intelligence engine work that I talked about. These are just some of the good examples.

And importantly, when we deliver AI capabilities, we work hard to deliver them embedded in the care team's existing workflows across our integrated enterprise-class software ecosystem, including VetConnect Plus, ezyVet and Vello with over 65,000 practices around the world using some or all of this system. We see significant opportunity here over time through the convergence of diagnostics, software and AI to help our customers close this gap. And we don't have to imagine the impact. We can see it today with practices that are using our software configured for wellness; they're doing a much higher level of blood work inclusion.

We can see that today. And we expect to see even higher levels being possible as we continue to add in intelligence and personalization. Now a little bit Tracy Byers will come on stage and she'll share more of this vision and work that we're doing in the area of software. But I now want to turn to our IDEXX commercial model. And our commercial model stands side-by-side with our products, and our services and our innovations as an integral part of our value proposition for customers.

We take a commercial ecosystem approach with a whole complement of experts, subject matter experts that can help practices with the different types of problems that they face every day. And our teams on the ground partner closely with customers in their practices, working shoulder to shoulder to help them achieve their practice goals. Now just in June, I've been doing a lot of travel to meet with team members and customers. And in June, I was outside Baltimore with our team meeting with one of our customers there, Dr. Bailey. She's an extraordinary and dynamic veterinarian, owner of two practices. She also happens to be a mom with 4 young kids at home. So she is very busy.

She took some time just to explain to me what a day in her life looks like. And throughout the day, she's got people coming to her asking her questions: 'Dr. Bailey, I've got a tough case. What should I do?' 'Dr. Bailey, what should I do with this patient?' 'Dr. Bailey, I've got a question.' And that's happening all through the day. And then she wraps up her day, and she goes home -- and what do you think happens at home. 'Mom, Mom, I've got some homework. Can you help me with my -- Mom, I've got a question. Mom --' so, this is what she every day is wrestling with. It's a lot.

And then she turned to me and said, 'So, who do I turn to when I have a question, when I have a tough case that I need help with when I'm trying to do something truly new in my practice, and I need help. That's when I turn to IDEXX. That's when I look to you.' We take that responsibility very seriously. We take that seriously. We know that we best serve that need when we're present, when we're there, when we have high customer proximity. This is the driver behind our IDEXX direct commercial model and our ongoing investments into commercial expansions that bring us even closer to our customers all around the world.

We have a proven playbook for doing these expansions with very reliable financial returns. And as I shared on our Q2 call, we are advancing incremental investments in the second half of this year to further expand in four important countries: Spain, France, South Korea and Canada, also with targeted additions here in the U.S., and we're going to keep doing this. We're going to keep doing this because this supports proximity and this supports our wave of innovations coming through. Now in a little bit, George will come on stage and really bring this whole playbook further to life for you.

The combined impact of these commercial investments, our investments also into innovation and the sector tailwinds that I talked about, the combined impact of these things provide for an attractive long-term growth opportunity. We see the opportunity ahead for consistent, high single-digit growth for the sector based on continued increase in blood work utilization, which -- as I've shared, is at the very core of our strategy. And as a leader, we're going to continue to play a key role in advancing this goal through our focus on sector development through expanding the pie. And as a leader, we also benefit through the value that we deliver and through a growth premium that Andrew will come on and talk a little bit about later this morning.

And so in closing, I'm rounding the bend on my first 3 months as CEO. I have never been more excited about the path ahead for IDEXX and for the industry that we have the privilege to serve. We're out executing the tailwinds and -- the headwinds rather that we've been talking about, we're out executing those in the field. through commercial execution, through paradigm changing innovation. This opportunity that I showed you to grow blood work inclusion, it's very significant and moving that needle.

The long-term prospects for the sector remain very strong. Now this picture on the screen that you're looking at. This is Brian. Brian is a member of our R&D team. He's on the team that's bringing Cancer Dx forward. And I am grateful for what Brian is doing, his whole team and all of our 11,000 IDEXXers all around the world who are living our growth mindset culture and advancing innovations that we know are making a difference in the lives of our customers, of pets and their families. There's a tremendous opportunity ahead of us, and we are highly motivated to go make it happen and deliver strong returns for our shareholders.

So with that, I want to thank you very much. And now it is my pleasure to invite Julie Godon to the stage to share an update on sector insights and opportunities. Julie?

Thank you, Mike, and a warm welcome from me as well. I really enjoyed last night getting to spend some time with some of you who have been coming to IDEXX longer than I have and also some folks that are coming to IDEXX headquarters for the first time today. So, thank you for being here. I joined IDEXX about 6 years ago, and I came here from the human health side, and I came here for a reason. I wanted to come over to Animal Health because I knew what a resilient and purpose-driven sector this was.

You see, my dad's a veterinarian; my daughter aspires to be one. And we, as a family, we're pet people. We consider ourselves to be permanent pet parents. I'm going to come back to this notion of pet permanence a little bit later. But what I mean by this is pet owners are telling us that they don't think about owning a pet as something they just do. They think about it as a part of who they are. I'm excited to say I was bragging about it last night, we're getting a puppy in a couple of weeks, so I am counting down the days and we're really excited to have that new addition to our family.

The human and animal bonds continues to grow stronger year-over-year. And there's no question that this connection with people and their pets. This is really a foundation for strong sector fundamentals. And this is really great runway for diagnostic opportunity. Around the globe, pets are increasingly a part of our family. And this is really supported by an expanding medicalized pet population. They're aging and like us, they -- when you age, you need to go to the doctor more, you need to get more testing. And we're seeing an evolution in an emerging new segment of pet owners.

We know that millennials are the largest group of pet owners and Gen Z is the fastest growing. And these pet owners are raising their hand for diagnostics. And they're making sacrifices for their pet care. We also know that in the veterinarian's office, we are seeing meaningful gains with blood work. We're seeing that aging, COVID cohort is starting to age up and they're coming back to the practices and they need more testing. There's a clear role for IDEXX in all of this. As our evolving -- as we hear these care expectations and they evolve around us, we're committed to helping our practices succeed.

And we're going to do this by deepening those relationships with our pet parents by enabling clinical care through innovation and helping really raise the standard of care overall. To understand where we're headed next, let's look at the underlying sector trends. And I think a great place to start will be the total pet population. So the total pet population and total clinical visits are above prepandemic levels. And this is important to say: the underlying care base is still expanding. Despite some softening in recent years, we're seeing that pets are on the rise.

And if you look at on the left, we can see the historical trend is that we grow 1% on an annual basis. We all know during 2020, something happened and millions of pets joined our families. Despite some macro conditions that happened after that point, we're still above where we were before COVID. And importantly, we continue to see the demand for care, and this is reinforcing the larger term opportunity created by an expanded pet population.

So, let's double-click on medicalized species, and let's look at both dogs and cats. We can see both dogs and cats are net higher than pre-pandemic. They just got there in a slightly different way. So dogs are steadily rising and then we saw a step-up during the pandemic. The population remains elevated and has returned to historical growth levels. Cats have taken a steady pace over this whole time horizon, and cats are a much smaller base. It's important to note we do not see felines at the expense of canines.

An important thing to look at next is how our pets are engaging in care. And so we spoke about the fact that the pet population has expanded 1% annually over time. But we can see adoption trends over the past 2 decades. They haven't been linear. While pet health care is highly resilient, it's not immune to macroeconomic pressure. And looking back, you can see the rapid expansion of the pet population during the pandemic with significant growth in canine.

More recently, we've seen canine adoptions have been more muted, reflecting the inflationary environment. The cat population has expanded, but at a lower rate, and we see modest impacts to the recent adoption rates. These impacts are consistent with what we've been seeing historically during periods of economic uncertainty: pet owners may be slower to add or replace a pet. We remain confident that the pet population will continue to expand over time. And underpinning this conviction is a concept we're calling pet permanence. So let me just take a minute and unpack that.

Based on a survey that we did with 9,000 pet owners across multiple geographies, this new concept emerged. We're seeing that for the vast majority of pet owners, they're telling us that owning a pet and caring for that pet, it's part of their core identity. This is reshaping how people think about their pets and how they're engaging in veterinary care and this is the notion of pet permanence. This really matters because pet owners not only have strong belief and conviction like you can see on this slide, but it's also changing their behaviors.

We know that this segment is leaning into preventive care. They're more opt in to advance diagnostics, and they're telling us that they will make trade-offs with their own household spend in order to make sure that their pet has better health. I've already shared with you, we're 100% in this camp in my family. And an example of this is our last family pet, Honey. We were able to give her more care in the late stages of her life when she had cancer. And due to those early interventions, we got a couple of extra years with her, and I'm so grateful for that.

And so whether you identify as a permanent pet owner or not, I have great news for you and for the industry. And that's that our pets' lifespans are expanding. It's fantastic to see that just in the last decade, we're seeing the average pet is living 1.5 years longer. That's about a 10% increase for both cats and dogs. And that's meaningful because it's not only more time with you as the pet owner, but it's more visits, it's more care opportunities. And that equates to a 16% increase in lifetime diagnostic spend per patient.

Both species are realizing these gains, and it's a true testament to the veterinary industry and pet health care in general. And this is where diagnostics really come in as our pets get older, we get new diseases, and that's a great time to detect early and put our pets on a better care path. Cats are such a great example of this because feline diseases really do progress silently and many times our cats, they're under-indexed in terms of care. And the industry is starting to take notice of this. So you are starting to see around the globe. We're seeing more cat-friendly clinics. We're seeing low-stress environments. I have some colleagues trying out the new self-cleaning litter boxes.

There's all sorts of stuff for cats today. And IDEXX is playing our role in this as well, and I'd love to share with you some great news with a new study that we just published this year. This really speaks to how diagnostics can help improve outcomes and contribute to longevity. We followed about 1,500 cats that had early-stage CKD. So that's chronic kidney disease. And we watch them to see the progression of the disease and to watch for survival rates. And we saw the cats that were fed that renal diet stayed in the early stages of the disease for a year versus those that didn't.

So, in other words, we weren't only detecting that disease early; we were actually changing the progression of this disease. The survival rates back it up. So we saw that on average, the renal diet group that was fed -- the renal diet, excuse me, they were surviving for 5 months longer on average over this 3-year follow-up period. So this is real meaningful extension of life that is directly tied to catching it early and putting an action plan into place. This is the value of diagnostics. And this is why we have our SDMA. We have it as part of our core reference lab panel, and we added it to the point-of-care clips just recently.

And we're not just talking about SDMA and kidney health, and we're not just talking about cats. IDEXX is very much carrying this dual-species commitment across our entire portfolio. We have many examples of this, and just a few here. So, at the point of care, Mike spoke this morning about proBNP being added to our Catalyst analyzer. Very excited about that because that's going to add cardiac insight for both cats and dogs. And our rapid assay line, we take this dual approach as well. So we offer both dual species solutions that can help simplify workflows, and we also offer species specific tests that can get to unique clinical needs for both dogs and cats.

And of course, as we expand our diagnostic capabilities at the reference lab, we're going to continue to think about both species as well, and Mike shared a couple of great innovations in the pipeline ahead. No one else has the breadth of canine and feline care as IDEXX does in terms of diagnostics. And ultimately, our goal is to help make sure that our practitioners have the tools they need to elevate care whatever patient is walking through the door. So these diseases, it's an important thing to think about early detection, especially right now because those puppies and kittens that we adopted during COVID are aging, and this is exactly when these diseases are starting to emerge.

So, let's think a little bit about the sector and what that means. We know that diagnostics become increasingly important as our pets age. And what you're seeing here is puppies and kittens and seniors and geriatrics, they go to the vet around the same number of times. So if you're younger and you're older, you're going to go to the doctor more often because you need more check ups. But we can clearly see that when our pets are aging. They just need more diagnostic increasing frequency and intensity. And this total view shows you a couple of things.

It shows you, number one, there is headroom here to elevate care across all of these age cohorts, massive opportunity in front of us. Number two, we know that diagnostics help improve outcomes but we're also seeing that diagnostics are doing a great job driving diagnostic revenue at the practice. So that's important. And number three, this is only going to accelerate as we look at that COVID cohort and they age up and because we can follow that age profile and see what's been happening and where to look in the future, we can really see the wave of utilization demand in front of us.

So if you did adopt a puppy or kitten during those years, they're about 5 or 6 years old. I think I spoke to a couple of you last night that might have a 5- or 6-year-old and you're sitting right in the middle of this chart. So this is when diagnostic increase really spikes. What you're seeing is a point in time here, 2020 and 2025 clinical visits and the bubbles at the bottom, they're showing you percentage of clinical visits with diagnostics. And the story here is clear. Those puppies and kittens we adopted are now supporting a much larger adult population who's about to become a senior and they are really driving increased diagnostic gains.

As we discussed earlier, we are in a cycle with puppies and so we are seeing some normalization versus those pandemic highs. The overall picture is demand is in front of us. We're understanding where these pets are in their health care journey. It can really help us clarify where future diagnostic demand will emerge. So let's take a look at the most common and foundational test that is run in the clinic, and that's blood work. Takeaway here is that diagnostic growth is not limited to visits alone. We have a lot of opportunity in front of us with the visits that are already happening. We can see that in total visits, yes, we have made meaningful gains year-over-year with our blood work inclusion.

But we also know that it's only 1 in 5 of these clinical visits where they're using blood work. You can see there's even more opportunity when we look at wellness. So nice step-ups and we're very happy to see that. And the majority of preventive care visits today still don't include blood work tests. So this is a story of consistent progress and significant opportunity. Our strategy is to develop the sector globally through innovation and commercial execution and help our practices connect those needs that our pet owners are asking us for with delivering more advanced care.

This is where we really can help our customers move from episodic testing to more proactive screening. And you're going to hear a little bit more later today, and Jo Malone and Michael Schreck talk about wellness at a corporate account. We'll hear about what that's like at VetPartners.

Another important dynamic that is shaping health care demand is the type of pets that are entering the population. So when it comes to pet health care spending, costs really vary significantly by breed. And if you normalize this over a patient lifespan, what we see is that there are breeds increasing in popularity that have higher care needs over the course of their lifetime. Now, an important thing to say here: breed mix is driven by consumers. So you might have a neighbor who loves Bernedoodles, and he'll have Bernedoodles for most of his life. I am going to get another standard because I enjoy standard poodles.

Consumers are driving these choices. So if we think about that higher spend set. So these are dogs like Golden Retrievers, Labradoodles, French bull dogs to name a few. They are trending up. They're more popular and they cost more on an annual basis because they have more well-known health risks. On the flip side, we see that the other -- the lower side of medical spend that they're actually starting to take a smaller share of the population. And overall, this is showing a mix in shift to breed. And over time, we expect to see more dogs that need higher care and therefore, will be spending more on an annual basis.

I'll give you a quick example of one of these higher-spend breed dogs, maybe some of you in the audience might have a golden. So if you do, it's the second most popular dog today and your golden is living about half year more than they did a decade ago. And if you're a golden owner, you're also spending about 20% more than the average dog owner because your golden is prone to some medical conditions. One of these conditions is lymphoma.

And so we at IDEXX are doing our part. We want to raise awareness that cancer is out there and that there's an ability to get that earlier and take a look at that. So cancer screening is really at the core of many of the trends that I've spoken about today. And no matter what breed you have as your dog ages, they're at a higher risk of cancer. And that's exactly where early detection and the emotional stakes of pet parents come into focus.

There's very few words that land as heavily on a pet owner as that word cancer. And the emotional weight of that, that is why screening matters. We know that our preventive care protocols are helping our clinicians provide good information and put our pets on good care paths, but our pet owners are telling us it means a lot more. It's giving them confidence. It's helping them get peace of mind about the situation, and it's really giving them a sense of control to help better care for their pet.

We're seeing that the majority of pet owners are interested in cancer screening, and this is particularly resonating with those at-risk breed owners I just spoke to you about. Let's also think about those aging COVID cohorts. They are aging into the time where we're going to start to see cancer is going to surface and be more prevalent and screening is going to be more of something that they will be interested in. So, Mike said it this morning: we are super passionate here at IDEXX to make cancer history. We are committed to help bring awareness about cancer and we really are at a tipping point.

Mike Lane is going to share a little bit more of the road map in more detail in his section later today. So the final sector trend I'd love to cover off with you is durability of pet spent. You see on the chart on the left, we are seeing remarkable consistency in pet spending across both time and across cohorts. We do know consumers are facing pressure, but what this data is showing us is that they're spending a steady share of wallet for pet spent. On the right, you can see veterinary care is a fraction of this spend and diagnostics is even smaller yet.

While levels may vary by income as expected, the commitment to pet spend is showing a durability across all the cohorts. And I think this is to be expected given some of the trends that we've outlined today. To continue to understand how pet health care spend is stacking up across the economic spectrum, we did something new at IDEXX, and we matched our IDEXX PIMS data with a new anonymized consumer set of data. This is a large data set: 30 million consumers, and spans 15 million households.

And it's a pretty clear picture when you look at this slide. What we're seeing is that pet health care spending absolutely remains an important category of household spend and prioritizing spend for our pets, it's not limited to one income cohort. Growth is broad-based, whether you're lower, middle or high income. And we're seeing both clinical and diagnostic revenue is increasing. You can see that diagnostics continues to be an important contributor. Medical insight is helping provide clinical care, and our pet owners are looking to spend on this.

This doesn't mean that all consumers experience the market the same way. We do know affordability matters and some of our practices are navigating this in communities. But the broader point is that pet health care demand has remained remarkably resilient across a range of household income segments, and in this case, the lower income is even outpacing some of the rest. This supports our view that the sector's long-term growth drivers are durable and not concentrated in only one income segment.

So in sum, these trends create a compelling opportunity for IDEXX and for the industry. The pet population remains elevated. Pets are living longer and aging cohorts are aging up into higher care need stages. Our pet parents continue to show a deep commitment to their pets, and they're willing to make sacrifices. IDEXX is positioned to translate these durable tailwinds into better care and long-term growth for the sector. And we'll do that by expanding the standard of care through our innovation and increasing diagnostic utilization and frequency.

We're also advancing our preventive and diagnostic care envelope, whether it's wellness screening, early detection or ongoing patient monitoring. And we're helping our practices deliver more personalized focused care by integrating our diagnostics workflow, software and clinical pathways. This is how IDEXX will help grow the sector globally by partnering with our practices to succeed to make sure that we help them succeed and expanding access to high-quality care, improving outcomes for our pets and driving long-term growth.

And it's my extreme pleasure to introduce George to the stage. George will talk a little bit more about our customers and where we're going next. Thanks.

Thank you. Considerably younger George Fennell in that picture there.

Good morning, everybody. It's great to be with you. Welcome to those of you joining along on our webcast. It stands to reason. After Mike has confirmed our IDEXX innovation growth strategy and Julie has provided great sector backdrop that the next reasonable place to go is to the central figure in all of this. The IDEXX customer, the health care teams that support veterinarians around the world.

So I have the privilege this morning of sharing a little bit about our commercial motion, how we show up with innovation, how we present and talk to customers and importantly, how we translate the value of IDEXX innovation into adoption. It is easy to fit on a slide, and it is decidedly a great commercial challenge in the field. The commercial organization broadly described, are those teams that work on the front lines with our customers every single day. It's happening now. It's happening right now, the East Coast of the United States. It's mid-afternoon in Europe. It's still going on. We are doing that work right now as we gather, and that's incredibly exciting to think about.

Translating the value of products and services is a process. It is not an event. Point number one, I'll leave that out there. And our organization is fundamentally built for demand generation. Demand generation is different than revenue generation. Revenue happens after you generate demand. The work of demand gen is difficult. It's a proper challenge, but innovation provides a pathway to a few essential elements to generating demand. But that's what the commercial organization here at IDEXX does. It's the aggregation point of all of our ideas, all of our products, all of our services. It all aggregates within the commercial team and then we turn and we face the markets in which we serve.

Importantly, not unlike biomarker research, assay development or instrument design, we think of commercial execution as a discipline, a set of tools with a set of skills, with a set of capabilities that we operationalize at scale and constantly refine. Commercial activity isn't just work with customers, it's a discipline. And we bring that mindset to everything that we do with our customers around the world. So what I want to do now is just build a little bit more texture on Julie's backdrop as we think about commercial execution in the field. So what do our realities look like today in the field? Well, certainly, veterinary care sophistication is growing.

Looked at from a patient care perspective, this is wonderful. New diagnostic tests. We've got more diagnostic capabilities coming since 8:00 this morning. Since 8:00 this morning, more capabilities are coming. So when you think about this from a pet care perspective, this is wonderful, new tools, new opportunities, new care sophistication. Increasingly, you've got a client who is incredibly interested and deeply empowered and engaged in the exam room with the health care teams with their own sets of curiosity, their own sets of information, oftentimes present with that information when they talk to veterinary health care teams, an increasingly important stakeholder.

Now I'm coming up on nearly 25 years in our industry. I have never seen the pet owner as engaged in the health care equation as they are right now, and that's growing. That's a part of the backdrop. Cannot opt out of that. We have to lean into it. So it's a really important dynamic to think about. And these clients come in with very high expectations. And it's not a bridge too far to believe that in some cases, they're more interested in Scout's health than their own. That's not a bridge too far. I can tell by the nonverbal reactions in the room that, that's reasonable to conclude. When you think about this also and you think about this through the veterinary health care team lens, customers are balancing this care complexity with veterinary capacity.

We've had a lot of discussions about veterinary capacity and complexity over the last several years. And that balance continues. That balance continues. And interestingly enough, I sort of described this as a daily resilience test is happening in veterinary medicine. That's what's happening every single day, this balancing act between care, clients, the tenderness of the health care team, we caring for our employees? Those dynamics continue to play out literally in real time. This is part of the moment that we need to meet.

And interestingly enough, veterinary medicine, all of my time in this industry always found this incredible deep emotional pull to the rewarding nature of providing veterinary care. Many of our customers feel like the profession of veterinary medicine was a calling, something invited them into this space from an early age. And it's incredibly rewarding to do the hard work that they do. That said, because I'm fond of saying that several things can be true at once, it's also emotionally demanding. There's no question about it. So just a little bit more texture in terms of what we see in the field. This is now the backdrop. So the question is, how does the commercial organization at IDEXX show up in this space?

Well, the way we meet this moment begins with a level of empathy and understanding, empathy and understanding. It's about our ability collectively around the world to read the room, to read the room, to know whether to advance, hold still or retreat. That's a thing. That's a thing, your ability to read the room because you just do not know what happened 15 minutes before you walk in that hospital. You don't. So you have to have the presence in mind to be able to read the room and understand how to bring the IDEXX commercial agenda and our innovation ideas to life.

IDEXX teams around the world, God bless you, are highly professional and deeply experienced, growing tenure from consistency of face in front of customer allows them to understand customers' needs at new and more profound levels. We're meeting this moment Julie described, Mike set up, and I just talked about a moment ago with a growth mindset and this notion that it's really important to bring both subject matter expertise and ability to read the room, effectively relate with customers and understand how to deliver value in translating innovation. All of those things are important but with a partnership mindset.

Now partnership is a word that's very often used in veterinary medicine, perhaps even overused. But let me just talk about what that mindset is in the IDEXX commercial organization. What that means is that we find mutually agreeable pathways for both parties to grow based on patient care first. Some of you have heard me say this, I'm going to repeat it intentionally because I share it with my own teams. The fastest way to agree on nothing is when you try to agree on everything, okay?

So we find places along the care continuum to create agreement. Why? Because we have deeply internalized that veterinary customers are a part of their communities, very likely to be there for a long period of time. And we also deeply internalize that to the companion animal veterinary customer around the world, veterinary diagnostics and software is not some of what we do. It is all that we do. That is all that we do. The customers are going to be there for a long time, and this is all we do. It stands to reason with those notions in your consciousness, you're going to try to find points of agreement and try to eliminate points of friction, as Mike noted, to constantly advance. Why? Because we're always going to be back in the veterinary hospital. Why are we always going to be back at the veterinary hospital? Because the IDEXX innovation machine gives the commercial organization, new novel products, tests and services. And so if you know you're always going to be back and you know they're always going to be there, and you can read the room at all times, you will find those points of agreement and build a layered relationship over time.

Our commercial teams are advanced practitioners of this. This is the way we speak to one another and to our customers about this. What you see is a picture in Montreal, Canada of one of our colleagues, truly working as a partner in the room shoulder to shoulder with our customers, talking about the value of IDEXX products and services. This is truly how it happens and how it's happening literally in real time, a very important notion.

Now Mike talked about our commercial ecosystem. That's an IDEXX term, and I'm going to bring that to life a little bit for you. You've got in the practice resources on the left, and you have what we call backstage resources on the right. It's not about having the resources. It's how they work together in a tightly integrated way. This is a unique motion with respect flowing across the IDEXX ecosystem with the customer truly at the center of this. In the practice, you have account managers at the core of all of this. You have specialists based on the unique needs. It could be laboratory specialization. It could be software specialization. It could be instrumentation specialization. It might even be a peer for our customer. It might be a professional services veterinarian. These are the folks on the stage in the practice, bringing innovation to life. It's not the having. It's how you work together, really, really important.

Mike talked about this with Dr. Bailey. There's a lot of Dr. Baileys in the world, which is great. That's why we love this business because there's a lot of Dr. Baileys. And when IDEXX's ecosystem performs well, we truly become an extension of Dr. Bailey's practice. And it turns out that she likes that support. And it turns out IDEXX teams like providing that level of support. So there's 2 notions here that are important that the customer needs this activity and the IDEXX teams enjoy this.

Now let me just talk a little bit about backstage. The internal medicine consultant on the phone, the clinical pathologist working through a case with a veterinarian is as important to the value proposition we extend to our customers as the account manager who may be articulating a growth strategy through care expansion with the professional services veterinarian, soon to talk about the addition of hemangiosarcoma to the cancer panel, okay? It's all important, and it's carefully coordinated and this model is what we are scaling globally because it's effective delivering results.

And our business results only measure the rate of agreement we forge with the customer, not about us. They're about the value we deliver to the customer, and they check that with their growth in diagnostics. And so it's important as you think about our innovation-based growth strategy, as Mike articulated it, why we would want to have the commercial capacity and capabilities globally to scale this.

Now let me just talk a little bit about innovation, looked at through the commercial lens. Confronting commercial organizations at IDEXX around the world are 2 questions every day from customers. How are you and what's new? They're not really waiting for how are you? They're really interested in what's new. Every single day, customers ask what's new. And let's talk about why that's important and what IDEXXers have the privilege of saying in response to what's new. And it might begin with a look at their phone or a look at their watch. Well, how much time do you have? Because IDEXX teams have a lot of innovation to bring to customers on a daily basis. But the reality is those 2 questions come every single day. And innovation looked at commercially, is a pathway to access.

Now any commercial leader in our business will tell you that access to veterinarians is not a right. That is not an entitlement that must be earned. But what we activate with innovation is curiosity. Curiosity is what opens up the access gap, and then there's an opportunity to perform. So let me just provide 3 lenses of IDEXX innovation and how the commercial teams think about this around the world.

Let's begin with Catalyst, okay? Catalyst slide expansion, new menu is incredibly important for a handful of reasons. One, it gives us an immediate reason to talk to the more than 80,000 Catalyst customers around the world and let them know and remind them that the catalyst is not a product, but rather a platform. A product is an asset that tends to depreciate in value over time. The IDEXX Catalyst has just taken on additional capability over time. It's a platform with extensibility. And adding new capability regardless of when the customer put the catalyst on the bench, might be Catalyst One in 2014, it could be 2019, it might even be 2025. That analyzer now has more capability than it did last week. That's a great message because that builds long-term loyalty with our customers. And loyalty obviously, is the foundation for growth.

So while we're opening up new care pathways, and that's important, it's also a loyalty driver and a business driver. It's a chance to remind the customer of the wisdom associated with their decision to put the catalyst on the bench whenever they made the call, whenever they made the call. So that's important if you're an account manager in the field to build that long-term loyalty.

InVue Dx. InVue Dx fundamentally is, as Mike described, paradigm-shifting technology. This is now about having the commercial scale and capability and partnership mindset to help customers not adopt, but go through a change management process. This is about training. This is about new workflows. This is about extensibility of the platform over time. This is about driving relevance in testing categories where technology now is going to provide incremental clinical insight to our customers. That's the moment if you're in the commercial organization, you want to be in that conversation. You want to be in that conversation.

It's a proper challenge, but it's not hard. It's a proper challenge, but it's not hard. What's hard is making something old appear new. That's hard. This isn't that. This is about technology and paradigm-shifting technology that we're a part of every single day. Now let's just talk about cancer. Mike touched on it. Julie did as well. Commercially, the cancer evolution, the addition of hemangiosarcoma to the cancer panel. Look that through the commercial team's lens, we are deeply internalized with this notion that IDEXX is leading from the front here. We're leading from the front. This is a privilege. Sometimes the hardest moment to see is the one you're in.

We try to help commercial teams understand what this cancer journey is all about. It's very hard to see it in the moment. It was 2035, we could probably look back with greater clarity and understand what's happening in 2026. But right now, you can see that IDEXX is trying to work together with the veterinary profession on a profound journey to make cancer history. This, again, is another opportunity for access to customers to talk about what IDEXX technologies can bring, an opportunity to focus on what we have, not what we don't, not what we don't. And because the IDEXX teams are so professional, this notion activates their own sense of purpose about why they're in the industry, about why they're working with customers. They're out here to try to make a mark, to try to make a contribution. And this cancer story is particularly profound. The point here is that innovation absent commercial capacity and capability only gets you so far. One thing to have the innovation, it's another thing to translate it and scale it.

Let's just spend a minute talking about how this happens in practice. This is sort of George's lens on what happens in the real world at the street level. We walk in with IDEXX innovation. We're convinced new care pathways, new opportunities, et cetera. That is what we talk about when the customer says, what's new? It activates veterinary curiosity. But increasingly, we think about innovation a little bit differently than maybe we did years ago. Innovation doesn't first require that you do something new, requires something a lot harder. It requires the customer and the health care team actually to let go of something.

Now humans run on routines. It's hard to let go of things that are essential to our routines. What if what we're asking the customer to let go of is what they were taught at Cornell or at the Royal College of Veterinary Medicine. What if we're asking the customer to let go of something that's been the only way they've practiced for 13 years. Now you've got a view on the proper challenge in front of the IDEXX commercial team. In order to adopt something new, you must be willing to let go of something to make room for it. Now it sounds like a challenge and not like, well, I get the question all the time, George, you guys have all these new products. I'm like, yes, just think about what this means. What this means is having the trust, the credibility and the subject matter expertise to ask the customer if they're open-minded to learning something new.

Now you're in a conversation. But this is the conversation you want to be in because the customer has invited you into this space. They're curious. They want to know what you have. And so when you show up, you've got to bring clinical evidence, the right answers in the room, the right perspectives, the right thoughts so that the customer can start to process this. Again, innovation adoption and translation of value is not an event, it's a process. It takes time. And therefore, the commercial model has to be built in such a way that allows teams to spend more time with customers to go through this process but it's an important part of the way we think about this.

Now commercial teams are either gaining ground or losing ground. No one is standing still. You're either gaining ground or you're losing ground. So your ability to read the room and bring change management programs and ideas and thoughts to the entire health care team, not just the owner veterinarian, not just the practice manager, but all the associates, all of paraprofessionals, everybody at the hospital goes through change management when innovation presents. So you must have the capabilities and the capacity to do this globally to get this innovation adoption taken. And that's what our commercial model has been designed for.

Fundamentally, it's a change management endeavor. Great breakthrough science, but you've got to ask the customer to put aside what they learned at UC Davis and say, okay, I hear you on that. And yes, this is what you've been doing for 22 years in the hospital but we have a different idea. We have a different idea. Now you see what confronts the IDEXX commercial teams and why we need scale. So here's a bit of a take. I'm going to unpack this a little bit on the cancer piece of this. This is incredibly exciting work, what we're doing.

On the left is a pictorial of Mike's comment. 20% of the customers who have submitted a Cancer Dx test to an IDEXX reference lab are from customers who do not consider IDEXX their primary reference lab. Now why is that? Why is that? If hospitals run on routine, tell me why now this customer will send those samples to the IDEXX reference lab. Well, my own personal take, and it's only a personal take, is that all innovation adoption in veterinary medicine tends to happen the same way. It begins with a specific product or in this case, a test, a profile, a set of efficacy requirements, how does it perform?

Veterinary curiosity and willingness and a pet. That's how innovation adoption begins. Those 4 factors together, product with a set of requirements and profile, veterinary curiosity and willingness and a specific patient. That's where it begins. And so Cancer Dx in this case for lymphoma, those pets that activate that veterinary curiosity and willingness happen in customers who don't necessarily use the IDEXX reference lab as primary and they break their workflow, they set up an account with the IDEXX reference lab and they send that sample to us to provide them with a result. That is a profound statement.

And look at commercially, that opens up opportunity. We're in the face of record reference laboratory conversions as a commercial business right now globally, record. We're just getting started. This mast cell tumor at the reference lab hasn't arrived. Hemangiosarcoma hasn't arrived. This is just lymphoma, activating customers who don't consider IDEXX their primary reference lab. Now on the right, 2 really important notions. It's the Net Promoter Score of customers who use the IDEXX reference lab, that's in blue. And the Net Promoter Score of the IDEXX reference lab for customers who are not primary users of the IDEXX reference lab in green. Those scores are nearly identical, which is almost unheard of.

IDEXX customers think extremely highly of the IDEXX reference lab. We performed well. IDEXX customers who are non-primary to the lab who have used the lab think as highly of the IDEXX reference lab as their own. That is a stunning finding, a stunning finding. What does that mean for the commercial team? Well, that means the funnel of opportunity is wider than we ever gave ourselves credit for.

So between capacity, innovation and the fact that the lab has clearly performed so highly has earned nearly identical Net Promoter Scores. And as a reminder, the Net Promoter Score is a willingness to recommend to a peer. Let's just say, scores are points, but what does it really mean? It means I'm willing to recommend this to a peer of mine and 50 is world-class. So the backdrop of opportunity looked at globally here as cancer arrives at Kornwestheim and in Brisbane is bright. And so you want to make sure if you know what's coming and you know the tailwinds behind you that you install the capacity to do this well ahead of time.

Mike shared this slide, I cut off the far right, okay? This is all about our motivation to drive greater adoption of IDEXX innovation faster. We accept these as truths. IDEXX customers that adopt more grow faster. That's the message. That's the message. So if you accept this as a truth, you'll install the commercial capacity to do it and do it well.

Now the next 2 slides go together. This is -- I describe it as an opportunity dense global landscape. This is utilization benchmarked against the United States, okay? Mike has made the case persuasively that the opportunity for utilization in U.S.A. and North America is still extraordinary, the headroom. We've just benchmarked against the U.S. and looked at the next 14 countries, and we see utilization opportunity, significant utilization opportunity. But if it involves change management, it's about having the commercial capacity and capabilities to do this and do this well.

Taken together with this opportunity lens, the Venn diagram, customers that use IDEXX chemistry and IDEXX reference laboratory services, you can see even in the North America context, how much additional opportunity there is to have customers partner with us in those 2 diagnostic modalities, more opportunity in Europe, even more in the Asia Pacific theater. On the right, you see a stacked bar of instrument placement opportunities approaching 400,000.

Now that will become my goal at some point, not yet, but it will become my goal at some point. And the point is the mind tends to find what it seeks. If you're looking for opportunity, you can find opportunity. There are incredible placement opportunities here. And placement opportunities, again, are not about the instrument and what the instrument itself does at the present time. It's a platform that is going to grow over time in capability. It will be a renewal asset in those countries where we use contracting as an element, not the element and element of how we do business with customers.

And this opportunity lens is why we're installing commercial capacity globally to pursue it, both now and into the future as these platforms take on the extensibility that they have in the past. This is a snapshot, another reason to believe what's been happening in our international business these last 5 years. Strong double-digit growth in recurring revenue, and we've nearly doubled our customers from an instrument placement perspective. And that's with the capacity that we have. And when you look at the last 2 slides strung together, you would see why we want to get, as Mike described, more proximity to these customers. Why? Because we've internalized the notion of change management. Why? Because we've understood that, that's a process and not an event. Why? Because we know we have to ask the customer to first let go of something before they adopt something new and that is a proper commercial challenge, requiring trust, subject matter expertise, credibility and an ecosystem to bring that to life. And that's what we're scaling globally.

Now originally, and only to have fun with you, we were going to de-identify the flags and see how well you knew your global flags. See if everybody understood that the Netherlands and France had the same colors but differently organized. Anyway, we labeled them for you. And the point here is the playbook on the left is what we're doing. We understand territory loading, we understand the optimal balance of customers in any given geography. We know the ratio and matchup of the job systems and the job types. We know how to work carefully with one another. We have specialization where necessary in order to drive that subject matter expertise that we talk about.

And this ecosystem approach is not about having the roles, it's how they work together, and we train the teams to bring value and deliver value to customers globally. One really, really important part of this is not necessarily the motion itself, but the profile of the colleagues, the talent that drives this business. This is a people-based model matching up with our customers.

And we believe we have truly identified the right professional profile across these job types to optimize the way we deliver value to our customers, increasingly powered by AI-enabled commercial tools to help colleagues answer the 3 fundamental questions of the IDEXX commercial model. I've said this for now almost 15 years. The model is about where to go, who to see and what to say. And the more efficient we can make them with AI-enabled commercial tools, the more time they can spend with our customers in the field. Fundamentally, this is about reach. This is about reach. This is about getting to the customer to be able to spend the quality time to talk about just what we talked about here. Change management and staying with the customer throughout this journey. This is not transactions. This is partnership, agreeing on what we can agree on and extending from there and reaching our customers.

Our investments in commercial capacity are designed to do this, but in a very thoughtful, calibrated way. This is not an arms race. This is not bedlam, hiring people at breakneck speed just to have them. This is not that. This is a measured view of what we're doing, constantly with a pipeline ready to go based on organizational capacity, leadership readiness and all of the right commercial attributes.

There are two stakeholders that love this. One is the customer, that's Dr. Michael Stief. On the left, those are his words, not mine. This is how he thinks about this. The best possible care ladders up from the best possible diagnostics. That is how he is thinking about the business and its impact on his teams. On the right, another colleague of ours in the purple sweater, that's Anke Schaller in the Leipzig, Germany territory. This is how she describes her own work. Support is important, but it's really about jointly developing solutions, not selling a customer something.

If I'm trying to bring anything to life, it's this idea that what we're doing is working with customers, working with customers. That's what this is all about. And in fact, she loves this. I love this. This is where the action is. This is where the action is. This is what we like. This is why we do this. And so we end where we began. This is an opportunity-rich environment. We see endless decades of opportunity to expand and deliver value to customers. Our offer is clarity in the face of complexity.

Our offer is a commercial ecosystem tightly integrated, delivering value through the change management programs that are necessary to move innovation into adoption and long-term utilization. We're using a well-established commercial playbook, scaling it globally in the moment, proven with high returns, good efficacy, well accepted by customers, and we bring a growth mindset to commercial execution. All of those things taken together produce a highly engaged global commercial organization. You need high engagement at the point of the customer, and that's what we present to our customers around the world.

And while quantity has a quality all of its own long term, this is about both quantity and quality to be able to do the work of paying off IDEXX innovation. And so at this point, I will thank our global commercial organization for the great work they do bringing value to our customers every day. And my phone is beginning to blow up because I've communicated to them what Mike shared just an hour ago. They're already more excited than they were to start their day. So I'll thank them there, and I will conclude our opening segment. Mike Lane will have the wheel on the other side of a 15-minute break. So I will ask everybody to be punctual. Our Investor Relations team will gather everybody here in the room. So 15 minutes for those on the webcast, and we'll take a break.

[Break]

[Presentation]

Thank you.

Good morning. I want to start by thanking Golden Retriever, [ Lemon ] and her parent, Abby, and Dr. Lindquist at Louisville Animal Hospital and our Louisville lab team, our global pathology team and our R&D team to bring to life what we do every day and why we do it. It's my pleasure this morning to share the progress we are making in Spotlight Cancer Dx as an example of how we turn innovations into recurring revenue and highlight why the period we are in is the most exciting in my time at IDEXX. It all starts with the patient. Patients like [ Lemon ] in the moment of need with the right diagnostics at the right time.

With world-class advocacy and a connected experience, our customers don't just purchase products and services, they recommend them because our innovations change what's possible, supporting them in their pursuit of providing the best health and well-being for the pets in their care.

Let's talk about how we do this. It starts with novel biomarkers. Our R&D teams have a long track record of developing markers, Lyme Quant C6, SDMA, Cystatin B, fecal antigens, more recently, cardiac and of course, cancer, biomarkers that see disease earlier and more precisely than ever before. And value multiplies when we combine these markers into integrated panels and protocols as part of a connected experience. This is how one scientific advancement on our R&D team generates revenue and multiplies value across modalities at IDEXX and generates value over decades from the initial day of introduction whether it be at the point of care with our real-time diagnostics and chemistry and immunology, hematology, urinalysis and now cytology.

Real-time diagnostics don't just generate great insights. They support very productive conversations between veterinarians and pet parents. Conversations with answers and insights in hand, helping to turn recommendations into care. And we're introducing innovations at the point of care at an accelerating pace. And Pooja Pathak right after me will share how we're transforming diagnostics at the point of care.

We're also transforming diagnostics at our global reference laboratory with 80 labs around the world forming a sophisticated hub-and-spoke network and over 260 pathologists that together form a follow-the-sun model of coverage to support our clinical pathology customers, 24/7, 365, including our IDEXX inVue customers. Automation, digitization and AI work together with our proprietary LIMS to simultaneously provide service quality, productivity for our lab teams and margin expansion. We take a technology and talent approach to innovation in AI.

So our technicians and our specialists can spend time on only what they can do in supporting as an extension of the practice, veterinarians. We have over 800 medical specialists in oncology, radiology, pathology, internal medicine that often for a general practitioner who's seeing such a wide range of species and ages and disease states, often reach out to our medical consulting team often with their most difficult cases. This is what world-class service looks like. And when you measure it, you've seen some Net Promoter Score results. These are the Net Promoter Score results in that same survey for the customer groups, our largest customer groups, our largest installed bases, ProCyte, Catalyst, IDEXX Reference Labs, SNAP, VetConnect PLUS, all above the threshold of 50 considered world-class across industries.

This does not happen by accident. It's the elegant load and go workflows on our point-of-care instruments. It's a 99.999% and a 5-star experience at our reference lab. It's the differentiated diagnostic menu across modalities. This is a leading indicator behind retention and loyalty and price realization and the foundation of our recurring revenue growth.

Let me share a couple of examples of how diagnostics work together. The highest value for customers is not to have one modality or even the same 2 modalities from the same provider. It's about how the diagnostics work together in integrated solutions. We've been doing this for decades. Let's take Lyme disease, for example. Ticks and Lyme bites or tick bites and Lyme disease are surging. Veterinarians need the tools, the technology to diagnose, quantify, manage and monitor. This protocol typically starts with SNAP 4Dx at the point of care for heartworm, ehrlichia, anaplasma and Lyme.

And when there's a Lyme positive, IDEXX customers have the opportunity to reflex to the IDEXX reference laboratory for what we call IDEXX Lyme Quant C6. So this is a quantitative test for antibodies supporting veterinarians with their care decisions and recommendations for treatment with pet parents, all integrated together in VetConnect PLUS in the cloud, available anywhere, anytime in the practice, on the phone, even on the watch with one connected experience. One clinical question, revenue across both modalities. This is one example of numerous of multimodality integrated diagnostic solutions from IDEXX. Here's a more recent.

Mast cell, the most comprehensive integrated solution. Cancer Dx as a liquid biopsy looking at the entire body of the dog for signals of mast cell. InVue with the ability to interrogate specific lumps and bumps. Now this could start either way. It could start perhaps with Cancer Dx as part of a wellness panel and a signal was found. Maybe it's a pet with a thick coat or maybe the lumps just weren't visible or it could start with a concerned pet parent coming in about a particular one that they saw. Could start on either side, and it's all supported by our global pathology team with one click reflex from inVue.

It's important to note that all inVue FNA customers are IDEXX customers. They're either already IDEXX customers or they become IDEXX customers as part of the installation of inVue FNA and training to access this highly integrated comprehensive solution. Now George shared this, and you can see both progress and opportunity with 40% of customers in North America, still single modality with IDEXX and over half internationally, single modality. But we continue to make progress as customers value the integrated multi-modality diagnostic solutions that I shared.

And we often get asked, does one modality, does reference lab or point of care pull volume from the other. And our experience is no. Testing begets testing. And you can see this big data, thousands of IDEXX customers that use both modalities with IDEXX. And as they use more of one, they use more of both. You can also see the opportunity here with a fivefold difference between the first decile and the 10th decile.

And overall, just 18% of these clinical visits, these are U.S. clinical visits, including a chemistry panel. A significant opportunity for us to continue to partner, as George described, partner with our customers to support them in their mission to provide care. Now we do this innovation in significant unmet disease category areas, whether it be vector-borne, renal, parasitology, oncology and cardiac. And Pooja will talk more about cardiac and renal. I'll talk a little bit more deeply on parasitology and cancer.

Now another lens on this opportunity is to look at the underlying about a dozen highly differentiated diagnostic categories. This is combined across point of care and reference lab, everything from immunology, chemistry, hematology, cytology, radiology and of course, cancer. And as you look from the left to the right, that white space, those are existing IDEXX customers that just have not yet adopted the breadth and depth of this diagnostic menu. They're already on our systems. They're already using some of our point-of-care instruments. They're already set up with courier service. This is an opportunity as we partner for them to adopt more of this highly differentiated menu.

Now parasitology is an example where we've run the technology life play -- technology for life play end-to-end, transforming fecal testing. For over a century, this testing was done by looking through a microscope. Now whether you're looking through a microscope at another reference laboratory or in the practice or with a traditional microscope or even an automated microscope, if you're looking through a microscope, you're looking for eggs and you're going to miss infections. We've changed this paradigm of testing by looking for the protein. And as a result, we discovered 2x the parasitic infections because the eggs are not always there based on the infection cycle.

And you can see over a decade, starting with Giardia and then to most recently, Taeniid Tapeworm just a couple of months ago, technology for life approach we've taken. Taeniid was one of the parasites that customers ask for quite a bit because it's zoonotic. And not surprising, we've already run 1 million fecal antigen panels just in the past 2 months since adding Taeniid Tapeworm. So we redefined what's possible for parasitology. We're doing it again with cancer. 1 in 4 dogs, 1 in 5 cats, a tremendous disease burden, representing a $2.5 billion addressable opportunity.

Starting with lymphoma, which covered about 1/4 of the canine cancer cases, now mast cell next month, 35% and then hemangio will be at 40%. We're not done. We're then going to continue to add cancers to the canine cancer panel to 50% in 2028, and we're still not done. We're going to find more cancers to address, and we're going to go to other species as well. We, as you have heard, are on a mission to make cancer history.

Now lymphoma now has claims across wellness, aid in diagnosis, and monitoring. And as you heard, already over 11,000 purchasers of Cancer Dx, just about almost 1,000 additional customers just in the month of July. It's the breakthrough performance and pricing that helps earn this adoption with our customers. And it doesn't stop at diagnosis. It can now be used also for monitoring remission during CHOP chemotherapy, resulting not just in one testing event, but recurring testing.

And then mast cell, as you've heard about a bit already, this is one of the most requested, one of the most diagnosed. You can picture the number -- if you're a general practitioner, it's top of mind, the number of pet parents that are coming with concerns about lumps and bumps. And what we've done is we've optimized this test to be most aggressive to the aggressive tumors. Some are benign, some are cancerous, but there's degrees of aggressiveness. And it's the aggressive ones that we want to be most concerned about, and it's important because we also take veterinarians take different approaches to surgery and treatment.

And this all works together, as I described previously, along with the integrated mast cell cancer detection capability combined with inVue, combined with our global pathology team. And as you've heard, lots of excitement about hemangiosarcoma, the silent killer. This is perhaps the most heartbreaking situation in veterinary medicine, and not just for the pet parent, but for the whole team when there's an emergency and there's a pet and there's internal bleeding and this pet looked and act healthy the day before, even maybe that morning and suddenly, within hours, they're gone. These tumors typically form on the spleen and once ruptured in one peer-reviewed study, if you find it pre-rupture, over 1/3, 35% survived a year or longer. Sadly, in that study, no pets lived a year.

And again, typically within hours. This one is personal. I've been there. We've had 4 dogs in our family. This is Moose with my son, one of my sons. And 2 of our 3 dogs died of cancer, 2 from hemangiosarcoma and all in this heartbreaking way where they were acting and look healthy the day before, and then they were done. And my veterinarian shared words like these that you see on the slide.

Now here's the good news. Even with disease this aggressive, when found early, it can make a huge difference in the outcomes, as I mentioned in the study I shared. 35% if found early, which is what this test is made to do pet survival a year and longer but not found before rupture, sadly, no pets in that study lived a year.

So here's some more good news. There's a wide range. When you look at these 3 common cancers that will be in the panel this year as we move from a test to a multi-cancer panel. There's a broad range of therapeutic testing -- excuse me, therapeutic options for mast cell and hemangio that may start with -- typically start with surgery, followed by chemotherapy, immunotherapy as well as other treatments for all 3. The outlook for veterinary cancer care is very promising.

Now let me translate this innovation-led growth strategy into the business impact it's having. You heard about the 20%, the non-IDEXX customers that are accessing Cancer Dx and some of the implications of that. The implications from a lab perspective, it means these customers are now set up with our courier service. They're now experiencing the 99.999%, 5-star service we aim to deliver with every sample. They're getting introduced to the broader menu of the IDEXX reference laboratory. And then as also mentioned, 70% of all the submissions to date coming with broader blood work. And as we look at the adopters, we're seeing higher wellness diagnostic utilization among the adopters relative to non-adopters.

Cancer Dx is a powerful growth driver and multiplier, and we're just getting started. Further translating this innovation-led growth strategy into the impact it is having, here you see the VetLab and reference lab recurring revenue combined nearly doubling over the past 5 years. 2 modalities, similar growth as customers value this integrated diagnostic capability. The model is straightforward here. We partner with customers to bring these first-in-world innovations with world-class service levels to help them with advancing care and help them grow. And when they grow, we grow.

And when we grow based on our investment of decades in lab network and logistics and extensible point-of-care platforms, we have high profit drop-through on incremental growth. And we're able to reinvest that in all the elements of the strategy that we talked about today, biomarkers, software, workflow, connected experience, technology and talent.

In summary, we deliver diagnostics at the point of need, the right diagnostics at the right time for the patient right there based on their age, based on their breed, based on their situation. And veterinary confidence turns the diagnostic insight into action. And I want to thank all my IDEXX colleagues around the world for all they do every day to support our customers and earn the trust of customers as we partner with them.

Cancer Dx is at a tipping point, as you've heard. And the opportunity, the care gap, you've seen the decile charts. You've seen it a variety of ways. The opportunity to close that gap is what I'm most excited about. We know how to do this. We are uniquely positioned across point-of-care diagnostics, reference laboratory, software to partner with our customers to close that care gap.

So in closing, it's the needs of those you see on this slide. It's the needs of [ Lemon ] and her parent, Abby and doctors like Dr. Lindquist that inspire us every day to advance our purpose of enhancing the health and well-being of pets around the world. Thank you. I'd now like to introduce Pooja Pathak, who leads our VetLab point-of-care business, and we'll discuss more how we're transforming diagnostics at the point of care.

Thank you, Mike, and good morning, everyone. I joined the team earlier this year, so I have 2 quarters under my belt. So I'm new to IDEXX, but I'm not new to diagnostics. I spent most of my career in point of care and diagnostic imaging on the human health side. I led the mammography business for breast cancer screening at GE Healthcare. Julie and I were part of the team that launched the very first molecular platform at the point of care in the United States.

And more broadly, I've built point-of-care testing programs in cardiology and infectious diseases globally. I really believe in the impact of prevention in real-time care, and it's my pleasure and privilege to lead our VetLab business. So that's me. And you met [ Lemon ] earlier today or just a couple of minutes ago. So [ Lemon ] came in with a lump and she left with an answer. There was no slide, no courier, no waiting for a callback. That's the window that we operate in at the point of care. It's one visit, one diagnostic workup, one conversation with the family and decision before they go home.

Most of the time, the answer is reassuring and the family can go home just knowing. But sometimes, it's not. And that's when the answer in the room changes the outcome. I will show you some truly incredible innovations in the next few minutes, but all of it exists to do what's happened to [ Lemon ]. Give our clinicians a result that they can trust and act on, give the pet parent clarity on what happens next and give the technician some time back with the patient, more time back with the patient.

Let's widen out from that exam room and look at the innovative platforms that make this all possible. This is what has been built over the past decade, delivered to roughly 100,000 practices globally. MultiCue Dx will be an exciting addition to the family. We already covered the first principles of each of these, real-time results, reference lab accuracy and load and go simplicity. What matters as much as each analyzer is how they come together. Chemistry, hematology, urinalysis and now cytology, all designed to work with one another, a single interface across the entire suite, one workflow, one integrated report. A technician trained on one can easily operate any of the other analyzers. That's key. And every result flows into the record and onto the invoice without anyone touching it.

Catalyst is at the heart of this suite. Catalyst is the sector's most versatile, highest-performing chemistry analyzer. It is the workhorse of any in-clinic diagnostic program. You may have caught the load and go workflow above me. It takes seconds. And this is the slide next to it, a single form factor across a majority of our tests. Dry technology, combined with a modular platform design drives that breadth and menu. It's how we put chemistry electrolytes and immunoassay on a single analyzer with reference lab accuracy. Anywhere else, it would take 2 or 3. It's also how we add menu without touching the hardware. Super sophisticated technology, super simple for the user. With a Net Promoter Score of 63, customers love it.

Today, Catalyst runs 43 parameters across 11 prepackaged CLIPs and 34 high-value singles. The prepackaged CLIPs are the foundation of in-house testing run on nearly every sick patient and every pre-surgical patient. The singles answer specific clinical questions either alone or in combination with the clip. And we keep adding to it, which is how the platform becomes more valuable every year it sits on the customer's counter. This is technology for life in a single picture. We add roughly one menu item to Catalyst every year. We've had 2 innovations just this year and 5 in the last 3 years.

Pancreatic lipase, cortisol and SmartQC are seeing strong adoption globally. And this year, we introduced SDMA inclusive CLIPs as well as proBNP. Each menu item lands across the entire installed base of 80,000 analyzers, not just the next one. So again, the platform value continues every year for the customer, 2.5x expansion of economic value per placement since the launch of Catalyst One. The two additions this year expand our largest disease franchises, renal and cardiac, and I want to spend a moment on each of them.

IDEXX redefined the management of kidney disease with the discovery of SDMA. SDMA rises earlier than creatinine during the onset of kidney disease. And unlike creatinine, it is not distorted by muscle mass. So it finds kidney function loss sooner in patients who look unremarkable on a standard panel. A decade later, customers have run more than 120 million SDMA tests. In sick pets with reduced kidney function, a standard panel misses about 30% of cases. SDMA catches them. And in cats, early diagnosis and treatment delays disease progression by about a year.

So in June, we did the obvious thing and built SDMA directly into our most common chemistry panels across North America. No separate slide, no separate decision. It's simply included, and it drives compliance to care guidelines. Early adoption has been strong, and international markets will follow in the first quarter.

Our second launch this year takes us into a category that we haven't yet served fully at the point of care. Heart disease affects nearly 1 in 10 dogs and 1 in 6 cats, and it remains underserved in general practice. Today, cardiac evaluation is limited a little bit to specialists. Echocardiography is a gold standard, but access to echo can be limited with about only 420 cardiologists in the country for more than 23 million cats and dogs with heart disease. General practice needs better tools.

In October, we bring Catalyst ProBNP to our customers in North America. It is the first and only dual species NT-proBNP test at the point of care with reference lab accuracy and quantitative results during the patient visit. The test helps doctors understand risk and make clinical decisions in real time. Think of an older cat with preanesthetic blood work, where heart disease is often silent and finding it changes the plan or a small breed dog with a heart murmur where proBNP helps evaluate the likelihood of clinically significant disease and earlier treatment can gain about 15 months of healthy life. And it builds on our connected cardiac offering, reference lab testing, ECG, advanced imaging, AI-assisted tools and specialist expertise, so a doctor can know who to treat, who to image and who to refer.

Both launches reinforce the value proposition of Catalyst to our customers over time. New menu is a key driver of Catalyst economic value expansion, as I mentioned, 2.5x since the launch of Catalyst One. That extensibility has been designed in from the start, and it's what enables the breadth of menu across chemistry, immunoassay and electrolytes. With Catalyst ProBNP, we pushed the platform further again, delivering a precise quantitative immunoassay across a wide dynamic range. The inVue and MultiCue are also designed with that same extensibility in other large existing test categories. For inVue Dx, that means utility across cytology. There are 150 million of them done every year.

And we're only at the beginning with inVue Dx. So that blue bar has a lot of opportunity to grow. Let me show you what this looks like in the practice, why customers choose inVue Dx today and where we're going from here.

Mike and George talked about the change in transformation in cytology with inVue Dx. That change is directly tied to improve clinical, operational and financial outcomes for the practice. The first is improved consistency. With load and go workflow, there's no slide to make and no subjective read. So the result isn't dependent on who ran it. The consistency and quality is built into the analyzer.

With ear cytology, it's 96%. The second and perhaps the one customers care the most about is the time savings. More than 90% of hands-on time is freed up within inVue Dx. That's about 10 to 20 minutes per patient. That's a technician back in the room with the patient rather than on the bench and a clinician with more practice time to practice medicine. The third is the integration. A microscope result lives nowhere unless someone types it in. Within inVue Dx, 100% of the results are recorded and invoiced automatically.

For one practice, this matters across a corporate group running hundreds of practices, it translates into a standard of care that's actually implemented. You've seen these inVue Dx categories before. There are roughly 150 million cytology readings done a year on the microscope. So this is work already happening today.

If we look at ear cytology, blood morphology and FNA, they're completely different areas of care. But the needs that we just discussed around consistency, around operational efficiency, around integration, these are common across all of them. And this is reflected in the adoption rates for inVue Dx.

A vast majority of inVue Dx customers are running both ear and blood and have expressed interest in FNA as well. FNA is a significant category in its own right, 12 million tests run on the microscope. And that's only a fraction of the opportunity because, as Mike mentioned, only 1 in 10 lumps and bumps is actually tested today. And then beyond these three, there are 100 million more other in-clinic cytologies that are run every year. That's our runway. And none of these categories is a single test. Each one of them is a platform within the platform.

Let's take blood morphology. We launched in December 2024 with a core menu focused on sick pets, CBC reflex and presurgical testing. Since then, we've added new morphologies continuously. I won't go into each one. The point is that each addition is enhancing the clinical decision-making at the point of care.

And the depth inside each one of these categories is something no one else has, a global network of board-certified pathologists training our deep learning AI across 60 million samples, plus the engineering and software capability to put this all on a benchtop analyzer.

Every addition reaches our customers through a software update over the air, so there's no service visit or no additional hardware required. And we're nowhere close to done here. We are keep adding menu to blood morphology, ear and, of course, FNA.

I am pleased to share that in Q4 for blood morphology, we'll be adding nucleated red blood cells to the menu. They point to severe regenerative anemia, toxin exposure and sometimes marrow disease. And together with CBC, they also ensure more accurate and reliable blood counts, which is exactly why CBC blood morphology belong together.

Every veterinarian is trained on this. But in practice, blood morphology often gets skipped because as Joyce says, time is precious and the technique is variable but put ProCyte and inVue Dx together and the problem goes away, the first comprehensive hematology solution at the point of care. It works because the interfaces are linked.

An abnormal CBC links directly to a morphology that needs to be run and both results come back in a single report. The prompt is built into the workflow. Testing begets testing. As customers see the value of the comprehensive hematology, testing volumes increase. Practices that adopt inVue Dx see 6% higher utilization of CBC on their ProCyte. And there are 50,000 ProCytes in the field globally.

Every one of them is a candidate to be paired with inVue Dx, which brings me back to FNA. FNA is progressing well through our controlled launch process. We meaningfully expanded our customer base entering into the third quarter. Practice team training on the integrated workflow is a key part of the continued rollout, and we're planning broad availability by the end of the year.

Stepping back, though, FNA shows what happens when we take both cost and complexity out of a test. With inVue FNA, we simplified the sample prep, we created a 5-minute alert to confirm sample viability, and we priced it for access. So the doctor never has to think about whether a lump is worth interrogating as doctors are testing twice as many lumps and bumps.

And as we talked about, every inVue Dx customer is an IDEXX reference lab customer. After the inVue Dx run is complete, with one click and inside the same workflow, the clinician can have the case reviewed by an IDEXX pathologist and a malignant result can be immediately followed up on. This is how a test becomes a protocol rather than an exception.

And as this happens, the standard of care rises and testing volumes increase both at the point of care and also in the reference lab. And inVue Dx is growing quickly. And with every placement, it multiplies across IDEXX, more CBCs run, more cytologies done in the reference lab and more of the diagnostic pathway being completed. All of this innovation scales with our installed base.

So let me just end with a forward look on that. We have visibility to 10% or better growth over the long term, and this opportunity is weighted towards international and towards new platforms.

In closing, real-time reference lab quality answers at every visit produce a step change in practice productivity and growth because it's built into the workflow. We are innovating at a pace that we have never seen, opening categories of testing that did not exist in general practice.

Technology for life keeps raising the value of every analyzer already placed without new hardware. And this execution compounds high-quality placements, expanding utilization and world-class customer loyalty are what make this recurring revenue stream durable, and that's what generates value for our customers and for our shareholders.

Mike ended with the note that behind every innovation is a pet parent and a clinician who needed an answer. Behind every innovation is also an IDEXX colleague who was inspired by that need and figured out a solution. That curiosity is what discovered SDMA and built in inVue Dx. And my thanks goes to those cross-functional colleagues around the world doing that work every day.

And with that, I'll hand over to Tracy Byers. Tracy is going to review with us our software and AI strategy and how it multiplies our diagnostic opportunity.

Thank you, Puja. So I love my son and soon to be daughter-in-laws cat Munk here, but what's funny about this photo is I'm allergic to cats. So good morning. My name is Tracy Byers, and I lead the software and diagnostic imaging portfolio for IDEXX. I joined about 4 months ago, and I brought with me about 25 years of experience in people medicine. I spanned a number of big tech companies like Philips, IBM and Optum. And my dedication is really to the mission of driving health care impact, and it's been a great match here at IDEXX. I've been able to bring my experience in software, artificial intelligence, diagnostics and medical imaging to IDEXX and the team, and I'm super happy to be here.

Veterinarian software has the privilege of playing a very vital role in the mission of helping pets live longer and healthier lives. And the software is an enabler of great care delivery, and it's also the benefit of serving as a strategic growth lever for IDEXX.

More importantly, though, we view it as a critical part of allowing practices to operate at their best, both helping the veterinarian practice the care they want to practice and helping pet parents engage and advocate for the care that they want to receive for their pet health.

Over the last few years, we've been building the first intelligent integrated ecosystem for veterinarian practice, one that helps serve as an operating system to achieve those core goals. Over the last few years, when I think about the power of artificial intelligence, the impact of having -- that's having on things like pet prompts, parent prompts and the impact they can have on the future of innovation, both inside and outside the company to help raise the standard of care at scale. When I think about the goals to build an integrated intelligent AI-driven platform, I think about it through the lens of our customers and the problems that they're trying to solve.

Veterinarian practices are incredibly busy with swiveling chairs to use different systems to run their practice. Our enterprise customers are looking for ways to standardize and scale the practices and our pet parents are looking for easy ways to engage and manage their pet's health.

We know that the time of care, the consistency of care and the confidence in care are three of the most major pain points that are experienced across the board. And what we're really seeking to do is take the work out of workflow. Our integrated ecosystem enabled by AI allows for smoother workflows, more reliable care and higher care acceptance, and I'm excited to get into a little bit more of the why.

When I think about solving those problems, time, consistency and confidence in care, this slide helps capture our unique approach to building the ecosystem, and it's engineered end-to-end for the health of the pets we serve. We're addressing the needs of three key populations involved in the care continuum, the practice, the enterprise and the pet parent.

And the tight connection of our software solutions to our diagnostic ecosystem supports delivery of incredible care to pets. Now the platform is purpose-built for veterinarian care. It's designed end-to-end workflow across clinical, operational and financial journey, and this is relevant both for general practice and emergency and specialty hospitals.

And it's built on an expandable ecosystem that enables hundreds of our partners and future modules to plug in seamlessly. And it's powered by a domain-specific data model that understands veterinarian context, and that's critical for AI deployment and deep insight into our customer. Corporate groups have enterprise scale needs that legacy PIMS largely were not built to handle, but ezyVet is. With ezyVet, we offer enterprise-grade platforms that enable standardization across multisite operations.

Our software delivers centralized controls, real-time insights across multisite operations, and it helps them drive wellness at scale for their network. It's built with enterprise-grade security to meet the standards of PE-backed and global organizations. It's backed by a world-class software team, including talent from Google and lots of other tech leaders, and it's designed to meet the unique and complex needs for emergency and specialty hospitals as well as the general practitioner.

On the right side, the impact is clear. The growth is being driven by corporate demand for platforms that scale and have world-class security and innovation. Bottom line, our value for enterprise is clear, and it fuels accelerated growth across the enterprise segment.

Now our data shows a surge of momentum, and it's a validation that we're constantly improving in our ability to solve those customer needs. Nearly 70% of our IDEXX PIMS installed base is in the cloud, and it delivers on a scalable seats environment. We have net recurring revenue that we're really proud of at 105% across our ecosystem. And in the past 6 months, we've seen meaningful user growth with 37% with Vello.

Now I'd like to turn to something we're really excited here at IDEXX. We've identified key moments along the care continuum where our platform is already having an impact today. And then when you layer AI on top of those moments, it's an area of huge opportunity to unlock value for clinicians and practices.

Think about the impact of prompting the pet parent to consider a wellness test or Cancer Dx for an at-risk read or a post-visit prompt with a follow-up on a visit. I know I really probably would have remembered to bring in my fecal sample if I had been prompted the morning I was walking my dog to bring it in and it really would have been helpful.

But the good news is that we have really immense scale. We have more than 107 million clinical visits a year across our practice management platform. So we have more to do. There's a great opportunity ahead of us with AI and the ability to drive moments such as configuration, appointment reminders, summarization and real-time prompts in the visit, not only more efficiently, but faster and delivering real value both the veterinarian and the pet parents.

Our software brings meaningful impact for customers, but it's also showing significant impact on blood work inclusion. Practices that use our system have higher wellness inclusion, but it's another 300 basis points higher when it's combined with Vello.

This is an impact that's not simply prompting the pet parent with bloodwork reminder, but it's reinforcing the importance of engaging directly with pet parents. The impact of -- the impact that AI is having across our portfolio extends to our imaging and telemedicine business as well. When it comes to imaging, we know that image quality is the largest driver to better diagnosis.

And for IDEXX, we're applying a layer of AI across the entire imaging portfolio, and that's delivering improved quality to every image. We have AI applied to the new ImageVue DR50 Plus, the Web PACS workflow software and with our board-certified radiologists in telemedicine. The result is IDEXX Web PACS imaging workflow software and telemedicine are driving meaningful productivity and image quality in the industry. Each of our products in the imaging portfolio deliver customer value on its own. And then it brings even more value when it's combined with the broader imaging portfolio.

And then again, when you combine it with the example Puja gave with the cardiology test and the diagnostics. Our imaging solutions are just another instance of innovative platforms across the entire ecosystem. Having spent more than 25 years in human imaging, I'm really proud to see the deep commitment to dose and staff safety here at IDEXX.

The good news is that veterinarians don't need to trade dose for image quality. You can see in this image, the ImageVue DR50, we have an unmatched digital X-ray image quality at a lower dose. In fact, it's 60% lower than the premium competitors. We know how critical to maximize the safety of our health care colleagues and while we still allow for the highest tier of quality. These solutions are embedded directly into the practice workflow, and they drive better productivity.

Now before closing, I wanted to turn to some of our high-level financial outcomes. The bottom line is this is a great business, and we're delivering. We're driving cloud migration, expanding ARR, driving pet parent engagement that delivers diagnostic synergy and it's fueled a high-growth software business within IDEXX.

These durable, high-quality revenue streams supported investments in new software features and also deliver solid profit gains. This is exactly the business we set out to build, and we're really proud of the customer response and the strong financial outcomes.

What you've seen today here is how our ecosystem is unlocking enterprise standardization. And it's driving higher practice revenue through a combined power of software and diagnostics. Our corporate customers are leaning in and pet parents are engaging digitally, and it's leading to higher compliance, stronger wellness uptake and better pet health and more sustained growth.

As we scale new innovations like Cancer Dx, software becomes even more critical. It's how we educate, embed into the workflow, engage with the pet parent and help make new standards of care stick. This is not just a tech shift. It's a transformation in how care is delivered and how IDEXX captures and delivers value with software at the center, diagnostics scaling and the profession evolving. IDEXX is not just building an integrated intelligent ecosystem, we're redefining the future of veterinarian practice and pet care.

Thank you. So next up, Michael Schreck will interview and have a discussion, fireside chat, I guess, with Dr. Jo Malone from VetPartners Group, but we'll have a 15-minute -- or a short break, I think, here, and we'll hand it over to you.

We're going to take a short 5-minute break. So a quick break, and we'll be back for the great customer conversation. Thank you.

[Break]

Well, good morning. Welcome back from break. It's good to see you. My name is Michael Schreck, and one of the privileges I have as a part of my responsibilities is to support our largest strategic partners around the world. And with that capacity, it's in that capacity, I'm delighted to introduce Jo Malone, who's the Founder and CEO of VetPartners Europe and is one of the largest hospital networks in the world. And we'll talk about that in a moment. I also wanted to share in context of Jo, maybe you could share a little bit about yourself just to give us some background.

But before you do that, I have a public concession, which is I asked your team, your team mentioned that you had a night job, and we really wanted to know what it was. And apparently, it's running ultramarathons as part of your night job.

Now it's not like you had enough to do already, but maybe you could share a little bit about the awareness that you're raising for this as well as a part of your background. So I'd love to hear a little bit about your journey as a DVM. I didn't mention that also a DVM and Founder and CEO of VetPartners.

Thank you, Michael. Yes, I'm a vet. Someone said earlier on, have a calling. Well, I am typical of that. I can't remember when I didn't want to be a vet. So I worked in clinical practice for 18 years before I founded VetPartners in 2015. And yes, I Marathon. I'm raising money for two charities close to my heart. One is Vetlife that provides mental health support for all vets in the U.K., and they do a phenomenal job. And the other is Macmillan Cancer.

My mom had cancer twice in the last 10 years, both diagnosed through screening. So another topic close to my heart. And very fortunately, she has survived both and she's now cancer-free. So raising money for both of those charities. So yes, it's 6 weeks away, so I'm still getting up very early in the morning and running late at night.

I know you ran twice since you've been here in Portland, Maine. So I know you're on a different body clock, but that's impressive. So we're excited to hear about this event. Maybe a little bit of background on VetPartners and its footprint in Europe and how you're thinking about its development and impact in Europe.

So 2015, VetPartners started five sites, GBP 8 million revenue. And fast forward 10.5 years, we've got 800 sites-ish, about 13,000 employees. and revenues of about GBP 1 billion. So really been a will-wind 10 years, probably even slightly better than my 18 years of clinical work actually, and you can make an even bigger impact on the patients that we serve.

When we started VetPartners, we were quite clear in our intent. We wanted to be the veteran group of choice for our team, our clients and our patients and all the partners that we work with. And really, quite simply, our key strategies have broken down to four real areas: be a great place to work, number one, most important; number two, provide an excellent experience for our clients; three, provide outstanding patient care; and four, grow our business in an ethical, sustainable and profitable way. And actually, that fourth one is delivered by focusing on the first three.

That sounds super simple, and most groups can probably say that. It is simple, simple to write down, that's for sure. What's complex is actually delivering that and doing that whilst you're scaling and at scale. Someone said earlier that change management is a huge part of delivery of the innovation into practice for IDEXX.

Well, it's certainly change management at scale when you're growing this quickly. And really, for me, there's two key elements. We focus from the very start on how we do it, how we behave, it's all about our culture, looking after our teams and delivering what we want to try and do through them.

And we do that secondly, through training them, training them on how to be the best they can possibly be across all our strategic pillars. We actually see ourselves really as a training company. So yes, it's been a whirlwind.

Wow, impressive. Congratulations. We're -- you've had a big impact on IDEXX. You spoke from this stage a little over a year ago to our global team. And you did mention that you saw yourself as a value-add platform in part through training and in part through standardization with kindness, I think, was your quote.

And I know IDEXXers around the world still use that in talking to each other about how we can serve you better. I think maybe sharing with the audience a bit about what standardization with kindness looks like and maybe how you see that projecting forward?

For me, as a vet, I understand that vets want their clinical freedom. They want their professional autonomy. But actually, they also want us to make their lives easier. So some element of standardization helps them, whether that's standardizing our wellness programs, whether it's standardizing estimates and giving treatment options to clients.

All of those things, how we send reminders, standardizing those things, standardizing the messaging, the wording just makes it so much easier for them, but not losing the bits that they really, really care about because for them, they like some freedom. Again, someone said earlier today, it's about treating the patient that's in front of you and the client that's in front of you. And each one is unique and different.

If we can give a safety framework of the standardization, but give them some flexibility of flexing the treatments that are important to that client and that patient, that I believe how can standardize with kindness and help our teams without taking away the bit that they really care about.

As you've thought about both recruitment and retention around that with your clinicians and you're doing that across many, many countries. How is that -- I guess, that philosophy landed? And how are they -- how are your teams responding to that?

Yes. So I would say they responded incredibly well. Our retention rate is excellent. We are market-leading across our geographies. We have the benefit of recruitment being slightly easier in Europe than it is in the U.S. varies a little bit by country. Germany is the most challenging.

But really, our reputation then grows and grows within the profession. The profession is tiny. And it takes a long time to build up your profession, your reputation and you can do it very quickly. So really, it's continuing to do what we say we do or what we're going to do and sticking to that. But it absolutely is the right approach.

As we sort of maybe migrate into some of your growth plans and initiatives, one of the things that is a unique feature of the European environment and particularly the United Kingdom, is the wellness plans and the membership components of that and how wellness gets woven into an annual cycle?

So perhaps you could share a little bit about your wellness plans. And I know you've thought a bit about how those get expanded annually and some of the countries in which you've launched them. Maybe we could hear a little bit about that as well?

Yes. So pet health plans are incredibly important for us. Our clients love them. It helps them spread the cost of care, and it helps them be reassured they're doing the right thing for their pet. So it includes vaccination and annual extra check with the vet, parasiticide treatment if it's needed. And we have seen it grows our revenues by 1.5% roughly in the United Kingdom year-on-year-on-year.

Roughly 32% of our clients currently or our patients are on a plan, and it grows, and we're expecting it probably to get to about 50% penetration in the end. So it's hugely important to us. Some of our European colleagues were thinking in their culture, it wouldn't work. I'm pleased to say it does work. And the benefit of being a group across multiple countries is you can share best practice and show how to do it.

So in Spain, it launched a year ago, they're already at 6% to 7% penetration of their active client base, and it's delivering GBP 1 million of revenue per annum already, and they've just started. And really, clients love it and clinicians love it.

And more importantly, it gives our teams the reason to have a preventative health conversation, a wellness conversation. There's a reason and it's also saving the clients' money. If they were to purchase everything on the plan independently of the plan, it would cost them about 25% more.

So it's a great good news story for our clients. And what we have also discovered through this is you can communicate directly with clients. So we send a lot of reminders to them, we send them prompts. So a year ago, we included wellness blood testing to our plans at a 50% reduction.

This July, from the 1st of July, we wrote to our clients and said, great news from the 1st of July this year, wellness blood testing is now included free of charge on the plan. And our numbers of wellness blood testing went up 15x what they were before. More than 15. 15x the number that we were doing before.

And our teams in the practice didn't really have to do anything. It's because we let the clients know about it. So clients want this. So it comes down to how we support our teams. We support our teams by letting clients know by educating them. That's absolutely shown me that this is what clients are looking for, and we see that more than ever.

Wow. Maybe two reflections on that. One is, as you've looked at the Gen Z rising generation -- are you seeing them adopt the wellness plan and this approach more readily? Are you seeing also perhaps how they're reacting to your expansion of wellness, including bloodwork?

So I would say when we've looked at our client base, it's across all generations. They want this for their pet. It was said earlier on today, I can't emphasize enough, people love their pets more than they have ever loved their pets. So across all age profiles, but I think the younger generation and actually the generation to come next.

The outlets.

I have two myself. They are into wellness like I have never been really are. So when they become pet owners, I know this is the sort of thing they'll be looking for, for their pet. So everything you've heard this morning, I see play out in our practices with our clients. It's what our clients want.

I don't -- your children must be ultimately well for an ultramarathon to say that their children are focused on wellness, that's amazing. I do think it's fascinating that, that generation is focused on their own wellness and that translates to their pet.

Maybe thinking a little bit about your journey with cancer. You mentioned your mother. Naturally, you've been in clinic and had to face the cancer dynamic. Maybe you could share a little bit about how that plays out as a clinician. And then perhaps we'll talk about how Cancer Dx might play a role in supporting your clinicians in that dynamic?

Okay. I mean, certainly, for us, most definitely in the U.K., but across most of our European countries, there's a lack of oncologists. Actually, we're seeing cases like lymphoma being referred less because we can't access appointments with oncologists. And it's such an emotive and difficult time when a pet is diagnosed with cancer. And actually, our first opinion clinicians are being asked more and more to deal with these really upsetting cases.

They're having to manage them, diagnose and treat them, guide clients through it. So it's really challenging. And as of that, even when I qualified more than 25 years ago, clients asked if there was a blood test for cancer, what could they do to understand and know.

So actually, the innovation that IDEXX is bringing out is absolutely fantastic. This is something we've been looking for, for a very long time. And the disease is coming. Hemangiosarcoma is as traumatic as discussed. These patients can die within an hour or 2 of being presented, and this has come as a total shock to pet owners. So it's going to be hugely helpful.

Yes. Wonderful. As you put your CEO hat back on and think about Cancer Dx and its connection potentially to your wellness plans and how do you think about, especially now that in Europe, it will be a panel in Q1. How do you reflect on that as an opportunity to drive wellness inclusion with bloodwork?

So I think the fact that it's a blood test, it's super simple. The specificity is really high. For me as a CEO, it gives us a growth opportunity. And more importantly, it gives us a growth opportunity through providing outstanding patient care and an excellent experience for our clients because it's what they've been asking for. So it helps all of them, and it makes our teams happy because they know there's more they can do.

So across the board, there are no negatives as I can see, apart from a very interesting discussion we had about change management. This is about just changing habits, creating workflows so that our clinicians are confident about how to use the testing, when to recommend it, what rooms to recommend it more in.

And that does lead then to health plans because seeing what's happened with our wellness blood testing, what happens in July, and we're anticipating even more wellness blood testing in August.

We're looking at all our numbers now, but actually, we are planning, hoping to put Cancer Dx as a panel in our wellness blood testing because we know that with more testing comes more testing. With more testing, we will find more subclinical disease, which helps our team members. They feel like they're doing a more fantastic job than they're already doing. It helps our patients, and it's fantastic in the eyes of our clients. So really, it's a win-win.

Maybe pivoting a bit to inVue and your experience with inVue, it's early days. You've started to roll that out, I think, starting in March. Maybe we can get a sense for the early clinician reception. And second part of the question would be around the menu expansion and how you see that driving or supporting adoption?

Yes. I guess I will start with when I was a vet, the worst thing you could possibly do was a finding Elspar because about 30% of the samples that you take, that you send off to an external lab come back embarrassingly saying there were not enough cells detected in the sample to give you any sort of reading, phoning an owner and telling them that when they were in the practice a few days before is incredibly frustrating. We know that ear cytology, we know that blood morphology helps us diagnose cases better and treat cases better. So why don't we do more of it already?

Because actually it's time consuming, it's complex. It's quite difficult to get samples that are consistent that give you the answers that you want to. And actually, you don't have time in the day to spend the time you need to looking down a microscope. So then you often send them off to an external lab, which means they don't come back for a few days and then you have to ring the client back.

All of those things are more complex workflows. If a workflow is complex and you're not sure to get consistent results, clinicians put off recommending them. And that's why we don't do as much. With inVue, it unlocks a different workflow, which means you can do it ear cytology, the nurse -- the veterinary nurse can do an ear cytology while the client waits.

You could do an FNA, which is fantastic, by the way, that's coming, while the client waits. So actually, if your sample hasn't got enough cells, you could repeat that sample before the client leaves the building, and you haven't got to make that embarrassing phone call.

So for me, all these things are fantastic innovation. The inVue will massively help and simplify workflows. The challenge is, and it was said earlier, it's change management. It's getting our clinical teams used to a different workflow and getting confident to use a different workflow.

But we will get there. We will absolutely get there. And the more we can use AI innovation, contacting our clients and telling them about these things that are possible, if they're booking in with their pet with an ear problem, actually sending a prompt to them to say, part of the treatment management for fluffy could be ear cytology.

This is what it would mean, click here to read more about this, so that clients come in more informed. So all of the innovation that is coming with the power of AI as well is hugely exciting for me as a clinician and as a CEO.

Wow, thank you. Our partnership with you is relatively new, and I can speak on behalf of our IDEXX teams. We're energized and grateful for the chance to be your partner. That's led us to do a pretty significant conversion of your lab business. So perhaps you could share a little bit around how our joint team showed up together, how that transition went. Maybe give us a reflection on that?

Yes. I think it's fair to say I've worked with IDEXX since I was seeing practice in practice when I was 14, packaging up samples to send to our local lab. So I've known IDEXX for a long time. But yes, I think it's been the last 2 years when our understanding of each other's companies and our perspective has really strengthened. And what has really amazed me is how similar they are.

When I visited here for the first time, the passion that all the team members I met have for looking after pets. You don't imagine that someone creating the machine you're going to use in practice is as passionate about pets and talks about that when you meet them, but it's lovely to see.

And then moving on to the lab switch, changing close to 400 sites, external lab provider, career service, all of those things, that's change management at a huge scale. And then we discovered we had to do it in an accelerated fashion over the span of 2 months.

So I think we had lots of phone calls organizing it, but actually it went incredibly well. And I was surprised actually by the Net Promoter Scores you put on here because I think if you ask our teams, around that experience and their experience of their external lab provider in the U.K. now, it would be higher than I'm sure it would.

So a huge thank you to all the teams that are involved because it's gone incredibly well. And just in time for the inclusions we added to our pet health plan and the increased volume as well. It went very well.

Beautiful. Thank you for that. We -- maybe just because we're never satisfied, this is probably something we share together, which is thank you for those kind words. We're always more interested in what we could do better or more of to serve you and serve your clinicians. So I'll ask the other side of the coin question. What is it that we could do as a company better to support you?

Yes. I think it's two main things. First one would be training, training, training, training, training for all members of the clinical teams, so the front-of-house teams, them understanding what happens about a sample, why Cancer Dx is such a fantastic thing. So you cannot do enough training. People forget, you train and then 2 months later, they forget.

So training, training, training, which you guys already do an awful lot of. And the second is simple workflows. And I think the recent partnership we've had training out on Cancer Dx through lots of roadshows around the U.K. has been a really great example because the person in our team who was working with your team came and all in the office and said, "I want you to see the materials we're using and she put this folder on my desk, and I thought that was the materials from every roadshow.

No, no, these were one set of materials. And I think everything has been thought about checklists, asking where the laminated sheet would go. And it was all about making sure our clinical teams understood the workflow so that they would adopt these things really easily.

And I was heartened by the commercial discussion echoing that. Sometimes as a clinician, you're on the end of what feels like a sales pitch and actually, you're worried that they don't understand how challenging changing those workflows is. What I heard today is they absolutely understand that their job is still to sell stuff at the end of the day and make you see what is really good for your business.

So they shouldn't change what they do, but echoing more that they understand the workflow and the changing workflow in hospitals that have got a lot of employees, getting them all to understand and change that workflow is challenging. So just focusing still on those two things that you do, but doing more of.

We're listening. We're listening. Thank you. With a few minutes left, maybe two questions. One is we haven't really touched on artificial intelligence. And so I'd love to get your view on how that is, in your mind, going to play out in supporting your clinicians and care teams?

And secondly, just as you're leading final thoughts with this group around -- over the next 5 or 10 years, what do you think is going to be materially different? Or what does that future look like to you?

Yes. And I think there's two things are link. I am a dinosaur when it comes to IT, even I am now in love with Claude. So I think AI is huge. The veterinary profession is very traditional. We haven't even touched yet really using AI at scale for customer communications. We're just getting our head around how many reminders you should send somebody to prompt them to come in.

Imagine a world where we're calling them and it's seamless and it makes -- the AI makes the appointment very in a very personalized way. There's a huge amount to come. I know our clinical teams want more help with prompts around clinical treatment plans. Imagine when that's in the practice management system and the prompts are coming up saying, these are the treatment options. These are the differential diagnosis. All of that will be immensely powerful.

And then using AI to work out which treatment pathways actually enhanced our patients' well-being, which caused them to live longer, what were the treatment options that worked. All of those things, I think, are going to be huge. And then I think for me, if you look forward now, we all had -- we all had a fantastic time during COVID.

There was more work that we take a stick at. Our clinical teams didn't have such great time coping with that volume of work, which is really, really challenging. They're all now having maybe a slightly easier time. We are all mourning the loss of that volume of growth, but it was inevitable.

The COVID moment and the growth was always a bit of a blip. But you saw earlier, we're still seeing the same growth trajectory. When we look at our active patients, actually, they're coming in as often or actually when you look at the age profile for that age group, they're coming in more often than they used to do. So all of those things are positive in our profession. We have a great profession. We have a great sector. There are a huge amount of things to look forward to.

People love their pets more than ever. I think the younger generations will love their pets more than the last generation before them. We've got huge improvements in medicalization happening. Our Southern European countries are growing phenomenally, double-digit stuff. Why? Because actually medicalization and humanization of pets is further behind.

The U.K. is further behind the U.S. So there are huge growth trajectories left in many, many parts of the world. So I think if you see what AI is going to unlock as well as the trajectory of people still love their pets. They want to do what they can for their pets, and there being more options, I think we've got a lot to be optimistic about.

Beautiful. Well, it's been a real treat, and we're grateful that you took a little hop across the pond to join us today. And thank you for your insight and perspective. It's been tremendous. Thanks, Jo.

Thank you. for every...

I'm going to transition to...

Well, good morning. I'm Andrew Emerson, IDEXX's CFO. Thank you all for joining our sessions today, and thank you, Dr. Malone, for sharing your insights as well. On the screen here, you can see Sunny and Uki. These are two of the six rescues that we have in the Emerson household, and we're equally distributed between felines and canines. And we are what Julie described earlier as a family with pet permanence. We love our pets today, and we see many more in the future with us. I'm pleased to take you through our financial review.

Today, we'll discuss how we're advancing our growth strategy and our overall financial management approach associated with that. Our strategy is really centered on our mission, which is to improve pet health care. And we do that through expanding the use of diagnostics and software centered on innovation and customer engagement. That builds durable revenue annuities that benefit from scale to deliver strong financial returns and free cash flow generation.

This consistent focused strategy has delivered outstanding multiyear financial performance, really aligned with the long-term goals that we've set. Our core attractive businesses and the segments in which we operate in produce ongoing ability to scale operating margins and generate cash. And 2026 is on track for another year of strong financial performance.

A key driver in this financial performance is our ability to expand CAG diagnostic recurring revenues on a worldwide basis. In the last 5 years, we've expanded these revenues by 10% annually to deliver over $1 billion of highly durable incremental revenue with high margins.

Our commercial model is really the key to how we continue to advance this. And as George defined earlier, we've really continued to refine this model over a decade plus, and it is globally applicable because it's centered on partnering with our customers. And as they grow, we grow. And so this expansion of revenue is really an expression of the value that customers see in the IDEXX solutions. And we see a long runway of growth ahead of us.

In the U.S., we see potential for 10% to 13% long-term growth on average per year. And internationally, it's even higher as the role of diagnostics is in earlier stages. And while clinical visits remain elevated to pre-pandemic levels, we know this has been a key constraining factor to our growth more recently. Clinical visit declines have persisted and recovery has really been uneven. This started with challenges within the clinic.

Staffing was a problem that constrained growth. And then broad cumulative inflation continued to compound on consumers and in areas like wellness that for some can be seen as discretionary have been more impacted by that. But we also know that puppies have also played a role and created a headwind.

In periods where we see economic pressure on the consumer, they're slower to add and replace pets. We've seen this before, but we expect this to return over time. And we have a number of long-term growth drivers. There's an expanded and aging pet population. The pet human bond, as you just heard about, continues to be strengthening and the role of diagnostics in veterinary services is an important characteristic that we continue to advance. And IDEXX has been remarkably resilient through this entire period.

We've grown well above clinical visit levels through a long period of time. This durability starts with the deep customer relationships that we have. High loyalty rates in the high 90% in areas like VetLab and Reference Lab imply decades of lifetime value per customer. And these deep trusted relationships pave the pathway for a conversation about innovation to focus on care expansion. That growth continues to support our ability to expand operating margins over time.

And we have a long-term track record of delivering the higher end of our long-term goals. And that's in the face of some of these pressures that we talked about in the industry and while we invest towards developing the sector over time. In the last 10 years here, we've continued to expand our margins meaningfully. And in 2026, we're expecting to deliver over 32% operating profit margin on the year.

We do this through continuing to leverage gross margin in our back-office functions and G&A. Those are the predominant areas as we invest in research and development and commercial capabilities as well as digital enablement as we move forward. And we see a long runway ahead of us to continue this as well.

So turning our attention to as we move forward, there's a number of areas that continue to drive demand within the sector. For those coming into the practice, diagnostics continues to play an increasing role in that visit type that they come in for. That's evidenced by the percentage of clinical visits, including bloodwork, expanding on average by about 50 basis points per year.

And as pets age, they continue to need higher levels of diagnostic utilization. There's a meaningful change when they reach 7 years and older. And we know there's a pandemic cohort that is now starting to enter these age brackets.

So we see multiyear tailwinds associated with diagnostic utilization that don't count on clinical visit changes at all. And innovation can add 2-plus percent to CAG diagnostic recurring revenue growth potential. We're seeing the early benefits of that already, and we've built a robust pipeline that supports this direction well into the future.

We have a focus on our core menu expansion, where rapid -- where these are rapidly adopted because they're designed to play on our installed base that's out there today. And we know we have large installed bases in categories like chemistry analyzers with Catalyst and hematology with ProCyte.

This is our focus from a technology for life perspective to continue to innovate, deliver new menu and deliver new capabilities to help clinicians around the world. But we've also built capabilities to expand transformational innovations and change the paradigm that we talked about earlier. These are meaningful.

And in categories more recently like oncology and cytology, we're starting to roll the effects out of this innovation capability. But they're also more than just the direct benefit that you see in this 2-plus percent potential. There's multiplier benefits that come with this.

Often, our innovations allow you to uncover more for less. And this step function change in cost can continue to broaden access to innovation in diagnostics and allows for more comprehensive testing.

In the case of canine lymphoma, we've seen a significant reduction in afford in cost to help with affordability when trying to advance cancer cases. This not only identifies cancers earlier, but the affordability of characterizing these between B-cell and T-cell are really important. And as Mike described earlier today, we're adding mast cell tumor detection and hemangiosarcoma at no additional cost when you include it with our reference lab panels.

So as we design these platforms and add new menu, analyzers appreciate and value over time and continue to broaden capabilities in the clinical setting. That's very different than most assets that depreciate. And we see a long runway ahead of us to continue to place instruments. We have over 200,000 placement opportunities for our core analyzers alone.

And these transformational innovations in areas like inVue and Multi-Q not only expand that to attract new customers, but they bring new capabilities to our current customers. So combined with our high levels of loyalty, we see the potential for 10-plus percent installed base expansion over time.

These placements also benefit from connectivity through software that's long been valued by our customers. Cloud-based software helps expand the workflow capabilities and efficiencies within the clinic, but it also supports this multimodal approach.

Our cloud-based business has continued to grow double digits over a long period of time and continues to improve in terms of profitability as we lead the way to converting from an on-prem to a cloud-based approach, but it also expands the capabilities within the clinic to help them work through challenges they face every day.

And when combined with diagnostics, we see the multiplier benefits associated with these two categories. As you can see, bloodwork inclusion for wellness exams is meaningfully higher in the case where these two categories are used together. So bringing this all together, IDEXX execution and innovation continues to sustain our long-term growth potential for CAG Diagnostic recurring revenues.

These are the building blocks that we think about. Utilization and innovation is the largest category as we advance diagnostic solutions to help bring confidence to clinicians in managing complex cases.

But we also see significant opportunity in areas like wellness to continue to benefit earlier screening, earlier detection and improve patient outcomes. We talked about the long runway of continuing to add new customers and expanding our core instrument installed base as well. That is a meaningful driver with significant runway ahead of us.

And net price realization is rooted in the value that we create with our customers. And this is something that we've seen elevated more recently given the inflationary environment that we've been operating, but has come down over the last several years and a long-term outlook of 2.5% to 4%.

So without any benefit from clinical visits, we expect this business can grow between 8.5% and 11% on average over time.

Now we do expect clinical visits to come back, and that will be another tailwind for us as part of our overall growth. And in 2026, this is a solid proof point where we're actually delivering on the upper end of these ranges today, even in face of clinical visit headwinds.

CAG diagnostic recurring revenues form a strong foundation for us, but we also see growth potential for software and diagnostic services on a recurring basis at 15-plus percent. And as we talked about, these two categories amplify each other.

They create new opportunities to continue to improve patient outcomes while advancing overall growth. And while it may be a little bit more uneven, our capital revenues or instrument revenues, we can see delivering 5-plus percent revenue growth potential.

And our water and LPD businesses operate within great sectors as well, delivering between mid- and high single digits in those categories to deliver a 10-plus percent organic revenue growth potential. This growth also enables operating profit improvements as we highlighted.

A key driver of that has been and is expected to be our ability to continue to expand gross margins. We have high incremental margin on the reoccurring revenue base across these categories. So growth benefiting from scale creates a virtuous cycle where we continue to improve our overall ability to scale the business profitably.

But we're also focused on continuing cost reductions. You talk -- you heard Mike talk about and we've talked about in the past, areas like lab operations through automation and AI enablement. But we do this across the board, manufacturing and supply chain and even our back-office functions. We're constantly looking for productivity in everything that we do.

And our software margin as we moved from on-prem to a cloud-based approach continues to have high incremental margins as well. So we leverage these benefits in gross margin and G&A to invest back in our strategic priorities of innovation and commercial enablement. And we test all of the investments that we make against a core set of principles.

They must support our core businesses of diagnostics and software and solve veterinary challenges. They also need to fit into our multimodal approach. And so we don't care whether we're looking at OpEx or CapEx or business development. We use the same principles in everything that we do.

These are our strategic priorities in how we think about making those investments. We have ongoing processes to look outside of our four walls. We're constantly sourcing and assessing opportunities beyond what we do internally in order to strengthen our assets. And in the last 5 years, we've spent about $400 million in this area to deliver new diagnostic capabilities, software capabilities and digital capabilities in areas like AI. This disciplined approach has led to the high 50% ROIC.

And our long-term potential also includes expectations for strong free cash flow generation. We've consistently seen high conversion rates of net income to free cash flow as part of the business model. And we use that cash to reinvest back into our organic growth strategy and augment through business development opportunities. Yet we generate significantly more cash than we need on an ongoing basis.

Typically, we're spending capital in the range of 4% to 5% of our revenue per year oriented around expanding capabilities and growth. So we want to continue to return excess cash back to our shareholders, and we found share buybacks has been a really compelling way for us to do this because we believe in the long-term value of the business.

And you can see over this time period, we reduced our overall share count by about 20% at prices meaningfully below where today's price is. And free cash flow per share on the right hand of this slide really captures our overall model, our growth, our margins, our capital intensity and our capital allocation approach, and this has compounded 25% since 2015.

So that brings me to my close at a slide that deliberately doesn't change. This consistency is the confidence that we have in the future of the sector and the strategy. We see potential to continue to grow the business 10-plus percent on an organic basis, deliver 50 to 100 basis points of comparable operating margin and capture benefits from capital allocation to deliver 15% EPS growth on average per year.

Diagnostics and software combined create a meaningful opportunity ahead of us to continue to grow into. And at the same time, we elevate our customers, our employees and our shareholders.

So that concludes our financial review, and I'd like to welcome Mike back to the stage, and we'll transition to Q&A.

John Block at Stifel. Mike, maybe for you. We all look forward to the Multi-Q event at VMX in 2027 that you highlighted. For inVue, I think you held an event in 2024 VMX. But call it the launch did not really start for another 12 months or so. So maybe you can just talk a little bit to the rough timing of Multi-Q's launch. Should we think about '27 as an introduction or a launch per se, just using that inVue analog?

And then just a second part, same question. inVue's 3,500 to 5,500 revenue per box at a high level without getting too detailed on what Multi-Q does, how do we think about Multi-Q a premium or a discount to that revenue range?

Great. John, thanks for those questions. So we're not talking about the timing today with Multi-Q Dx. The main thing we talked about is the event that we have, we'll share more about all of that. What I will say, just to reinforce a couple of things that I said on stage is that it's in an entirely new category. So it complements everything that today happens within our VetLab suite. It's going to be paradigm changing.

And then the other aspect that's important to appreciate is that this is not like an OEM instrument where we're slapping a name badge on this, putting IDEXX on something that comes from the outside. This is something that was designed here from a blank piece of paper and built up, it's manufactured here.

So we know that it's purpose-built for the veterinary industry, addressing real concerns and a real gap that we see at the point of care. And so we're excited to talk more about that. And we'll talk more about economics there today. I don't want to say more about that today. But when we get to the event, we can talk more about those things as well.

Erin Wright, Morgan Stanley. So two macro questions for you. Just one, the data on Slide 59 to 60, it was interesting. It just shows that resiliency in pet spending, but how much of that is price driven given existing or treatment of existing pets may be more resilient. But how do you think about that pet replenishment? You talked about those historical trends. What gives you confidence that you're going to see something similar to what you saw given that this time around, maybe it's different than what we saw during GFC.

And then we also have the pleasure of having Dr. Malone. I think she's still here. Okay. Okay. So I think it's great to hear a lot about the U.S. market, which you provided a lot of data on, but would love to hear what you're seeing just macro-wise in Europe, just given how broad-based your practices are across the region. How are your same-store visits, same-store sales trending relative to the overall market? How do you see that evolving as well?

All right. Do you want to start with the first part of the question, I can then talk about international.

Yes, sure. So I think when we think about the industry and Julie was able to share some of these insights, we have seen in the past and more than just the great financial recession more recently, that's an example. But we have seen when consumers are going through periods of challenge economically, they tend to be slower to add and replace pets. We've also seen the high resilience of that.

So I think at this point, and you heard from Dr. Malone that pet generationally, parents still love their pets. They still see a lot of conviction in bringing pets into their home. I think we have high confidence that at some point along the way here, this will remain kind of a resilient market, and we'll continue to see pets join the overall population.

Keep in mind that medicalized pet population is elevated compared to pre-pandemic levels, right? And so I think there's a strong foundation here that we can continue to build off of, and we've proven that over a long period of time as well. It's something we'll pay close attention to, but I think we do have conviction over a longer period of time that you'll see the return of clinical visits and the pet population will continue to expand.

Yes. Maybe just to build on a couple of those points, and then I'll come back to your question, Erin, around the international outlook. This deep bond between pets and people that Andrew talked about and we talked about today, pet permanence. I mean that's the driver of this long-term conviction that we have.

And then when you layer on top of that, these other things that we talked about, I mean, the fact that pets are living 1 to 2 years longer is incredibly profound. They're not just having to visit more, but they need more care when they visit and when they come in. You're attacking those -- that extra 1 or 2 years on the end of that curve where you're seeing their care needs go up as pets age, just like with people.

The breed mix story that Julie talked about, that's consumers opting into breeds that they know. Everyone -- this is not a secret. Everyone knows that these breeds need more care, but that's what consumers want.

So all these factors to us when we put it in are what bolster this long-term conviction that we have around both visits and demand for care. And we can see it today. I mean we're outcompeting some of the headwinds that we face today with what we're doing in terms of innovation, in terms of what George talked about, partnering with customers. And so we know we can move the needle on this, but we have a lot of conviction in the future in general.

And then specifically coming to international, Erin, I mean, that's a place where we've invested significantly over the years, not just with our presence and our proximity and expanding our commercial organizations, but also investing into our reference laboratory network.

So we have more reach and can really provide an excellent service offering. We've invested into localizing our software. We have VetConnect PLUS, for example, localized in every one of these countries.

And then in our portfolio, you can look at product market fit choices that we've made with things like SNAP 4Dx Plus mania for Southern Europe, where that's a real need or even ProCyte One, which is a global platform, but part of the impetus for that was recognizing that there are certain parts of the world that needed a high-performing but lower cost platform for hematology and ProCyte One is fitting that need exactly.

So the overall macro is somewhat similar, differs a little bit by country. I mean I think Dr. Malone nicely talked about the differences between Northern and Southern Europe. But as Jo put it so beautifully, people love their pets all around the world, and there's tremendous opportunity as we look internationally, particularly seeing how the development of wellness is maybe a little further behind in a sense relative to the U.S., but some of the really interesting innovations that Dr. Malone talked about like these wellness programs that we're seeing you advance and vet partners in other parts of the world, I think, will be a key driver of that.

Mike Ryskin, BofA. I've got a little bit of a multiparter, but it's all on R&D and innovation. So I'll just try to ban it all at once. You highlighted Multi-Q, obviously, inVue spent a lot of time talking about that. I think you had a slide where you kind of showed new platform launches over the last 5, 10 years, Catalyst One, SediVue, InVue, MultiVue coming next. It feels like there's a new platform every roughly 3 or 4 years.

What I kind of want to get at is how much room is there for more platforms at the point of care, sort of in a joking context of like how many boxes can you fit on the bench and if there's room for more?

And then you also talked about $1.3 billion of R&D over the last 7 years and then $1.3 billion of R&D over the next 5 plus. So certainly continue to ramp that. Where is that incrementally going? Is that more on new platforms, new systems?

You had that -- I think it was $80 million of in-licensing 4 or 5 years ago that kind of led to the two POC platforms. Is it internal? Is it partnership in-license? Which parts more reference lab point of care or software?

And then last one tied to that, the 2% plus innovation in the LRP, you've got the platform side of things, but you've also got the menu expansion on the existing platforms. Is there one that's more biased that's driving that 2-plus versus the other?

Okay, Mike. I'm going to try to make sure I stay track to all three of those questions. Maybe, Andrew, I'll hit the first two, and you can round those out and hit question number three.

So I shared -- I have the privilege of looking behind the curtain and getting to see what's coming from a pipeline perspective. And I'll just say it again, I've never been more excited about the innovation pipeline at IDEXX. I mean we're in the very early stages of this broad-based innovation cycle, some of which we've talked about openly. And obviously, we -- as we've done in the past, we don't talk about all the things that we're working on. We want to talk about those when we're ready to talk about them. So I love the fact that today, I shared that we're going to be coming back and talking more about Multi-Q Dx at the VMX conference.

And Mike, you're asking me about what comes after that. I think that's the way we think about things, too. There's always more to come. From an innovation standpoint, maybe I'll pivot a little bit to the investment side of things. I mean it's really broad-based. We're innovating across all three of those areas that I talked about in our innovation stack. It is platforms.

I mean that's a really significant area of investment for us, but it's also assays and tests and capabilities on those platforms. I mean you saw today throughout the day across all these different platforms applying this technology for life approach. And we know that's really valuable.

It creates a really good financial return, but even more valuable and what's sort of driving that is it's creating more clinical value in the hands of our customers. And our customers love the fact that they can go home on a Tuesday and come back to their practice on a Wednesday and their IDEXX instruments do more, and they didn't have to do anything.

And that's true across the board. We talked today about Catalyst. We talked about MV Dx. Multi-Q Dx was built with that same platform extensibility in mind. And so that's new testing.

And then we talked also today, and I talked about software and AI innovation, data connectivity. That's another real important area of investment for us for all the reasons that we talked about. It's a great business to be in. But I think even more important than that is we just see that opportunity to close the intent to care gap.

There's friction in the practice. Dr. Malone talked about it as well. And so if we can do anything, and as we do these things to take a little bit of that friction out and make it easier for our customers, reduce that cognitive load, make it easier to do things like wellness in the practice, that benefits their practice that provides more care to more pets, and we see the growth through our diagnostic recurring revenue. So do you want to hit the last part?

Yes, just on the revenue side of this. So again, I think there's the multiplier effects of innovation. And so it could be probably a little bit hard to parse out what is that direct contribution between category or product because it all works together, right?

There's significant opportunity to continue to expand just the basic use of blood work. And how do we think about doing that through innovation approaches like adding Cancer Dx into wellness panels at a cost that makes sense for our customers and their clients.

At the same point, we think about how do we enter these meaningfully new disease state areas and bring capabilities over time into the clinic for workflow efficiency and insight and consistency. And so we're constantly kind of balancing those dynamics. And I think they're both really meaningful contributors to that overall growth number.

Navann from BNP. We know that Zoetis is working on some renal therapeutics in dogs and cats. So maybe if you can discuss the potential tailwinds for IDEXX of upcoming therapeutics in new therapeutic areas?

And then my second question is on software. If you could maybe discuss a bit further your strategy and progress towards the 15% plus growth potential goal?

Okay. Great. Thank you. Yes. Thanks, Navann. So we've always seen this benefit as we roll out diagnostics innovations, it in turn inspires innovation on the therapeutic side. We saw that with IDEXX SDMA. I mean it's stimulated a lot of exciting innovation in terms of renal protective diets. They've been around, but there's been some great innovation there.

And obviously, having more innovation on the therapeutic side, along with diagnostics innovation helps to grow the sector. It helps to grow the pie. There are more options for clinicians and more options as they diagnose and find disease earlier. So I think any investment like that is good.

And certainly, renal disease is an area of real need, particularly for cats. I think we're seeing the same, and I would expect to see the same thing in cancer, for example, as we're really bringing forward new innovations there and just across the board.

So if it grows the sector and it helps more pets, it's good. And then on the software side of things, we've been really pleased with the momentum that we have in software. I mean, double-digit growth in terms of our cloud PIMS growth. You saw Tracy talk about the really strong high double-digit growth in terms of users on Vello and everything that we've done there.

So we're really pleased with the momentum and the trajectory as well as the opportunity ahead in software, not just for what it does in terms of the software business, but in terms of what it does for diagnostics.

So thank you. So with that, we are going to draw the program to a close. I want to thank all of you for your participation. Throughout the day, I want to thank our presenters for all the insights and everything that they've shared. And that concludes our 2026 IDEXX Investor Day program. Thank you very much.

Good morning, and welcome to the IDEXX Laboratories Second Quarter 2026 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Mike Erickson, President and Chief Executive Officer; Andrew Emerson, Chief Financial Officer; and 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 second quarter 2026 results and updated 2026 guidance, please note all references to growth organic growth and comparable growth refer to growth compared to the equivalent prior year period unless otherwise noted. [Operator Instructions] 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 second quarter results and provide an updated outlook for our full year 2026 financial expectations. During the second quarter, IDEXX delivered excellent financial results, building on strong execution and expansion of IDEXX innovations in our companion animal business. Revenue increased approximately 10% as reported and 9% organically, supported by over 10% organic growth in CAG Diagnostics recurring revenues with double-digit gains in both the U.S. and international regions and strong global growth in our Water and LPD businesses.

CAG Diagnostics recurring revenue growth was led by expanded volumes, while U.S. same-store clinical visits declined an estimated 1.3% in the quarter. Premium instrument placements reached over 5,200 units in the quarter, including approximately 1,600 IDEXX inVue Dx analyzers on pace for our full year inVue DX placement goal of 5,500 units. IDEXX's operating performance was excellent with comparable operating margin gains of 110 basis points, supported by gross margin expansion with benefits from strong recurring revenue growth and favorable product costs in the quarter.

Operating profit gains enabled earnings per share of $4.27 in the quarter, resulting in EPS growth of 15% on a comparable basis. Strong second quarter performance supports an increase to our full year outlook while advancing incremental growth investments. We're updating our full year revenue range to $4.7 billion to $4.745 billion, an increase of $5 million at midpoint, net of a $20 million increase in operational performance, offset by a $15 million headwind from updated foreign currency effects. Our updated full year overall organic revenue growth outlook is 8.5% to 9.7%. And with organic CAG Diagnostics recurring revenue growth of 9.5% to 10.7%, these organic growth ranges represent an increase of approximately 40 basis points at midpoint to our previous guidance, aided by global momentum in our CAG Diagnostics recurring revenues.

We're also increasing our full year EPS outlook to $14.69 to $14.94 per share, an increase of $0.14 per share at midpoint, reflecting a 13% to 15% comparable EPS growth range. We'll provide further details on our updated 2026 financial expectations later in my comments.

Let's begin with a review of the second quarter results. Second quarter organic revenue growth of 9% was driven by nearly 9% CAG revenue gains 13% growth in our water business and 9% growth in LPD. Strong CAG results were supported by CAG Diagnostics recurring revenue growth of 10.3% organically, net of a 50 basis point negative impact related to equivalent days and average global net price improvement of approximately 4%. As expected, CAG Diagnostic instrument revenues declined 20% organically as we lap the broad commercial availability of inVue Dx in the prior year period. U.S. organic CAG Diagnostics recurring revenues grew nearly 10% in Q2, including strong volume gains and net price realization aligned with our full year expectations.

U.S. same-store clinical visits declined 1.3% 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. Pressure on wellness visits remains the primary constraint to clinical visits when nonwellness visits showing modest growth. We continue to see growth in pets 5 years and older across both categories. IDEXX benefits from quality of clinical visits with an increasing number, including diagnostics and broader use of diagnostic testing menu. With a substantial majority of wellness visits today, not including bloodwork, we see inclusion as a long duration volume lever that does not depend on visit recovery.

International CAG Diagnostics recurring revenues grew nearly 12% organically in Q2, sustaining double-digit gains, led by volume growth. International performance continues to be driven by IDEXX execution with volume gains from net new customers, supported by expansion of our premium issue installed base in same-store utilization, including benefits from IDEXX innovations. IDEXX continued to deliver strong organic revenue gains across our major global testing modalities in the second quarter. IDEXX VetLab Consumable revenues increased 14% on an organic basis, reflecting double-digit growth in both the U.S. and international regions.

Consumable revenue growth included benefits from net new customer gains in our premium instrument installed base and expanded testing utilization. IDEXX innovations, including our expanded catalyst menu and growing benefits from inVue Dx reoccurring revenue continue to support utilization gains across our customer base. CAG premium instrument placements reached 5,265 units during the second quarter resulting in an expected year-over-year decline as we lap the broad commercial availability of inVue Dx in the prior year.

Instrument placements remained high quality. Globally, we placed 1,602 IDEXX inVue Dx instruments in Q2 and over 1,000 new and competitive catalyst instruments globally with nearly 300 in the U.S. IDEXX global reference lab revenues increased over 10% organically in Q2, led by volume gains. Reference Lab carries a higher index to wellness visits, which declined 3.4% in the U.S. during the period. Performance was driven by net customer gains and increased same-store utilization as existing customers adopted broader testing menu, including IDEXX Cancer Dx.

Global Rapid Assay revenues increased approximately 1% organically in Q2, returning to growth as the impact from customer shifting of pancreatic lipase testing to our Catalyst instrument platform eases. Veterinary software and diagnostic imaging organic revenues increased approximately 12%, driven by recurring revenue growth of approximately 10% during the quarter and continued strong placements of the DR 50+ platform. Our cloud-native PIMS installed base grew double digits, creating an expanded customer footprint to improve workflow and enhance diagnostic protocols in the clinic. Water revenues increased 13% organically in Q2 with strong double-digit growth in both the U.S. and international regions, including benefits from order recovery in the Middle East. Livestock, poultry and dairy revenues increased 9% organically in the quarter, with solid gains across our regions.

Turning to the P&L. Strong recurring revenue growth and favorable product costs enabled 12% comparable operating profit gains in the quarter with reported operating margins achieving 35%. Gross profit increased 12% in the quarter as reported and 11% on a comparable basis. Gross margins were 64% and up approximately 120 basis points on a comparable basis. These gains reflect benefits from strong recurring revenue growth in IDEXX VetLab Consumables and Reference Lab volumes operational productivity and favorable business mix, including strong margin gains in our Water and LPD businesses. Pricing benefits offset inflationary cost pressures, which eased in the quarter compared to our expectations.

On a reported basis, operating expenses increased 10% year-over-year and 9% on a comparable basis. We expect to maintain growth in operating expenses through the remainder of the year as we advance investments in our innovation agenda and global commercial capabilities given strong revenue performance. Q2 was $4.27 per share, an increase of 18% as reported and 15% on a comparable basis. EPS in the quarter included a $0.14 per share benefit related to share-based compensation activity compared to a $0.10 benefit in the prior year period and foreign exchange added $6 million to operating profit and $0.06 to EPS in Q2, net of hedge effects. Free cash flow was $323 million in Q2 and $557 million for the first half of 2026.

On a trailing 12-month basis, our net income to free cash flow conversion rate was 110%. For the full year, we're increasing our outlook for free cash flow conversion to 90% to 100% of net income, including full year capital spending consistent at approximately $180 million. Our balance sheet remains strong, finishing the period with leverage ratios of 0.6x gross and 0.5x net of cash. We maintained deployment of excess capital towards share repurchases, allocating $332 million during the second quarter and $693 million year-to-date. Capital allocated to share repurchases supported approximately a 2% year-over-year reduction in diluted shares outstanding in Q2.

Turning to our full year 2026 outlook. As noted, we're increasing our outlook for overall revenue to $4.7 billion to 4,745 billion. At midpoint, this reflects a $20 million operational improvement from our prior guidance, building on strong second quarter performance, including CAG diagnostic recurring revenue expansion. Our updated reported revenue outlook includes a $15 million headwind related to foreign currency changes compared to our prior estimates. This reflects a reported revenue growth of 9.1% to 10.3% and including approximately a 60 basis benefit to full year growth 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 $8 million and EPS by $0.03 per share for the remainder of the year. Our updated overall organic rent growth outlook of 8.5% to 9.7% includes organic growth range of 9.5% to 10.7% for CAG Diagnostics recurring revenue including approximately a 4% benefit for global net price realization. At midpoint, we're anticipating second half U.S. clinical visit declines approximately 1.5%, reflecting similar Q2 trends. Business momentum, combined with recent and upcoming product launches support our outlook for the second half and the full year.

In terms of key financial metrics, we're updating our reported operating margin outlook to 32.3% to 32.5% for 2026 and reflecting an increased expectation of 70 to 90 basis points for full year comparable operating margin improvement supported by gross margin gains from strong reoccurring revenue growth. We're advancing incremental investments in commercial and R&D during the second half, supporting our long-term growth agenda. Our updated full year EPS outlook is $14.69 to $14.94 per share, an increase of $0.14 per share at midpoint driven by operational performance compared to our prior guide. EPS also includes an increase of $0.05 per share related to share-based compensation benefits offset by a $0.05 headwind from updated foreign exchange rates.

For the third quarter, we're planning for organic revenue growth in line with the implied second half growth range and foreign currency impacts creating a 70 basis point headwind to reported revenues at rates outlined in the press release. In the quarter, we're planning for modest comparable operating margin expansion of 20 to 50 basis points with reported operating margins expected to be 32.5% to 32.8%.

That concludes our financial review. I'll now turn the call over to Mike for his comments.

Thank you, Andrew, and good morning. IDEXX delivered an exceptional second quarter with execution across all key growth drivers: expansion of diagnostic utilization, growth in our instrument and customer base and continued advancement of our broad-based innovation pipeline. The structural importance of diagnostics in the veterinary practice supported increased diagnostic frequency and utilization, even as overall clinical visit growth remained a modest headwind. We continue to see tailwinds from the aging pet population, with pets aged 5 and older contributing positive growth across both well and non-well visits.

Pets are living longer. And we know that pets like humans require more care, including diagnostics as they age. Turning to commercial execution. Instrument placements in both competitive conversions and greenfield accounts remain strong. and our installed base grew 11% year-over-year. Each new placement is a long-term platform investment. And with every menu expansion, the recurring value of that installed base grows. Customer retention globally remains in the high 90s for our CAG Diagnostics business. This is a metric that we work hard to earn every day as it is a key part of our growth algorithm reflecting the trust veterinarians place in IDEXX and the durable value of our integrated diagnostics and software solutions.

We know from experience that diagnostics is a performance category, practices on our platform, point of care, reference labs, software and imaging see materially higher growth in both their diagnostics and overall practice revenue. We are also advancing investments in our global commercial capabilities. During the remainder of the year, we will expand our field presence across 4 international countries as well as targeted additions in the U.S. This builds upon last year's international and domestic expansions and is a statement of our confidence in these geographies, our innovative diagnostic portfolio and the opportunity to grow testing utilization. We have a well-proven operating playbook for these expansions.

When we work closely with customers in the practice, helping them integrate innovations into their everyday protocols we see higher adoption, higher utilization and stronger long-term relationships.

Turning to innovation. inVue Dx momentum continues to be strong. We placed 2,700 instruments through the first half and are on pace to achieve our full year placement goal. We're seeing a steady ramp internationally as our commercial team support integration of inVue Dx into practice workflows and awareness builds across regions. Customer feedback is positive and consistent across geographies with veterinarians highlighting the integrated slide free workflow, the diagnostic confidence of objective AI-powered results and the productivity gains of having cytology answers while the patient is in the clinic. We've also continued expanding the clinical value of inVue Dx through menu additions.

In the second quarter, we added new pathologic red blood cell morphologies associated with underlying diseases of the liver, spleen and kidneys. These updates push automatically to every connected inVue Dx instrument worldwide with no action required by the practice. As blood and ear cytology capabilities expand, customers find more reasons to run samples on inVue Dx and utilization growth. In parallel, fine needle aspirate or FNA is progressing as expected through the controlled launch process and we've meaningfully expanded the base of customers entering Q3. With inVue Dx FNA, veterinarians can evaluate lumps and bumps for mast cell tumors during the patient visit with optional expert pathologists review available in a single click.

Today, fewer than 10% of lump-sum bumps ever get evaluated largely due to the cost and workflow complexity of glass slides. We're seeing early indications that the slide free workflow, real-time results and affordable pricing of UDX F&A are associated with an increased number of masses evaluated. Given the platform within a platform nature of F&A, we're providing clinical practice team training as part of the rollout process with planned broad availability by the end of the year. IDEXX Cancer Dx reached another milestone, surpassing 10,000 global clinics ordering since launch. A reflection of how this test is addressing the critical need for early cancer detection and becoming part of routine veterinary care.

Cancer Dx is now available in North America, Europe and Australia. Momentum in both screening and monitoring applications continues to build. Approximately 70% of Cancer Dx tests are run as part of a broader blood work panel, reflecting integration of cancer testing into everyday clinical protocols. Globally, over 20% of Cancer Dx orders come from practices using a competitive lab, an indication that clinicians are putting their patients first and breaking from their typical workflow to access this innovative test from IDEXX. As customers adopt Cancer Dx, they experienced the broader value of our IDEXX reference lab ecosystem contributing to strong new customer growth in the quarter.

Cancer Dx will expand from a test to a panel in late Q3 with the addition of mass cell tumor detection. That means veterinarians will soon be able to screen at-risk dogs for 1/3 of all canine cancer types during the single routine wellness visit. Mast cell tumors are among the most common cancers in dogs, but also among the most frequently missed as they can resemble benign lesions and go undetected, particularly in dogs with long coats. Importantly, this expansion comes at no increase in price to our customers. The full Cancer Dx panel, including mast cell tumor detection will remain approximately $15 when run as part of a profile in our lab.

We're committed to doing our part to support broadly available, affordable cancer screening that also inspires wellness blood work. Our Technology for Life strategy continues to create broad-based value for customers and for IDEXX and Q2 delivered 2 meaningful expansions to our platform capabilities. In June, we enhanced our most common catalyst chemistry profiles known as CLIPS, to include IDEXX SDMA for all customers in North America. This built-in integration expands access to SDMA at the point of care, helping veterinarians identify kidney function loss earlier and detect up to 1/3 more renal dysfunction in sick pets, all within a more streamlined workflow.

Since introducing IDEXX SDMA in 2015, customers have run nearly 120 million patient tests globally, a reflection of its widely recognized clinical importance. Early response to the new catalyst clips is positive with strong adoptions and favorable feedback on workflow and inventory management. Catalyst menu additions such as these SDMA clips, pancreatic lipase and cortisol, expand the value of our nearly 80,000 catalysts around the world. We also expanded our reference laboratory Fecal Dx antigen testing platform, adding tinea tapeworm detection in late June for U.S. and Canadian customers at no additional cost. This is our third Fecal DX menu expansion in 4 years, and the platform now covers 7 of the most clinically relevant intestinal parasite groups.

Each expansion reinforces the clinical value of running this panel as part of every routine wellness visit, enabling detection of 2x more infections than fecal flotations. Our software and imaging business delivered strong results in Q2. We independent practices and corporate groups choose IDEXX software to drive productivity through workflow efficiency, deep diagnostic integrations and the ability to centrally manage operations across a large scale network. Fellow, our pet owner engagement platform continues to expand with double-digit sequential growth in active users. Fellow brings personalized outreach, diagnostic-driven campaigns and forward booking capabilities that improve practice efficiency.

Practices on easy vet with Vello show higher wellness bloodwork inclusion rates than practices on competitive on-premise PIMs, a direct measurable impact from the conversions of software and diagnostics in support of expanded care. In Diagnostic Imaging, we saw our sixth straight record quarter of digital radiography system placements. These results reflect strong commercial execution and customer demand for the DR 50+ launched in January, which combines AI-powered imaging quality, with up to 60% lower radiation dose than premium competitors. Radiation safety leadership is an important area of focus for us. given that 75% of veterinary technicians working in practices are women of child-bearing age.

As I reflect on IDEXX and the veterinary care industry, we have the privilege to serve. I'm energized by the opportunity ahead. The long-term drivers of animal health remains sound. The bond between people and their pets continues to deepen. Pet owners remain committed to high-quality care and to being lifelong pet parents. The aging pet population supports durable increasing demand for diagnostics across dogs and cats and expectations for quality care continue to rise with high-performing diagnostics at the center of clinical decision-making. We're in the early stages of an innovation cycle that is broad-based and building in BDX, Cancer Dx, Catalyst menu, EqualDx expansions, DR50 software and AI.

Our innovation support higher standards of care, increased diagnostic intensity and expanded access to diagnostic insights for more pets globally. We look forward to sharing more on all of this at our Investor Day on August 13 at our headquarters in Maine and live stream for those unable to attend in person. Lastly, in my first few months as CEO, I've had the privilege of connecting with many IDEXXers around the world. Those conversations reinforce what I've long understood about the strength of our talent, and our growth mindset culture.

I want to thank our employees for their steadfast commitment to our customers and to advancing innovations that empower clinical teams to see more and do more in their practices. That singular focus, turning diagnostic software and AI innovations into everyday clinical value is what will keep compounding into long-term durable growth. for our customers and IDEXX. With that, I'll open the line for Q&A. Thank you.

[Operator Instructions] We will take our first question from Erin Wright with Morgan Stanley.

Great. So can you speak a little bit about the rollout of SNA and how that's progressing relative to your expectations? Is that helping to fuel some of the NV placements in the quarter? And can you remind us of just how the consumables flow-through is tracking relative to your expectations for inVue and the overall consumables number was solid in the quarter. Just -- can you remind us of, I guess, in terms of potential upside even to the consumables targets that you have especially as you kind of broadly launch F&A?

Around $3,500 to $5,500 per instrument. And so we're really happy with what we're seeing. And just overall, the launch and progression of inVue Dx has been just outstanding, really one of the most successful product rollouts that we've had at the company. As you heard, 2,700 placements in first half of the year, overall. You asked about the progression of F&A. It's going well. It's on track with our controlled launch process that we've talked about in the past. This is the process that we follow to make sure that we really get all the details of the customer experience nailed. That's what our customers expect from us. And it makes sense to do that because we know that these things have very long tails.

So we want to make sure we get the flywheel running well. So we broadened the rollout, the controlled rollout of F&A as we headed into Q2. And based on the great feedback that we're getting from customers, we're broadening that again meaningfully as we go into Q3 with planned full availability by the end of the year. And I think it's just worth mentioning each of these applications on inVue Dx is really a platform within a platform. When we rolled it out, we started with 2 large areas of testing with ear cytology and blood morphology, and we continue to add menu to those. And when we do that, we can just push that out to our customers.

F&A is a whole new application. So it's like a platform within the platform of inVue Dx. And so we're taking the time to train customers as we roll this out to make sure that they get the very best experience. And as you heard me share on the comments, we're really excited to see that in the early results with M&A, we're seeing even more masses getting looked at which just reflects the fact that we're addressing the real challenge in the practice around the cost and complexity of glass lines with this new application. So very excited. And as this continues to roll out, we do see upside in that consumable number over time.

Okay. That's great. And you hit double-digit growth in the reference lab for the first time since the beginning of 2023, if I have my numbers right. And I guess can you break down the components of that growth and the sustained market share gains that you're seeing there? And we always seem to find that segment to be more correlated to vet office visits. And just on that front, there is this shortly narrative out there as well as some supportive analysis from the former CEO and Chairman of IDEXX calling out some sustained pressure in vet visits over the next several years.

I guess, how do you think about that in the context of the data that you are seeing and the pushes and pulls you see there from an underlying demand standpoint, given some of the metrics you shared in terms of aging population and other metrics as well? How does that fit into your long-term growth algo?

Great, Erin. So I'll talk a little bit about the reference lab and then Andrew can talk more about visit trends. So we're really happy with the growth in the lab really reflects a broad set of just execution and performance across the team, where we've added, obviously, to the lab offering with what I shared around Fecal Dx, adding Tenia tapeworm and then Cancer Dx has just really hit the mark this critical need for early cancer screening, monitoring and diagnosis. And as I shared, we're seeing 20% of the volume with Cancer Dx coming from practices that have been using a competitive lab.

And so that means that they're putting their patients first, prioritizing their patients' needs over whatever existing workflows they have, and that's associated with record lab conversions. And we're seeing that worldwide. And so the growth in the lab really reflects the investments that we're making in innovation, very strong commercial execution, customer conversions and really, overall, the strong volume growth. And again, we're seeing that internationally, which we're very pleased to see.

Yes. And Erin, just on the sector, certainly, I think we've continued to see declines in U.S. same-store clinical visits, 1.3% within the quarter, largely on track with our expectations from our previous guidance. we are continuing to see pressure more on the discretionary areas, wellness visits being down below 3% compared to the prior year. And we're seeing some positive benefits on the non-well side. Certainly, I think the economic pressure that consumers are facing just on broad inflationary dynamics and challenges with things like gas prices and housing prices put pressure on those discretionary categories.

But there's also certainly been a more muted puppy impact here just given the pace of adoptions that we have seen. I think we've called that out in the past during these times of economic pressure, we typically see consumers to add or replace pets within their household, and I think that's playing out to some degree. But I think the foundation of the overall pet population continues to be positive. And I think we're paying close attention to that. Ultimately, we'll continue to provide updates from our longer-term growth algorithm at our Investor Day event here coming next week. So we're excited to provide more details at that point.

We will take our next question from Chris Schott with JPMorgan.

Just wanted to come back to vet visits and just a little bit more color on the trends you're seeing. I guess any big differences as you look at the trends that you're seeing from corporate versus independent practices or urban versus suburban locations? And maybe just a secondary question on that same topic. What do you think it's going to take to get wellness visits back to growth given the continued erosion there? It seems like the non-wellness trends going the right way, but that wellness piece of the business, just any directional outlook of how to think about that going forward?

Chris, we don't see differences looking across different parts of the country or across corporates or independents. And in fact, what we hear from, in particular, talking to CEOs at some of our large corporate partners, they're seeing exactly what Andrew talked about this wave of older pets coming through COVID pets. And by the way, that's driving growth not just in non-well but in well and non-well within that particular age cohort. I think the key is and what we really focus on is visit quality.

Andrew talked a little bit about that. That's the diagnostic frequency and utilization within the visit. So we're focused on developing the sector to keep enhancing that quality, and that's what we're seeing happen. And that's a combination of innovations that provide new opportunities, new episodes of testing things like Cancer Dx, for example, and then also just commercial execution, working with our customers on education and really honing and optimizing their diagnostic protocols, including their well testing protocols. And there's massive headroom to keep growing this. I mean we know, for example, in the U.S., only around 1 out of 10 wellness visits are getting blood work today.

And outside the U.S., it's much less, around 1/3 or even less than that in most countries. And so there's substantial headroom through innovation and commercial execution to continue to drive this kind of growth in wellness testing. So that's really where we're focused is driving that quality of visit.

We will take our next question from Jon Block with Stifel.

Mike, maybe you could talk a little bit more about these commercial investments that you called out. They certainly yielded good returns in the past. But why now for the net tranche? I think you just did a recent tranche over the past 4 quarters or so, are these different international markets and that -- maybe most importantly, does it mean anything from an innovation standpoint? In other words, beefing up the sales force in certain areas as maybe that innovation bucket could continue to grow when we look forward.

Jon, thanks for the question. We're just really excited about the opportunity internationally. We know that there's a lot of headroom to grow placements, utilization to develop the sector for diagnostics, particularly around wellness, for example, where there's just a little less developed than in the U.S. And so we've been consistently making investments really across the board internationally to support that. This includes investing into expanding our field presence. And that ties to a playbook that we have, and we've seen a really reliable return on that.

I mean the bottom line is when we're working more closely with customers, when we get our territory sizing dialed in right, then we can help them adopt these new innovations into their protocols. We see higher adoption. We see higher flow-through stronger relationships, all the sort of positive things that really drive the flywheel for customers and for us. But it's not just innovation on that front. We've also invested significantly to expand our lab network around the world and to make sure our service levels are outstanding. We've invested into software, for example, with VetConnect [ Clastuned ] for local geographies. We've invested into innovation specific to the needs around the world with Snap a [indiscernible], for example, or ProCyte One, which is successful globally, but really was developed in part to address specific kind of performance cost needs in different parts of the world.

And then we're seeing things like inVue Dx also really picked up internationally with 40% of our placements coming abroad. So as we step back and look at the international opportunity, we just see a lot of opportunity, and we see a very reliable return on these investments. And so we're going to continue to make these investments to continue to develop the sector and help more pets globally.

Fair enough. And I'll pivot for the second question. Andrew, a recurring theme here. The 2H '26 2-year stacks would not have had to accelerate further if you did not raise the guidance, but once again, you did. So I guess, I got to ask you the silly question that almost penalizes you for raising that guidance. When I look forward, it seems like visits are expected to be more of the same in the back part of the year. Is the first half price at 4 is pretty much the same in 2H versus 1H like what aids that premium on that stack basis? If the question is making sense. Maybe I'll ask a question and maybe answer it. I mean do we think those customer wins, which have been solid, they're growing recurring from inVue, Cancer Dx broadening? I'm just looking for maybe some color on the drivers behind that really solid stack 2-year CAG Dx recurring in 2H?

Yes. So as you highlighted, we are planning for continued strong CAG Diagnostic recurring revenue growth over the balance of the year. We did raise our expectations from our prior guidance that was certainly the strong Q2 that we had. And we're really continuing to build momentum here within the business, both in the U.S. and on the international region basis. As Mike highlighted, we continue to make investments in reaching our customers being able to translate the value of these innovations to our customers and help them leverage the different diagnostic capabilities and software capabilities in their clinic to support overall pet health.

I think when we think about the guidance, certainly, it's a range that we've put out there. There is an increase at midpoint and reflects the strong first half performance that we had. But we also are really excited by some of the recent and upcoming product launches. Mike highlighted a few of them on the call here, both the new menu on SDMA within the clip, really simplifies some of the workflow in the clinic and helps with inventory management. We've also added to our Fecal DX panel, which I think will be beneficial to our customers. continue to broaden the rollout of FNA on inVue Dx, and we'll be adding mass cell tumor detection to Cancer Dx here. So we have a number of continued innovations that I think will support the back half and we maintain high customer loyalty levels in the high 90s really across our modalities. So the combination of factors here builds a strong case for the second half, and we feel good about the guidance that we have set.

We will take our next question from Ryan Daniels with William Blair.

A quick question for you regarding the SDMA move to the catalyst. Do you think that will have any cannibalization on the reference hub?

No, no. What we consistently see, Ryan, is whenever we invest into one modality, for example, at the point of care or vice versa, the reference labs, we actually see that testing begets testing and we drive overall more diagnostics. The types of things when you think about using SDMA at the point of care, certainly, it can include well pet types of situations. But very often, it's a more acute or sick pet kind of use case. And with SDMA combined with the clip, customers are able to see up to 1/3 more true renal dysfunction than if they're just using creatinine alone. And that's for a sick pet, so it really is a really valuable medical application.

And what we've done is we've taken the SDMA slide on the catalyst, which we could put manually into the clip, and we've just put it there for them. So it takes out all the work of having from a workflow standpoint to do that, streamlines inventory management. And so we're getting a great response from customers to this innovation at the point of care while at the same time, for many years, we've included SDMA in every single chemistry panel that's run at the reference labs. And so the bottom line with SDMA is that it really is an integral part of every type of chemistry that you want to run, whether it's at the point of care or in the reference labs. It's just a medicine.

Very helpful. And then as a follow-up also on the lab. I think you mentioned 20% Cancer Dx is coming from competitive labs. And I think that's helping you with some conversions. We've heard during our conversations that expanding the panel later this year could really be a big catalyst because it will identify more cancers and make it a more valuable panel. So I'm curious if you could talk a little bit about your expectations for that, both in regards to helping lab growth and then maybe what that could be to market share gains for the lab in the future?

Yes. Thanks, Ryan. We're really excited about Cancer Dx moving from a test to really a multicancer panel with the addition of mass cell tumors. These are very common amongst the most common canine cancers, mast cell tumors are. And they often get missed, as I mentioned in my comments, because it can be hard to find them in particular with dogs that have long coats. And so to be able to systemically detect those and to take early agent when found. And then, of course, pairing that within inVue Dx because when you find a positive mass cell tumor, you want to know, okay, which of these masses is the one that I want to take action on and actually remove. And that's where FNA on inVue Dx comes in.

So the paring of those 2 is a particularly valuable kind of end-to-end solution tool set, if you will, for the general practice veterinarian. So we do see this as a tipping point, if you will, from a cancer screening standpoint, having multi-cancer screening that's affordable as part of blood work for all at-risk dogs. That's all dogs over 7 and at-risk breeds over 4. We really see that as over time becoming the de facto standard. And so yes, we're -- and we're hearing this from customers as well. One of our large partners in Australia, for example, has on their own now added Cancer Dx to all of their senior dog premium wellness program participants and has seen just a fantastic uptake both in terms of enrollments and just overall blood work. So this is the type of thing that we think over time will really help to develop the sector further.

We will take our next question from Daniel Clark with Leerink Partners.

I wanted to ask about your second half expectations. How are you kind of thinking about in CAG growth between the U.S. and the international segments just given the strong run we've kind of seen ex U.S.?

Yes. Thanks for the question here, Dan. This is Andrew. I think we've seen really strong momentum in the regions, both the U.S. and international. Again, as Mike highlighted, I think we see a lot of opportunity internationally to continue to develop this sector. We've made investments both from a commercial perspective as well as within the infrastructure to support our customers more over time. And so I think Internationally, I think we're now multiple quarters of double-digit growth and continue to see, again, strong momentum across the reach in areas like Europe and APO in particular. .

Overall, on the U.S. side, certainly, the clinical visit challenges that we've seen have been the key constraining factor. But from an overall IDEXX U.S. CAG diagnostic recurring revenue growth premium to those clinical visits. Yes, we have been actually ramping that up here in the last several quarters and that has a lot to do with our ability to maintain customers with the high loyalty rates and continue to provide solutions for their everyday challenges with new innovations and continue to build out best practices alongside them in a partnership. So no specific kind of direction we're giving on the makeup of growth ranges within those areas. But again, I think we feel confident really across the regions on a global basis.

Okay. Got it. It's helpful. And then just a quick follow-up on kind of the visit trends in pet age 5 believe you said they're contributing to both well and non-wellness positively. Have you seen any changes on a quarterly basis from that cohort? Or is it just generally positive? .

It's general -- Dan, this is Mike. It's generally positive, and we've now seen this trend for multiple quarters in a row. And as I shared also, we're not just seeing it in our data, but we're hearing about it from our customers as well. So we think it's a consistent trend.

We will take our next question from Michael Ryskin with Bank of America.

Great. I want to touch on in view placements in the quarter, a little over 1,600 you reiterated the full year guide, but it's still a really nice step-up versus your 1Q instrument placement number for inVue. Is this just sort of normal lumpiness that we should expect in the business? Is there anything that you kind of turned back on related to F&A, lumps and bumps. Just kind of what drove that momentum? Or should we just sort of ignore it and just sort of assume this is the normal noise quarter-to-quarter on placement numbers?

Yes, Mike, this is Andrew. Thanks for the question. For the inVue Dx placements, again, you could see there's been a level of variability here throughout the quarters. I think when it comes to placements, really, it's about when the customer is ready to take on some new instruments and plan for that. We work again in partnership with them. And so there's always some level of variability that you're highlighting on the placement metrics. From a year-to-date perspective, about 2,700 placements this year, that puts us essentially 50% of the way towards the full year delivery. And so we didn't guide necessarily on Q3 or Q4 independently for the view placements.

But still anticipate about 5,500 for the full year. Q4 tends to be a little bit stronger capital quarter in general for us. And that's just one thing to keep in mind here as you think about the rest of the year just in terms of the placement metrics themselves. But again, it's really about the partnership and the demand that we're seeing pull through on the VDX analyzer. And I think we continue to see a lot of momentum on that front, both in the U.S. and again, internationally.

And Michael, I think -- look, I think the overall feedback that we're getting is just really positive. I mean every practice does cytology. They're all challenged with the workflow -- hands-on workflow complexity and technique sensitivity of slides and getting repeatable results for things like year rechecks. And so inVue Dx, it's hitting the mark. And that's why we're seeing overall these very strong results. And ear cytology and blood morphology are very large categories of cytology that we're addressing as we come on and expand with F&A on inVue Dx. We think that just further expands excitement for this, and we keep adding even in our core applications. As I mentioned, we added 2 new red cell morphologies to our blood morphology offering. So each of these platforms within a platform just keeps expanding. And we're really, really happy with the overall performance and 9,000 placements since launch makes this one of the most successful launches we've ever had.

Okay. That's great. And then maybe a quick follow-up. You talked about the Analyst Day a number of times, looking forward to it, as always. One thing you haven't touched on is Multi-Q. It's something you kind of -- you announced a little while ago, but we haven't had a lot of updates. Maybe I'd just ask sort of conceptually, if you could talk about bandwidth and the capacity to launch 2 platforms to RAM 2 platforms. Obviously, you have things like F&A and lumps and bumps in Cancer Dx. So you're not -- you're not unfamiliar with launching multiple solutions at the same time, but 2 instrument platforms would still be somewhat of a new venture. So just talk about sort of bandwidth and capacity to do that if that was to come about.

Yes, we're very comfortable with our capacity from a commercial standpoint. I mean we -- of course, we keep investing internationally as we shared, which is really focused on sector development, not capacity constraints, if you will. It's really focused on opportunity in developing the sector. And we also make targeted additions here domestically. I shared some of that on the call as well. But overall, we're really comfortable with our capacity to launch and bring forward the innovations that we are and to support customers as we do this and make sure that they've got the right information and data and workflow and that they can incorporate these into their protocols so that they can be successful.

Yes. And I would just highlight, Mike. We do this on a number of fronts today already. We have core analyzers with our Catalyst chemistry analyzer in hematology as well as SediVue and inVue, and that's on top of some broader platforms like Cancer Dx that continue to take sector development work. So I think we're -- we've got a model here that we're highly focused on being able to do more than one thing at a time. And I think that's our key focus for us going forward.

We will take our next question from Daniel Grosslight with Citi.

Congrats on a strong quarter here. I wanted to double click on the margin degradation in the second half of this year. Obviously, you've got investments, which you've outlines here and you also have FX being a headwind in the second half. But I was hoping you can provide a little bit more detail on the phasing of incremental investments in the second half. And as we think about the split between 3Q and 4Q, how should we be modeling out the margin and investments you're making in the business?

Dan, so just in terms of the margin outlook that we have, I think the things I would highlight is we would continue to expect gross margins to really lead our overall operating margin profile here. And I think if you look at the first half of the year, gross margins continue to benefit from strong reoccurring revenue growth. We see high incremental margins as we obtain the type of volume growth that we're seeing. And we're really expecting that continue in the second half. And so gross margins will likely lead the operating profit flow through.

But as we highlighted, we're going to continue to make incremental investments in the second half, really for the longer term overall growth projections. And Mike highlighted the different commercial investments we were talking about and always some level of variability on project timing within areas like R&D. And we have different dynamics around things like our information technology structure internally, how do we think about really enabling the base of the business and making the right investments in our IT infrastructure areas like AI continue to add into that as well. So not necessarily splitting out Q2 versus -- or excuse me, Q3 versus Q4. Here, we did highlight on a comparable basis in Q3, we expect 20 to 50 basis points of operating margin benefit in Q3. So that gives you a sense for how we're thinking about it. But we'll continue to make those investments throughout the second half of the year.

Yes. Makes sense. And you guys also raised your free cash flow conversion, which was great to see. How are you balancing buybacks against potential M&A opportunities? Are there any specific capability after your geographic markets where inorganic investment may be more efficient than growing organically?

Yes. I think one of the things we're constantly doing is just making sure we are investing in our organic growth profile. That is the core that we focus on. We have active assessments associated with things outside of our 4 walls and business development continues to be an area that we look at opportunistically as we see assets that may make sense for us. we're highly focused on those core areas within diagnostics and software. We've seen more assets recently in the software space when I think back to the recent deals that we have done in the past, but it's something we continue to pay attention to.

And certainly, we're willing to leverage our capital against business development type of opportunities or in-licensing types of targets as well. Any of our excess cash, we really continue to see a conviction in the long-term orientation of the business. And so the best of that way that we've leveraged share buybacks to kind of deliver capital back to our shareholders. That's been the best way that we've seen so far going forward, but it's something we constantly assess.

Thank you for the questions. Well, thank you very much. I'll wrap up the call now. Thank everybody for the questions. We'll now include our Q&A portion of this morning's call. It's a pleasure to share IDEXX's continued strong execution against our organic growth strategy, while delivering strong financial results in the second quarter. And so thank you for your participation this morning. And now we'll conclude the call.

Once again, this will conclude today's call. We thank you for your participation. You may now disconnect.

It's Jon Block with Stifel. Good to see everyone. We're going to push forward. And next up on stage, we have IDEXX Laboratories, the leader in animal health diagnostics and joining me on the stage is the company's relatively new President and CEO, Mike Erickson, as well as John Ravis, Vice President of IR. Guys, thanks very much for joining Jaws & Paws again.

Thanks for having us, Jon.

Mike, I got sort of the typical tee-up question, 30 days on the job, give or take, but you have been at IDEXX for 15 years roughly. So just walk us through maybe those top 2 or 3 goals that you see for the company that you're looking to implement going forward?

Well, first off, huge, huge honor to be leading IDEXX and serving our customers and really serving this industry that I love 14 years at IDEXX, really across all the different parts of the company, software, diagnostic, our commercial organization. And for me, it's also personal. I've seen the power of pets in my family. I see it in other families.

We're a very purpose-driven company, people love their pets all around the world, and we feel that, and we really think about our customers and how we can empower them through our platform, diagnostics and software together to do more and see more in their practices through deeper insights and productivity and how we support them commercially.

In terms of big goals, I mean, we're really focused on innovation, I have the privilege of seeing behind the curtain, I've never been more excited about our portfolio of innovations. We're in a real cycle right now. It's very broad-based, point-of-care, reference labs across the board, and I'm sure we'll talk about several of those. But we're seeing that really provide a lot of opportunity in how we work with our customers and helping to propel our growth.

Commercially, we continue to advance and expand our footprint around the world. That will continue to be a top priority. What we find is when we spend more time with our customers, we help them adopt and incorporate more of these innovations into their practices. We get a very nice return on that.

And then on the software front, I mean, that's always been an important part, combined with diagnostics of our overall platform. We see a lot of demand in that area and also a lot of opportunity. And I think we heard from the prior speakers, some of those types of opportunities, the opportunity to really bring technology in, not just to support deeper insights, but to support productivity in the overall practice environment. So those are some of the things that I'm focused on. But I feel a deep responsibility to our customers, to IDEXX-ers around the world and to our shareholders. We have a long-term growth strategy, and we've been very transparent around our long-term goals, and that's what I'm focused on.

And I always have sort of the structure of the talk track, but then I'll just bounce around all over the place. I mean we did hear in that last presentation, software, AI, pardon me, I sort of think of you as a software guy going back at your time at IDEXX. And just even when I asked you about the opportunity, you obviously brought up diagnostics, but right behind that was software as well. Not a bad business, right? When we think about recurring and high margin. Is that something that you anticipate leaning into a little bit at IDEXX?

I do. Yes. I mean there's a lot of opportunity there. I think when you go into a practice, there's still a lot of friction in how the work gets done in putting together the protocols; all of those things really can yield to better technology adoption. And again, I think we heard some of that in the last discussion.

If I take a step back, we look through a number of lens. So one of them is just what we can do through software and AI on the insights front. And we've been doing that for many years. I mean we have AI embedded into solutions like inVue Dx or SediVue Dx. I mean with inVue Dx, this takes what's been an incredibly manual process, very technique sensitive of making a slide. Every hospital around the world, every practice has a microscope, they make slides.

And we basically have completely transformed that with this technology where you don't have to make a slide, you put the sample effectively into the instrument and with advanced optics and onboard AI, you get a really reliable objective answer in 10 minutes and ear cytology, blood morphology.

So that's an example of AI really transforming a particular category of diagnostics. AI in the actual work that gets done in the practice, whether it's Ambient Scribe, like we heard about, giving time back or helping to yield new insights around what's happening in that really important discussion between the doctor and the pet parent is another area of opportunity. We have that in our software as well. And then just how we use AI for the work that we do at IDEXX. I mean we're seeing tremendous impact from doing that. We have teams -- software teams that are using all AI to generate code and we're seeing things that took weeks or months, take days or weeks. It's just an incredibly -- I see a lot of opportunity to use that and how we do work at IDEXX as well.

Okay. So maybe just one more on my end. I mean you mentioned the AI that IDEXX has been pursuing for years and embedded in point of care, something like inVue, right? You mentioned AI at IDEXX to maybe streamline and become more efficient, et cetera, something that the prior panel talked about was like AI to train the docs and maybe sell better, maybe better utilization, uptake on diagnostics. Is IDEXX going to lead that charge? Is that going to come from IDEXX Laboratories? Is that going to come from other parties that maybe IDEXX partners with or watches from the sidelines. I'm just wondering how that plays out and if IDEXX going to be a forefront of that or maybe just hopefully benefit from that transition?

I think all of the above. I mean, we -- we're in that space, but we also partner. We have a very connected software ecosystem over 100 different third parties connected into that. And so we look at both of those types of opportunities. The insight that comes out of Scribes participating in the conversation in the exam room, I think, can be very formative to help doctors just improve the kind of value proposition that they can then provide to their clients coming through.

The other interesting thing around AI, if you take that example with inVue Dx is longer run, we see AI as an opportunity to bend the cost curve in veterinary medicine as well. Again, you think about cytology traditionally being done with a slide. It's a very hands-on, labor-intensive process. In most cases, that slide needs to be sent out to a reference laboratory. That could be a $150 charge when that gets marked up to the pet parent. It could be a $300 or $400 thing to do. And that can be kind of expensive.

If you look at inVue Dx, one of the key applications is what's called a fine needle aspirate for a lump or bump. All the time, every day, people are bringing in their dogs with a bump and asking the question, is this cancer? So then you've got to go through this whole process. And it turns out less than 10% of the bumps ever get looked at because of how hard it is to do and because it's kind of expensive.

With inVue Dx, we can do that at an order of magnitude less cost and take all of the work out of doing it. So there's opportunity to fundamentally expand access to care and trade volume for price, we see as a really tremendous opportunity across the board. That's sort of one example of it to help more pets get access to what they need from a care perspective.

Okay. That's very helpful, and a good sort of segue you mentioned, I'll go down that road. I think last year, when you launched inVue, you sort of said, hey, we're going to do around 4,500 boxes in 2025. You ended up doing over 6,000, I think close to 6,400. For 2026, you said, look, the placements will be 5,500. And international is now playing a bigger role. And the placements in 1Q '26 were 1,100, which I think was viewed -- you guys didn't give a specific number, but it was viewed as below expectations. Maybe help us out with the cadence throughout the year. The launch in the international markets is more recent. Does that book sort of need to build in coming quarters?

Yes. So I'll say, I mean, the launch of inVue Dx has been one of the most successful launches we've had in the history of IDEXX. It hits the sweet spot. I talked a little bit about cytology as a use case that every practice has and how hard it is to do. And so to have a kind of product market fit into that particular use case with inVue Dx has been -- it's really hit the mark. And so demand has been very high. We're very happy with the overall trajectory. There's always some lumpiness from quarter-to-quarter, so we feel good about the overall forecast for the year.

The categories that we came into between ear cytology and blood morphology, these are massive categories of testing, volume that's happening in hospitals today that really were able to enable and transform do it at a higher level of diagnostic quality, but also turn it into IDEXX volume with our customers, and we're seeing that happen.

The instrument is -- the way it's wired, it's able to learn and grow at an incredibly unprecedented pace. So on our Q1 call, we talked about adding acanthocytes, that's a red blood cell morphology to the menu. Literally since that call, we've added 2 more with...

These are just going out to...

Just able to -- because all of our instruments around the world are connected to our Internet of Things network. And so we're able to just push innovation out the practice, team can go home on a Tuesday, come in on a Wednesday and their instruments on their bench top can do more.

And so through that, we're able to continue to expand the capability of this platform with ears, with blood and then we're in a controlled launch for finding [ last bird ] as well. And as we look over the long, long run, we see 100 million cytologies being done all around the world in additional categories. And so we just see a very, very long runway to expand the value of this platform. So we're very happy with where we're at and the trajectory, and we see a long runway ahead of us.

Okay. And that was helpful. And that FNA into the back part of the year, will FNA be fully launched at some point in the back part of 2026. Is that the time?

Yes, yes, yes. Later this year, we're in a controlled launch. I mean FNA is a -- the way to think about that, it's really a platform within a platform. And so we -- as we launch and we launched just in my time at IDEXX 4 different instrument platforms. So we go through a standard process of controlling the launch, making sure that we get everything perfect in that practice environment. That's the stage that we're in right now. We're actually expanding that, right now, we shared that in our last quarterly call that we're expanding that.

But as we look to the later part of the year, we'll move from controlled to more of an unconstrained launch. And we just -- we know that this again hits a use case that's very high demand and very important and high stakes because a lot of times what we're talking about here is cancer.

And so maybe just to wrap that part up, IDEXX is not seeing a pause or hesitancy to adopt inVue with this next tranche of practices as they sort of await the full rollout of FNA. You're comfortable in the cadence, you're comfortable in the 5,500, because FNA, I didn't think in January of '25, FNA was going to be a late '26, to be honest with you, right? I mean we knew it was ear cytology and blood morphology, and FNA on the come. But here we are almost 18 months later. But even with that, maybe elongated FNA launch, you're still confident on the cadence of how we get there.

Yes, there are always some practices that will say, we don't force this on anybody. So there's always some practices that could say, hey, I want to have FNA before. So that's always possible. But we haven't seen that as a headwind to make in our goals.

Okay. Maybe one more on the inVue sort of list of questions. And I might just have this wrong in my head, where are you on revenue per box? I know you guys gave 3,500 to 5,500. Are you already in that band? And I'm asking because everyone is trying to figure out this 2H acceleration, and we'll get there. But I think what I'm trying to figure out is the growth contribution specific to inVue, you're kind enough to give me the boxes, but now I got to figure out the revenue per box. Are you already in that band? Or are you approaching the lower end of that?

Yes. So to be clear, we're already comfortably in that band with where that band for, as a reminder, included blood, ear and FNA. But we're in that band today with blood and ear. And so as FNA comes on board and moves from controlled unconstrained, I think that will also be a good thing.

That's a pretty -- I don't know, notable accomplishment, no. And I just asked that because the way that -- at least our checks -- what our check showed was people loved it for ear and used it for blood, but FNA was always supposed to be, I think the highest utilization of accompanying FNA. That's what they seem most excited about. So does that give you some comfort that if and when we're fully launched, that maybe you're sort of pushing up to the higher band of that revenue per box versus the...

We give a range to sort of encompass all of these things. I mean we've got large practices, small practices. You've got practices. 1/3 of our placements are international. And so we provide that range to encompass all of those scenarios. The majority of the practices that have inVue Dx have adopted it and are using it for both ear cytology and blood morphology. These are totally complementary use cases. And I think the same thing will be true with fine needle aspirate.

And we've got a number of customers that want to have multiple inVue Dxs in order to handle all the volume that's coming through. So I mean, if you take a look at catalyst, and we've shared these numbers in the past, this -- similarly, this is a platform that expands in value over time. If you look over the last 10 years with Catalyst, the economic value per instrument has grown 2.5x.

And that's a consequence of continuously bringing forward new menu innovation, which then provides more opportunities and inspires more testing. I mean, we just rolled out SDMA package into our Catalyst clinics. We rolled out pancreatic lipase slide cortisol. So we keep bringing forward these innovations, which expands over time, the economic value of the instrument for our customers, by the way, and then by virtue of that for us. And that's our same approach and strategy for inVue Dx over the long run.

That's really good color. I'm going to go back to innovation in a second, but I do want to ask -- I want to ask you probably the most pressing question I get, right? And new CEO, so I want to talk strategy and big picture, but -- and I won't do a bunch of back of the envelope implied math up here. But I get the question, hey, look, the guide, they beat, they raised. We can all look at the 2-year stacks. They need to accelerate for the balance of the year for you guys to get to, just call it, the midpoint of the guidance.

And I think there's a misconception out there where everyone's so obsessed with inVue. I don't think it's inVue that makes or breaks the guidance. I think it's other dynamics of like international utilization, maybe visits. But as we sit here today, Mike, what are the enablers that allow that 2-year stack to accelerate for the next 3 quarters?

Yes. So it's really multiple things. I mean, to come back to Q1, we had a really solid quarter with double-digit growth across the board. And I think the thing to appreciate about our business, you sort of said it, but it's not one thing. It's many, many things contributing to this. I mean we were double-digit growth point of care, 15% on the consumable side, double-digit growth in reference labs. Within each of those, it's not just inVue, it's multiple platforms. We have new slides and catalysts.

So really, the short answer is innovation is really propelling our growth and you look at our growth as a premium to overall sector growth. But I should talk about the sector, too. I mean we see long run, just this incredibly durable growth trends that ties back to what I said earlier, it's personal, right? People have this relationship with pets as members of their family. And as we talk to younger and younger generations of pet owners, that's only more and more true. So that's an up and to the right trend.

We've been facing into some of the headwinds on the visit side, as you know, but what we're seeing is that whole bolus of pets that came through and were adopted as part of the pandemic, particularly these dogs are aging. And so we're seeing green shoots of growth in dogs over 5 and we've seen this now for 3 quarters. And in Q1, we saw it both in well and in non-well dogs. And so we can look at that and look forward and see that. And by the way, the visits that are happening are happening with even more quality from an overall care perspective, medicalization...

Dx utilization.

Overall, but then Dx utilization standpoint. So it's really the combination of aging pets, that are driving volume. So we see that, the higher quality visits and our innovation, which supports more and more reasons to test in that context. And so we have now seen several quarters of some moderation on the overall clinical visit side of things.

So we did say we're going to modestly adjust for the rest of the year from minus 2% down to minus 1.5%, so still negative, but reflecting some of those things. And so the combination of our execution and our performance on the innovation front with that is really what gives us a lot of confidence in the year ahead and really in the long run.

And Mike, I would just add to that, we're also seeing solid benefits from net customer gains, including adoption of our innovations in the form of growth of our installed base. So that grew 12% in the first quarter, really building on very solid commercial momentum. That direct customer engagement is really helping us. And we're seeing that also pull through in our reference lab business, which has seen accelerating growth. So really strong performance across our major modalities and geographies, including international.

Okay. Yes. I mean if I take that, just as an example, with Cancer DX, I mean we're seeing a tremendous reception to this breakthrough innovation in early cancer detection with Cancer DX starting out with lymphoma. I mean, 20% of the volume in that case is coming from practices that don't have IDEXX as their primary reference lab.

Yes. So there -- and so these are practices that are appropriately prioritizing the health and well-being of their patients and the kind of care that they can provide over whatever relationship that they have on the vendor side of things and sending us this volume and that's helping to further drive new customer growth on the lab side. So to John's point, it's really it's a combination of intensity of utilization, but also a lot of new customer growth.

Okay. Last time you mentioned inVue and I use that as sort of the transition to ask you a handful of questions. I'll do the same with Catalyst Dx. So I think I've got these metrics correct. 7,500 practices that are ordering the test. I think almost all those are U.S. So 25% share of U.S. practices. I'm just rounding, call it rough 30,00...

For Cancer Dx.

For Cancer Dx. 30,000 practices, 7,500 are ordering Cancer Dx. I've got IDEXX's reference lab share, probably 60% plus, 60% or 70%. So talk to us on -- you guys have 60% to 70% share, 7,500 are ordering the test. How do you bring that closer to the representation that you have of well north of 50%? And what does it take to get there? Do we have to wait for the test to expand and broaden out in the other types of cancers to be brought on board?

So we're -- first off, I'll just say we're incredibly happy with the demand and the overall trajectory that we have for Cancer Dx. I mean this is a real breakthrough in a category that frankly hasn't -- it's really been incredibly underdeveloped in veterinary medicine. I mentioned earlier, this is personal. I mean I've lost 2 dogs in my family to cancer. And in both cases, it was too late to do anything about it by the time it was found. And that's just an all too common story if you talk to dog owners.

Probably many people in this room have been impacted by this as well. And so the ability to detect lymphoma up to 8 months before there are any clinical signs. And then you can take action and to be able to type the lymphoma to take the right kind of care, it's transformational. And then because of our technology, we're able to roll it out at only $15 when packaged with an IDEXX blood panel.

And so the overall strategy supports access to this technology, but also helps provide overall pull-through of blood work. And we're seeing that. So in the 7,500 practices and all the volume, 70% of what's being run is actually being run together with blood work at the IDEXX reference lab. So the strategy is working.

What I'll say this is a long-term strategy. I mentioned that this part of the sector has really not been developed. In the U.S., there are only around 470 oncologists. And in the entire developed world, there's like less than 600 of them. And so while we're working with specialists to help support their use of the test for aid in diagnosis and monitoring therapy, the broader strategy is really to enable and empower general practitioners to incorporate this into their wellness protocols and how they practice medicine.

And that's -- we support them with the test, with data. We have specialists, oncologists in the fields and that are on call to support with that. That's a long-term development opportunity. As we go from a single test to a panel, I think that will be pretty formative, adding mast cell tumor later this year will be important.

So I was going to go down that road. So adding mast cell tumor later this year, I think a third indication undisclosed, but third as well by the end of '26.

By the end of the year, yes.

Do you feel like that, that's the tipping point to start to get this into a wellness panel, because, hey, John, your dog is 7 years old. I want to -- I want to run this as part of a geriatric panel. Oh, great, you identify cancer. No, we identify one type of cancer, right, canine lymphoma. That's a tougher sell, right? If it's, hey, we identify 50%. So maybe talk to us on are these 3 the tipping point? And the follow-up question is, remind us when you get to the 50%.

Yes. So we get to 50%, we've said is by 2028. So as we continue to expand the panel, we'll be at about 1/3 of the major cancers covered when we add mast cell tumor later this year. So it's good coverage. And I think there are multiple tipping points. I wouldn't say there's one tipping point. This is really -- if you look at our business across the board, we're developing the sector. These innovations have very long and durable tails to them. And Cancer Dx, I think, will be like that as well.

So as we continue to expand the panel, that creates more and more reasons to test to capture broader net, so to speak. We're also able to help doctors and pet parents identify which dogs really should be getting Cancer Dx. So we have really good insight on these dogs, dogs who are over 7, particular breeds who are over 4. And we can help them identify those patients, both in their client base and even through our software, help prompt that in advance of the visit to help pet parents think about, hey, for your pet, you want to think about a cancer testing. So we're able to help develop this sector through technology and data and specialist support. Ultimately, we see this as being a really important new part of the medicine and veterinary.

Okay. And when I think about these 2 innovations, inVue and Cancer Dx, inVue, we can all do the math. As I mentioned earlier, I'll do the boxes. I'm taking your word of 5,500, so I'll end at 11,900 boxes a year...

3,500 to 5,500.

Right. And the revenue per box and you get the contribution to growth. Is Cancer Dx a little bit more like this wildcard? It's out there. It's gaining some momentum now, but there's really sort of you turn the dial when you really get into wellness and becomes a little bit more widespread.

So I know you said it will increase over time, but is that more of like an inflection point '27 into '28 in terms of a growth contribution where inVue is more of the steady state as you layer on more boxes and maybe increase the revenue per box a little bit?

What I would say, this might not help your math, but all of these things have a lot of sort of multiplier value built into them. I mean if you take Cancer Dx, for example, I shared, this is driving -- this is supporting new customer growth. This is supporting more blood work. And then there's the use of the test. It's not just used for early detection. It's also used for aid and diagnosis. It's used for monitoring therapy. I mean we have a claim out there that Cancer Dx can detect molecular remission if you're running a PET through CHOP. That's never been possible before for lymphoma.

So it creates all these reasons to test. It expands our customer footprint, and it drives additional testing. And the same thing is true with inVue Dx. When we look at an instrument platform like inVue Dx or Catalyst, it also drives lab, our lab business because a lot of the ways we work with customers, really, they appreciate having an IDEXX 360 program where they get instruments combined with labs, so pull-through testing, testing begets testing.

And as I mentioned, we continue to add to the menu of these instruments. And so over time, it's not a straight line. It's a curve. And so that's the way we think about it. And all these things together factor into our overall growth -- confidence in our growth.

Okay. Talking about growth, Multi-Q. We actually called out that trademark that we found in March of last year.

Very perceptive of you, Jon.

Thank you. I got a good team. So the trademark is general. It's intended to cover laboratory consumables for veterinary purposes. It's pretty broad. Just talk to us about what the core functionality of the box is and then maybe the timing as well.

So we haven't commented on either of those things. I mean the one thing what we've said before, which I'll just reinforce today is that what Multi-Q Dx will do, it will transform the category that it's in and it will be entirely complementary to what we have today in our VetLab suite. So we haven't said specifically what it does, though.

I'll ask it a different way. What you've done a really good job of is going to a veterinary practice, identifying the pain points and then trying to simplify and streamline it, for example, ear cytology, maybe taking out some of that subjective nature behind it. What are some of the remaining pain points that exist at a veterinary practice today?

We have a long, long list of opportunities that we identify as pain points. And so Multi-Q Dx fits into that list, and we see more opportunity beyond that as well.

Would you likely handle it the same way that you have in prior years like you did with inVue? You've got an Analyst Day coming up in 2 or 3 months. You have in the past unveiled and talked about the box and then subsequently launched it 4 or 5 months later at VMX. Would it be a similar playbook that you would run for the next box?

Yes. I mean the playbook that we follow is we talk about it when we're ready to talk about it. We don't want to get ahead of ourselves on that. So we'll follow that playbook when we're ready, we'll talk about it. And then we'll talk more about what it does and all of these things.

Talked about it a little bit last year, about 20 seconds that you talked about.

A little bit. Yes.

Okay. Okay. Last one down this road. Can the commercial organization handle these 2 point-of-care analyzer innovations simultaneously? Because inVue, while introduced Gen 1 and '25 is still relatively new as FNA comes on board. So is there a bandwidth or a capacity issue from that perspective?

No. I mean our -- if you look at our commercial organization, we've continued to invest in the capacity of our commercial organization, adding to our commercial organization and also how we support globally our commercial team through centers of excellence. I mean we, every year, have continued to invest to expand the footprint in the U.S. and also around the world.

And looking forward, we would intend to continue to do that. But we have a tremendous amount of capacity in our commercial organization to spend time with customers. I mean, really, customers view our team as extensions of their practice, helping them to reach their goals and to practice a higher level of medicine. And that's what our team does every day.

Okay. We've got about 2 or 3 minutes left. We touched on this a little bit earlier, but I want to talk about future innovation. And maybe just help me out, Mike, I mean is this a hardware thing? Is it a software thing? Is it AI in a separate bucket? I don't know -- if you say all of the above, do you want to rank order them? How do we think about what's in that pipeline for IDEXX and where priorities may lie?

Yes. So as I mentioned, I have the privilege of being able to be behind the curtain and see an innovation pipeline that I've just never been more excited about. And one of the things that differentiates us at IDEXX is that we really have this full stack innovation capability across instruments, novel assay development, software, AI, all of these things.

And then, of course, the integration of these things into platforms like inVue Dx or Cancer Dx and so forth. And so our strategy has really been a multifront innovation strategy, and it will continue to be that. I think there's opportunities in the AI space like we talked about earlier that are -- we've been in that space for a while. We'll continue to be in that space. But I think some of those opportunities are opening up inside IDEXX and outside IDEXX...

So that could be organic or inorganic...

I think there's opportunity there to continue to -- with just some of the advancements that are happening. But across the board, I mean, we see instruments, assay development, software as being more of an integrated solution approach that will continue to drive forward.

Guys, any last minute questions from the audience? Mike and John. Perfect. Thank you very much for your time.

Thank you, Jon. Nice to see you.

Good morning, and 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; Mike Erickson, Executive Vice President and incoming Chief Executive Officer; Andrew Emerson, Chief Financial Officer; and 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. [Operator Instructions] 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 Diagnostic 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 inVue Dx 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 reoccurring 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 built confidence to increase our full year revenue range to between $4.675 billion to $4.76 billion, an increase of $42 million at midpoint or an outlook for overall reported revenue growth of 8.6% to 10.6%. Our updated full year overall organic revenue growth outlook is for 7.7% to 9.7% with an organic CAG Diagnostic recurring revenue growth of 8.7% to 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 to $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% to 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, an average global net price improvement of approximately 4%. CAG diagnostics instrument revenue increased 28% organically, with another strong quarter of inVue Dx 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-plus years old. Non-well visits also continued to show signs of improvement, increasing 20 basis points year-over-year, while wellness visits declined minus 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 recurring 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 recurring 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 in our premium instrument installed base and expanded testing utilization, including benefits from innovations.

InVue Dx utilization continues to track well to our reoccurring revenue estimates previously provided and progression of our controlled rollout of F&A 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 inVue Dx 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 installed 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 recurring revenue growth of 11% during the quarter and strong nonrecurring 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 recurring 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 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% to 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 continue 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 to $4.76 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 our revenue growth outlook for 8.6% to 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% to 9.7% includes an organic growth range of 8.7% to 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 minus 1.5% after a third sequential quarter of clinical visits trending between minus 1% to minus 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% to 32.5% for 2026, reflecting increased expectations of 50 to 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 to $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% to 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% to 8.7% and CAG Diagnostics recurring revenue growth of 8.5% to 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 InVue Dx during 2025 and modest revenue pressure from regional and placement mix. Second quarter reported operating margins are expected to be 33.9% to 34.3%, reflecting expansion of 10 to 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, and 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 a 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 a 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 health care. This commitment is reflected in the continued expansion of diagnostics frequency during both well and non-well visits.

Customer retention remains in the high 90s 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 diagnostic 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 4 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 inVue Dx 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 team 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 inVue Dx 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 advanced in Q1 for blood morphology, the ability to detect and report [indiscernible]. These are red blood cells associated with severe underlying diseases such as with liver, clinic or kidney disease.

We're also pleased with the solid progress of our controlled rollout of F&A. Early customer response to F&A 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 pathologists review available with a single click. This workflow enables clinicians to evaluate more lumps and bumps by reducing clinical effort and cost of 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 experience and support further broadening of the launch in Q2 as we ran volume and anticipate full volume ramp in the second half. Overall, F&A utilization is tracking to our planning assumptions, and we remain excited about the potential of F&A as a platform capability that can expand over time beyond mass cell tumor detection.

Turning to IDEXX Cancer DX. Momentum continues to build behind this important innovation as veterinarians increasingly incorporated 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 ] business, and we believe it is one of the many elements driving competitive lab transitions at IDEXX.

A major milestone this quarter was the international launch of Cancer DX for [indiscernible] and 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. 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 mast cell tumor detection for later this year and a third test by the end of '26. 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 the quarter. In 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 platform installed base grew double digits in the 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 recognizing the importance of driving client deployments. 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 and customers who use all of our diagnostic software and imaging solutions experienced 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 and 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. And 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 was 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.

Now 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, and 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 and 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 inVue Dx 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 want to 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 inVue Dx, 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.

[Operator Instructions] We'll go first to Michael Ryskin of Bank of America.

Congrats on the quarter, and I [indiscernible] the comments. Jay, congrats. Been a pleasure. I want to kick things off on inVue. You had a lot of comments in the prepared remarks on strong performance. But just that placement number, 1,099. You reiterated the 5,500 for the year, but we would have expected you to do a little bit more in the first quarter. Is there just some pacing dynamics there to think of that 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 these placements will be there for the full year?

Yes. Michael. The -- we -- Keep in mind, we came off a very strong year in 2025 and Q4. We have a high degree of confidence in the 5,500 number. It tends to be -- 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. So we have a lot of confidence in the overall 5,500 projection for the year.

Okay. Great. And for my follow-up on just sort of underlying market assumptions and what you've seen you had about 2% visit decline in the first quarter was to be expected in a lot of expectations. You talked about, I think, in your prepared remarks, modestly [indiscernible] the industry outlook -- just would be great to drive into that a little bit more. Is that U.S. or OUS? Is that something you're seeing now? Just expectations as you go through the year? Just parse that part a little bit more.

This is Andrew. Yes, so from a clinical visit perspective, we highlighted a minus 1% in the first quarter. So that's about a point better than what our initial guide had laid out from that standpoint. We continue to see positive momentum from the aging pet population, pets that are 5-plus years and older continue to add some positive momentum just to the overall industry. And I think what we're trying to do is capture the multi quarter perspective that we've started to see the green shoots in that area into our outlook. I hear more directly. I think if you look at the past trailing 12 months, the average is now very similar to what we're anticipating for the full year, which is about minus 1.5% decline in clinical visits. A lot of that is really from the wellness visit area and areas like the discretionary types of categories. We continue to see pressure related to the macro dynamics and consumers making trade-offs, whether they come into the clinic. But the positive side of that is when they are coming into the clinic, we're seeing really strong quality of care within those visits. So diagnostic frequency and utilization continue to expand at really healthy rates. And so you're seeing the diagnostic care protocols really continue to play out positively from that perspective. So we feel like we've kind of captured the range of outcomes here on the industry, but it is a little bit better than we had anticipated for the full year.

Yes. Maybe just one comment on those pets 5 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. And so that cohort of pets said we know it's a very large cohort are coming into the practice, not just for sick visits, but also for well visits.

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

Jay, 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 curious 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? And then maybe the second one for me is just coming back to inVue and the F&A rollout. I know you made some comments in the prepared remarks, but 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.

Sure. Chris, I'll take the international market comment, then I'll ask Mike to handle the F&A rollout and how we think about that. The international markets just from a overall macro impact and performance side, we don't see broad differences between international and our domestic market. There's a macro impact, obviously, on wellness as a whole. Wellness is less a dominant [indiscernible] -- it's at a much lower rate than typically what we see in the U.S. just from a development 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. So it's not just in terms of commercial expansion. So that's an important part of that, and we've done double-digit expansions over the last 5 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. And if you look at our product road map and what we've rolled out over the last couple of years, 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, we saw the opportunity footprint cost and performance to go more from a value standpoint. I think on the Rapid Assay business [indiscernible] is another example, really tailoring solutions for some of our international markets. And we're realizing I think that 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, and 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 Mike to talk about F&A's [ controlled launch ].

Chris, thanks for the question. We're very happy with the controlled launch process for F&A. It's on track. And in fact, we're broadening it as we head into the second quarter here, 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 4 of these just in my time. And 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. And F&A, 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 pathologists. And we're seeing our controlled launch customers give us great feedback and really make use of all of that functionality.

And then the final thing I'll just say here is that, as you know, these products have very long tails. We want to 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.

So 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 in view related or directly associated with inVue 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 inVue launch? And just when should we think about kind of inVue, 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?

Yes. The inVue consumables is definitely contributing to the strong growth and momentum we see in the VetLab consumables portfolio with ear cytology, blood morphology, we've communicated this before. It's well within expectations. Customers are enjoying it. It represents 100% new growth in the consumables area that we didn't have before. So we think that with F&A, we'll continue to build off that and 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 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, where we're able to market that into a very large installed base. And customers have grown to trust our solutions and the performance of the solutions and workflow of it is really load and go. So what we're seeing is a rapid uptake of these innovations across a large installed base globally. And these are -- in the case of my pancreatic lipase and cortisol, these are measurements or parameters that customers have been asking for. They see every day, dogs, cats coming into their practices that require these types of measurements. And the same really is true across the portfolio. We've seen a nice, I think, build in SediVue, for example, internationally, which started a little bit later than when we introduced it in the U.S., hepatology is typically sold as part of a chemistry and hematology suite. So 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. And then just on F&A again. And just on kind of the building a broader launch there. I guess, do you have a backlog or preorders to speak of on that front that customers are waiting for F&A, like what do you hear from the field as kind of you more broadly launched that throughout the year? And then what is your expectation? Or when should we hear more on the next menu expansion for inVue and how meaningful full that could be to the platform? And 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.

Yes. Thanks, Erin. Why don't I -- I'll take the commercial aspect of it and then maybe have Mike talk a little bit about the F&A and why we think virtually all customers would be interested in it. From a commercial standpoint, what we launched at what customers, I think, focused on was, obviously, the ear cytology and blood morphology, it felt like from a menu standpoint that, that offered a degree of completeness that supported the placement of the instrument and overall utilization, and that's certainly played out. And they -- of course, we communicated the fact that we weren't going to stop at that from a menu standpoint that it was kind of -- we were going to broaden it to F&A, first on [indiscernible] and then over time, continue to expand the menu because the architecture and the technology enables us to do that. And I think we've communicated at one of the -- our last Investor Day that there's over 100 million, 150 million cytology done on a global basis, manually. So there's a very, very sizable opportunity still in front of us.

Mike, why don't you talk a little bit about the F&A and how customers think about that?

Yes. Thanks, Jay. I mean F&A, just like blood morphology and ear cytology, I mean these are all complementary care episodes, applications, if you will, on the inVue Dx platform. And really, every practice that you see is doing all of these things. And so 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 of F&As being done, but 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. And frankly, it's pretty expensive. And so we're really excited about F&A on inVue Dx as an opportunity to not only elevate the standard of care, but also expand access to muted care and 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. And so we see a long road map, a very exciting road map ahead on inVue Dx and we'll continue to share more about that as we move forward.

We'll go next to Jon Block with Stifel.

So -- when I factor in the 2Q '26 guide, the first half CAG Dx recurring looks like it's expected to be about 10.25%. That's the [indiscernible] at. And the midpoint for CAG Dx recurring for the year is now after the raise 9.7%. So slightly below the [indiscernible] in a quarter but the comps get much more difficult in [ 2 age ] and it doesn't look like you're assuming the visits improve off the 1Q number. So Jay or Andrew, can you just lay out the drivers that allow the CAG Dx recurring call it, 2-year stacks to accelerate into the back part of the year, again, because it doesn't seem like there's a big uplift at least embedded in the visits from the 1Q number.

Yes. So I think from an overall perspective, if you look at the full year guide. We're really planning for solid growth. And we've actually increased the outlook both at midpoint and the overall range on an organic basis by about 70 basis points. That confidence really stems from continued execution that we see on a global basis. Our commercial teams continue to support our customers exceptionally well. We've also 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, the contribution between inVue Dx as well as some of the new menu that we've added to our Catalyst platform. We've certainly seen expanded utilization as well, both in terms of the industry metrics as you highlighted, we are thinking that clinical visits are slightly improved from our initial guide, which is partly playing a role in there. But we continue to see really strong quality of visits. And I think that diagnostic frequency and utilization certainly benefits the overall growth rate that we have outlined as part of our long-term guide.

Keep in mind, guidance continues to be a range. I think if you look at the upper bound of the guidance range, certainly more consistent trends with what we have now. And again, I think that comes back to confidence in our business execution and continuing to maintain strong relationships with our customers. Placement trends on instruments are really positive. We've seen growing benefits from utilization across our key modalities from a business standpoint. So I think we have really captured kind of a range that we feel confident with going forward here. But maybe I'll let Jay talk to a couple of the specifics just from a broader business perspective.

Yes. One thing we haven't spent a lot of time talking about is the momentum also in the Reference Lab business. It's been very strong. We've seen that globally. Part of it comes down to a lot of differentiation. Cancer DX has given us, obviously, something to go in and talk to customers about, but leveraging that to talk about the broader differentiated portfolio in Reference Labs, not just from a menu standpoint, but from a service standpoint and being able to serve all of our customer needs. And what we've seen is we've been able to grow successfully the entire IDEXX portfolio. So point of care, Reference Lab, software, the integration that provides. And the business just has a lot of momentum because of that. And we've been, I think, transparent with customers in terms of the innovation agenda around what's coming, the expansion of IDEXX cancer diagnostics as an example, continued to build into more of a full volume posture with inVue Dx F&A in the second half of the year. I think that gives us a lot of confidence in terms of being able to sustain good momentum in the business.

Okay. That's helpful. And maybe just a quick follow-up. For inVue, the way you guys frame it makes it seem like you're not yet in that [ 3,500 to 5,500 ] revenue per box band yet. And I guess maybe a couple of parts to the question. One, is that an accurate statement? You're not there yet, you're, I guess, trending to it or however, some of the verbiage is laid out? And then when do you expect to be in that band? And do you need sort of that full launch unrestricted launch of F&A to get there.

Yes. Thanks, Jon. Maybe I'll start and then Mike can add in here. But just from a recurring revenue perspective and utilization of the instrument, I think what we are seeing is very much in line with what we had anticipated as part of our build. Certainly, the range that we've given, again, is a range. I think it wasn't a precise number and it did include the launch of F&A, which we've started while that's in a controlled basis, we continue to ramp. We're within the band that we've highlighted here on a per instrument placement perspective. And I think, again, we'll continue to provide more insights and updates. We would like to see us more broaden out the F&A launch and then we can continue to identify exactly how that's playing out over time. But I think we're within that band, and we feel confident about the range that we provided.

Yes, Jon, 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 F&A. So we see more opportunity ahead. And as I mentioned earlier, only 10% of the masses that come in today get looked at. And so we see -- if you look at it kind of the TAM for F&A, if you will, is very, very large. So we see lots of opportunity ahead of us there.

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

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? And then I'll ask my follow-up upfront as well. When we think about performance in the first quarter, were there any changes in either visits or diagnostic frequency between January and February and March when we saw fuel prices pick up?

Thanks, Dan, for the questions. Maybe I'll start on this one. So from a visit guide perspective, certainly, fuel could have kind of an impact on consumers. I think obviously, the range that we provide, again, is a bit of a range, the lower end. You may assume that, again, you see continued constraints on the consumer demand side. But I think overall, what we know now is it's a pretty volatile and evolving dynamic in the Middle East and how fuel prices are going to play out and energy costs are going to impact the consumer, a little bit hard to predict that piece of it. But I think from a longer-term trend perspective, we're calibrated more on where we're -- 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 3 quarters, we've been relatively flat on non-well visits, meaning that as pets experience issues that they need to be dealing with. Consumers are willing to prioritize that spending. What we have seen though is that trade-off of consumers maybe not coming in for wellness or discretionary visits that have been more impacting just their overall decision-making here. But 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 what we believe is a good range at this point.

Yes. Just the one thing I would add to Andrew's comments is we've seen very consistent international growth for a long time now. And that's been through Obviously, there's been a war in Europe, and there's been inflation and macro pressures. And we've been able to -- it's not that it's not real. We've been able to out-execute that through innovation and commercial partnership with customers and commercial expansion. So we've got a lot of confidence in the health of the business and our ability to continue to bring innovations to our customers.

And then maybe the second part of your question, just in terms of Q1 performance. We don't typically break out the monthly dynamics just relative to visits. It can be really noisy. There's a lot of factors including things like day accounts, et cetera, that can play out in a month. We just see a lot more variability on a week-to-week or month-to-month basis. So not something that we give too much stock in from that perspective. But certainly the quarter had a minus 1% decline, majority of that being the wellness side, 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. And again, we're guiding to a minus 1.5% for overall clinical visits for the year. So I think we've captured expectations for continued pressure in those areas.

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

Congrats on the leadership changes. 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 really relate to this aging pet population, is it anything with maybe some pent-up care demand because of the lack of wellness volume? Just anything you see there and how sustainable that might be would be helpful.

Sure. Yes. We have seen -- we break it out through different age cohorts. And initially, if you go back some quarters, we have seen it in that 5- to 7-year cohort. So these are pet adoptions that largely occurred during the pandemic, where we had that huge step up. And what we've seen in terms of the type of breeds that were adopted during the pandemic is they're more heavily medicalized. The doodles, for example, frenchies. Dogs just require more care. And that's been -- in talking to customers, especially the corporate customers who track that sort of thing. They've also validated that, that's a real thing but we're beginning to see the front end of that very big pandemic adoption that we've seen. So we think that that's sustainable.

Okay. That's helpful. And then one just clarification. You mentioned some supply chain disruption impacting, I think, international growth. So maybe a multifold question there. Can you go into that? And was it for CAG or for Water and LPD? And then has that abated or how is that incorporated in your guidance looking forward?

Yes. Thanks for the question. So really, that was related to the Water business, specifically, and that was related to the Middle East. The Middle East region certainly have seen some dynamics going on where supply chain has gotten disrupted. We continue to work through that, but there was modest pressure in the water business that we factored into our outlook here.

Our last question will come from Daniel Grosslight of Citi.

I wanted to 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. And as we look to the [indiscernible] top end of the range now, what's the biggest swing factor between those 3 contributors, volume, pricing, innovation?

Yes. So 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 Diagnostic recurring revenues. In the U.S., that's modestly lower than we've highlighted before as well. But 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 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 conclusion continue to expand, which benefits the business as well as a modest improvement in the declines that we expected associated with the clinical visit flow through. So those are the components that we've highlighted specifically here but a lot of this comes back to the volume that we're able to drive as an organization for CAG Diagnostic recurring revenues.

Yes. Just to build off that. It really is a volume-driven growth trend on the point-of-care side, we note that we've been able to grow double digits our installed base over a period of time, that's the flywheel in which customers drive utilization. I referenced that business is very healthy. All the investments that we've made, cancer, IDEXX cancer diagnostics, 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 it's a -- we're in an attractive part of the market with good momentum.

And so 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.

[Audio Gap] on Day 1 of the Raymond James Institutional Investor Conference. I'm Andrew Cooper. I'm happy to be joined here by the team from IDEXX. We've got CEO, Jay. We've got incoming CEO, Mike, and we've got CFO, Andrew as well. So the full team.

With that, I'm going to pass it over to Jay for a presentation, and then we'll go down to Amarante 1 for a breakout afterwards. Thank you.

Great. Good morning. It's a great pleasure to have a chance to update you on IDEXX' strategy, a couple of what we think are significant opportunities. I'm Jay Mazelsky, I'm President and CEO of IDEXX. Just a quick reminder, this morning is covered by safe harbor disclaimer, a copy of which is also on our website. So with that, let's dive into it.

We're blessed to really be able to support a veterinary profession and industry that we think represents an exceptional long-term opportunity. We pegged this at about $45 billion-plus TAM. Of course, we have to develop that over time. And I'll talk this morning about our strategies and pillars we use to really drive diagnostics testing. The thing to keep in mind about diagnostic testing is it's foundational to practice and practice health. You can't prescribe therapeutics or pharma or specialty diets unless you know what potentially as the patient. It's also a foundational part of just assessing basic health status.

So diagnostics plays a unique role. And our strategy is very straightforward in terms of really developing the opportunity, and it starts with innovation. It's an innovation-driven strategy centered around developing platforms, not just platforms for point of care, but also platforms and software and our reference labs that provide really, I think, compelling extensibility.

We're able to also innovate to take advantage and bring innovations for our customers to our large installed base. We have approximately 78,000 Catalysts, which is our chemistry analyzer. And this past 12-plus months, we introduced a number of important innovations, just as, I think, a great example of being able to bring cortisol and pancreatic lipase and new calibration technology. And of course, our customers are businesses. They're in the business of providing exceptional medical care, whether they're independent practices or corporate groups. They look to software to help them really deliver excellent medical care, optimize the workflow within the practices, engage their clients, support their teams, and there's nothing better than software and data, which provides clinical insights to be able to do that and increasingly enabled through AI.

Of course, you can come up with exceptional innovation and innovations as we do, but you need a commercial ecosystem to support your customers. And we have a very large, sophisticated commercial group that are subject matter experts that partner with our customers that help them achieve their objectives, that grow over time through awareness and education, relevant testing. The net result of innovation and partnering with our customers as trusted advisers is we believe that there's an opportunity to grow our top line at 10-plus percent over time with really attractive high return on investment type characteristics to the business.

Let me just set up my discussion this morning and share with you how we think about our portfolio. You may have noticed that the patient or the customer, the veterinarian and pet owner are at the center of everything we do. Our customers typically use both point of care and reference labs. It may be situational depending upon the patient condition and circumstances. It may just be preference. And so our strategy around innovation is developing best-in-breed innovations, whether it's point of care or reference labs, tying it together through software and creating a seamless experience. And I'll cover each of these modalities in the next 15 or 20 minutes and give you a sense of how we think about them, how they come together in a very integrated way.

Let me now talk about the opportunity, and this is on one level, it's a financial slide. On another level, it's an output from a successful articulation and execution of our strategy. You've seen that we have been able to grow through different time periods, double digits, the U.S. at 10%, international at 200 basis points faster. And the -- just to call out the different characteristics of these time periods from 2015 to 2020, you see it was 13%. What drove that is we introduced a new chemistry analyzer called Catalyst One in 2014. And at least in North America, we went direct. So we began to directly represent our products and solutions and directly with our customers.

Internationally, you see that we've been able to grow faster. Part of that is investments we've made, not just in our commercial organization, but building out the enabling infrastructure, reference labs, logistics, VetConnect PLUS, which is our diagnostics portal, commercial expansions even more recently, and I'll share with you what those look like. And even in the U.S., where we've seen some headwinds with capacity and macro factors, we've continued to grow that at a fairly rapid pace. We think that testing and diagnostics testing is relatively underutilized that there continues to be really nice runway over time to develop these markets.

So to double-click on the international piece, you see the 12% CAGR is pretty linear over time. As I mentioned, a couple of things have really driven that commercial expansions. We see in our country markets, Germany and the U.K. and Australia and Japan, they love their pets and consider pets to be members of their household just like we do in the U.S. It's just a little bit earlier in terms of overall development. And our strategy as a company is to help drive that sector development. And we do that, as I mentioned, through enabling infrastructure, new reference labs, commercial expansions, building out capability across the full value chain.

We also do that through product development. If you take a look at the growth in the installed base, it's been very significant from a -- through a premium instrument lens. Hematology, as you can see from the color code there, has grown very substantially. That was a result of ProCyte One, which is a hematology analyzer we introduced quite some years ago that from a physical characteristic, economics, ease of use fits what are hematology-first markets in many of these countries and more recently, inVue. So we see a very significant opportunity over time as you build that installed base you benefit from the flywheel as you inspire increase in testing.

A little bit about the U.S. geography. As I mentioned, it's a little bit further along and mature than some of our international regions. But I think what this highlights is this foundational, very important role that diagnostics plays in practice health. So over a 5-year period, which is a fairly significant time period, clinical visits have been very modest at 30 basis points. But total practice revenue and clinical revenue is -- has grown approximately 6.3% to 6.9%, respectively. Diagnostics revenue, 90 basis points faster than that. That gets back to you can't treat, you can't assess basic health status unless you first diagnose.

And then in the case of IDEXX, we've grown 180 basis points faster than that average. And I'm often asked, why do we do that? What explains that? It comes down to a variety of factors. Our diagnostics are differentiated. We uncover more. And when you uncover more, you find more things and you treat them. It's also integrated as part of a workflow, so you can integrate and harmonize care protocols. You can make it very easy for customers to test. I'll talk about our point-of-care platforms in a minute, but they're load and go. You don't have to get into very complicated sample preparation and management activities. And that drives diagnostics usage over time.

A couple of market or macro, I think, tailwinds that I'd like to describe, and this is a very important one and one that we're very proud of as a company. Pets are living longer. In fact, dogs and cats, approximately 2 years longer, just over a single generational lifespan for these pets. Now a lot of things explain that. There's been a mix shift into smaller breeds of dogs, the smaller dogs live longer than larger dogs. In the case of cats, they're being kept indoors, which is more often, which is safer for them.

But also the role of innovation should be understated or underappreciated. The innovation that we have made in diagnostics in terms of uncovering more and really assessing the basic health status of a patient, innovation that our colleagues in the pharma space and specialty diet or nutrition space have also contributed. This is good for pet owners. Those of us who have pets, we love the dogs and cats that are members of our family. It's good for veterinarians because they're dedicated and very purpose-driven to provide longer lifespans and healthier pets. And it's good for business because as these pets age, that I'll share with you in just a minute, they consume more health care.

And so this is a slide that we have, it's a subpoint of this notion of as pets age, they consume more health care. This is broken out or spotlighting specifically diagnostics. And the way to think about this is just like very analogous to what we as humans experience. But as we get older, we have more disease typically and that you need more health care. In the case of pets, it follows that exact same relationship. And you could see as they progress from young to adult to senior and geriatrics, significantly more diagnostics is used. And in fact, diagnostics, both in an absolute value sense and as a percentage of total health care spend increases disproportionately. So we think that this -- as pets live longer, as they age as a result of what we saw a step up in pandemic, that there's a tailwind connected with medical services consumption and the use of diagnostics, which drives that.

A little bit more about the pet population piece because that's the other very significant tailwind in front of us. The -- during the pandemic 2020 to 2022, so that 3-year period, there was a 4x increase, 4x relative to the pre-pandemic baseline of 2019 of the number of pets that were adopted. In the U.S. alone, it's over 20 billion pets. These pets, as they age, getting back to the point that I made earlier, they're going to use more health care, consume more health care and veterinarians are going to use more diagnostics as part of assessing and treating patients.

We, in fact, as we've indicated in our last 2 earnings call, have begun to see the front end of that, what we think may be the front end of that green shoots, if you will, within that age 5 through 7 cohort, where on a nonvisit or nonwellness clinical visit standpoint, we're starting to see slightly modestly positive growth in that respect. So typically, if you look at dogs, just to maybe highlight that at age 7, historically at age 7 or so, they need more medical care. And that line begins to pivot and goes up. So we think that this is another long-term tailwind to the business.

Let me talk about now going from tailwinds to testing and how we drive testing utilization. It starts with innovation. Innovation is an important part of our value proposition to our customers, solving their most challenging, not just medical problems, but business problems. If you think about practices as in the business of providing medicine, they can be independent practices, they can be corporately owned practices, but they need solutions and technology is really helps provide that solution. We have accelerated the investment that we've put into innovation. If you think about this in chunks of $1.2 billion, [indiscernible] the tape beginning of 2025, we'll invest approximately at that level in a period of 4-plus years. If you compare that amount and how long it took previously, it was 7 years and before that, 20-plus years.

So we're investing more. We're very focused, I'll share with you in a minute, and across this broad solutions portfolio, premium instruments, biomarkers or menu, software, data and AI enablement. Having now almost 4 decades in human health and animal health, I can tell you, very few companies have this type of broad capability and competency across all these areas and how we bring these areas together for fit for purpose, fit to task for what our customers want.

I'd say that even though we're spending and accelerating in innovation, solving our customers' most challenging problems, we're very focused. We're disciplined capital allocators. We're disciplined and prioritize where that investment goes. We think about this in terms of disease states or disease conditions that offer multiple billion dollar TAM over time. Now in the case of vector-borne disease, that's a great example. We've been investing in vector-borne disease for over 3 decades, starting with heartworm, expanding to include the full vector-borne disease of Lyme and of anaplasmosis and ehrlichiosis and then more recently, Leishmania in some of our international country markets.

We continue to improve performance. We brought rapid assay and that testing portfolio into the IDEXX diagnostics ecosystem with SNAP Pro, and this is a great business for us. Parasitology with fecal antigen, another great example, where we introduced fecal antigen at our reference lab, which detects more. We're detecting proteins before the eggs become available, so we can detect more and we can detect earlier. And then we expand the menu more recently over the last couple of years, flea tapeworm and Cystoisospora. Renal, we reimagined what was possible in renal, starting with SDMA in 2015 to really detect far earlier than creatinine chronic kidney disease or kidney impairment. We expanded to include Cystatin B, which is an acute kidney injury marker. And the importance of this and the focus of this is driven by the fact that kidney is really our indication for overall patient health.

And more recently, with oncology, and I'll share with you, provide an update on our oncology offering, the challenge is we do today over 1,300,000 tests for detecting or validating cancer. This is on a global basis. But by the time the patient comes into the practice and is clinically symptomatic, the challenge with that is that there's -- from a treatment standpoint and an outcomes and efficacy perspective, it's -- there's not as much you can do. And in fact, it's in many cases, tragic. So being able to detect cancer earlier, being able to do something when the disease is in an earlier stage is a very, very important clinical contribution that we made.

And I'll come back to that, but I want to just touch on our point-of-care modality. I'm not going to go through each of these. I will spend some time and talk about inVue Dx. But I do want to point out that we've earned our industry-leading franchise in this space through really delivering what the customer wants. We follow a set of first principles in terms of developing new instruments. First and foremost, from a performance standpoint, it should work as well or better than what you get at the reference labs. It needs to integrate within the workflow within the practice. We believe that veterinary technicians are not laboratory technicians. So from a sample prep standpoint, having a load and go functionality is extremely important.

And as important as anything else is what we call technology for life, which is menu extensibility, making sure that when a customer purchases a Cat One 10 years ago that their investment is protected, meaning that they have the same feature, functionality and capability as a customer who purchased Catalyst One 2 weeks ago.

A little bit about inVue. This has been a really successful, I think, well-received analyzer. We've had the fastest ramp in the history of any of our premium analyzers. Last year, approximately 6,400 of these were placed. I think this fits those first principles that I described in terms of ease of use, it's slide free. Customers don't have to spend 15, 20 minutes preparing a slide. It fits within the workflow. It delivers differentiated performance at the hands of the veterinarian and it takes variability out of the interpretation equation, and it supports very high volume, well-understood use cases and menu extensibility, technology for life.

Starting with blood morphology and air cytology, we expanded it in Q4 of this past year and a controlled launch for FNA for mast cell tumor. And as you can see from the slide, as we count up the total number of manual cytology exams done today on a global basis, it's 150 billion. So a very significant opportunity still in front of us. This is obviously good medicine. Veterinarians love having their investment protected and having this type of technology for life capability.

But let me just give you an important analog. It's also a good business for IDEXX, which is when we introduced Catalyst One, which is our chemistry analyzer, it had a comprehensive menu with it back in 2014, late 2014. But through the 10-plus years since then, we've introduced SDMA on a slide, Total T4, fructosamine, cortisol, pancreatic lipase, there's a series of tests that we introduced. The economic value of that platform has grown 2.5x. So I think there's an analogy within inVue Dx that we create technical architectures for cell cytology. Anything done manually in cytology has the potential to be adapted and adopted onto this platform. So it's something we're very excited by.

The point-of-care business, though, we've been very successful, and we had a record year of over 22,000 placements in 2025. We have a very large installed base, but you can see from this slide that it's still early in terms of -- at least in terms of international adoption and for the new analyzers, we think there's a really nice opportunity still in our largest market, which is the U.S. And we think that this is a function of the fact that veterinarians want a laboratory within their clinic. They want the type of capability that these analyzers generate or create for them, and we've seen really nice traction over time. And we think that those international country markets and geographies provide very, very compelling opportunities and ones in which we'll continue to pursue.

Now let me move into the reference lab business and maybe spotlight or highlight our cancer diagnostics platform. We've now been on the market for about a year or so with canine lymphoma. We started with lymphoma because it's highly prevalent, and it's hard to detect early. And in fact, 1 in 4 dogs through their lifespan will get these type of common cancers. It's been very successful as a test. In fact, the performance, as you can see from the chart, 99-plus percent specificity. So very few test results are false positive, very high sensitivity. In majority of cases, we could phenotype B versus T, which is important from the type of therapeutic pathway that the veterinarian pursues. And then at VMX, we were able to come out with some additional data that we are able to detect or have test consistent with canine lymphoma up to 8 months before clinical symptoms appear. On average, it's about 3 months.

So very, very important. And also when lymphoma is detected, the treatment of choice is CHOP, which is a 4-agent chemotherapy regimen. It tends to last 5 to 6 months. It's not always efficacious our biomarker for canine lymphoma is able to detect molecular remission, meaning if it's not working, if it's not molecularly going away, then the veterinarian should stop and maybe pursue some other means. We announced at that point that at VMX that we will introduce mast cell tumor as part of a panel expansion sometime in the middle of the year and one other test this year. Our belief is that our commitment is to be able to provide a panel in -- by the end of 2028 that detects 50-plus percent, the majority of common canine cancer cases.

Again, keep in mind that cancer is very, very prevalent. 1 in 4 dogs through their lifespan will develop cancer. And we price this for access at $15 when included as part of a blood work panel, 2- to 3-day turnaround time. And when we include mast cell, we're not changing the price. We're not changing the workflow or the time to result. So very -- I think it's a very compelling offer and that customers have -- are not only using it as an aid in diagnosis but as a screening tool.

This is a depiction of how diagnostics over time has developed. Typically, what we've seen historically in the business is that pet owners and veterinarians when a pet comes into the practice, they will screen. And they may screen at some very basic level for heartworm or vector-borne disease or fecal testing. And then over time, as they recognize the value in diagnostics and blood work is included, you see a more comprehensive panel or approach given. But in the U.S., which is the most advanced market for diagnostics in the world, only about 12% or so of these tests include blood work. We believe that cancer because of what our customers have told us, can change that paradigm from left to right, to right to left, that it's such a huge driver of adoption based on what pet owners and veterinarians are telling us.

And this is a great chart that I think is a global market research survey that as pet owners and veterinarians their interest in cancer screening and testing. And you can see in -- it's high 90s in many countries, high 90s in many countries from a pet owner standpoint and veterinarian is equally compelling. So just a great opportunity, and we look forward to continuing to develop this market over time.

Software is an important part of our overall solution portfolio, as I mentioned in the beginning, veterinary practices or businesses. They want to optimize workflow. They want their teams to be productive. They want to be able to communicate in many cases, digitally with pet owners, being able to provide a full vertical stack really focused and fit to task for the animal health market is an important part of our overall solutions portfolio. You can see it's PIMS, pet owner engagement application, our Vello solution, VetConnect PLUS, which is our diagnostics portal and the ability to leverage our balance sheet and provide payment and financing in some cases, to support other payment processing solutions.

I've talked about innovation and the importance of innovation and our solutions orientation as a company. This market is not going to just develop by itself. It requires subject matter expertise. It requires a partnership approach with our customers, interfacing with them to understand their most challenging problems and how our solutions can help them. What we have found is key to being able to democratize our solutions and drive our solutions orientation is this partnership with customers, and it requires frequency and reach and access.

So over time, we have expanded our commercial footprint. Just recently in 2025, we announced 4 commercial expansions of our ecosystem, the U.S. as well as our international country markets given the backdrop of the opportunity that I described to you. This is an area of continued focus for us. We believe that when the data tells us that when we call on our customers and create awareness and education and consideration for diagnostics, they use more diagnostics. We grow faster and pets get better care. So this is something that over time, we'll continue to invest in. It's an important part of our overall value equation.

So let me now bring this together because just down to the last minute or so. We are blessed to participate in this remarkably compelling, robust long-term opportunity that we pegged at $45 billion-plus TAM. Diagnostics plays a foundational role within the practice. You can't treat, you can't assess basic health status unless they first diagnose. Our innovation strategy is around creating differentiated platforms, whether it's point of care, software or the reference labs and bringing them together in a compelling way.

As a result of this innovation strategy, a commercial ecosystem, which is large and sophisticated and trusted by our customers, we're able to generate attractive long-term returns for the business. We believe that over time, we can grow top line revenue at 10-plus percent, operating margin expansion, 50 to 100 basis points, capital allocation leverage as a result of share buybacks and long-term EPS growth potential at 15% plus.

So thank you for attending this conference. I've enjoyed providing a quick update and overview of IDEXX. And for those of you joining us with a Q&A session afterwards, look forward to answering maybe some specific questions you have.

Ladies and gentlemen, the program is about to begin. At this time, it is my pleasure to turn the program over to your host, Michael Ryskin. You may begin.

Great. Thanks, everyone. Thanks for joining us, and welcome to today's event. My name is Mike Ryskin. I'm the lead analyst for the life science tools and diagnostics team here at Bank of America. And I also have the privilege of covering the animal health sector, which I've now followed for over a decade. It's become an annual tradition for us to host this Animal Health Summit in the first quarter. I think it's a great opportunity to dedicate a full day just the space, take the time to dive deeper into key trends, topics, debates that matter specifically to the animal health community. We've always had really strong participation from companies in the sector. I'm pleased to say that continues again this year in 2026. We also have very strong interest from clients and investors. So really glad to see that.

I want to say I appreciate everyone taking the time to tune in today. I know there's a lot of other news flow going on across the space, across health care in the broader market. So as always, our goal is to make the event as useful, productive and beneficial to you as possible. If there are any questions, if there's any comments, anything you like to include any of in the chats, feel free to use either the Veracast portal or reach out to me directly via on Bloomberg chat. You can e-mail me at [email protected], although I imagine most of you have my e-mail.

My associate covering animal health, Alexa Chan is also on, and you can feel free to reach out to her and ping her with questions or anything you want us to include. With that, I think we're ready to kick things off. So for our first session of the day, we're excited to be joined by IDEXX Labs. With us, we have Mike Lane, Executive VP and GM of Global Reference Labs, Diagnostic Solutions Information Technology. And joining him is Andrew Emerson, Executive VP and CFO. Andrew, Mike, thanks so much for joining us.

Thanks for having us. Thank you.

So maybe just to kick things off, we'll start with sort of our default opening question. You guys reported 4Q recently. Maybe you could go through sort of the key moving pieces of the result, what stood out to you, sort of what trended a little bit better, what surprised you a little bit? And then we'll follow up on a lot of those topics, I'm sure.

Great. That sounds great, Mike. So yes, in the fourth quarter, we had exceptional financial results that we delivered. That's really benefited from top line double-digit gains that allowed us to also deliver strong operating margin improvement. From an overall organic growth perspective, we delivered about 12% organic revenue growth in the quarter, and that really supported the full year in terms of achieving that double-digit growth on an overall organic basis for 2025 as well. The innovation that we saw really helped us continue to drive the volume growth, which was really a more significant step-up in the second half than the first half in 2025.

New platforms like our inVue Dx analyzer helped us exceed over 1,900 incremental placements in the quarter in that category. And then overall, our premium instrument placements were really a record level that we've had in a long time. So our installed base expansion really grew about 12% year-over-year, and that was led with some of those innovation benefits. We saw continued sustained double-digit growth in our international business as well in the fourth quarter and really saw a step-up just in terms of the volume growth in the U.S. business, all in face of the fact that the sector continued to decline.

So we saw clinical visit declines of about 1.7%. So really, really nice improvement just from an overall growth rate in face of some sector challenges on clinical visits. And I think that really has a lot to do with some of the innovation that we've delivered, inVue Dx, incremental slides on our Catalyst platform as well as areas like Cancer Dx, which I know Mike can talk to as well. The commercial teams continue to engage our customers, and we're just seeing a lot of strong demand for some of these new innovations, which help grow the overall industry and sector that we participate in. So as I mentioned, for 2025, we saw double-digit top line gains.

We delivered about 90 basis points of comparable operating margin improvement year-over-year and really in line with our longer-term financial algorithm for 2025. So excited to see that type of performance. As we head into 2026, just as a reminder, we're not updating or confirming guidance today. But in terms of what we highlighted on our recent earnings call, we are planning for CAG diagnostic recurring revenue growth of 8% to 10% organic overall. And so the midpoint of that of approximately 9% really is about 100 basis point step up year-over-year compared to what we delivered in 2025. So we feel good about that trend and again, continuing to execute on the innovations that we're building off of here from a recurring revenue growth perspective. We also see strong interest in -- continued interest in our platforms like inVue Dx. This year, we're planning for about 5,500 instrument placements, which is a really solid metric that we've been tracking. This time last year, we were planning for about 4,500, and we outperformed that in 2025 and certainly are planning for a higher metric here in 2026 as well.

So overall, feel good about the trends of the business, strong interest. We are still faced with clinical visit headwinds. We're planning for about a 2% decline in the U.S. business on clinical visits on a same-store sales basis, but still anticipating to deliver about 5% volume growth overall from a worldwide perspective in light of that. So I think we like the trends that we're seeing just more generally, even though, again, we're not planning for a change in kind of the underlying sector dynamics that we've seen. And from a margin perspective, again, continue to focus on delivering expanded margin on a comparable basis year-over-year. So our target for 2026 is 30 to 80 basis points. the midpoint of which is really kind of in line with the range that we provide for a longer-term opportunity for the business as well. So I think we're really in a good position, and I think we're excited to see how we can continue to drive the innovation growth.

Yes. I maybe add a little color on our innovation-led growth strategy. We exited '25 with really strong momentum, as Andrew mentioned, in particular, let's talk a minute about inVue Dx, over 6,000 placements on the year, beating original estimates and just really well received, building on really common clinical use cases with ear cytology and blood morphology, beginning the control rollout of FNA, starting with lumps and bumps for mast cell. Similarly, 6,000 customers on the year for Cancer DX and a lot of momentum there. Interestingly, about 18% of these customers were new to the IDEXX reference lab, maybe either being introduced for the first time or being reintroduced to our exceptional service. So this innovation-led growth and can talk more about these extensible platforms of inVue Dx and Cancer Dx, just adding a lot of benefit both to record instrument placements, but utilization growth as well.

Okay. I mean that's a great intro. I've got about 7 different things from that. I want to follow up on, guys. So let me handle them one at a time. First, maybe, Andrew, you called out sort of like the overall 2025 performance and how the year played out. If we just take a step back and we look at where you ended the year, 9.6% organic versus where you were guiding originally sort of in that mid- to high single-digit range, 6% to 9%. You guys outperformed pretty meaningfully by about 200 bps, if you could sort of unpack that, like what really worked for you last year, right?

Because it's not that vet visits came in much better. It's not that price really deviated from your original plan. So it's the execution, it's the IDEXX portfolio. Is there any way for you to say, hey, the biggest driver was inVue than this, then Cancer Dx? Any way you could break it down and just sort of -- so we could see why you guys did so much better than initially thought last year?

Yes. So I think just in terms of -- we did take up our guidance range kind of over the course of the year a couple of times. And part of that was really driven by the strong execution of some of the innovations that we had. As we highlighted earlier on the more recent call, we had started the year with about an expectation of about 4,500 placements on InVue Dx. And so we do see a nice benefit just in terms of the revenue on the companion animal instrument placement revenue side of the house.

Now that's a bit more onetime in nature. We ended up doing over 6,400 or about 6,400 placements in 2024 -- excuse me, 2025. But reality is like that was one of those meaningful drivers of the top line. It delivered about 200 basis points to our overall revenue growth in the year. What's really exciting by that, though, is this momentum that we built on the recurring revenue side. And that's part of why when we look at the CAG diagnostic recurring revenues, we benefited from that as well in 2025, but the step-up at midpoint to 100 basis points, I think, has a lot to do with, to your point, that strong execution more globally as well as some of these innovations that we continue to get benefits from. So inVue Dx is tracking to what we've highlighted in the past of 3,500 to 5,500 per instrument.

However, that also includes our F&A launch, which Mike noted we're in a controlled launch phase of that, and we expect that to grow over the course of the year. So we feel really good about the performance that we're seeing and the track record of the instrument. And there's certainly strong demand for it. But that instrument placement played a portion of that. And then again, we continue to see strong execution. And as we are able to, again, reach customers internationally, we had announced midyear that we were expanding our field force in some of these global markets. And so that also allows us to continue the journey of building belief in use of diagnostics more broadly on a global basis. So I think it's a combination of those factors and really being earlier in this ramp cycle on some of the innovation platforms.

And I'd maybe just add the quality of the visits utilization, we saw a step-up in what we call frequency, the percent of clinical visits include blood work to about 100 basis points. So 2x historical levels, and that builds on these innovations that are supporting veterinarians to raise the standard of care, support patients with higher levels of care, particularly as they're aging.

Okay. Okay. That all makes sense. I mean, Andrew, given your emphasis on inVue, maybe we'll just go drive jump right into that and come back to some of the other points later. Yes, you're right. I mean, the placement numbers in '25, exceeding the original guide, you sort of quantify that because we know the ASP is just over 10,000, so you can kind of see the impact there. Now you're seeing that pull-through start to come through for 2026. You're talking about the recurring revenues going from 8% in 2025, total company being a guide of 8% to 10%, so 100 basis points improvement into this year.

By our math, about 50 to 75 bps of that is going to come from inVue pull-through, the incremental inVue pull-through given install base. I mean, again, depends on exactly where you are in that 7,500 to 5,500 range, we're about there. Let me know if that's a reasonable starting point. But then the other factors there, you're assuming visits relatively similar year-over-year. Price, you're taking a little bit less. So again, what's another driver to get recurring from 8% to 9% this year?

Yes. So to your point, we aren't expecting any change in the sector landscape. I think we've continued to see pressure on wellness visits as well as some of the more discretionary types of procedures, things like dentals as an example. And Mike highlighted the benefit that we see on the quality. So when folks are coming into the clinic, we're actually seeing them use diagnostics more frequently and certainly, the utilization or the breadth of the diagnostic categories has continued to expand over time. There's a multitude of factors that go into kind of the growth rate. But I think you've characterized some of them well.

We are expecting a modest headwind on price -- net price realization for the year. We're anticipating about 4%. In 2025, we did between 4% and 5% -- or 4% and 4.5%. So there's a bit of a headwind there, not really expecting too much change within the underlying sector dynamics. So what it comes down to is really that volume growth that we're going to expect benefit from. Mike highlighted Cancer Dx. That's another innovation category that I think will continue to help us. We noted that we'll be launching mast cell tumor midyear on the Cancer Dx platform. So in addition to lymphoma, which is available today, we're also globalizing that over the course of 2026 here as well. And we're continuing to build on other innovation areas.

We had launched pancreatic lipase a little over a year ago at this point into the Catalyst platform base. We also launched cortisol midyear of this year. So we continue to have a robust set of other menu additions that help us continue to drive volumes and expand the use of diagnostics over time and really improve the workflow at the clinic level. So I think it's a combination of these factors. that we're focused on. And as we mentioned, again, an expanded field force internationally should help us have these conversations more in depth with our international teams across the globe and clinics to continue to build the conviction behind how to use diagnostics more broadly.

Yes. I would just add, if you think about Cancer Dx, it really hits on all the growth drivers, right? It engages the practice. It supports raising standards of care utilization. It also expands the value, which supports both price and high 90s customer retention. So just like other innovations that are highly differentiated before SDMA, Cystatin B, fecal antigen, Cancer Dx, these innovations drive multiple growth drivers and enablers.

Okay. Sticking with -- sticking with inVue for a little bit, let's talk about FNA. You're rolling that out, as you had indicated before, you said starting with mast cell tumor detection. Can you talk about that rollout over time? Why start with just mast cell? Why not broader? When should we think that would expand? And just sort of talk about your pull-through assumptions, 3,500, 5,500, just sort of how the incremental rollout of these capabilities will impact that?

Yes, I could start on that. Andrew may want to add. These are highly extensible platforms in the case of inVue, starting with ear cytology and blood morphology. And then FNA is a broad area, but mast cell, in particular, is one of the most commonly diagnosed cancers for general practitioners. And so it's an area where we prioritize -- most pets will form lumps and bumps in their lifetime. We estimate only 10% of those are tested. Many are not found. They may be hidden in the fur or they just may be below the skin. Yet there are also about 12 million that we estimate that are done. So it's a large traditional opportunity done at the point of care. So that's why we prioritize mast cell with inVue FNA to start. Clearly, we'll continue to expand that platform just like we're expanding Cancer Dx.

Yes. And to Mike's point, I think the great news is there's a lot of opportunity just around lumps and bumps in general, a lot of potential continue to ease the workflow in the clinic to make that easier so that we're not testing just 10% of those. We're really expanding how often those are looked at. And a lot of that has to do with the simplicity of the inVue diagnostic instrument platform and the load and go mentality, which is a core principle as we think about bringing new diagnostic capabilities into the clinic.

But I think the other kind of exciting part of this is not only is inVue DX really extensible by being able to address these different cytology categories, but to your point, FNA actually becomes an extensible panel or profile within that as well. So we'll be able to continue to add new capabilities on FNA, just like we are with the broader system itself. And so it's a really powerful underlying technology that I think really adds a lot of productivity benefits in the clinic and gives us the opportunity to continue to broaden out the use of diagnostics more comprehensively over time.

And maybe, Mike, I'd just add that we prioritize mast cell, of course, not just for inVue, but for Cancer Dx, and that was very deliberate. These work together. Cancer Dx really looks at the whole body through a simple blood test to indicate if there's mast cell and then inVue comes along to interrogate specific lumps and bumps. And it's really that interrogation of the specific lumps and bumps that the parent can get peace of mind that this is a benign lesion or tumor or this is cancerous. And with Cancer Dx and inVue, we find it earlier and a lot can be done about it to extend the life of these pets.

Great. What I was saying was, how difficult is it to expand from one indication to another, -- sort of like -- I mean, it's sort of a technology biology question, but okay, you've got FNA for mast cell. How different is that from developing FNA for other cancers, for other indications? Is it completely different technology, sort of like how easy is it to make the leap into the next application and the next and the next once you have it for one?

Yes, I can -- it's a platform. So it's designed to extend. So it's not a different application. I think it's just you need to prioritize. Some of that comes down to data sets, clinical evidence. And so rather than hold something back when we have such clinically relevant tests to provide, we've decided to release them as they come, ear cytology, et cetera, blood morphology, FNA, and we'll continue to expand that. But I think it's time and distance in terms of how we continue to extend the platform.

Similarly, as you've seen with Cancer Dx. This isn't that different than when you look at fecal antigen. We started with 2 fecal antigens, and we have a third, fourth, fifth, we have another one coming. So this is part of our technology for life. It's part of our innovation approach, which is it's not really the big bang. It's about bringing incremental value to the pet, to the practice as we have it. And so that's, I think, what you're seeing is in the rollouts of both of these breakthrough innovations.

And we continue to build in the investments towards research and development in order to continue that pace over the somewhere at our Investor Day, Martin Smith had provided an overview of just how we think about research and development and our approach to commercializing that with high confidence. And I think we're continuing to invest in that area just to be able to improve that pace over time. To Mike's point, we think about this as platform technology so that it becomes easier to add these things in as we're able to identify them and build conviction and bring confidence that we're capturing the right resulting.

Yes. Okay. So it sounds like it's just a matter of time of generating the clinical evidence and having the runs and training of the algorithm, okay. As you touched on price briefly, I want to make sure we touch on that as well. 4% this year, like you said, just a modest tick down. I think you talked about your LRP of 2.5% to 4%. So you're at the higher end of that. Should we just continue to expect that to just kind of grind down and gradually come back down to that range and still feel like that's a good sustainable point longer term? And I guess other part of the question would be what determines if it's 2.5% or 4%, right? Like that is a relatively broad range in any given year, what are you looking at to determine where you shake out in that? Or what did you look at in '26 to shake out at 4%?

Sure. Yes. So I think over time, certainly, what we'll be paying attention to is the value equation here. And I think that's a key part of how we determine the pricing, whether that's this year or any other year. But it's really about how much value are we able to kind of bring to our customers across a myriad of different avenues. Some of that is new diagnostic capabilities that we don't charge for discretely. So we have a long history of doing this, things like SDMA or cystoisospora, where we're adding additional insights into these panels and profiles that we deliver. And we don't charge explicitly for that, but part of how we recapture that value over time is through list price changes on a yearly basis.

An example of that this year is mast cell tumor detection on Cancer Dx, what we have highlighted is we're actually not changing the price of the panel, which already is quite affordable from our lens on when you're including it in a broader diagnostic panel, it's about $15. But even stand-alone, it's only about $60 as we sell it to the clinic. So that's part of our design is how do we think about making sure we're helping build and support the sector. We believe strongly in some of these clinical use cases, we believe there's real clinical value there as to our customers, and we're really trying to bring that more comprehensively.

Certainly, the last several years, we've been dealing with significantly higher levels of inflation really across the board. And that's another thing that we have to take into consideration in any given year. But as you've probably seen more broadly, that's been easing. We pay attention to CPI and certainly work with our partners and suppliers on how to manage some of those dynamics. But in those periods of significantly higher inflation, we have to accommodate and take that into consideration as well, which is part of why you saw some higher levels of pricing historically. But our starting point tends to be around the value that we deliver and making sure that our customers understand that and I also believe in that value as well.

Okay. Want to make sure we don't skip over vet visits and sort of the macro dynamic and where it goes from here. I'm actually surprised it's taken me 20 minutes to get there. Normally, it's the first question we start with. But we've had a lot of debates over the last couple of years in terms of what's driving the weakness, why it's been depressed for as long as it has been, why it's not recovering more. 2025, I would say, on the whole was still somewhat of a disappointing year in that regard because I think we had hoped to see some change at some point, and it really doesn't seem like it's turning. With another year under your belt, what would be your latest take on just sort of what's keeping that so suppressed for so long and just sort of what the road map is for here?

Maybe I'll start -- jump in. So yes, I think on clinical visits, Michael, what we're seeing and certainly in 2025, what we saw was a lot of pressure really on the wellness side of the house. And again, these discretionary types of procedures that can happen. So that's -- folks, I think, as they're managing, again, a broad base of inflationary impacts across their own environment, making those decisions about whether they go into the clinic or not. And again, we're seeing that more in those cases where it's less about the acute issues that may be happening with a patient or a pet. I think what we find is when those types of situations are happening that folks are willing to go to the veterinary, seek the health care for their pet.

They still believe that they're part of the family. They want to prioritize health care for those individual pets. But they may be a little less inclined as they're trying to work through their own budgetary constraints and especially in some of the lower economic levels to go in and get those wellness visits. And I think that's where we've been seeing the pressure this year more explicitly. We did see a little bit more benefit or kind of less impact on the non-wellness side. And just as a reminder, non-wellness visits account for about 60% of overall clinical visits, and they tend to use higher intensity of diagnostic utilization.

And so when you actually look at the diagnostic revenue associated with that, it tends to be more about 70% to 75% of the overall sector. So we are seeing, I think, solid kind of stability on the non-wellness side at this point and certainly the aging cohort, pets that folks got during the pandemic are starting to hit that adults and more senior age category. We talked about some of the green shoots that we're seeing on the aging pet population, but we continue to see pressure on some of those younger age cohorts, a little bit more muted puppy and kitten types of visits as well.

I think that has a lot to do with, again, just the broader macro environment that we've been managing through. Consumers tend to be a little slower to add or replace pets when they're feeling under pressure from their own, again, budgetary constraints. So I think those are the types of dynamics that we see play out. And we're not anticipating a major change to that this year. But I think we're optimistic on some of the aging pet populations over time.

Yes, if you step back and you think about the long-term opportunity that we have, only 20% of the visits are receiving blood work today. And so the real opportunity is the visits that are coming in to expand that. And we talked about the quality of the visits earlier. We're seeing 2x over the historical rate last year, the quality, the frequency, the diagnostic intensity that Andrew is describing as pets age, certainly, that's an element. So that -- for those visits that are happening, saying yes to diagnostics, both the veterinarian and the pet parent, that's what we're seeing drive utilization.

Okay. We did this -- I'm sure you guys saw, we did this analysis maybe a week or 2 ago where we looked at visit trends, not just going back to 2020 or '21 or '22 post-COVID, we kind of took a step back and looked over the past decade. And while they were still positive visit growth pre-COVID, it was decelerating a little bit. And what we've gotten increasing feedback on from some of the vets and KOLs we spoke to is the role that vet clinic consolidators and private equity has played in driving excess price and therefore, maybe destroy some demand. I'm just wondering if you have any view on that or any thoughts on that, just sort of like the prevalence of the consolidators, how big they've gotten in the industry, how hard they're pushing price and whether that's having some sort of multiyear, decade-long impact of pricing out some of the consumer.

Yes. So maybe I'll start on that one again. I think from our perspective, certainly, again, we pay attention to things like the vet service CPI, and it's been a little bit more elevated here versus overall CPI. It has kind of come down some in the last year or 2 as well, which I think is good news. But there's been a level of, I think, professionalization within the industry at the clinic level as well that some of these larger consolidators have had to invest in just from a staffing perspective.

I think what we saw initially coming out of the peaks of the pandemic was more of a capacity constraint. That had a lot to do with stability of maintaining veterinary capacity, technician capacity within the clinic itself. And I think making sure that they could create some stability on that and not see the types of levels of turnover or burnout that they did, had to do with some of the rebalancing of things like pay over time that I know they're having to accommodate as part of that change. I think the broader kind of point from our perspective on the pricing piece of this is it tends to be a little bit more macroeconomic, right?

Again, the cost of housing and food and transportation all went up in this time period. And so maybe a little less acute relative to the veterinary industry specifically changing some of those economic metrics. There's always some interplay on price volume elasticity. But I think our perspective is kind of broader macro environmental change that consumers have been working through here related to that. But over time, we have a lot of conviction in the return of clinical visit growth, just given things like the aging pet population, the fact that the underlying dimensions related to people loving their pets and wanting to treat them well and provide them the health care services that they need. I think that all is really intact and sustained longer term and will be kind of coming back over a longer period of time.

Have you seen -- we've seen a little bit of this in international markets, especially in Europe. There's been a little bit of government involvement in those regions to try to keep pet inflation down, try to keep costs down a little bit. Any sign of that happening in the U.S.? I mean we typically think of the veterinary industry as being incredibly unregulated and just sort of ignored by the government to large degrees. Any concerns that you'll get some regulation and some price controls given how elevated it's been in recent years?

Hard to predict the future on where the governments might go. I think it's certainly something we'd be paying attention to. But again, when you actually take the underlying cost of a pet visit into consideration, it hasn't changed so dramatically just from a pure dollars and cents perspective. I know some of the growth rates seem quite high, but it's still a relatively small portion of the overall consumer budget. But again, I think it's some of these broader kind of challenges that we've seen on the inflation side that consumers are having to deal with and maybe seeing some separation between lower income households and higher income households, although that hasn't been a significant impact that we've seen to date.

Yes. I would just add, of course, we work hard as part of our innovation to make these highly differentiated tests highly affordable. Andrew mentioned $15 for a breakthrough early cancer indicator with -- starting with lymphoma, which, by the way, we just expanded the claims for lymphoma around therapy monitoring and early identification. But we do this because it's part of the innovation process to make it affordable in this case, so there's not a false choice between, hey, do I run a broader blood panel or do I run cancer, at $15 this can be combined. And that's what we're seeing in the -- for example, the cancer diagnostics runs, 50% of them part of wellness panels and the vast majority part of overall panels. So we work hard, Mike, to make these innovations affordable to drive and support the adoption and utilization.

Okay. We've got about 5 minutes left, and I got a couple of more topics I want to run through real quick. One on the demographic shifts, just going back to the vet visit and the macro. And you talked a number of times about a post-COVID puppy pandemic boom and what that might for demographic shift. You've had some good data on that. So just thinking through the next couple of years, we start approaching '27, '28, investors going to be thinking about this more and more. Could you help us size that potential benefit, how to think about it? We've always debated, is it going to be like a 1-year jump and then back to normal? Is it going to be spread out over 5 years or just the shape of the curve. And at peak, could this improve underlying volumes by 100 bps, 200 bps, 300 bps? Just anything you can tell us to help us size that demographic shift and the tailwind it could be.

Maybe I'll start, and Andrew can add some specifics. But just big picture, I think we all know, as we age, as all of us on this call age, we have more diagnostic needs. And we're seeing that. We tend to say senior at 7 in adult in that 5-year range, which were -- for that cohort of pandemic puppies and kittens, we're well within the adult and heading quickly to senior. And I think in the second half of '25, we started to see in the data, some of that increase in frequency and utilization for that cohort. I think, fortunately, pets are living longer. So I don't personally see this as a 1-year thing. This is a secular trend that's going to go on for quite some time as these pets continue to age beyond 7, 8, 9, unfortunately, thanks to all the great work that veterinarians are doing, pets are living longer, which is great.

You captured that one.

Okay. All right. We'll stay tuned to see how that develops. Just a couple of minutes left. Maybe I'll do this as the last one. I mean, Andrew, first of all, we've spoken many, many times before, but I guess this is your first time joining the Summit as CFO. You guys are also sort of in the midst of a CEO transition. So both internal promotes, both with a lot of longevity and IDEXX and sort of a lot of continuity, and that's always very encouraging to see, but still a good amount of management transition at the top of the organization. Anything you want to say in terms of where that might impact strategy, priorities, how both you and Mike are viewing your new roles as you're stepping into them in 2025 and 2026?

Yes, sure. Maybe I'll kick off and Mike might have a point of view on this as well. But the great news about all of that is I think we have a really strong executive leadership team, Mike being a key part of that and has been part of this team for a long period of time. Both he and I have worked with Michael Erickson as the next CEO coming into the role for a decade plus since Mike's arrival or my arrival to IDEXX. And I think we have a lot of key components or key leadership talent at the senior level. There's a ton of opportunity within our space as well, right? We've highlighted over time that we believe there's an opportunity for about a $45 billion of diagnostic sector growth or sector expansion.

And so I think when we think about just the size of opportunity in the areas that we've been hyper focused on playing and adding value to our customers, whether that's in-clinic productivity, new diagnostic insights, allowing them to have a workflow that is easier to manage, I think that's all a space for us that creates significant upside growth over time as well as really high returns within this business. So I wouldn't anticipate a lot of change. We have a robust pipeline of innovations that we've been developing over a long period of time, and Mike knows these areas quite well. And I think we're excited to just continue to keep driving the company forward.

Yes. I would just add, we, of course, IDEXX has a really well-defined, consistent long-term strategy, innovation-driven. Mike Erickson is uniquely suited for the CEO role. Mike and I have worked together for 15 years since he joined IDEXX. He's been in the diagnostic business, the software business, our commercial team, our corporate accounts team, highly innovative. So really look forward to working with Mike in his new role.

So are we, so are we. All right. Well, that's all the time we have for today. Thank you for joining us. Mike, Andrew, thanks, everyone, on the line, and we'll stay in touch. Looking forward to...

Thank you.

Thanks, everybody.

Good morning, and welcome to the IDEXX Laboratories Fourth Quarter 2025 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; Andrew Emerson, Chief Financial Officer; and 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 fourth quarter 2025 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.

[Operator Instructions] 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, and welcome to our fourth quarter earnings call. Today, I'm pleased to review our Q4 and full year 2025 financial results and the company's outlook for 2026. In terms of highlights for 2025, IDEXX delivered excellent financial performance in Q4 driven by double-digit top line gains. Revenue increased 14% as reported and 12% organically, supported by 10% organic growth in CAG Diagnostics recurring revenues.

We achieved record premium instrument placements in Q4, with strong gains across our major platforms, including over 1,900 IDEXX inVue Dx placements, supporting a 69% organic year-over-year expansion of our CAG Diagnostic instrument revenues.

Strong revenue growth delivered $3.08 in EPS, up 17% on a comparable basis, while advancing planned investments in our commercial and innovation capabilities. IDEXX execution drove solid full year revenue expansion with benefits from organic revenue growth supporting strong financial performance aligned with our long-term potential. IDEXX achieved 10% overall organic revenue growth for the full year driven by 8% organic growth in CAG Diagnostics recurring revenues. Our global premium instrument installed base expanded 12% year-over-year, including benefits from nearly 6,400 inVue Dx instruments.

Full year operating margins reached 31.6%, an increase of 90 basis points on a comparable basis, supported by solid revenue expansion and productivity gains. Full year EPS of $13.08 per share was up 14% year-over-year on a comparable basis from strong operational performance.

These results were achieved through successful advancement of our innovation-driven growth strategy, including new platform launches, creating a solid foundation to build upon as we enter 2026. We'll discuss our 2026 financial expectations later in my comments. Let's begin with a review of our 2025 results.

Fourth quarter organic revenue growth of 12% reflected solid gains across IDEXX's major business segments, including 13% organic growth in CAG, 10% organic growth in Water and 4% organic gains in LPD. Worldwide CAG Diagnostics recurring revenue increased 10% organically in the fourth quarter, including solid benefits from volume growth and average global net price improvement of 4%. U.S. CAG Diagnostics recurring revenues increased 9% organically in Q4, including approximately 4% net price improvement and approximately 5% volume growth. Volume benefited from sustained new business gains aided by high customer retention levels and expanded utilization, including benefits from IDEXX innovations.

In the fourth quarter, IDEXX achieved a revenue growth premium compared to U.S. clinical visit growth levels of approximately 1,100 basis points. Pressure on clinical visits remains a headwind to the sector with U.S. same-store clinical visit declines of approximately 1.7% in Q4 and 1.9% for the full year 2025. Wellness and discretionary visits remain more pressured than sick patient visits with wellness visits down 3.6% in Q4, while early signs of an aging pet population and benefits from IDEXX innovations contributed to diagnostic frequency and volume utilization gains per clinical visit.

International organic CAG Diagnostics recurring revenue growth was 12% in Q4, with gains from net price realization and solid volume growth enabled by new business expansion, reflected in our double-digit year-over-year growth of our international premium instrument installed base. International regions have maintained strong growth throughout the year, highlighting the significant global opportunity and strong demand for diagnostic solutions.

IDEXX VetLab consumable revenues increased 15% organically in the quarter, reflecting strong double-digit gains in the U.S. and international regions. Consumable gains benefited from 12% increase of our global premium instrument installed base, reflecting solid advancement across our [ Catalyst ], premium hematology, [ SediVue ] and inVue Dx platforms. In the fourth quarter, we placed 6,567 premium instruments, up 42% from the prior year. Quarterly placement results included strong gains in inVue Dx and SediVue while sustaining Catalyst placement levels worldwide. For the full year 2025, we achieved approximately 22,500 premium instrument placements with excellent quality, reflected in significantly expanded EVI metrics bolstered by new and competitive Catalyst placements in nearly 6,400 inVue Dx instruments.

The successful launch of inVue Dx contributed over $75 million in instrument revenue for the full year, supporting approximately 200 basis points of overall company growth.

Rapid assay revenues declined 3% on an organic basis in Q4. Rapid assay results were constrained by pressure on U.S. wellness visits and continued transition of pancreatic lipase to our Catalyst slide, which had an estimated 4% headwind to Q4 revenue growth.

Global reference lab revenues expanded 9% organically in Q4. Reference lab results in the quarter were supported by solid volume growth across regions and net price improvement. Volume expansion included new customer growth along with continued traction of innovations like IDEXX Cancer DX in North America reaching nearly 6,000 customers.

CAG Veterinary software, services and diagnostic imaging revenues increased 13% organically in Q4, with results supported by 12% reoccurring revenues with momentum from our vertical SaaS strategy, including double-digit growth in our cloud-based PIMS reoccurring revenue.

In other business segments, Water revenues increased 10% organically in Q4 with double-digit international revenue growth and solid gains in the U.S. Livestock, Poultry and Dairy revenues increased 4% organically in Q4, supported by solid gains in the Americas.

Turning to the P&L. Q4 operating profits increased 21% as reported and 17% on a comparable basis from the prior year, including gross margin gains and modest operational expense leverage. Gross profit increased 15% as reported and 13% on a comparable basis, achieving 60.3% in Q4. This is an improvement of 60 basis points comparably, adjusting for approximately 10 basis points of negative foreign exchange impact. Gross margin gains were aided by strong consumable growth and benefits from higher reference lab gross margins, offsetting headwinds from business mix on strong instrument revenue levels.

Operating expenses were up 11% as reported and 10% year-over-year on a comparable basis in the quarter, reflecting increases in R&D and commercial investments aligned with advancing our innovation road map including recently announced expansions of inVue Dx and Cancer DX platform capabilities and the completion of our global commercial expansions.

For the full year 2025, operating margins were 31.6%, an increase of 90 basis points on a comparable basis net of approximately 180 basis point benefit related to lapping and now concluded litigation expense. On a full year basis, there was immaterial margin impact from foreign exchange effects.

Q4 EPS was $3.08 per share, up 17% year-over-year on a comparable basis. In Q4, EPS benefited from strong operational results and lower effective tax rate, including $0.07 per share in tax benefit from share-based compensation. Foreign exchange provided a $0.09 per share tailwind to the quarter net of hedge effects.

Full year earnings per share was $13.08, an increase of 14% on a comparable basis. EPS results were driven by strong operational performance in the year and include a combined $0.64 benefit from an accrual adjustment during 2024 and 2025 related to a now concluded litigation; a $0.10 positive impact from currency changes; and $0.35 in tax benefits from share-based compensation activity.

Foreign exchange had an 80 basis point full year revenue growth benefit and increased operating profits by $10 million and EPS by $0.10 per share, net of $1 million in hedge losses.

Full year free cash flow was $1.1 billion for 2025 or 100% of net income, aligned with our third quarter guidance and ahead of our long-term goals with capital spending of $125 million or approximately 3% of revenue. We allocated $1.2 billion to repurchase 2.4 million shares at an average cost per share of $506, supporting a 2.7% year-over-year reduction in diluted shares outstanding.

Our balance sheet remains in a strong position, and we ended 2025 with modestly lower leverage ratios of 0.5x gross and 0.4x net of cash.

Turning to our full year 2026 financial outlook, IDEXX is planning to deliver solid organic revenue growth and profit gains, building on strong commercial execution and extensible new platforms. We're providing initial guidance for revenue of $4.632 billion to $4.720 billion, an increase of 7.6% to 9.6% on a reported basis, reflecting 7% to 9% organically.

CAG Diagnostics reoccurring revenues are expected to grow 8% to 10% organically for the year, representing an increase of approximately 100 basis points at midpoint compared to our 2025 results. At current exchange rates, we expect foreign exchange to have an approximate 60 basis point benefit to full year revenue growth, largely in the first half of the year. At midpoint, our 2026 organic CAG Diagnostic reoccurring revenue growth outlook incorporates expectations for global net price realization of approximately 4%, reflecting a modestly lower net price realization than 2025.

In the U.S., we anticipate net price improvement of approximately 3.5% and have incorporated declines in U.S. same-store clinical visit growth of approximately 2%, similar to the full year 2025, given ongoing macro and sector constraints.

These targets incorporate continued solid global growth benefits from IDEXX execution and innovation drivers, including new customer gains and increases in testing utilization. The higher end of our CAG Diagnostic reoccurring revenue growth outlook captures the potential for improved sector and same-store growth trends, while the lower end of the range calibrates for further potential effects of macro and sector pressures. We're planning for solid placement levels for full year 2026 across our premium instrument installed base categories, including 5,500 inVue Dx instruments. We expect declines in CAG instrument revenues in 2026 as we lap the rapid expansion of IDEXX inVue Dx instrument placements and anticipate regional revenue mix dynamics.

Our 2026 reported operating margin outlook for the full year is 32.0% to 32.5%. On a comparable basis, this reflects an outlook for 30 to 80 basis points of improvement year-over-year net of approximately 30 basis point benefit from foreign exchange and an approximately 20 basis point headwind from lapping a prior year now concluded litigation accrual adjustment in 2025. We're planning for solid gross margin gains on a comparable basis supported by growth in CAG Diagnostics reoccurring revenues, benefits from lab and operational productivity initiatives and expansion of our high-margin cloud-based software business. We've captured impacts of tariffs under current laws in our outlook, and we remain well positioned to maintain supply continuity to our customers.

Our 2026 EPS outlook is $14.29 to $14.80 per share. This reflects an increase of 10% to 14% on a comparable basis net of a 1% reported growth headwind from comparison to the prior year now concluded litigation accrual adjustment. Our EPS outlook includes $34 million of net interest expense at prevailing rates and foreign exchange benefit of approximately $0.22 year-over-year at rates disclosed in our earnings release, net of established hedge positions.

We're planning for a consistent year-to-year tax rate when excluding share-based compensation effects. In terms of sensitivities to changes in foreign exchange rates, we project a 1% change in the value of the U.S. dollar would impact full year reported revenue by approximately $16 million and operating income by approximately $5 million net of hedge effects.

Our 2026 free cash flow outlook is for net income to free cash flow conversion ratio of 85% to 95%, aligned with the long-term potential and reflects capital spending of $180 million or approximately 4% of revenues. The outlook incorporates capital deployment towards share repurchases to support a 1% to 2% year-over-year reduction in diluted shares outstanding while maintaining leverage ratios similar to the past couple of years.

Regarding our Q1 outlook, we're planning for overall reported revenue growth of 11.5% to 13.5%, including approximately 2.5% growth benefit from foreign exchange at rates outlined in our press release. Organic revenue growth of 9% to 11% includes approximately 1% to 1.5% growth benefit from CAG instrument revenues supported by ongoing momentum in inVue Dx analyzer placements. As noted, growth of capital revenues is projected to become a headwind to overall growth over the balance of the year as we lap the launch of inVue Dx.

We expect Q1 CAG Diagnostic reoccurring revenue growth of 8.5% to 10.5%, which includes approximately 50 basis point benefit from equivalent days at midpoint and U.S. clinical visit trends and pricing expectations aligned with the full year guidance levels.

Our Q1 reported operating margins are planned for 31.4% to 31.9%, reflecting solid expansion of comparable margins in the quarter, aligned with our full year expectations net of approximately 90 basis point headwind from lapping a discrete litigation accrual adjustment in the prior year quarter and approximately 30 basis point benefit from year-over-year foreign exchange impacts.

We're well positioned entering 2026 with an expanded global field team and innovative platforms aimed at solving customer challenges. This concludes our guidance update, and I'll now turn the call over to Jay for his comments.

Thank you, Andrew, and good morning. IDEXX delivered a very strong fourth quarter, closing a year marked by exceptional execution across the organization and meaningful strategic progress towards our long-term potential. In many respects, 2025 was a defining year for our company. We successfully scaled multiple transformative innovations, expanded our commercial presence in key international regions and continued to demonstrate the resilience and durability of the IDEXX business model pressured by broader economic uncertainty.

Our performance reflects the strength of that model, one built on customer-centric innovation, high-quality, durable recurring revenue and solutions deeply embedded in the daily workflows of veterinary practices. This year through significant innovations like inVue Dx, Cancer Dx, Vello and Catalyst cortisol, our solutions provided valuable insights in the productivity lift sought by our customers. The human-animal bond continues to deepen and pet owners remain committed to providing a high standard of care given what for many of them may be challenging household economics. This commitment is especially evident in the aging pet population where owners and veterinarians alike are prioritizing early detection, proactive screening and longitudinal monitoring.

Early signs of aging pets with solid visit growth for canines 5-plus years old more weighted to non-well supported a second consecutive quarter of improving visits in this important segment. Additionally, in the fourth quarter, diagnostics frequency, the percentage of visits that include diagnostic testing, expanded, highlighting the structural demand for advanced diagnostics and the role it plays in driving the broader veterinary care envelope.

Our commercial organization continues to be a core competitive advantage for IDEXX. In Q4, we completed the targeted expansion of our commercial footprint in geographies where we see significant long-term opportunity to increase diagnostics adoption and utilization. These new team members were fully onboarded and trained and are now active in their respective territories: in Germany, the United Kingdom and Australia, alongside an expansion in the United States.

By enhancing commercial capabilities in these markets, we meaningfully reduced the number of accounts assigned to each representative. This enables more frequent, higher quality interactions with clinics and supports deeper integration of diagnostics into everyday care protocols. Our experience consistently shows that increased engagement leads to higher utilization, stronger customer satisfaction and better medical outcomes.

CAG Diagnostics recurring revenue growth in the quarter was driven by a combination of strong volume gains, adoption of new innovations and continued success in premium instrument placements. Diagnostic frequency and utilization per visit remained important contributors, benefiting both patient care and clinic economics. Customer retention remains in the high 90s for our global CAG Diagnostics business. This level of loyalty underscores the value veterinarians place on the reliability, consistency and clinical performance of IDEXX solutions and the strength of the partnerships our teams build over time.

Our commercial team delivered an exceptionally productive year, achieving record instrument placements and sustained double-digit economic value growth, including contributions from 6,200 Catalyst placements while delivering on our inVue Dx agenda.

We continue to see solid momentum in both competitive conversions and greenfield accounts. For the full year, we delivered double-digit growth in our premium instrument installed base, which now includes nearly 78,000 Catalyst analyzers globally. Our expanding premium instrument installed base provides multiple future growth vectors for the business, including benefits from higher diagnostics utilization and new menu additions over time.

We recently announced several new innovations, including expanding the IDEXX Cancer DX panel to include canine mast cell tumor detection with availability expected midyear 2026 in North America. This builds off a successful start to canine lymphoma commercialization where we crossed an important milestone last quarter. Now more than half of lymphoma tests submitted are for screening versus as an aid in diagnosis.

Building off the successful start in North America, we are on track for the next stage of expansion, a Q1 international rollout of IDEXX Cancer DX.

Getting back to mast cell tumors, they are among the most common cancers in dogs, yet they can be difficult to identify early. These lumps and bumps may go unnoticed, particularly in dogs with long coats and often resemble benign lesions even when detected. This creates uncertainty for clinicians and pet owners alike and underscores the need for tools that support earlier confident assessment.

Building on the strong momentum of Cancer DX panel, mast cell tumor detection will be added at no additional cost, with no change to specimen requirements or workflow, and sustained 2 to 3-day turnaround in the United States. This expansion allows veterinarians to screen at-risk dogs for approximately 1/3 of the most common cancer types during routine wellness visits and to evaluate the symptomatic patients where mast cell tumors are suspected. Importantly, it integrates seamlessly into existing workflows, reducing friction while expanding clinical insight.

We believe this enhancement further strengthens Cancer DX as a foundational tool for early detection and informed decision-making. We have also seen exciting new developments with the first Cancer DX marker for canine lymphoma. Evidence shows that we could detect a lymphoma signal up to 8 months prior to clinical manifestation of disease. This means crucial months of earlier detection and treatment potential. As patients undergo treatment, the lymphoma test has also been proven to be useful for repeated testing to monitor remission during [ shop ] chemotherapy, a common treatment for canine lymphoma.

With this treatment monitoring use case using reasonable assumptions, we see an addressable opportunity for canine lymphoma monitoring with Cancer DX at approximately 130,000 tests per year in North America alone. As is the case with the broader diagnostics category, the more we test, the more we learn.

IDEXX inVue Dx continues to be a transformational platform, redefining point-of-care cell cytology across several high-volume use cases. The rollout of inVue Dx represents one of the most successful product launches in IDEXX history. And the fourth quarter reinforced that trajectory, bringing inVue Dx placements for the year to nearly 6,400. This performance was driven by strong customer demand, operational readiness and highly positive clinician feedback, exceeding our initial expectations.

In December, we reached an important milestone with the controlled launch of Fine Needle Aspirate or FNA on inVue Dx. While the initial menu is for mast cell tumor detection, we view the FNA capability as a platform of its own. As with new platforms, this will be a controlled launch that builds over time, ensuring that the testing performance and customer experience are exceptional within the real world environment of a veterinary practice.

FNA is a critical diagnostic technique used daily to evaluate masses and skin lesions. Historically, this process has been manual, time-intensive and dependent on specialized expertise and external lab interpretation. By automating key steps and applying AI-powered analysis, inVue Dx allows technicians to prepare a sample and receive results within minutes while the patient is still in the clinic with the option of a one-click pathologist evaluation for additional expertise and review of FNA images and results.

The initial FNA rollout focuses on mast cell tumor detection, one of the most clinically significant canine cancers. Together with Cancer Dx, these innovations will give clinicians confidence at every step, from screening to diagnosis, so they can act sooner and faster [indiscernible] cancer in or out with certainty.

Our Catalyst platform continues to reflect IDEXX's Technology for Life strategy, delivering sustained value through disciplined menu expansions that enhance diagnostic confidence and efficiency at the point of care. In 2025, we built on the strategy with growing adoption of Catalyst pancreatic lipase and the launch of Catalyst cortisol, both of which enable veterinarians to make faster, more informed decisions during the patient visit. Catalyst pancreatic lipase, introduced in late 2024, saw broad uptake throughout 2025 as practices incorporated it into routine workflows to support timely pancreatitis assessment. The test provides rapid quantitative results for both dogs and cats, with reference [ of ] quality, helping veterinarians address a clinically challenging condition with greater confidence. Adoption across tens of thousands of practices supported diagnostic frequency gains and improved patient outcomes.

We extended this momentum with the launch of Catalyst cortisol in the third quarter, making the third Catalyst menu expansion in under a year when including Catalyst [indiscernible]. This test delivers real-time cortisol measurements to support endocrine diagnosis and ongoing disease management, allowing clinicians to move quickly from testing to action. Early adoption exceeded expectations and contributed to solid consumable growth in the second half.

Together these high-impact menu addition underscores the platform benefits of our robust installed base and Technology for Life strategy. We are able to rapidly expand new specialty tests like these across a large global installed base of approximately 78,000 Catalysts. For example, in North America, over 50% of Catalyst users adopted the pancreatic lipase test in the first 12 months.

Our software ecosystem remains an important growth driver and a source of strategic differentiation. IDEXX software is deeply integrated across diagnostics, imaging, client communication and practice operations, helping clinics fully realize the value of their diagnostic investments. In 2025, we saw strong performance across our practice information management systems as well as continued momentum in pet owner engagement tools such as Vello. Our ezyVet [ enabled ] platforms delivered double-digit installed base growth with particular strength among multi-location practices of corporate customers.

We closed the year with record quarterly bookings, reflecting contracted future ARR, signaling strong momentum for IDEXX's software solutions. Clinics continue to choose our cloud data platforms for their modern interfaces, diagnostics interpretation and ability to scale efficiently across locations with centralized workflows and data.

Vello continues to expand, growing its users over 40% from last quarter, and nearly tripling last year. Clinics using Vello report improved communication with pet owners, increased visit frequency and better compliance with diagnostics and treatment plans compared to practices relying on more basic engaged pools. We see Vello as a powerful complement to diagnostics, helping clinics translate clinical insight into action.

We also made exciting progress in our diagnostic imaging business where we launched in early January the most advanced radiography system in veterinary medicine, one that combines superb image quality at the lowest dose of radiation an important consideration where 75% of technicians are women of child-bearing age. Our solution enables a connected diagnostic imaging workflow for veterinary professionals where AI-powered viewer automates key clinical measurements and customers can now submit and review telemedicine cases [ practically through Webex ].

As we close out 2025, IDEXX remains firmly committed to creating long-term value for our customers, employees and shareholders. Over the past year, we strengthened our commercial foundation, scaled impactful innovations and reinforced our leadership in diagnostics and software. We enter 2026 with confidence in our strategy, our teams and the opportunities ahead. The human-animal bond continues to deepen and expectations for quality veterinary care continue to rise. IDEXX is uniquely positioned to support this evolution by delivering diagnostic and digital tools that enhance productivity, improve outcomes, support sustainable practice growth.

I want to close by thanking our 11,000 employees around the world. Your dedication to innovation, quality and customer partnership is what enables IDEXX to deliver consistent performance year after year. We're excited about the year ahead and look forward to continuing to build on this momentum. With that, I'll open the line for Q&A. Thank you.

[Operator Instructions] And our first question is going to come from Chris Schott.

Great. I just wanted to start on the vet visit side. We're obviously seeing a pretty wide divergence between wellness and non-wellness visits. It sounds like part of that from your perspective is the pandemic puppy starting to age here. But just interested to see how you're thinking about this evolving in 2026 as we think about wellness versus non-wellness visits and that negative 2% overall number.

And maybe just related to that, on price, I know you're targeting a bit less price this year. What are you seeing at the vet practice level in terms of price increases? I guess are you seeing any signs of some of these corporate practices starting to moderate price at all this year as well? I'm just trying to get some -- my hands around some of those dynamics.

Yes. Yes, just in terms of -- let me start with the vet visit profile first. We have seen some headwinds more on the wellness side. We think that's, at this point really, macro, probably in the lower economic demographic households where there's obviously some financial pressures. Less so on the non-wellness side, obviously, and we have seen some green shoots now 2 quarters in a row with those pets 5 years plus starting to grow. So we think that's positive. We think that likely reflects the pandemic adoption boom and these pets aging and will likely continue going forward.

In terms of 2026, we just -- we kept that baseline of about 2% decline until -- I think until we have clear evidence that that's going to improve. We thought that was an appropriate path to take. From a debt inflation standpoint, maybe not on the vet services side, more from the corporate perspective, we have seen a moderation. It's still running hotter than CPI, and I think that will come down over time. What we [ say is ] I think the corporate practice is recognized that that may be in obstacle to getting care with some of their clients and they're interested in being more aggressive in driving demand and patient traffic into their practices. So I think more to come as that develops.

Yes. And Chris, I'd just add on the visit dynamic just in terms of both the non-well and the wellness visits, we continue to see a really nice quality of visits overall. The frequency and utilization continues to expand in both categories. And so even in those groups in terms of the wellness and discretionary types of visits, when they are coming into the clinic, we're continuing to see really positive momentum for the use of diagnostics, which I think is a key part of our strategy overall.

Yes. Keep in mind, the non-wellness visits represent about 60% of the visits, but 70% to 75% of the diagnostics revenue. So this combination of what Andrew put his finger on, which is they're using more diagnostics when they come in, so we call that frequency, but also it's more intensive, I think is an important factor to keep in mind, just from a -- through a diagnostic lens.

And our next question is going to come from Erin Wright from Morgan Stanley.

So could you speak a little bit about the underlying drivers of the consumables growth? How should we be thinking about continuing mid-teens growth into 2026 or the cadence that we should be thinking about things here? What are the components of this? What will you lap? And then also, I assume that inVue isn't necessarily directly contributed all that much in terms of meaningful consumables flow-through as yet. So is there more to come on that front? What are you seeing in terms of that consumables flow-through? And then if not, like how do you think about when you enter into these contracts with placing inVue, how is that translating into consumables growth across the entire portfolio?

Yes. Let me just maybe set this up from an innovation standpoint, and then I'll hand it off to Andrew who can provide some additional specifics. The approach that we take with putting platforms out, the market and growing our installed base with this overlay of Technology for Life has proved very successful in terms of driving relevant consumables testing. So if you think about Catalyst with these 3 tests over the last year plus with Smart QC, pancreatic lipase and cortisol, we now have almost 78,000 Catalysts on a global basis.

And keep in mind, the way we incent our sales organization is really on quality of premium instrument placements, Catalyst being obviously an important one, but really across the board. So they're looking to make sure that we [indiscernible] customers who are going to use them and who have higher utilization patterns. So in terms of driving the consumables growth, it really is a combination of being able to grow our installed base of premium instruments and increase utilization intensity through innovation. And for inVue, that's part of the story, of course, with cell cytology, blood morphology, ear cytology and now FNA for lumps and bumps. And so that's tracking plan in terms of consumables usage. So in combination, it's all these things that are driving the type of performance we've seen in 2025 and incorporated into 2026 guidance.

Yes. Maybe just to add a couple of specific metrics there, both for the full year and Q4, the installed base actually expanded by about 12% overall. So I think really solid economic view here of the expansion of the installed base, to Jay's point, that's supporting the consumable growth. We also had a really exceptional new and competitive Catalyst placements in the fourth quarter. So we did over 1,350 new and competitive placements from a Catalyst perspective on a global basis. We did over about 360 in North America. So really nice trajectory there and we see rapid uptake of the new innovations that we deliver.

inVue I think continues to be more the $3,500 to $5,500 per instrument. We're tracking well to that. That includes FNA, which we'll launch later this year, as we previously announced. And yes, we're excited by the expansion of that, that controlled rollout.

Okay. And then just quickly on reference lab, you mentioned new customer growth. Is that U.S. market or is it international? Where are you seeing the tangible market share gains? And then is it innovation that's really changing the game in terms of you winning business in that inherently competitive category?

Yes. We think we're doing really well on a global basis, and there have been a number of factors involved in seeing that reference lab growth. First, we've invested heavily in the network, the reference lab network, so the customers get the type of service that they expect next day in both cases. We've invested heavily in enabling infrastructure, whether it's lab information systems and VetConnect plus localized outside the U.S. That's been important.

And of course, the innovation story, really across the board, whether you look at fecal antigen and our vector-borne disease. But cancer also has got a lot of attention both in terms of differentiation and having customers who don't use us as their primary reference lab send us samples. So in terms of competitive submissions, we're at approximately 18% now. That represents, in many cases, a complete break for workflow, veterinarians and customers really focusing and prioritizing on the patient, not who their primary reference lab provider is. They start with cancer as part of a panel, and then we believe, over time, will give us more of their business.

So I think it's all of those things in combination, which has created really strong differentiation in the reference lab business, and we're just seeing good growth as a result of that.

And our next question is going to come from Mike Ryskin from Bank of America.

Great. I want to ask sort of a big picture one on innovation. You guys had a really strong year for inVue placements in 2025. You beat all of your targets as you went through the year. I think you called out $75 million revenue contribution in '25. Any way you could quantify what Cancer Dx was sort of a total innovation contribution in '25 was? Again, it would be great to get a sense of how you think about inVue and Cancer DX, what the dollar contribution for '26 would be, just so we can look at the year-to-year comparison.

Yes. Mike, just -- I'm going to keep this high level and Andrew may provide some specifics. The way we think about innovation, this direct economic contribution, is obviously inVue revenue and consumable usage in sales as a result of that. But there's also a tremendous leverage impact, indirect economic benefits when you place capital. It's very often placed through an IDEXX 360 type program, inspires usage of our broader portfolio, including reference labs and software and anything that is part of that program.

So we've seen, I think, as a result of innovation and overlapping innovation, cancer being a great example with FNA and IDEXX cancer, Dx with mast cell that's coming in '26, a leveraged impact, a multiplier impact across our entire portfolio. I think customers feel like it all works better together, it optimizes their workflow, they're able to really focus on what they want to focus on, which is the patient, of course. And we take care of everything else.

Yes. I think Jay hit it well. Just in terms of a couple of specifics. We haven't broken out the Cancer DX component of that. But I would say it's a direct revenue contribution, but it's modest. I think the stand-alone test pricing is about $60, and when it's included in a broader diagnostic panel, which we're seeing increasing percent of the tests being done that way, it's about $15. So the direct contribution here isn't super large, but to Jay's point, I think it's really the opportunity to continue to see broader adoption of our screening core blood work. And over time, I think it would be really compelling to see the direct contribution as well. We believe that for Cancer Dx, the opportunity to expand that panel or profile about $1.1 billion over time. So yes, it's a really meaningfully large category that we want to continue to advance through the innovation, including the launch of mast cell tumor, as Jay highlighted.

Yes. One way to think about the innovation impact, if you take a look at Catalyst one, and we began shipping that in late 2014, and you compare its economic value 10-plus years later as a result of coming up with all the slides and the innovation we have, it's about 2.5x as impactful from an EV standpoint. And so that's always been our strategy, that testing drives differentiation, not just within that modality, but across the enterprise. And that the instruments that we have placed in the case of Catalyst, nearly 78,000, they're just -- they're used more and they're therefore worth more to the company.

Okay. And then if I could follow up on price. You guys were talking about 4% total company next year, 3.5% in the U.S. It seems like you're bringing that down as you had previously said to be back within the LRP. I'm just curious what the conversations with vet clinics have been on pricing power over the last couple of years. I know that in '21 and '22, it was sort of understood that, with inflation what it was, it was going to be taking a lot more price. Are you having more conversation with bets on that? Is there any pushback? Is there any dialogue with you on how to manage that? I know you have your long-term contracts and relationships, but just wondering if that's becoming a more common discussion point with your customers.

Yes. It hasn't been a big flash point with customers. They recognize that during the period of high inflation, they and their partners, you need to take a little bit more in price. The cost went up. They wanted to invest back in their practices, their staff. And I think that's -- we, if you take a look at over the last 4-plus years, we've remained pretty close to where the CPI is, a bit above, but not much above. I think what we've seen now is more a volume-based recovery in our business. And so it's more balanced. We're back to, I think, a volume-driven top line growth profile, which is healthy.

Inflation has subsided. It's a little bit under 3%. So I think it just reflects getting back to more of a historical baseline of what we've seen in the business.

Our next question is going to come from Jon Block from Stifel.

First one pretty straightforward, second one not so much. But just on the first one, Jay or Andrew, any thoughts or color on the 2026 international CAG Dx recurring revenue growth rate versus the U.S.? Just as we sit here and sort of contemplate the year to tie to the worldwide, I know you've got some of those commercial investments going on in international markets and, arguably, some of the innovation is more in an infancy stage relative to the U.S. So any color there would be great. And then I'll just ask a follow-up.

Yes. So we think the international region offers -- and we've shared sort of the assumptions behind this profile, a bit of a higher growth profile than the U.S. over time. Part of that just comes back to where they are in terms of diagnostics usage, how often it's included. It's more of a sick patient testing market. We've made some very substantial investments over time, not just in the commercial piece, as important as that is. We shared that we invested in Germany and U.K., Ireland and Australia. But also the reference lab network, all the enabling infrastructure, which is important from just a customer success standpoint.

So we do think the international opportunity is a bit higher from a CAG Diagnostics recurring growth rate. It obviously still requires sector development. But all the pieces are in place. And so what we've seen is that the -- we've sustained double-digit growth now for multiple years. And I think that's just the result of the pieces that we've put in place and the focus that we have, but also the inherent customer opportunity.

Okay. And then maybe a little bit more detail one, Andrew. Can you help me out with this if I've got these numbers correct? So the 1Q '26 CAG Dx recurring revenue growth guidance of 9.5% at the midpoint is off a 4.5% comp. So the 2-year stack for the first quarter is 14%, and that includes a 50 bps days tailwind, if I heard you correctly. The full year '26 guide for CAG Dx recurring is 9% at the midpoint off what you did in 8%, so a 17% stack. So can you just talk to why the 1Q guidance is a decent discounted full year on the stack basis? Maybe tell us what you saw in the first month of the year with some weather challenges that seem to be out there. Any color there would be helpful.

Yes. Thanks, Jon. So I think just in terms of Q1, the performance that we had outlined, what I would highlight is really consistent with the full year outlook overall. Certainly, we are picking up some days benefit, which I think would be captured in that 4.5% metric that you quoted. We had a bit of a day's headwind last year, and so we're picking that back up to some degree. So when you normalize for those, I think it's a relatively more consistent story.

Certainly, I think from a clinical visit pressure, it's an area that we want to make sure that we continue to understand. In Q4, we saw about a 1.7% decline in overall clinical visits. So we're planning for about 2% for both Q1 and the full year. So it's a metric we'll continue to watch, as well as some pricing dynamics as we get in '26, is a bit of a headwind into the full year math here.

So I think the way we look at it is it's actually a relatively consistent story, and we're really focused on executing against the innovation that we have. But there's nothing I'd call out specific to January at this point. We won't get into kind of a week-to-week or month-to-month metrics here, but we feel good about the Q1 positioning overall.

And our next question is going to come from Daniel Clark from Leerink Partners.

Great. Just had a question on inVue placements. Where are we sort of in terms of placements into the larger corporate practices? And how are you thinking about placements into those groups in the '26 guide?

Yes, we're now placing inVue into corporate practices. Yes, as I've shared in the past, it tends to be a little bit longer selling cycle. They like to do the pilots and then they want to make sure that there's both clinical and economic benefit. So they approach it a little bit differently than independent practices. But we're now well into the sell-in and placement within the corporate groups.

Got you. And then just one on sort of divergence in wellness and non-wellness visits. When we think about the relative stability of non-wellness heading into 2026, if that does hold, would it be fair to kind of take the second half of '25 run rate for non-wellness and extrapolate that forward? Or how should we think about kind of that run rate into '26 in the context of the 2% overall visit decline guide that you gave?

Yes. So the 2% for '26 is the baseline, and that includes both well and non-well, roughly within what we saw in '25. What I would say is the non-well is more resilient to macro pressures. Obviously, pets are getting sick, they need to come into the practice. So I think that they tend to be a bit more resilient. We also expect that the pandemic dog and cat -- puppy and kitten boom will continue and will -- those green shoots that we've seen will continue to modestly grow over time as these pets age and require more health care.

So I think it's reflected at this point in the 2% decline guide for '26. And hopefully, as time progresses, that improves.

And our next question is going to come from Brandon Vasquez from William Blair.

Maybe you can start, pivot us a little bit, we spent a lot of time talking about the good innovation on the hardware side. Maybe you can spend a couple of minutes talking about the software especially some of the pet owner facing ones like Vello. I don't think we've gotten a good update on those. How are they contributing to results? And then more specifically, are they really helping you offset any of this weakness we're seeing in end markets? Are you -- in the accounts that are using things like Vello, are you seeing better pull-through of the portfolio?

We are. The software piece is very, very important strategic business within the overall IDEXX business. It's a great business in and of itself, software business. It's growing strongly. We see good profitability. There's a nice leverage impact in terms of diagnostics. We've grown our cloud-based placements at double digits. So we're a leader within cloud-based PIMS within the North American market, something that we think is very important.

With that, from just an ARR standpoint, we see better engagement. Application Vello is getting excellent traction. We shared some statistics both quarterly from a sequential basis and year-on-year. We know that those customers who use our software solutions use more of our diagnostics with -- specifically with reference to Vello, we see fewer no-shows for clinical visits, more diagnostics usage, all the things that you would expect. So it is an important part -- it's an important offset.

Now it's still relatively small compared to our total installed base of customers who use diagnostics, but we're very bullish on it. And we think it's an important element of really driving a solutions portfolio.

Yes. We saw a solid double-digit growth in software on a reoccurring basis in the fourth quarter. And to Jay's point, yes, I think he had highlighted that Vello expanded users by about 40%. So we're seeing some nice traction there, and we're going to continue to build off of that momentum. But there's strong demand, I think, from a customer perspective to continue to move to this vertical SaaS orientation that I think we're amplifying through the different offerings that we have.

Okay. And as a follow-up here, as we're a little early playing with the numbers still this morning, but it looks like to get to the '26 guidance, you don't really need to push your utilization metric too much even when you back out price next year to kind of be within the midpoint of that range. But I also hear you making comments about how FNA is still in controlled launch and you maybe haven't even really gotten into the corporate accounts with inVue yet. Correct me if either of those are wrong, especially on the latter.

But I guess the question being, one, is that correct? Like is utilization largely consistent through '26? And then two, are some of these opportunities to maybe push utilization even higher? You're yet to see some of the benefits of innovation in the utilization bucket.

Yes. So Brandon, just in terms of the '26 guide, one thing that I would highlight is, if you look at the midpoint from a comparability on the CAG Diagnostic recurring growth rate, where we ended about 8% in 2025, where midpoint is about 9% for 2026, so about 100 basis point improvement year-to-year. A lot of that is driven by volume. And certainly, it comes with the expansion of our customer base, but also just maintaining and growing strong utilization metrics overall, led by some of the innovation benefits that we have.

So I think you captured the controlled launch correctly from an FNA standpoint. Yes, that will be something that helps us in 2026. We've captured that in our outlook already. And as Jay just highlighted, I think we are placing inVue into corporate accounts at this point. So that's an area that we've been working towards and it typically takes a little bit longer than independents. But we feel good that we have a nice momentum there, and we're targeting about 5,500 inVue placements for 2026 as well. So we feel really good about the innovation and continuing to help our customers drive growth. I think we're just being cautious relative to the macro environment and the sector trends that we've seen on areas like clinical visits that continue to be more muted. But overall, the business is performing quite well despite that.

And our last question is going to come from Andrea Alfonso from UBS.

I was just curious about the dynamics underpinning the gross margin mix in the quarter. It looks like pricing growth is pretty stable sequentially, although you did cite some pressure from mix. And I guess as we think about the 2026 margin expansion of 30 to 80 basis points organically, how do we think about your gross margin improvement stacking versus that 30 to 80 bps? I think you mentioned the moderation in pricing in the U.S. and obviously still calling out the mix impact. And then I guess the other part of that algorithm is how do we think about SG&A growth recognizing some of the ongoing commercial investments you're making?

Yes. Thanks, Andrea. Just in terms of what we saw in Q4, we did have modest pressure just from instrument revenues in the quarter. Yes, I think we had highlighted that on the call. But we still delivered about 60 basis points comparably from a gross margin expansion standpoint. So quite solid on the improvement that we see on gross margins. And then for the quarter, we also saw about 120 basis points of operating margin improvement as well. So quite solid there as well.

That included investments that we were making. Jay had highlighted we completed the expansions that we're expecting to be announced about midyear. So that was factored certainly into the overall SG&A growth as well as continued investment in areas like innovation, the strong R&D number as well. So that's how the quarter played out. I think it was largely in line with our expectations. I think the implied midpoint was right around those same metrics.

As we think about 2026, our guidance for operating margin improvement is the 30 to 80 basis points that you had highlighted on a comparable basis. That's largely going to be gross margin led. I think we continue to see benefits from a gross margin perspective there as we invest back into the business for the longer term. So we expect most of that would likely be gross margin led overall, and we'll be -- we feel good about kind of where that positions us as we invest back into the long term.

Okay. Thank you for the questions. We'll now conclude our Q&A portion of this morning's call. It's been a pleasure to review another quarter and full year of strong IDEXX results. So thank you for your participation this morning, and we'll now conclude the call.

And this concludes today's call. Thank you for your participation. You may now disconnect.

Good morning, and welcome to the IDEXX Laboratories Third Quarter 2025 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; Andrew Emerson, Chief Financial Officer; and 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 third quarter 2025 results and updated 2025 guidance, please note all references to growth, organic growth and comparable growth refer to growth compared to the equivalent prior year period unless otherwise noted.

[Operator Instructions] 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 third quarter results and provide an updated outlook for our full year 2025 financial expectations. In terms of highlights in the quarter, IDEXX delivered strong financial results supported by outstanding commercial execution in our Companion Animal business with benefits from recently launched IDEXX Innovations. Revenue increased 13% as reported and 12% organically, supported by over 10% organic growth in CAG Diagnostics recurring revenues, reflecting over 8% gains in the U.S. and double-digit growth in international regions.

We achieved another quarter of strong premium instrument placements, including over 1,750 IDEXX InVue Dx analyzers, resulting in 71% organic growth of CAG instrument revenues. CAG Diagnostics recurring revenue growth in Q3 was negatively impacted by declines in U.S. same-store clinical visits of 1.2%, driven by ongoing macro and sector pressures.

IDEXX's operating performance was excellent in the quarter with comparable operating margin gains of 120 basis points, supported by gross margin expansion which benefited from strong recurring revenue growth. High operating profit gains enabled earnings per share of $3.40 in the quarter, resulting in EPS growth of 15% on a comparable basis.

We're increasing our full year revenue outlook by $43 million at midpoint, with an updated range of $4.27 billion to $4.3 billion, an outlook for overall reported revenue growth of 9.6% to 10.3%. Our updated full year overall organic revenue growth outlook is for 8.8% to 9.5%, with organic CAG Diagnostics recurring revenue growth of 7.5% to 8.2%. These organic growth ranges represent approximately a 1% increase at midpoint to our previous guidance, supported by strong global execution in our CAG business.

We're increasing our full year EPS outlook to $12.81 to $13.01 per share, up $0.33 per share at midpoint, reflecting 12% to 14% comparable EPS growth. We'll discuss our updated 2025 financial expectations later in my comments. Let's begin with a review of the third quarter results.

Third quarter organic revenue growth of 12% was driven by 12% CAG revenue gains, 7% growth in our Water business and 14% gains in LPD. Strong CAG results were supported by CAG Diagnostics reoccurring revenue growth of 10% organically, including average global net price improvement of 4% to 4.5% and benefits from CAG Diagnostic instrument revenues increasing 71% organically, aided by global placements of InVue Dx.

U.S. organic CAG Diagnostics recurring revenues grew 8% in Q3, supported by solid volume gains and 4% benefit from net price realization. U.S. same-store clinical visits declined 1.2% in the quarter, reflecting an IDEXX U.S. CAG Diagnostics recurring revenue growth premium to U.S. clinical visits of approximately 950 basis points, highlighting outstanding performance by the IDEXX teams.

Q3 benefited from aging pets with non-wellness visits declining only 30 basis points year-over-year while wellness visits declined 2.5%. Health services continued to expand in the quarter, including increased diagnostic frequency and utilization per clinical visit for both well and nonwellness visits as customers expand the use of diagnostics in their care protocols.

International CAG Diagnostics recurring revenue grew 14% organically in Q3, including approximately a 1% benefit related to equivalent days. Revenue performance was driven by volume gains, including benefits of net new customers and same-store sales utilization. International regions have sustained strong growth on a days adjusted basis for the past 10 quarters, highlighting the significant global opportunity as we invest in global commercial capabilities and expansions.

IDEXX innovation and commercial execution also delivered strong organic revenue gains across testing modalities globally in the third quarter. IDEXX VetLab consumable revenues increased 16% on an organic basis in the third quarter, reflecting double-digit growth in both the U.S. and international regions. Consumable revenue growth was supported by expansion of our premium instrument installed base and expanded testing utilization, including benefits from recent product launches.

InVue Dx utilization is tracking well to our reoccurring revenue estimates previously provided of $3,500 to $5,500 per analyzer, and we're excited for the upcoming launch of FNA starting with mast cell tumor detection.

CAG instrument placements increased significantly in Q3 compared to prior year levels. Total premium placements reached 5,665 units, an increase of 37% year-over-year. The quality of placements remains excellent, reflected in 1,203 global new and competitive Catalyst placements, including 347 in North America. Globally, we placed 1,753 IDEXX InVue Dx instruments as we continue to meet customer demand for this highly innovative analyzer. Ongoing progress of placing instruments combined with high customer retention levels supported the 10% year-over-year growth in our premium instrument installed base in the quarter.

IDEXX Global Reference Lab revenues increased 9% organically in Q3, up approximately 4% growth from the second quarter, driven by solid volume growth across regions, including expanded same-store volume benefits and net new customer gains. IDEXX Cancer Dx continues to gain further traction in North America, reaching nearly 5,000 customers through October. Global rapid assay revenues declined 5% organically in Q3. Rapid assay results continue to be impacted by customers shifting pancreatic lipase testing to our Catalyst instrument platform, which we estimate to be a 6% headwind in Q3 revenue growth.

Veterinary Software and Diagnostic Imaging organic revenues increased 11%, driven by recurring revenues which grew 10% during the quarter. Solid growth in veterinary software was supported by a strong double-digit growth of cloud-based PIMS installations and adoption of related reoccurring services. We also saw continued strong double-digit year-over-year growth of diagnostic imaging system placements in the quarter.

Water revenues increased 7% organically in Q3 with strong growth in international regions and solid mid-single-digit growth in the U.S. Livestock, Poultry and Dairy revenues increased 14% organically in the quarter with double-digit gains across most regions.

Turning to the P&L, strong revenue growth enabled 16% comparable operating profit gains. Gross profit increased 15% in the quarter as reported and 13% on a comparable basis. Gross margins were 61.8%, up approximately 80 basis points on a comparable basis. These gains reflect benefits from strong reoccurring revenue growth and IDEXX VetLab consumables and reference lab volumes along with operational productivity and pricing benefits, which offset inflationary cost pressures. Reported gross margin gains were moderated by 10 basis points of foreign exchange impacts, net of hedge positions.

On a reported basis, operating expenses increased 12% year-over-year as we advance investments in our global commercial and innovation capabilities. Q3 earnings per share was $3.40 per share, including benefit of $14 million or $0.17 per share related to share-based compensation activity.

Income tax includes a $0.09 negative impact related to accelerating tax deductions for previously incurred research expenses allowed under the new U.S. tax legislation, which benefits cash taxes while increasing our effective tax rate in the period. Foreign exchange added $1.9 million to operating profit and $0.02 to EPS in Q3, net of hedge effects, reflecting a comparable EPS increase of 15%.

Free cash flow was $371 million in Q3 and $964 million on a trailing 12-month basis, with a net income to free cash flow conversion rate of 94%. For the full year, we're updating our outlook for free cash flow conversion to 95% to 100% of net income. This increase includes a 10% cash tax benefit primarily related to $105 million of acceleration of tax deductions for previously incurred research expenses allowed under recent U.S. tax legislation and a refined outlook for our full year capital spending of approximately $140 million.

Our balance sheet remains in a strong position. We finished the period with leverage ratios of 0.7x gross and 0.5x net of cash. We continue to deploy capital towards share repurchases, allocating $242 million during the third quarter and contributing to $985 million on a year-to-date basis, supporting a 2.7% year-over-year reduction in diluted shares outstanding through Q3.

Turning to our full year 2025. As noted, we're increasing our outlook for overall revenue to $4.27 billion to $4.3 billion. At midpoint, this reflects approximately $43 million of operational improvement, building on strong third quarter performance, including CAG Diagnostics' recurring revenue expansion and increased InVue Dx revenue expectations.

Our updated revenue growth outlook is for 9.6% to 10.3% growth as reported, including a 0.8% full year growth benefit and 2% growth benefit in Q4 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 $4 million and EPS by $0.01 for the remainder of the year.

The updated overall organic revenue growth outlook of 8.8% to 9.5% reflects an estimated organic growth range of 7.5% to 8.2% for CAG Diagnostics recurring revenue, including a consistent 4% to 4.5% benefit from global net price realization. At midpoint, during Q4, we're assuming U.S. clinical visits continue to decline at levels moderately better than the year-to-date average. We are again increasing our expectations for our InVue Dx, which we now expect to be approximately 6,000 during 2025, with instrument revenues of over $65 million as we continue to see strong demand from this exciting new platform.

In terms of key financial metrics, we're increasing our reported operating margin outlook to 31.6% to 31.8% in 2025, reflecting an increased expectation for 80 to 100 basis points of full year comparable operating margin improvement net of 180 basis point operating margin benefit related to the discrete litigation expense impacts and updated foreign exchange effects.

As noted previously, IDEXX remains well positioned to navigate the ongoing changes in the trade landscape with a largely U.S.-based manufacturing footprint. We remain focused on continuous supply to customers while actively managing cost impacts, which will continue to play out into 2026.

Our updated full year earnings per share outlook is $12.81 to $13.01 per share, an increase of $0.33 per share at midpoint. Our EPS outlook incorporates increased projections for operational improvement of $0.22 at midpoint compared to our prior guide. We've also incorporated lower effective tax rate benefits, including $0.09 of share-based compensation activity compared to the prior outlook, partially offset by other tax impacts including the noted acceleration of research expense deductions under the new U.S. tax legislation. Updated estimates for interest expense, average share count reduction and foreign exchange impacts have also been incorporated, with additional details available in the tables in our press release and earnings snapshot.

That concludes our financial review. I'll now turn the call over to Jay for his comments.

Thank you, Andrew, and good morning. IDEXX delivered very strong financial performance in the third quarter while advancing our strategic priorities globally. Our proven model of high-touch commercial engagement, combined with differentiated testing and workflow innovations continue to drive adoption of IDEXX's world-class diagnostic and software solutions. These capabilities directly support our [ customers ] [indiscernible] to deliver the highest standards of care, enabled through greater diagnostic frequency and utilization in everyday practice.

Diagnostics remains the fastest-growing revenue stream within veterinary clinics, a durable trend reflecting the central role testing plays in determining patient health status and guiding treatment decisions. Our financial results in the quarter were underpinned by accelerating gains in CAG Diagnostics recurring revenues across major regions. Growth in recurring revenues reflects multiple execution drivers, including double-digit growth of our premium installed base, instrument installed base, sustained strong new customer gains, solid net price realization and continued momentum in cloud-based software adoption.

Importantly, these results were supported by continued momentum in our innovation playbook, highlighted by strong placements of InVue Dx, growing adoption of Cancer Dx and benefits from the expanding Catalyst menu, including early uptake of Catalyst Cortisol. IDEXX solutions, anchored by our integrated software-enabled multi-modality approach, are well positioned to help clinics enhance efficiency, expand diagnostics reach and deliver exceptional patient care.

Building on the groundbreaking innovations we launched in 2025, and as highlighted at our August Investor Day, we will further expand our Cancer Dx franchise in 2026 with the addition of mast cell tumor, another high-impact cancer biomarker to the panel. We also plan to bring Cancer Dx panel to international markets starting in Q1 2026, extending its reach and accelerating our global leadership in veterinary cancer diagnostics.

Our commercial organization again delivered outstanding performance in Q3. Across geographies, our teams drove very strong instrument placements, with a high quality of placements supporting outstanding year-on-year growth of economic value placements, a key measure of future recurring revenue gains. Retention of our CAG Diagnostics recurring revenue remained in the high 90s, reflecting the enduring loyalty and press that veterinarians place in IDEXX. This loyalty is not simply the result of world-class products. It reflects the strength of our customer engagement and support model where IDEXX representatives serve as true partners in helping practices improve medical outcomes and business performance.

In the U.S., growth was fueled by strong volume gains, including benefits from adoption of new innovations alongside sustained strong new and competitive Catalyst placements. Our teams are effectively engaging practices, whether start-ups outfitting their practice for the first time or established clinics seeking to upgrade and expand capabilities.

Accelerated growth in the important diagnostics frequency metric as well as utilization per clinical visit is a critical driver of success, enhancing patient care while creating durable growth for both clinics and IDEXX.

We are also benefiting from corporate account relationship extensions and expansions. These relationships represent significant multiyear growth opportunities as practices transition volume into IDEXX's ecosystem of diagnostic software and services. Importantly, these partnerships are increasingly structured to elevate care at the practice level, to greater diagnostics frequency, utilization, workflow optimization and expanded menu adoption.

Internationally, we delivered double-digit installed base growth for the 11th consecutive quarter, with the step-up in the growth of CAG Diagnostics recurring revenue growth across major regions. Our commercial strategies are globally tailored to regional dynamics supported by strong reference laboratory networks and backed by an innovation approach that ensures high product market fit, such as with ProCyte One and SNAP Leishmania expanding diagnostic frequency in international regions continues to be a key growth lever, elevating the standard of care and expanding the sector opportunity.

We remain committed to investing in our commercial footprint where the customer readiness and growth potential are strongest. We are on track with plans to expand in 3 international countries by the start of 2026, while also enhancing our U.S. commercial footprint. These are high-return investments, reducing the number of customers per account manager, supporting more frequent engagement, strengthening loyalty and driving adoption of IDEXX solutions.

The commercial organization's ability to consistently deliver growth across varying geographies and macroeconomic conditions demonstrates the durability of our model. Practices continue to prioritize diagnostics and software because they are foundational to their mission, and IDEXX is their partner of choice.

Turning to our innovation update, let me begin with Catalyst Cortisol, the newest addition to our Catalyst platform. Launched in North America in late July and at the end of the third quarter internationally, Catalyst Cortisol is already seeing strong momentum with over 1/4 of Catalyst customers in North America adopting test within the first 3 months of launch. This is among the fastest adoptions for Catalyst menu expansion, underscoring both the clinical need and the level of customer anticipation.

Catalyst Cortisol enables veterinarians to rapidly measure cortisone levels at the point of care, supporting diagnosis and monitoring of adrenal conditions such as Cushing's syndrome and Addison's disease. These conditions are often complex and require real-time insights to guide treatment decisions. With Catalyst Cortisol, veterinarians can deliver highly accurate results during the patient visit, avoiding delays, reducing callbacks and increasing confidence in treatment planning.

The addition of cortisol was the most frequently requested Catalyst menu expansion from customers, a clear signal of its importance to clinical practice. The rapid uptake we've seen validates the power of listening closely to our customers, and then delivering innovation that directly addresses their highest priority needs from both a testing accuracy standpoint in workflow friendly way.

This is also a great example of our technology for life strategy. By continually expanding the Catalyst menu, we increase both the medical and economic value of the installed base. With nearly 77,000 Catalyst instruments and practices globally, each new menu expansion represents a lever for increased utilization [indiscernible] improved care and long-term recurring revenue.

Alongside Catalyst Pancreatic Lipase, which has already achieved adoption across over 50% of the available installed base and Catalyst Smart QC, which is simplifying quality control workflows, Catalyst Cortisol is strengthening catalyst position as the most versatile, value-creating chemistry, immunoassay and electrolyte platform in veterinary medicine.

Moving to InVue Dx. By the end of Q3, we have placed over 4,400 InVue Dx analyzers globally year-to-date, exceeding our expectations in reinforcing the momentum that began with preorders last year. This represents one of the most successful product rollouts in IDEXX's history. This strong start gives us confidence to once again raise our full year outlook to approximately 6,000 placements.

Customer feedback has been overwhelmingly positive, with veterinarians consistently highlighting workflow transformation, diagnostic confidence and powerful clinical insight as the most meaningful benefits. The [indiscernible] cytology workflow reduces technicians' time improves consistency and delivers results while the patients are still under practice. At the same time, AI models, now trained on more than 60 million cellular images, provide reliable, high-quality insights that elevate standards of care.

Frequent software updates, as often as every other week, continuously expand these capabilities, enhancing accuracy and ensuring clinicians always benefit from the latest advancements. A great example of this is a recent update that reduced time to result of an ear cytology to approximately 8 minutes. Utilization for ear cytology or blood morphology has been robust and well-aligned with our expectations. Both of these broad-use categories have great use cases in everyday practice, serving as high-frequency diagnostics to support patient care across a wide range of conditions. Their adoption underscores the value of InVue Dx in addressing routine, repeatable testing needs to drive workflow efficiency and strengthen clinical confidence.

Importantly, success in these initial categories provide a strong foundation for the platform, creating natural momentum as we expand the menu into additional high-value areas, such as oncology with the addition of fine needle aspirate, which remains on track for rollout later this year.

Importantly, InVue Dx not only driving placements in consumables, but also strengthening customer loyalty and long-term contractual relationships. Many practices adopting InVue are expanding their broader IDEXX commitments with some extending agreements ahead of schedule to secure access to this transformative platform.

Turning to Cancer Dx. Momentum remains strong with nearly 5,000 practices to date adopting these tests within just a few quarters of launch. Utilization is tracking well with expectations and we continue to be encouraged by competitive customer adoption, now over 17% of customers. This reflects growing awareness and underscores Cancer Dx's importance as a new standard in veterinary oncology. While the majority of samples are still being used to aid in the diagnosis of canine lymphoma, the number of practices incorporating the test into wellness protocols is nearing parity, enabling early detection and improved patient outcomes.

The clinical need for oncology screening is clear. Cancer remains one of the leading causes of death among dogs, and early detection is critical to improving outcomes. Cancer Dx provides veterinarians with a cost-effective, highly sensitive tool that integrates seamlessly into a standard wellness visit. Looking ahead, our Cancer Dx road map is ambitious as we expand internationally and [indiscernible] tumor detection in one additional cancer next year. With canine lymphoma and mast cell tumor detection Cancer Dx platform will address over 1/3 of all canine cancer cases. Mast cell tumors are top of mind with pet parents because they can often feel the lumps and bumps while petting or cuddling with their dog, and early detection can significantly improve the clinical outcome for an affected dog. The upcoming availability of [ FNA ] for lumps and bumps on InVue Dx will allow for cytology results during the patient visit, helping to provide clarity to a concern to apparent.

We have a couple of important highlights in our software business, specifically related to the broad-based adoption of our cloud-based products, reflecting the strength of IDEXX's vertical SaaS model purpose built for animal health. Veterinarians across all stages of their careers recognize the workflow efficiencies and easy use that our solutions provide, enabling them to spend more time delivering care and less time on administrative tasks. Our cloud-native PIM platforms delivered double-digit installed base growth again this quarter, surpassing a milestone, now with over 10,000 locations, and strong adoption among both independent practices and enterprise customers with multi-location groups. Customers are choosing IDEXX for our growing vertical SaaS platform where integrated modules create seamless workflows for clinicians and connectivity with diagnostics and increasingly for pet parents with Vello.

Vello, our client engagement platform continued to expand in Q3, with active clinics growing over 20% sequentially and over half of PIMS bookings in the quarter included available subscription. Clinics using Vello report higher appointment adherence, increased diagnostics compliance and greater client satisfaction, all of which translated to higher visit volumes and revenue growth. The integration of Vello with our diagnostics and PIMS ecosystem further amplifies its value, making it an increasingly important part of IDEXX's long-term growth engine.

As we conclude, I want to extend my deep gratitude to our 11,000 IDEXX employees worldwide. Your commitment to innovation, customer partnership and operational excellence is what enables us to deliver results like these.

Q3 was another quarter where innovation and commercial execution came together to drive strong financial performance and advanced veterinary care. As diagnostics sit at the center of the veterinary system of care, IDEXX will remain at the forefront of advancing standards, unlocking practice productivity and driving sustainable growth.

Now please open the line for Q&A.

[Operator Instructions] Our first question comes from Erin Wright with Morgan Stanley.

Great. I want to unpack a little bit the strength of consumables in the quarter and what's sustainable -- what's sustainable here. For instance, how much of the strength is actually InVue consumables, lipase or just the new contracting terms when you do place an InVue? For instance, you used to give us this metric back when you launched Catalyst Dx, that you used to say, with every Dx upgrade, it translated into a considerable amount of consumables uplift. I guess, do you have that metric when you're placing kind of InVues you're establishing and recontracting with new IDEXX 360 relationships? And presumably, this is an all InVue consumables contribution? I just want to unpack that.

Erin, yes, the growth in the VetLab consumables piece is very broad-based. So there's obviously the large installed base growth of 10%, and you can go back many quarters, and we continue to grow that very aggressively.

And the quality of these placements is very high. We track economic value across the board; what we're seeing is high-quality placements competitive and greenfield is something we disclose both for chemistry and hematology so you get a sense of that.

Also the technology for life, the specialty tests, we've now had 3 within a period of a year. Those are -- those contribute. There's pancreatic lipase and Smart QC and now cortisol. So these are tests that veterinarians prefer to do at the point of care, and that's clearly benefiting us. And I'd say -- by the way, it's, at an enterprise level, we're doing more testing in those areas. So this isn't a case of substituting from the reference lab to point of care.

With respect to the InVue, I'd say that it's early stages. Obviously, it's all drop-through because it didn't exist before at the point of care and it's proceeding well to plan. And so that's an add, and as our installed base grows, we expect that, that will contribute greater amounts on a go-forward basis.

But just to summarize, it's very broad-based growth across our point-of-care business.

Okay. And then are we still on track with FNA and the launch? And what are you seeing from some of the pilot programs with FNA so far? And do you think there's this backlog of customers kind of waiting for FNA that should support another leg of growth here for InVue?

Yes, we are on track. What InVue customers tell us is that they -- there's very few customers that are just looking at one of the testing use cases, ear cytology or blood morphology or FNA testing for mast cell. They really are looking at as a broad portfolio tests that they would use. And obviously different mixes depending upon the practice and their preferences. So we expect that most of the customers, I can't say 100%, but the vast, vast majority of customers who purchase InVue for ear cytology and blood morphology will also use it for FNA testing. So we're very excited by that.

The next question is from Michael Ryskin with Bank of America.

Can you guys hear me?

Yes.

Yes. I want to follow up on some of your comments on end market business trending a little better. You guys continue to put up really impressive numbers. Can you hear me?

Got you, Mike.

Okay. Sorry. Just had some audio problems. You've put up really good numbers despite the end market weakness. I was just wondering if you could parse out a little bit, you talked a lot about InVue and the strength of that rollout there, whether you're seeing sort of the ability to leverage that for the rest of the business, the uplift you're seeing in consumables that will add consumables in the reference lab. Just sort of -- I don't know if I would call it a cross-selling opportunity, but just the ability to bring that into the vet clinic office, if that's leading to a stronger IDEXX premium and just ability to really drive the performance despite the continued softer macro? And I've got a follow-up.

Thanks, Mike. This is Andrew. Maybe I'll just touch on your initial question on the sector, and then Jay may have a point of view on the portfolio side here. But ultimately, I think what we did see was the non-wellness visits were closer to flat in Q3. We did see some benefits from the pet population that was 5 years and older related to the clinical visits themselves. And then as we've been highlighting, I think, with those adult dogs and cats transitioning to more seniors, we also see higher quality of the visits where we see expanded diagnostic frequency and utilization benefits with that as well. So that was one of the key drivers.

What I would say is on the wellness side, we continue to see pressures from a macro perspective. We know there's still challenges out there just related to the consumers and the macro trends. Wellness visits did continue to decline, more about 2.5% overall within the quarter. So fairly consistent pressure on the more elective and wellness characteristics of that.

We'll continue to monitor this sector. But to your point, I do think that as we think about the broader portfolio, there's really an opportunity to continue to play that out. We see reference labs tend to be a little bit more weighted to wellness visits, same with rapid assay. And so we do see a bit of a benefit in the IDEXX VetLab consumables, but I think there's an opportunity for us to continue to see benefits from the aging patients over time.

Yes, Mike, with respect to your question around InVue and its broader impact, we've always had, when we come out with a new instrument, it's a big deal. There are a direct economic benefits and there are indirect benefits. Obviously, the direct, you're placing an instrument that that's capital revenue and over time you build an installed base and the flywheel for recurring revenue. But most of these instruments get placed in some sort of marketing program, like IDEXX 360. And so the customer can satisfy volume commitments and is very often inspired to do more of their overall testing volume, including reference labs and rapid assay and our SaaS software solutions through us. And so those are the indirect benefits.

And most of our -- about 2/3 of the InVue placements to date have come out of North America, 1/3 internationally. So we're excited. It does have some leverage impact, and we'll see more direct benefits, as I indicated earlier, from just the recurring revenue stream of InVue.

Okay. And if I could squeeze in a follow-up, you talked about investments a couple of times in the prepared remarks. Could you expand on that a little bit, between incremental R&D on future platforms and maybe to continue to work on Multi-Q Dx, I don't know how much you'll be able to talk about that, or the commercial sales force. Just wondering the strength that you've had in the top line this year, how you're flowing that through the model and just sort of what are your relative priorities for investment from that strength?

Yes. I'll cover the investment piece and if Andrew would like to cover how we're thinking about the mix within the P&L., I'll hand it to him. From an investment standpoint, the way we think about it, there's commercial opportunity and sector development. We know that that takes investments in reach and frequency of our sales organization.

And so we're on track for the first of the year. They have 3 international, a modest increment in the U.S. We know these are good investments. These tend to be more of a short-return type of thing with a high confidence level because we have a playbook and a template in terms of how we think about it, and they fit well into our territories. And within 3 or 4 quarters, are trained and onboarded and very productive sales professionals.

The ongoing R&D investments, these tend to be multiyear in horizon across the board. There's biomarker investment, obviously, that can be leveraged both reference labs and point of care, new instruments, InVue and Multi-Q Dx, those are ongoing and tend to be 4, 5 years. And then, obviously, the software piece is a critical part of our strategy, and we're investing heavily both in cloud-based PIM systems and Vello and the other software applications.

Yes. Maybe just, Mike, in Q3 in particular, we highlighted 12% year-over-year growth in our operating expenses. So one of the things that we do always look at is how we're performing from an overall company perspective and making the right investments to continue to drive future growth. Again, if I take a step back and think about our longer-term growth algorithm, we constantly want to reinvest back into the business while still continuing to deliver solid operating margin gains over time here. And I think Q3 was a good example of our ability to do that. With higher top line growth, we were able to both contribute an operating margin gain benefit, but also invest heavily back into the business. And I think it's a really disciplined resource allocation approach to think about that mix across innovation and commercial and other support areas that Jay was highlighting that we want to make sure we get right.

The next question is from Jon Block with Stifel.

Maybe I'll just also start with InVue. The '25 placement guidance, I think I've got my math right, implies roughly 1,500 systems for 4Q '25. So still solid, and I know you raised the full year, but that would be down sequentially. You flipped from an order number to a placement number. So I guess the question here is, are you caught up with the orders when we think about where you are with InVue? And then just even any high-level thoughts on, I believe I've got it right, the initial 20,000 over 5 years. You're running well ahead in year 1 in totality. Any thoughts on the longer-term goals that you guys had put out? And then I'll ask a follow-up.

Thanks, Jon, this is Andrew. So from an InVue perspective on the longer-term goal, we certainly are still focused on the 20,000 over 5 years. We haven't updated that. We're off to a strong start here and we're targeting 6,000 placements by the end of 2025, which is really our first year of launch ultimately. So we feel good about that 6,000 placement trajectory here, and that's well above our initial guide of 4,500 where we started the year.

We've seen really strong demand for the platform itself. And I think we're going to continue to build on the impact that that can have with FNA, starting with mast cell tumor detection, is a great example of the extensibility of the platform overall. So nothing I would call out specifically. To your point, I think the math or the implied placement math that suggests 1,500 to 1,600 placements in Q4, and that's certainly still a very solid trajectory here and we feel good about the trajectory that we're on for the platform overall.

Fair enough. And maybe I'll go to a different topic. I actually thought one of the most impressive metrics for the quarter was the international CAG Diagnostic recurring revenue growth of almost 14%. I think it's the highest growth rate since coming out of or emerging out of COVID. And arguably, it doesn't really reflect much of InVue, no Cancer Dx. I think it's before the additional sales reps really take hold in the field.

So it's always more limited visibility in the international markets. I know you've spoken to the increased double-digit in the installed base for 11 consecutive quarters. But there's got to be more than that even as traction. So any color you can provide there? And is this sort of the right run rate in the international markets, especially because you'll have those incoming tailwinds of innovation and sales reps going forward?

Yes. So we're -- there's a couple of dimensions to think about from just an international opportunity standpoint. One is it's just more embryonic in terms of diagnostics. And we have a tried and true approach from the standpoint of just developing the sector. And what we have found is it's very translatable to the international market. So obviously, the quantity of your sales professionals has a quality, while it's also being able to increase the sales organization. So it's important, and we've been doing that now for 4 or 5 years.

But the other thing that I would just point out is the maturity of working within the system takes some time. So it's not just about the account manager or the VDC, it's about the full commercial ecosystem of the professional service [ fit ] and the field service representative and the inside sales then and all those working in a synchronized fashion.

The other pieces that we've invested in internationally is the reference lab network and really building out a network that enables next-day performance. We've invested in software localizations like [ VetConnect Boss], all of those pieces come together. In terms -- we just think there's an outstanding opportunity in the international geographies. We guided from a -- at Investor Day that the international opportunity is a couple of hundred basis points, I think, faster than the U.S. We feel good about that. We think that that offers a pretty long-term horizon opportunity year-on-year that we can develop.

Really great results in Q3. I would highlight that we did call out there's about 100 basis points of benefit related to equivalent days on the international business. So very significant results overall regardless, but we did see some modest days benefit in the quarter.

The next question is from Chris Schott with JPMorgan.

Just a couple for me. Maybe just coming back on the aging pet commentary. It sounds like you're starting to see this supporting visits in the U.S. I guess is it fair to think about this point this now being a tailwind for the business as we look out to 2026 and beyond and start thinking about [ posit ] at least clinical visit growth or could this remain kind of bumpy in the near term?

And just my follow-up was just on the international business and the discussion. Can you also elaborate on visit trends there? I guess we see a similar dynamic to the U.S. where the clinical visits are starting to pick up and wellness is still under some pressure, or is it more balanced in the international markets?

Yes. I'll cover your second question first. We don't have as good visibility into clinical visits internationally just because we don't have the installed base of PIM systems, which allows us to access what is otherwise a very fragmented installed base of software. Our perspective, our market research suggests that it's largely stabilized from some of the choppiness we've seen over the last couple of years. So I think it's a stable environment, and we're clearly being able to execute against an environment that we think over time will improve.

From the standpoint of the aging pets, the nonwellness visit essentially flat, we did see that adult dogs coming for more non-wellness visits. Some of that is likely pandemic dogs, designer breeds that are more heavily medicalized, larger breeds, larger dogs that get sicker earlier in their life spans, in terms of how that sustains quarter-to-quarter remains to be same. This is just a data point. I think what we could say with a good degree of confidence is that these pets, as they age from the pandemic and the large step-up that we've seen, will come into the practice more for sick care and that, from a clinical visit trend standpoint, it will be very positive.

The next question is from Daniel Clark with Leerink Partners.

I also wanted to ask on international, maybe in a little bit of a different way. On a days adjusted basis, CAG recurring grew at least 13% in the quarter. As you mentioned on the call, your kind of growth potential is 13% to 16%. So like what gets us up to the 15%, 16% range? Is it just continued sales rollout? Or what else should we be thinking about here?

Yes. It's really all the pieces that I mentioned. We're going to continue to invest in sales force expansions over time. That's really a function of time and distance and maturity of the sales organization. We're very disciplined about that. We want to make sure the market is ready. There's a product market fit dimension that we evaluate expansions and growth. For example, ProCyte One, that was -- the hematology analyzer, really designed at the inception for our international hematology first markets in terms of cost and footprint.

It's super important just to reference lab network. So we continue to build out our reference labs on a global basis, both from a European geography, but also within various markets in Asia Pacific, we know that that's super important and then making sure that the customer support or customer experience proceeds is ahead of the investment in commercial. We want to make sure that customers who may not know IDEXX and the first exposure to IDEXX, they get not just solutions that perform at a very high level, but the support organization is there in-country, supporting them when they have all challenges. We think all those things combined give us a lot of confidence that the 13% to 16% growth rate is achievable.

Just had a quick follow-up on visits. Last third quarter, you talked about 1% to 1.5% growth benefit to visits from launch of a different company's pain medicine. Was there any impact on headline visit numbers in the quarter as you've lapped that launch?

Yes, Dan, I think just in terms of the metric that you're quoting, I think that was from the prior year. We had highlighted that we have seen some effect on clinical visits and the inverse impact on diagnostic frequency. Really what we're just trying to call out is the change in the metrics themselves and not necessarily an impact on our IDEXX business directly.

And so there's nothing I'd call out or highlight as part of the change or impact that we saw here in Q3 related to that at this point. And again, I think we're in at least a clean view from both the sector metrics and what we've highlighted for the interim performance that we've had in IDEXX.

The next question is from Brandon Vazquez with William Blair.

Congrats on a nice quarter. I'll just ask 1 here because we're coming up on time. But you highlighted the ability to get into some competitive accounts with Cancer Dx. Just curious, given on the reference lab side, given there's a lot of contracts there, what's your ability to maybe use that as a foot in the door and start taking share, even more share, within that market? So just talk a little bit about what that commercial process can look like and how long that might take given you're kind of opening new doors there?

Yes. Brandon, our reference portfolio is very broad and differentiated. Clearly, that's a point that Cancer Dx test is a point of differentiation and having approximately 17% of test submissions coming from competitive reference lab customers, I think, is something that is gratifying both from these pets getting a better standard of care. And also that gives us an opportunity to put our best foot forward and reintroduce, in some cases, the IDEXX and the IDEXX reference lab to these customers.

So it's an important piece, but I think it's just a piece.

The next question is from Andrea Alfonso with UBS.

I just have a question on Cancer Dx. You noted the 5,000 ordering practice. I guess just with respect to adoption in terms of the screening panel, are you able to frame at all sort of how that sort of thinking in terms of just general cutoff plan as far as age and frequency, where there's sort of a green on the sweet spot? And obviously, wellness visits, you continue to lag, so how is the company engaging that as far as initiating those talking points?

Sure. There's 2 separate use cases for Cancer Dx. One is an aid diagnosis. So these are typically dogs that come in, they have clinical symptoms consistent with lymphoma, and veterinarians are using this as a test. At this point, they represent the majority, but just bare majority, of tests. And then the screening test that is more wellness screening, and that we think it makes sense for dogs that are 7 years or older, as well as breeds that may have a higher incidence of cancer.

So we believe that over time, what we're going to see is we're going to see the test use flip. It will be more as a screening test, but also aid in diagnosis for sick patients, but that will be the minority of cases.

The other thing that I would point out is, as the panel expands, so if you think about lymphoma, plus mast cell tumor detection, that represents over 1/3 of cancer cases in dogs. It becomes a much more compelling value proposition as part of a wellness screening. And we've also indicated that there will be a third cancer screen in 2026. So at that point, we think this -- it's sufficient in terms of menu comprehensiveness to really be seen by customers as an attractive screening test.

The next question is from Keith Devas with Jefferies.

Maybe just higher level, just thinking about the thoughts on the pace of innovation you guys have done a lot, obviously, in the last year. There's more coming next year. How do you guys know you're not doing too much too soon or too much that the market can or can't absorb it, macro environment is only slightly improving maybe from your standpoint? And maybe the second follow-up is, do you think the planned reinvestment plans that you have from this year and into next year is enough? And how you might course-correct if things are a little bit better than anticipated?

Yes. We're -- we think the innovation agenda portfolio is aggressive, but aggressive from an intentional standpoint, that it represents a set of portfolio solutions, whether it's assays or new instruments or software that our customers are hungry for. Clearly, our commercial organization has a very large footprint, and they're subject matter experts and they're able to digest these testing solutions and bring them to customers in ways that allow testing growth.

So the opportunities abound. Ours is a sector development business model, and innovation is a key driver behind being able to develop the sector.

And so with that, we'll now conclude the Q&A portion of the call. Thank you for your participation and engagement this morning. It's once again my pleasure to share IDEXX executed against our organic growth strategy while delivering strong financial results in the third quarter.

And so with that, we'll conclude the call. Thank you.

This concludes today's call. Thank you for your participation. You may now disconnect.

Good afternoon, everyone. My name is Erin Wright. I'm the health care services analyst at Morgan Stanley. For more important disclosures, please see the Morgan Stanley disclosure website at morganstanley.com/researchdisclosures. If you do have any questions, please reach out to your Morgan Stanley sales representative.

And with that, I'm happy to have IDEXX Laboratories with us today. We have the President and CEO, Jay Mazelsky, with us and as well as Andrew Emerson, EVP and CFO of IDEXX. So thank you so much for joining us. We're really happy to have you. It's been quite a road this year and something we're excited to dig into. But I'll turn it over to Jay to just tell us a little bit more about IDEXX. Tell us about your positioning in this unique and attractive, what we like to call the dognostics market.

Sure. Thank you, Erin, for having us. We appreciate the chance to have a conversation and share a little bit about the company as a whole. The thing to keep in mind about diagnostics, it's just such a foundational aspect of the practice of medicine. You can't treat unless you first diagnose. You can't uncover chronic disease without diagnosing. You can't assess the basic health line status of a patient without diagnosis. It drives about 80% of the activity within the practice, if you think about the prescription of specialty diets or therapeutics or vaccines. Very often, it starts with the diagnostic. So directly, indirectly, it's about 80% of that activity. We're a global leader. Our strategy is to really provide best-in-breed solutions, both point of care and reference labs, integrate that with software, help support both the practice of clinical medicine but also workflow optimization and client communication and staff productivity, all the things that are important to practices. So with that...

All right. Let's get right into it. Okay. So let's talk a little bit about what happened in Maine. And at your Investor Day, you highlighted new innovation drivers. One, you reaffirmed your long-term targets, 10% plus organic growth, 15% plus, which is a little bit different but EPS growth. Can you talk a little bit about the moving pieces to bridge to that growth, the key drivers to get there while the industry still kind of recovers from a vet office visit standpoint?

Sure. So Andrew, why don't you talk about the growth algorithm and I'll talk about some of the individual pieces like innovation.

Yes, sounds good. So we have a very consistent financial framework that we outlined. And really, it starts with having a really investable business focused on the long-term potential. We see a really meaningful $45 billion opportunity in front of us within the diagnostics space and that's what we're focused on, to Jay's earlier comments. So with that, our CAG diagnostic recurring revenue growth algorithm is really focused on continuing to align with new customers, continuing to expand globally and place core instruments while we focus on innovation and utilization over time. So we've been really successful at expanding utilization within the diagnostic area. We look at the blood work inclusion per clinical visit as a key parameter of that and we shared that 50 basis points, which has been our long-term historic average, can contribute 1% to 1.5% growth associated with really the diagnostic usage within our customer base.

Innovation, which Jay can highlight in a little bit more detail. We outlined an opportunity for about 2% growth with that. So a combination of acquiring new customers and really focusing on expansion, aligned with net price increases over time gives us the opportunity to continue to grow CAG diagnostic recurring revenue at 11% to 14%, if you assume a more historic range of 3% clinical visits. But even if clinic visits were just flat, we see the opportunity to continue to grow the business 8.5% to 11% just in terms of execution and our core strategy. You pair that with the focus that we have in software, where we see the opportunity to grow our recurring revenue base by 15% plus and mid- to high single digits in our Water and LPD business, that really leads us to that 10-plus percent revenue growth that you had highlighted.

And we are -- benefit from -- as we grow, we have really high incremental gross margins. So that allows us to continue to expand our operating margin profile while reinvesting back into the business to achieve that long-term objective that we have. So finding that balance, we're focused on the 50 to 100 basis points of annual comparable operating margin expansion over time, which leads us to the 15% EPS expansion. So I think we feel really good about those parameters and we've been executing towards that today.

Yes. So maybe just a word about utilization. Our business model is based on growing utilization. And that's really a function of a couple of different things. It's the innovation, executing the innovation agenda and road map and then the commercial engagement piece. So a lot of the innovations that we've introduced over time, whether it's technology for life or new platforms like IDEXX Cancer, Dx or inVue Dx or future analyzers, comes down to driving blood work inclusion, driving testing inclusion. And we do that by solving these unmet clinical problems or in some cases, just workflow challenges that are being done manually or not being done as often as they might otherwise be done.

Okay. And then how is -- how are trends from a vet office visit perspective progressing throughout the quarter? And implied in your guidance, I think it's a negative 2% level in terms of what you're anticipating in terms of vet office visits for the balance of the year. Is that playing out according to plan? And how confident are you in that? And what ultimately turns this market in your view?

Yes. So we don't provide intra-quarter updates on that. I think what we've said is, at the first half, clinical visits were down 2.5%. And it was -- when you take a look at wellness versus nonwellness, they were pretty much moving in trend together. The -- our view is that both capacity and the macro impacts have largely stabilized. We're at a point, I think, on a go-forward basis that we can begin to build off of that. Obviously, it's a factor in the growth algorithm. It's not the only factor. We're driving through innovation and commercial engagement, the growth outside of what clinical visit -- outside of the clinical visit piece. What we guided to as part of our Q2 earnings call is that we assume clinical visits would remain in a comparable place or space that we saw in the first half.

I do think to your question, there are longer-term trends that are extremely supportive of seeing clinical visit growth. We know that there is this huge pandemic puppy and kitten boom. They're now at the 5-plus year point if you adopted a puppy in 2020 or maybe you adopted a pet that wasn't a puppy but a young adult. They're at the point now at that magic 6.5- or 7-year point where they just consume more health care, just like we as humans need more care as we get older.

And the percentage and absolute value of diagnostics in that equation grows in an outsized way as a pet ages. The other piece that we think is important and we've now been tracking for almost 3 years is, pets are living longer as a result of what we're doing and the specialty diet companies and the therapeutic companies, they're living appreciably longer. And we know that's a good thing. We love our pets and we want them to remain healthy and happy as long as they can but they consume more health care, too. So it's a good tailwind for the business. And I think we're looking at a trend line over time that reverts back to what we've seen historically between that 2% and 3%.

Okay. And then you talked about utilization being an important part of that algorithm. I think utilization did tick up meaningfully higher in the most recent quarter, depending on how you want to calculate your CAG premium net of pricing. How sustainable is this sort of level? We're back to kind of pre-COVID levels in terms of utilization on that front in that high single-digit range. I guess, can you talk about what's happening in the U.S. and outside of the U.S. on that front and how sustainable that is?

Yes. A couple of pieces that we think drive -- can help drive that outside of whatever clinical visits do. The innovation piece is extremely important. Obviously, I keep coming back to that. But if you take a look at Catalyst and we've had 3 new parameters in really the space of a year, the Spark QC, which is really a calibration test but pancreatic lipase and cortisol, these are significant specialty tests that really support pretty pervasive clinical use cases. And we think continuing to provide that menu expansion, we see at an enterprise level an uplift in the absolute number of tests. And there's added -- they're typically done with broader panels, whether it's chemistry and hematology. And then on the reference lab side, we've talked about IDEXX Cancer diagnostics.

We think over time, as that menu expands from canine lymphoma to canine lymphoma plus mast cell plus one other in '26, you reach a critical mass of panel tests that represent over 1/3 of common cancer cases in dogs, can pull through wellness testing at the reference lab. So that's extremely important. We also think that if you take a look at outside of the U.S., our commercial footprint is -- we're expanding that with a number of different country and market expansions that could help drive growth. We know when we visit customers, they use more diagnostics through awareness and education. They grow faster, we grow faster. So all those pieces, we think can contribute to a more sustainable growth profile as we outlined.

Just in terms of the guidance itself, as we just mentioned, we did say we updated the clinical visit outlook to be at the same level as the first half. And yet our total CAG diagnostic recurring midpoint is about 40 basis points ahead of what we saw in Q2. So that gives you some indication about how you might want to think about the premium at least for the rest of this year and we'll certainly be continuing to report on those metrics going forward.

Okay. Got it. And then on price, price realization historically is in that 3% to 4% range. 4% to 4.5% is what's expected for 2025. And how are you thinking about price realization into 2026? Does it go back to that more normalized range?

Yes. So we're obviously not updating our '26 guide today. But just in terms of what we have seen over the more recent period, we start with the value that we deliver when it comes to our price expectations. And from there, we also have to take into account the inflationary environment that we're operating with in terms of costs that we're having to see and manage within the business. And that's really what you saw, I think, in the recent past in '23 and what we've seen is in '23 and '24 and '25, it's kind of stepped down. And right now, we're at the high end of what we outlined in terms of the long-range financial plan, which was 2.5% to 4% price. So that 4% to 4.5% range is really on the upper bound there and we know we're still dealing with levels of inflation that are more elevated than history. So I think we'll continue on that path and make sure we're balancing that value equation and making sure we're successfully teeing ourselves up to achieve that long-term potential. We don't want to get too far ahead of ourselves in terms of pricing. Really, we're looking to expand the sector and make sure we're driving volume.

The one thing I would add to that, we've done a number of things relative to pricing that I think have also provided substantial value and may have mitigated being at some of the higher end range. Like if you think about cancer diagnostics, pricing it at $15 as well as $15 when it's included as a test. That's a great example of, I think, expanding access. In other cases, fecal antigen and Cystatin B for urine test, for acute kidney injury, we've included those at no additional price. So some of these very common high-volume tests, we've added value. We haven't added price necessarily. And I think that's been a factor driving volume.

Okay. And when you add on those new indications in terms of Cancer Dx, that is a price escalator though, for you on top of the $15? Is it correct?

Well, we haven't communicated that, except at Investor Day, we said in the case of mast cell in addition to lymphoma, we'd like to keep it within the approximate price range of where we were, say approximate turnaround time and performance and price range.

Okay. Got it.

When it's sold as part of a panel.

Okay. Got it. Got it. And then on -- understanding you're not commenting specifics on 2026 but then you spoke about price. How do you think about some of those different headwinds and tailwinds as we go into 2026? Obviously, innovation being a key tailwind for you but how do you kind of rank the key headwinds and tailwinds?

Yes. So again, we're not providing a '26 guidance. But I do think we're in the early stages of innovation. So we feel really good about kind of the innovation cycle and being able to build that recurring revenue base. So in the case of inVue Dx, we certainly see more capital revenue this year. We highlighted that we anticipate 5,500 placements and approximately $60 million on capital. But that really builds the durable recurring revenue base over time. So that will ramp as we get continued access into accounts from that perspective.

So that, along with, again, expanding Cancer Dx and some of the new Catalyst menu that we've launched, whether that's pancreatic lipase last year or cortisol this year, those give us some nice tailwinds in terms of how we'd be thinking about our overall volumes. As Jay mentioned earlier, too, we're focused still on continuing to expand our global reach. So 3 OUS countries that we're continuing to expand our sales force into and make sure we have reach and customer intimacy, help share best practices and really build that belief in diagnostic usage over time. So that's how we tend to think about it. But I think we have a good foundation that we can continue to build off of.

Okay. I want to dig into inVue here. I mean this is an area that, I mean, you've significantly exceeded my initial expectations in terms of placement trends for this product or this instrument by the end of the year at 5,500 placements. You're at -- still at -- you're still forecasting 20,000 by -- within that 5-year time horizon. Is that still the right number given the trajectory that you're on? Has this exceeded your internal expectations as well? Can you talk about a little bit more about the -- how we should expect kind of the placement cadence, which I do think there's a little bit of an overfocus on that placement quarterly cadence and it should really be focused on the consumables flow-through as well.

Yes. I mean we haven't updated that 5-year 20,000 unit placement goal or aspiration. We'll do that. We tend to do that when we have some quarters behind us in terms of what that trajectory looks like. I think what we've learned is that we've hit the sweet spot with customers in terms of menu that addresses some of the productivity challenges within the practice in terms of 15, 20 minutes of preparing a slide but also clinically, your cytology, blood morphology, these are very well understood, high-volume clinical use cases. And so an instrument that addresses the workflow bottlenecks as well as provides consistent and accurate output in those areas. So something that a lot of veterinarians really welcome.

And then you add F&A lumps and bumps and the whole dynamic around -- most dogs through their lifespan will have those. They're challenging to diagnose, whether it's deposits of fatty acid, fatty deposits or cancers or precancers. I think providing a solution that will give the veterinarian indication within that practice window when the pet is there is something that's very well received, has been very well received in the market. So we expect as we roll that out towards the end of the year in addition to the existing menu that enthusiasm and momentum that we see in inVue will continue. Hard to know quarter-to-quarter what that looks like but we think we have a winning solution.

But I think the focus also is on that recurring revenue streams, the flow-through in terms of the consumables. Can you talk about how you're going and you're recontracting, renewing these contracts under presumably IDEXX 360 relationships, locking them into minimum revenue commitments and this is driving a considerable amount or outsized consumables growth consistent with what we saw kind of in the second quarter. I mean, am I wrong to think that the consumables growth in the second quarter didn't really have much to do with inVue consumables, specifically with IDEXX's broader package.

[indiscernible] Yes, it's the broader -- a couple of things to keep in mind about how we think about IDEXX 360 and new instrument placements and the consumable strength. So just maybe a couple of details to anchor my comments. For inVue, we've said the consumables brackets are between 3,500 and 5,500 F&A lumps and bumps inclusive. And we're still early in the launch. It's tracking well against our expectations. And then at some point, we'll provide an update in terms of what that looks like. The thing to keep in mind about the instrument placements, there are a lot of direct and indirect benefits when we come out with a new instrument. It really is a very big deal. Most instruments are placed through some marketing program, IDEXX 360 being the predominant program that the customers use.

To your point, it's a placement. There's no cost upfront and then there's a volume commitment connected with that. We use that as a recontracting event for customers who may not be using any of our equipment, we then use that to gain access that we didn't otherwise have. We potentially could place a broader suite that's 100% drop-through in those instances. For those cases where the customer may be an existing IDEXX customer, they use our chemistry, hematology, maybe SediVue, we can place it in inVue, use that as a contract extension, as a way of inspiring a deeper relationship. And with that volume commitment, they may be inspired to use a broader portfolio of our testing solutions. We can satisfy that volume commitment either through our in-clinic solutions or reference labs or telemedicine or software, if it's a Software-as-a-Service type model. So there's a lot of both indirect and indirect benefits. We have seen and I shared this on the Q2 earnings call, a nice uptick in contract extensions and renewals using that as inspiration.

We continue to place Catalyst at competitive clinics as well. So we're expanding our customer base more generally, both the U.S. -- in the U.S. and internationally. That certainly helps us continue to create a recurring revenue stream. And we've had a new menu on something like Catalyst with pancreatic lipase and Smart QC, which we really benefit by having that large instrument base. There's rapid adoption of some of these specialty tests over time. So I think we benefit from those types of characteristics as well. But the focus is really on continuing to drive utilization within our core customers through the expanded use of diagnostics.

So hopefully, is this all driving these durable recurring revenue streams. But then on top of that, you also have potentially upside from an inVue utilization perspective, depending on how it shapes out relative to your expectation. Is $90 million really the right flow-through in terms of the high-margin consumables? I mean some of our survey work suggests that it should be higher but what are you seeing in terms of use cases, feedback? And what are the vets saying in terms of -- how are you seeing the traction in terms of consumables?

Yes. I'll describe qualitatively the -- what we're seeing and what customers are telling us. Most -- I would say the vast, vast majority of customers do both ear cytology and blood morphology. There are some customers who use -- who think about inVue primarily through one lens or the other. And it depends a bit on the patient use case in terms of what they're trying to determine. The receptivity has been great. The thing to keep in mind is that veterinary technicians are not lab technicians. And I don't think that's a controversial statement. But what they'll tell you is too often they get trapped into spending 15 or 20 minutes trying to prepare a slide, doing a chemistry experiment. And they just don't have the training or the time to often do those well. So all things being equal, that workflow benefit is something that's very important to the practice and the technicians themselves.

When you layer on top of that, the fact that you're getting consistency and high accuracy, it tends to drive more usage. We know in the case of blood morphology, for example, about 2/3 of the cases of a CBC standard blood work produces a result that suggests you should do a follow-on blood morphology. And in only about 10% of the cases in the practice does that happen. And the reason that doesn't happen more often is it gets back to slide preparation. It gets back to -- we don't have 20 minutes to stop and do a blood morphology, maybe it needs something, maybe it doesn't. So it's not like there's this yawning clinical gap where veterinarians and technicians are saying, we shouldn't be doing this and now we're going to be doing something that may not add a lot of value.

They think they're starting from a point that we should be doing this. We'd like to do it. There's clinical value. We just don't have the time or we're just not happy with the variability that results. So we think there's a really nice utilization play there in terms of the quantification itself other than what we've provided, the 3,500 to 5,500 and the 20,000 placements. We haven't updated that since the initial launch.

So we'll wait on that.

We'll wait on that. That's a long way of saying, to come.

Yes. Okay. So you have Cancer Dx, you have inVue. I mean I want to say that this is probably the most robust pipeline I've seen from IDEXX since probably covering the company. I mean now you also have on top of that [ MultiQ ], which you haven't said much except for the name for us. But you're more than welcome to announce the [indiscernible]

Can we show the picture?

Yes. Can you talk a little bit about the time line for the new platform? It's noncannibalizing, I think you confirmed and will it have a material contribution in 2026, '27?

It is noncannibalizable. We provided a profile of what we think from a placement standpoint in terms of the instrument placement standpoint it represents. We haven't provided a time line with [ MultiQ ] other than to say that we're making really solid product development progress on it. Yes, instruments are a bit different than, let's say, tests that you add to a Catalyst in a sense of we like to preview them because there's some preparation from a customer and field standpoint around budgeting and things that are important that we think there's some benefits of previewing it.

We're excited by the instrument. It very much fits the profile of what we think drives successful adoption, which is, the performance is as good or better than what you can get in the reference labs. It's very easy to use. It solves sample preparation and overall management challenges that the practice may be saddled with. It fits within the workflow. We think the economics and turnaround time are attractive. So we're excited by it and we'll provide additional specificity in the future.

And on Cancer Dx, you did recently announce the expansion of the offering. It seems that other constituents here at the conference are also very excited about Cancer Dx and what cancer diagnostics, generally speaking, can do in terms of innovation across therapeutics and otherwise. So can you talk a little bit about the market opportunity, the reception of Cancer Dx thus far? It's been still relatively early but yes, any insight you can give us? And what is this doing to ultimately drive market share gains to across the competitive lab space?

Yes. This is a very significant unmet need. Cancer diagnostics, we've been in the cancer diagnostics business for almost 3 decades with pathology. But the challenge is and I think this is really well understood as you -- if you wait until the patient is clinically symptomatic, they tend to be at Stage III, Stage IV cancer. And the lifespan depending upon the cancer and the virulence of it, maybe a couple of months to 5 months, something in that range for the vast majority of cases. So being able to detect and screen earlier with high specificity, meaning you're not getting false positives for common cancer cases, starting off with dogs is very significant.

In the case of canine lymphoma, it represents almost 1/4 of all cancer cases. There are excellent treatments already on the market in terms of CHOP protocols being able to do chemotherapy through an infusion path that we've seen rapid uptake, not just from IDEXX reference lab customers but also from competitor customers who don't use this as the primary provider, about 15% or so. We think that's very significant. It requires a break in workflow and how they practice. And I think veterinarians think about this as, I don't care who's providing it. We just want to make sure we're getting the best tests for our customers. The way we break down cancer diagnostics is in 2 categories. One is an aid-in-diagnosis So that's, the patient is suspected of having cancer. It's a confirmatory test. The other one is a screening test. We know both the veterinarians and pet owners understand cancer, both at a visceral or motive level as well as the clinical benefits of early detection.

So there's very high receptivity to doing cancer screening tests. And there's a very significant group or cohort of dogs that get cancer at early ages. When I say early, 4 or greater, you start seeing a significant increase from an incidence standpoint relative to more classic 7, 8 years of age. So going from lymphoma, canine lymphoma plus mast cell plus one other in '26, you get over that 1/3 of all cancer cases. And price -- where we've priced it, including it, screening, we think can drive a paradigm shift in terms of how you think about cancer and its inclusion in just wellness screening for dogs. And so we're excited. We think that over time can be a multiplier in our reference lab business from a volume standpoint. And the early indications are very well received.

Okay. You have over 1,000, I think, in your field sales force and technical service representatives globally. How are you thinking about sales force expansion? You talked about some commercial initiatives at Investor Day more recently. And then on that front, how do you think about other levers too from a margin expansion standpoint and balancing kind of some of those investments that you're making on that front? What does peak margin look like for IDEXX longer term?

Yes. Why don't I talk about the sales force and I'll have Andrew address some of the initiatives that drive margin expansion. The sales force expansions are really around increasing the density, the footprint of our sales organization. In the U.S., we have approximately 115, 120 accounts per account manager, primarily diagnostic consultant. Outside the U.S., it's at least twice that depending upon the country and market. And the -- just through experience and frequency of visits and the amount of time that they can spend with customers, the optimal reach and frequency metrics are achieved at that rate we see in the U.S. with our existing portfolio. Now we've expanded in the U.S. as our portfolio has expanded in metropolitan areas from a population standpoint, they've gotten more dense.

But we think that model and those metrics for the model are about right. Internationally, we're not close to where we think we can be. Now you don't want to rush it. The market and the sector has to be ready and developed. But we know we can drive that. It's a function of both innovation as an input and IDEXX creating awareness, education and then ultimately, consideration, which has resulted in growth through that playbook. And so we'll continue to evaluate where there are opportunities for expansion. And we know from experience, the return on that is pretty quick. It's not something that, generally speaking, is a high-risk strategy. And then, Andrew, why don't you talk about...

Yes. And those investments are, to Jay's point, very rapid and quite high. And so those are the types of investments we look to make. And part of that is driven by our ability to continue to expand our gross margins. So when we think about our comparable operating margin expansion of 50 to 100 basis points annually, really, that's going to be gross margin led as we see significant opportunity with incremental gross margins higher above our overall business across all our major modalities, including things like software over time. So that growth and that recurring nature of the growth really enables us to expand our gross margin as we find the right balance to reinvest in operations as well as expand into R&D and sales as well.

So we're focused on expanding gross margins. That's a key parameter for us. We've talked about areas like reference labs with automation and digitization and leveraging newer technologies like AI to create efficiencies within the operation itself. But we also benefit just again from that scale. So we have a lot of initiatives that go on. We think there's a long runway ahead of us in terms of gross margin expansion but we're trying to find that right balance of reinvestment to achieve our long-term objectives.

And Andrew, you're not new to IDEXX but you're newer to the CFO role. Any changes in philosophy around capital deployment? And how do you think about potentially introducing a dividend as a use of capital here? Or can it be better used elsewhere?

Yes. So we -- I've been part of the company, to your point, for about a decade and I've been part of the senior leadership team for quite a long time. So I've been able to influence that and I don't think you're going to see any major change within the strategy that we have. As I mentioned, we had a very consistent long-term financial framework that we published in -- at the Investor Day a couple of weeks ago. In terms of the capital deployment front, we've been really successful at leveraging share repurchases over time to return excess capital to our shareholder base. We always want to be thoughtful about how we do that. We do assess things like dividends over time but it really starts with reinvesting organically and then returning excess capital to shareholders through share repurchases.

And as you think about all of this combined, I think in your growth algorithm, I want to go back to innovation just for the last question, just you have inVue, Cancer Dx, [ MultiQ ], all that kind of contributing to the 200 basis points in CAG growth in terms of innovation contribution. Or does that offer potential upside longer term just given how robust the pipeline is?

So we have obviously better insight to our overall pipeline. And we think that's a good long-term metric to use on average for innovation. Certainly, it captures some of how we think about the currently announced items. But again, we're continuing to invest in R&D over time.

Okay. All right. Thank you so much. Appreciate the time.

Thank you.

Thank you. Appreciate it.