IDEXX Laboratories Aktie

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.

Good morning. and welcome to IDEXX's 2025 Investor Day. Welcome -- warm welcome to those of you here in the room at our global headquarters in Westbrook, Maine, and welcome to those joining us virtually through our webcast.

I'm Jay Mazelsky, President and CEO of IDEXX. We'll be joined by our management team this morning, who'll go through a number of growth drivers in the business. And I believe we have a very informative program plan for you.

Let me quickly set up the day and go through the agenda and some of the topics that I'll set up for the presenters who will follow. First, I'll speak about the company, our strategy and some of the initiatives -- key initiatives that the leadership team will highlight. I'll be followed by Dr. Hunt, who heads up our Strategy, Corporate Development and Global Commercial team. Dr. Hunt will spend some time on the sector, sector development and some of the underlying growth drivers. She'll be followed by Dr. Martin Smith, who heads up R&D Manufacturing and Supply Chain. Dr. Smith will talk about some of the depth and I think technical depth of our innovation engine and its sustainability. And we'll have a short break and come back and be followed by Mike Lane, who heads up our reference lab business, our technology-enabled service platform, will talk about the depth and breadth of our menu as well as spotlight oncology, which sits here, resides on the reference lab.

Dr. Erickson will follow. He leads our point-of-care business, and he will talk about the transformation in point of care, highlight some of the innovations and the direction in that business. And then Michael Schreck who leads our customer-facing software, corporate accounts and customer experience group, will talk about veterinary software, the role it's playing with practices, both independent and corporately owned and the way they use it to support and really optimize workflow. We'll come back from the break, George Fennell, who leads our commercial team, will facilitate a conversation with Dr. Brian Greenfield of Animal Clinic Northview. Dr. Greenfield has generously spent -- agreed to spend time talking about the state of the state, in the industry and the veterinary profession and his partnership with IDEXX. And then Andrew Emerson will complete the formal part of the program as our Chief Financial Officer and talk about the finances and financial review, and we'll have time at the end for question and answers.

And so with that, let me just briefly pause here and mention the safe harbor disclaimer, a copy of which is also on our website that you can refer to. And with that, let's begin.

A key point to understand about IDEXX and the IDEXX business model is that there's a very significant opportunity still in front of us. We measure this in decades and at $45 billion-plus TAM. The realization requires a set of strategies. Those strategies support the sector development. Key amongst them is innovation, and we're proceeding at incredible pace and acceleration for innovation across all dimensions of the business: point of care, reference lab, and customer-facing software. Also, our model is supported by a large integrated commercial ecosystem, very much aligned with our customers' priorities with a focus on international expansion. The net result of that is a long-term durable growth opportunity with high returns, which reflect the value that we, as a company, bring from a differentiated solution standpoint.

Our business strategy is very much aligned with our company's purpose. As a growth company being purpose-driven, has some significant advantages in terms of employee engagement and professional motivation amongst our team. And as we advance our growth strategy, we're committed to creating a positive and lasting impact on the health of well-being of pets, people and livestock. This morning's discussion is going to primarily focus on a companion animal group because that's the largest part, by far, of our portfolio. For those of you who may be more interested in delving deeper into topics of corporate responsibility, I would refer to you the -- our 2024 corporate responsibility report. It's on our website, and you can go deeper into that.

We've deployed a consistent strategy over time. And as you can see from the chart, the result of it has been a highly durable recurring revenue stream. In fact, this durable recurring revenue stream now represents over 80% of the company's total revenue. And this growth has been supported by key drivers. And this morning, we're going to speak at length about these drivers: diagnostics innovation, industry-leading multi-modality solutions, product development supported by pace and depth, fast-growing customer-facing software. Customers increasingly tell us and appreciate that we're targeting the first vertical health SaaS for animal health, and as opposed to the type of fragmented application solutions they live with today. And a direct commercial model with a focus on global expansion. We'll speak about the importance of this global commercial model in terms of creating customer partnership and intimacy and really awareness in education.

But before we go into the strategies, I'd like to talk about the sector and the sector landscape as a whole. In that, we see it as very, very attractive with long-term tailwinds that reinforce the potential growth of the business. It starts with an expanded pet population and pets living longer. We'll share with you just how much longer they are living. It really is a fairly dramatic improvement, just over a generation. Younger generations of pet ownership. They now form the majority of pet forming households. And we know there's a propensity to spend for the care and well-being of their pets.

Rapid innovation, which is supporting an increased standard of care. In some cases, very dramatic. This just isn't in diagnostics. It's also on therapeutics, actually diets, new financing models like health care insurance. And while staffing and inflation challenges persist, and not trying to, in any way, minimize those, we've seen a large measure stabilization in these trends in which to be able to build off going forward. And again, Dr. Hunt will spend some time and really go into these trends with some details and share with you some information that's new and I think pretty revealing.

But for us, the key to developing the sector and realizing the long-term potential is increased utilization of diagnostics. And we're presenting this at a little bit of a different way in terms of quartiles. And in the U.S., this has grown about 50 basis points a year across wellness and nonwellness. During the pandemic, it was a little bit faster than at 50 basis points. And the key thing to keep in mind is it doesn't just happen. We have to work as well as others have to work, hard at creating awareness and education and a change in belief system to drive diagnostics utilization. And this is where our focus on innovation and commercial engagement come into play as enablers to really support best practice standards within the veterinary community. And our strategy to take a step back is multifaceted. We try to lift all boats, independent of where the customer may be today in terms of diagnostic usage left and right, we believe that based on education and partnership, all of our customers would benefit from a patient care standpoint in using more relevant diagnostics testing.

The other thing that we have learned over time is by focusing on those customers on the 2 -- in the 2 right quartiles. They tend to have a very strong belief system as a foundation in the importance of diagnostics, the role it plays in achieving their missions, and can be inspired through education and new innovation, perhaps become the top 2% or 5%. So very -- I think that's an important insight.

But independent of where the practice is today in terms of overall use of diagnostics, the foundational role of diagnostics to their mission, I think, is very well understood amongst practice owners and veterinarians and their staff. And this chart really speaks to the evolution of the mix of -- in favor of services over time and diagnostics being a direct or indirect driver of about 80% of the activity within the practice, therapeutics and vaccines and specialty diet prescriptions and all of those pieces. And these increases have helped the clinics grow appreciably over that time period. About 15 years, you can see, they more than double. So diagnostics is a multiplier to growth. You've seen it's grown faster. It has accelerated from period 1 to period 2. And it's not surprising. You can't treat unless you diagnose. When you treat, you often need to provide follow-up monitoring. You can't assess the health status and establish a baseline of a healthy pet unless you first diagnose. So all this foundational role is a key part of the practice themselves.

But the other piece to keep in mind about diagnostics as a category within the practices, it's a profit center. In fact, it's the largest profit center in the practice as a percentage of EBITDA basis. And it represents almost 1/3 of the total profits. And it's not surprising if you think about it. Not only the -- most veterinarians capture the cost of the test, but also their activity and the activity of the staff and the procedure itself. So the key takeaway -- the key thing to keep in mind is about the alignment of diagnostics to practice economics. Not only is it good medicine, but it's also good practice economics. And so there's this alignment between what the practice is trying to do and the benefit we're trying to achieve in terms of growing diagnostics utilization.

So now let's get into the strategies. How do we drive this diagnostics utilization. How do we really drive over time, this increase in relevant testing is. And it starts with R&D. This is a view that of spend, we keep $1.2 billion fixed. You can see the 20 years and then the last 70 years, and if we project on a go-forward basis 4 plus years. So we are recognizing that there's some inflation in here. We are accelerating our spend as a company. And we believe that the role of innovation to address our customers' most challenging clinical or medical problems as well as business problems justified. And we invested, and Dr. Smith will speak to this, this morning. We invested in instrument platforms, biomarker assay, discovery and development, customer-facing software, getting all these pieces to work together in a seamless way.

It's my experience having been in product development for decades, both in human health and now animal health is that the competencies, the deep competencies we developed across all these disciplines. It's very rare, if not -- companies tend to be good at instrument development or software, but not all 3. And we've had to develop these deep competencies and capabilities in all 3. It very often is impossible to take a solution that's been developed for human health. It has the wrong economics, form factor, easy use, reliability. Everything about it doesn't necessarily translate in the right way for our environment. And so this is something that we have focused on and have really built up, we think what are sustainable capabilities.

But the other piece about this, even though quantity of spend has a quality all its own, is we look to be efficient and disciplined. And one way we're able to do that is we get leverage across reference hubs and point to care. We develop a biomarker, for example, [ SDMA ], for our reference business, and over time was able to successfully port it our catalyst in point of care. But that's not it. We also focus on making sure the investment support disease states because after all, patients are more than a test, they come in sick, we need to be able to provide a portfolio of testing solutions that support that. And these disease states, tend to be billions in addressable size, which is important. And we look to be able to create sustainable differentiation in each.

So in the case of vector-borne disease, for example, we -- it's a performance category. And through peer-reviewed research, it supports that our tests are performed at the highest levels in the marketplace. We also, through SNAP Pro, was able to bring our rapid assay testing into the IDEXX Diagnostics ecosystem. In the case of paracytology with fecal antigen and detecting the proteins, we detect these earlier and more of them. Far in advance of being able to see in OVA under the microscope.

In the case of [indiscernible], we started about a decade ago and said, there's got to be a better test than creatinine. SDMA demonstrated that we could detect kidney impairment, functional impairment much, much earlier than SDMA, and save lives in the process of doing that. But we didn't stop there. We also -- FGF-23, which is for therapeutic delivery in [indiscernible] [ statin b ], which is acute kidney injury and being able to distinguish between progressive and stable kidney disease.

More recently, we have focused on oncology. We've been in oncology testing and interpretation and support for decades. But it's mostly been on the later stages of disease. The patient comes into the practice, they're already clinically symptomatic. The outcomes are more challenging, in that case. So being able to detect earlier is super important. So I'm excited to share with you some updates on that. We're not standing still.

But before we do that, I do want to set the table and talk a bit about the overall TAM or opportunity. But the thing to keep in mind is you're going to see a number of different charts this morning that describes the size of the opportunity. This is the broadest possible one. It's global. It's cats and dogs. It's enabling diagnosis as well as diagnostic screen. So $2.5 billion is what we peg this opportunity today.

Just to quickly go through the definitions of how we think about aiding diagnosis versus screening. Pretty intuitive based on the name. In aiding diagnosis, pet comes into the practice, have symptoms, clinically symptomatic, consistent -- consistent with cancer, but it could be other things. The veterinarian wants to run a test or they have validated through our test or others that the patient has cancer. They begin a therapeutic path and then want to be able to monitor it through remission. That's an aiding diagnosis.

Screening is like the way it sounds. A healthy dog may come into the practice, needs to be screened because of age or they may be an at-risk breed, and we offer a test and plan to offer more tests to be able to screen.

The thing to keep in mind about cancer, as we talk about it this morning, it is very complex. We're in and of itself and relative to some of the other disease states that I shared with you. The heterogeneity of cancer types and subtypes, the biomarker discovery piece that you need to be able to identify cancer with the type of performance that our veterinary customers are looking for makes it complex. And by the way, this is the type of challenge that we at IDEXX, our scientists and medical folks, just love. They rally to it. That's why they're here. It's the spring in their step. And so we're excited to be able to support that.

So an important question, obviously, is we've had canine [indiscernible] in the market, less than 5 months now. How is it doing? And what's the reception been? And it's been -- I can tell you, it's been outstanding. Customers tell us that we've hit the sweet spot. It's an important part of the tool set that they feel that they need and pet owners want.

Today, we're about 3,400 practices who have submitted a test to us. What's very gratifying, from my perspective, from our collective perspective, is that 15% of these test emissions are coming from competitive customers. And it's gratifying in the following sense. Veterinarians are saying, it's not about who my primary reference or provider is. It's about the patient and providing the best possible care for that patient. And if it comes from the other guy across the street, then we're going to send it to them, even if it requires breaking workflow. Maybe having a vial blood sent to them and the second vial blood sent to IDEXX. So we think that, that strong validation in addressing an unmet need and one we're excited to be able to support.

Performance has been outstanding with some more data. We've been able to say it's 99% plus specificity. So very rare false positives. Very often when we get a call from a veterinarian and she may say, I suspect this is a false positive. We'll recommend waiting, testing 4 weeks, 8 weeks down the road. And in a handful of cases, they have come back as positive. The patient really developing lymphoma. So it's an important, I think, validation of the quality of the test.

We've been able to achieve our published turnaround times of 2 to 3 days. We've priced it for inclusion, and we'll talk more about what that strategy entails this morning. And as a result of spending time with key opinion leaders, and European and international customers, our field organization, we made the decision to launch this internationally in the coming year. So more to come on that. It's very exciting. But that's not all. I'm excited to announce the expansion of the IDEXX cancer diagnostics panel to also include mast cell tumor detection for canines, and one other test yet to be announced. All coming in the -- in 2026.

Mast cell is a very common type of skin cancer in dog, just to give you some background. It's part of the immune system. And when the mast cell becomes cancerous, it tends to manifest itself as a lump or nodule on the skin of the canine. Now between canine lymphoma and canine mast cell tumor, those represent over 1/3 of the most common type of test. So now we have a panel, which from a critical mass standpoint starts to get there. And there'll be one other test that will continue to be able to grow. And because of the technical achievements in biomarker discovery and development and testing platforms, we're very excited to say, we think the performance is going to be excellent. We're still working through that. It will be the same type of turnaround time of 2 to 3 days. And our intention is to be able to price it around where we are today.

So keep it accessible, keep it as part of this broader commercial sector development strategy. And we're still on track to be able to achieve the majority of common cancer types of dogs as part of a broader panel, and that will be achieved in 2028. So again, very exciting. This is something we know that our customers -- so you'll see some data in terms of how veterinarians think about mast cell cancer types and its prevalence and the key part of the practice.

Now it fits very much in with a broader tool set -- integrated tool set we're developing, where you can screen and then through inVue F&A testing for lumps and bumps, really interrogate that suspicious lump or bump or nodule and determine whether or not it has mast cell cancer. And we'll spend more time this morning. We'll talk about exactly what that looks like from a clinical workflow standpoint.

Keep in mind, mast cell cancer, it's a little bit different than lymphoma cancer in terms of the ability to treat it among -- out of the general practice in the following sense. If you have a test that you can detect it and validate that, in fact, that pet has cancer. In a vast majority of cases, veterinarian can treat it. Now they'll treat it through surgically remove the cancer itself. They'll then perhaps send biopsy, send it in for histopathology. Pathology interpretation, if it comes back positive or you get some additional grading information, they may decide at that point to administer chemotherapy. But there's a lot of oral -- oral type of chemotherapy solutions on the market. So you can do that out of the general practice. You don't have to send that pet to a specialist. And that's important that you'll see some data in terms of why that's important because there just aren't enough specialists, oncologists out there to support the 1 in 4 dogs, 1 in 5 cats who develop cancer over their lifespan.

Customers will also tell us. It's not just about the test, they want access to our specialists, internal medicine. Pathologists, when they get a difficult case, they want to be able to get -- run some ideas, offer somebody who's been a practicing oncologist is board certified. We offer that. It's free of charge when you use. Our diagnostics is something that they value in great measure. And as we develop this cancer testing and care management sector or opportunity, we believe that that's a key differentiator for the company.

So let me now take this inVue solution, maybe frame it as part of our broader point of care portfolio. And we're in vision quest to really transform point-of-care testing. And Dr. Erickson is going to speak to that at [ blend ] this morning. And we're going to do that through innovation. And sometimes, innovation takes the form a menu extension or expansibility for Catalyst, for example, over the last year, we introduced SmartQC, pancreatic lipase, cortisol, we call that technology for life. Sometimes we do it through completely new platforms like inVue Dx, which takes very well, high volume, characterized use cases and really automate it. We eliminated the slide perhaps save 10 to 20 minutes on that front, establishing highly consistent, reliable results. And we're able to bring these, I think, transformational point-of-care analyzers to the -- to our customers because we follow important first principles that we've come to appreciate and realize and through experience know how important they are.

First principle is performance. It should be as good or better than what you find at the reference side. And better often it comes down to you have a fresh sample like in the case of urine and [indiscernible]. Secondly, we design for technology for life, menu extensibility, so that when a customer buys a solution a week ago, it has no more feature or capability than the customer who bought a Cat One as an example or inVue as time passes, 10 years ago, an important first principle. Number three, we recognize that veterinary technicians are not laboratory technicians, that they have a set of responsibilities this wide. And they can't take 20 minutes to prepare a slide and do it consistently as well as do all the other responsibilities that they're tasked with doing. So we design our system from a salable preparation and management standpoint for load go. And then fourth, the fourth first principle is it needs to fit within the workflow, be integrated, capture, be able to run the test, capture the test results, invoice the customer through pins and really support it. And when we do that and do that well, we see really remarkable uptake and receptivity in the overall amongst our customer base.

Now there may be some of you in the audience who are highly perceptive -- visually perceptive, and see our fifth premium analyzer on the slide. That's the IDEXX [ Multi-Q Dx ]. It fits all those first principles. All those first principles, it's been designed to fit all those first principles. There's a strong connection in a clinical and workflow sense to what I've just described, what's important to our customers. And we're making really good product development progress on it. Now today, I'm not going to go through the testing category or the launch plan, except to say we're making solid progress. And as we get closer to launch, we'll provide some additional details.

But what I will talk about is inVue Dx because it's on the market today and doing extremely well. As you know, and as part of our Q2 earnings call, we upped the forecast of 5,500 units as a result of customer enthusiasm. Consumables are tracking very well to expected usage. We're getting very good feedback on it. [indiscernible] expansion is increasing. We really had a buy -- monthly buy every 2-week basis in terms of continuing to put out menu extensions in [indiscernible] and blood morphology. And then by the end of the year, we'll have [ 5 ] [indiscernible] as per testing for lumps and bumps. So really a very robust menu that supports cytology across the spectrum. And Dr. Erickson will speak to how we're thinking about future menu extensions and just sort of sizing what that opportunity looks like.

I will say, just from an economic standpoint, as Andrew talks about our growth algorithm and how we think about the benefits of a new instrument launch, they're very substantial. There are direct economic benefits in terms of revenue from the instrument and the consumables. And then there are indirect benefits in terms of multiplier from. It gives us access to competitive accounts. George will tell you that it helps the productivity, the field selling a suite this big versus this big. We know that there's also as part of our IDEXX 360 and other programs, it allows us to extend the relationship we have with customers. So lots and lots of benefits. It's a big deal when we launch an instrument at IDEXX, and it really drives productivity just beyond the clinical and medical contributions we make.

And so as we size out what this looks like from an opportunity going forward. We finished 2024 at 147,000 placements. We think the opportunity on a global basis is many factors larger than that. In the U.S., for existing platforms, even though it's our most advanced market in terms of diagnostics usage, still tons of opportunity. Internationally, you can see the darker colors on the slide, even more so because in some country markets, it's more embryonic. And then, of course, for the new platforms, inVue and Multi-Q Dx, we broke that out. Those are more greenfield opportunities and very, very sizable. So we're excited. We feel like there's tremendous runway to transform point of care from a technology and bringing labs to the clinic.

Let me now quickly segue into talking about the reference lab business. This is a technology-enabled service business. It's a key modality for us. It's a surprisingly complex business to get right and to run. It involves deep science in terms of developing biomarkers for them. It's a lot of work behind that. But if you think about just being an extension of the customer's practice, which is what they want from us and keeping the complexity behind them, it's very complex from a full value chain standpoint. Picking up the sample, at the right time, bringing it to the right lab, running the right test, tracking it through the reference lab, providing the result. So from a transportation and logistics standpoint, you need to have very deep capabilities to be able to do this well.

And again, what -- the way the customer wants to think about testing capability is we're just an extension of their practice. We need to keep the complexity back office and front office to just deliver a pleasing experience. And so this is a business that requires, in addition to being logistics and transportation experts, a heavy investment of IT and information management system that involves automation and digitization and really being able to deliver millions of results in a timely way without the errors. And when you do that well, it's reflected in the type of statistics you see in front of you, where from a sample pickup and processing accuracy standpoint, [ 4 9s plus, 4 9s plus ], which is outstanding. And then from an NPS, world class is 50. We're deep into world class level. So there's deep advocacy and support for that.

Now our customers tell us, it's not just about the reference lab, and Mike Lane will speak at depth to that this morning. It's also about the software that ties it all together, that integrates, that helps support workflow, that optimizes workflow, that supports team collaboration and productivity, that enables digital communication with their clients, that really has a technology stack in an application portfolio that is designed and developed for animal health as opposed to sort of the fragmented islands of applications today. We're very proud that we are increasingly seen as the first company to develop a vertical SaaS technology stack for animal health from the ground up. We continue to drive it. It's a key area of investment focus for the company, with increased emphasis on the pet owner engagement application, a digital connection with the younger generations who want to interface with the practice and their veterinarian in that way. And again, Michael Schreck will spend some time this morning talking about that and what that looks like.

So just maybe to wrap up the innovation piece. This is a picture we've shown us in the past. I think it's a good depiction of how we think about innovation. It starts with the customer, in our case, the veterinarian, his or her customer, the patient and the pet owner at the center of everything we do. They expect from us as table [indiscernible] in-breed modality solutions, point-of-care and reference apps. And so we endeavor to deliver that. But they wanted all to work together. They want it to be seamless, supportive of their workflow, supportive, giving them the flexibility to practice in a way they want to. We layer on additional complementary layers of innovation, big business model, for example, pay-per-run and auto replenishment is a great example of that.

The net result of that is what you see on the right-hand side of the slide. Customers stay with us, which is a part of our growth algorithm. Our Brand Promoter Score at the IDEXX level, so that's all in is deeply into world-class levels. And that product availability number, the way to think about that through the customer lenses, it allows them to focus on their patient. They don't have to worry about is the IDEXX test? Can I get the IDEXX test? When is it going to come to me? Is it going to be accurate? This allows them to really focus on why they're in business and what they do best.

So as important as innovation is, we believe that the commercial investments that we make and our commercial ecosystem is equally important. It's really about the partnership with the customer establishing customer intimacy, being aligned with their priorities, supporting what they want to get done. And we know there's no better way to do that than to be able to understand their practice needs, calling them frequently, have a relationship, be trusted, be subject matter experts when there's a question to create awareness and education and support. And the only way to do that is through commercial density. It's by assigning a few enough accounts per account manager, per our professional service vets and field service representatives so that they can visit these practices frequently. It's -- they're not only there when they want to try to sell something.

So that's what we endeavor to do. We've had 9 commercial expansions in the last 4 years. As you know, as part of the Q2 earnings call, I announced 4 more, 3 of which are international, 1 that includes really expanding what we're doing in the U.S. due to the size of our portfolio. And some of the opportunities that we see, these will be in seat, ready and really moving up the productivity curve strongly by January 1 of this year.

I'm often asked, so you do this and how do you know when to do it? Or what are some of the unanticipated perhaps benefits of that? And what we find is when we call on customers, they use more diagnostics. So they have a propensity to use more of our entire portfolio. And these are some numbers -- updated numbers that we've shared in the past, but not just for the U.S. but also for Germany and Australia, New Zealand. And what you see is they're growing strongly, the ability to really use all of our portfolio. And Michael Schreck, as part of the software piece, will give you a different cut in it through the software lens. But I think the message is through the customer perspective, it all works better together. It gives them the flexibility to practice, how they want to practice, and it's a key element of our growth strategy.

Now in response to this, we often get the question, well, aren't you cannibalizing reference labs or point -- will you bring out a new point-of-care analyzer? Does that result any decrease in reference labs? And it doesn't. I think our data and experience shows the testing begets testing. As you use more point of care, you use more reference lots and vice versa.

And part of this comes down to those customers on the right-hand side of the chart, had a strong belief in diagnostics. It really comes down to -- they had this belief system. They realized this a foundational role. It helps them achieve their practice and patient objectives. And they use board diagnostics. And when you test in clinic and you want to get a quantitative viral load, you want a biopsy of tissue and send it in for histopathology and pathology interpretation, you use more reference labs.

The other thing that I would point out is that wellness testing is done in reference labs. And wellness testing is a big thrust for the business, for the profession for a lot of reasons. It engages and anchors this client experience, it's good medicine. You find things that are seemingly not there. These are healthy pets that, in fact, aren't healthy, so by doing wellness testing, you really drive the reference lab business also.

Now this is new data. This is an interesting cut. What this shows is that our corporate customers, and corporate customers more generally are doing more wellness testing than the sector as a whole. This is U.S. data. This is where we have excellent [ TAM ]. So the mean, blood work, [ inclusion ] and wellness visits, it's 12% in the U.S. You've seen that number repeatedly, and you'll see it this morning.

For the corporate account customers, 3 out of the 4 quartiles are above that 12% U.S. sector average. And in fact, some appreciably about the top 5 corporate groups, these are very big practices. They're doing wellness testing and blood work inclusion in the high teens, low 20s. And they do it. There's a couple of reasons that they're doing it. One is they see this as a growth strategy. It's just much harder to grow through acquisitions for a lot of reasons, including the cost of money, the availability of clinics. So they're looking to really grow organically.

The second thing is they can operate at scale. Once they decide to do something, it's not like just pushing a [indiscernible] and they can go from 0 to 1,000 clinics overnight, but they can move much faster at scale once they decide that it makes -- it's good business and good medicine. And we believe IDEXX is extremely well positioned to support these customers through our programs, through our field organization. Wherever they are, we are, and we can bring expertise and campaigns and program educational support to help drive this change and help the customers achieve these objectives.

Now let me take this up a level and tie it together, the cancer strategy and wellness testing, which is such a key priority for the industry as a whole. The way blood work inclusion, remember, about 50 basis points a year historically has grown. It's really from left to right. The clinical -- those patients that come into the practice are medicalized. About half of those patients, 47% of those patients undergo some diagnostic test. Sometimes it's just hardware or fecal test and a much smaller subset of that 12%, that's the number I showed you previously, have blood work inclusions, so chemistry and/or hematology. So it's been hard work. We've done it. Others have done it. We've lifted the boats. It's 50 basis points a year, blood work and closure.

There's an opportunity to change this paradigm, to go from right to left. And you're going to see some very interesting data from Dr. Hunt and Mike Lane this morning that just shows how veterinarians and pet owners are thinking about cancer testing. It's very motive. It resonates with them. They recognize based on age of the dog, breed of the dog, there's much higher risk. It's something that they're willing to pay for. We priced it for access to turnaround time, means that they don't have to wait weeks to get a result back. So we think that this is a potential game changer.

And as we go from canine lymphoma, a single test as part of the panel, to canine lymphoma and mast cell tumor detection, one other one next year, the value proposition gets more and more compelling. We develop a critical mass and have a chance to grow faster than that 50 basis points. So this is -- when we talk to customers, I spoke with a number of corporate groups personally, this very much resonates with them. They get it. Their medical staff. It's very supportive. They -- obviously, they have to get the pieces in place, but it's a key part of our strategy.

So let me now begin to tie some of these pieces together. As a result of the sector tailwinds that I shared with you, the innovation strategy of solving our customers' most challenging medical as well as business problems, a commercial model that's a partnership model of subject matter experts, trusted by our customers, aligned with their priorities. We believe that there's an enduring opportunity for long-term attractive growth. And we pegged this out 20, 25 years. That's how we -- compelling, we believe the opportunity is.

From a sector opportunity, we peg the growth possibilities or opportunity in a high single -- it's a little bit faster internationally than the U.S. as you might suspect, based on some discussions, but that IDEXX and Andrew will go through the growth algorithm, 10-plus percent opportunity, again, faster internationally in the U.S. and Andrew will sort of build this up through the different building blocks of the growth algorithm, and that we can grow faster as a result of our leadership position, as a result of our differentiation and the contributions that we deliver on behalf of the customer.

So now let me tie it all together before handing this off to Dr. Hunt, which is I'm going to end where I started, which is a key point to understand about our business at IDEXX and our business model is that there's a significant opportunity still in front of us. We measure this opportunity in decades at $45 billion plus. We realized that it's just not going to fall out of the sky, that we have to develop it, our strategy to develop.

At the next 3 hours, you're going to hear about innovation and innovating faster than ever before. across a very broad spectrum of the business: point of care, reference lab, customer-facing software, modality, is a commercial model, which is second to none, which is trusted by our customers, which has the time and capacity to visit our customers, to understand the opportunities that are aligned with their priorities to support their practice objectives. With an eye towards clear eye, towards expansion in our international geographies, which is much earlier in development than here in the U.S. The net result of that is a long-term durable growth opportunity with high returns, reflecting the value and differentiation that we as a company bring.

So with that, I'm going to turn the podium over to Dr. Hunt, who's going to talk about the sector and some of the growth drivers in the sectors and the opportunities as we said. So Dr. Hunt?

Thank you, Jay. Good morning. It's great to be here with all of you again. If your family is anything like mine, pets are probably -- will win in your lives also. Some of you may remember my German Shepherd, [ Ishka ], who has been part of the family for years along with our 2 cats. This year, our family had a new addition. My 23-year-old son, who lives in a tiny apartment in New York City, adopted a cat named [ Nala ]. He has been wanting a pet of his own since he left the house because as he told us, my life doesn't feel complete without pets. That deep connection between people and their pets is what makes what we do at IDEXX so special.

The pet health care industry is at a defining moment. As Jay shared, innovation is expanding what is possible in care and pet parent expectations are rising faster than ever. And IDEXX is playing an important role in this transformation. What sets us apart is our proven ability to develop the sector end to end, from breakthrough innovations to belief building education, to driving global adoption, all grounded in deep customer center city. Cancer is a clear example of that. It's globally resonant. It's globally relevant, emotionally resonant and it makes wellness a shared priority between clinics and their pet families.

To understand where this industry is headed, let's first look at the strong underlying sector trends that are shaping future demand, starting with one of the most relevant, the evolving pet population. The surge in pet ownership over the past few years has reshaped the veterinary landscape. Historically, the net pet population in U.S. has grown at about 1%, a trend that we expect will continue into the future.

But between 2020 and 2022, millions of households added pets, driving a 12% increase in the total U.S. pet population. We saw similar adoptions pretty much everywhere around the world. These pendemic era pets are now aging, and they're entering life stages where their health care needs rise and diagnostics move from occasional, nice to have, to essential. And at the same time, pets are living longer. We now get more time with our pets, more years, more memories. Every pet parent wants more birthdays.

We track this through a longitudinal data set of about 2 million pets who have access to medical care in the U.S. The average life spans have increased by nearly 2 years since 2020. Those extra 2 years translate into a 22% increase in the diagnostic spend over the life of a pet. And while cats may not have 9 lives, it is wonderful to see that 18% increase in their average lifespan. That said, cats are masters at hiding pain and disease, and they will also suffer in silence. Without regular checkups and diagnostics, the conditions can often go unnoticed. So when cats do come in, they are often very sick.

Feline visits, as you can see, have been increasing. Still, last year, only 30% of the cats came in for a health visit compared to 70% of dogs, leaving a tremendous opportunity to provide the care that cats deserve. Practices are adapting from cat-only clinics to low stress environments, the industry is shifting to meet the needs of the feline patients. This is signaling a broader mindset change that will result in better care and stronger health outcomes for cats.

Given the unique needs of feline care, IDEXX has a purpose-built portfolio that is designed just for cats. It is focused on areas that matter most for the feline biology, such as diabetes, hyperthyroidism, feline-specific infectious diseases. Some of you may be surprised to learn that 1 in 3 cats, 1 in 3, will develop some sort of kidney disease over their lifetime. Anyone who's had a cat with kidney issues knows how hard it is, both for the cat and for the pet family. And that's why innovations from IDEXX, like SDMA, Cystatin B ,FGF-23 are so important. They help a veterinarian assess the full [indiscernible]. That commitment to cats also carries through in our future innovation pipeline. We're developing new ways to help veterinarians detect and manage feline conditions earlier and more effectively. Our goal is to help veterinarians practice the caliber of medicine and experience that they aspire to provide.

Over the past 6 years, we have seen modest but meaningful growth in the total number of clinical visits, primarily driven by the growing pet population. What lies ahead, because of the population growth, could shape the sector in new and important ways. We're entering a phase where aging pets and rising expectations will be shaping the next wave of demand. And clinics will need to be ready with the right tools and capacity to meet that demand.

There are 2 important things for us to take away from this data. As you can see, as pets get older, diagnostic intensity increases. It's just like as humans, aging brings greater complexity. The light blue bars are the average diagnostic spend for U.S. practices. What's most compelling is the dark blue that represents the top 1/3 of clinics. These clinics are doing 50% more diagnostics than the peers across all age groups. That tells us 2 things. Firstly, there is real and replicable headroom to elevate care across the industry. And second, consistent use of diagnostics not only get -- ensures better health outcomes. As Jay highlighted, it facilitates better business performance. And this opportunity is only accelerating as a pandemic era pet -- that's a large cohort of pets enter into higher care stages of life.

Most of these pets are now -- when diagnostic usage starts rising sharply. Let me first explain this chart. The bars show the clinical visits by each group, and the green line is the number of -- the percent of visits that include diagnostics. This is a snapshot in time, but it's an ongoing phenomenon. By 2030, we expect to see 30% more senior visits and 20% more geriatric visits. As the clinic visits increase, so will the need for diagnostics. The next wave of demand is coming. Clinics who plan and build capacity now will avoid the stress and burnout that they experienced during the pandemic.

Let's go a level deeper and look at one of the most common diagnostics. It's a foundational diagnostics that is running clinics every day, blood work. Why is blood work important? Since pets can't tell us what's wrong with them, blood work is a critical tool to understand what could be going on inside the body and to uncover any hidden health issues. We're seeing a steady increase in how often blood work is run, 50 basis points every year. But even with that momentum, only 1 in 5 pets coming in for a health checkup, get the benefit of this powerful diagnostic tool.

The right side shows a much sharper story. Blood work use climbs steeply with age. As blood work moves from occasional to more routine, it unlocks substantial medical value. IDEXX led research based on samples from 220,000 patients demonstrates that clinically relevant abnormalities are found in seemingly healthy pets at all ages. The rate of those findings increases dramatically as pets get older, as they become mature and senior, and it reinforces the medical importance of regular preventive screening.

And this was before we introduced Cancer Dx, which will only add to the value of wellness screening. The good news is the younger generations already place high importance on proactive wellness. Millennials and Gen Z like my son are reshaping what it means to be a pet parent. These younger generations now make up the largest segment of pet owners. For them, pets are unquestionably family, inseparable from the daily rhythm of life. They expect care that is more personalized for their pet. They are more engaged in health care decisions than any of the generations before. With greater access to data than ever before, they seek advice, share stories and build beliefs online. That shared belief is powerful. And when that belief meets the medical recommendations of the veterinarian, they're ready to say yes.

The data shows that the main barrier to diagnostics is an acceptance. It's whether the conversation happened at all. There is a huge variation in how often veterinarians will recommend diagnostics based on their assumptions on the parent's ability to afford, but acceptance varies little by financial status. Most pet parents, even those on tighter budgets, are willing to make trade-offs, skip vacations, delay purchases in order to take care of their pet. They prioritize their pets care. This is a fundamental mismatch. It's not a demand problem, it's a supply problem. The opportunity is clear. Equip veterinary practices to offer diagnostics more confidently and consistently because diagnostics are the engine behind the system of care. They not only enable early detection, they set care in motion.

Up to 80% of our practice's activity can be tied to diagnostics, including medical services, therapeutics and nutrition. For example, a routine blood test can help uncover the onset of early disease, leading to follow-on testing, prescription diet and better health outcomes. Our SediVue might reveal a urinary tract infection, resulting in targeted treatment and faster relief for a suffering pet. This is where IDEXX is highly differentiated, combining diagnostics, software and communication tools to help clinics operate as one cohesive system.

As health care needs rise, operating as a cohesive connected system is going to give clinics the one thing that they need most: time. That was the idea behind our landmark finding the time study. We extensively mapped workflows in real practices and found that by using better tools and smarter processes, clinics can free up to 2,000 hours annually. That is equivalent of a full-time veterinarian without making a single hire. That time can be reinvested in patient care, client conversations are just simply easing the load on busy veterinary teams.

So the question becomes, how do we unlock that time? With innovation. Innovation plays a critical role, especially in busy practices where every minute matters. That's why our latest innovations are designed to make that time count. inVue Dx with its low [indiscernible] free load-and-go workflow. IDEXX [indiscernible] lab station at twice the speed. ezyVet, giving time back to clinicians to focus on care. Vello, modernizing pet parent engagement and reducing no shows. Individually, each of these solutions save time. But together, they create a productivity flywheel that enables clinics to do more with the teams that they have.

And it's not just about efficiency, our innovations elevate the level of care that veterinarians can provide. Cancer is a great example for -- to look at on how that comes to life. Cancer is by far the leading cause of death in adult dogs. Many of us, myself included, have felt the impact of this unforgiving disease first hand. By the time cancer is diagnosed, it is too late, which is why early detection matters so much.

Our global research shows that veterinarians around the world are open to adding cancer screening as part of their preventive care protocols. And when they recommend it, majority of pet parents will say yes. Now we know this won't be an overnight shift. By building beliefs and growing categories is what IDEXX does best. We've done multiple times before with vector-borne disease, parasitology and renal health with SDMA. Now it's time to make cancer screening the global standard through belief, education and access.

The case for screening becomes even more compelling when we look at breed-specific risk. 13 of the most common dog breeds, that is 13 million pets in U.S. alone, are at an elevated risk of lymphoma and mast cell tumor starting at the age of 4. All breeds have an elevated cancer risk around 8 7. Detecting cancer earlier opens doors to more options and better health outcomes. But to bring this benefit to more pets, we also need to rethink how scale is -- how care is delivered at scale. As Mike Lane will share, there simply aren't enough specialists to meet demand. That means that general practitioners will have to lead more through -- more of that cancer journey.

This shift is necessary, and IDEXX is helping make it happen. This is how. It starts with a strong clinical foundation. And we're not doing that alone. We are working with specialists and key opinion leaders to define new standards of care. We're also equipping general practitioners with the tools and confidence to diagnose and manage cancer care effectively. That includes AI-enabled diagnostic support, clear step-by-step case pathways and communication tools to help guide families through difficult conversations. We're not just launching a test panel, we're helping transform a care model.

Cancer is a defiing example of how diagnostics can shape care. And the broader opportunity to elevate diagnostic utilization across all categories is significant, especially across the global stage. While there's still ample opportunity for growth in the U.S., international regions represent the largest untapped opportunity. What has fueled growth in U.S., rising care standards, stronger economics, growing clinical confidence with tools and technology can be replicated internationally. We have excellent product market fit, and our reference lab infrastructure meets the needs of these regions. And we are tailoring our commercial strategies to address local needs and dynamics. We see this as an IDEXX playbook of sector development and the engine behind the long-term TAM expansion that Jay referenced earlier.

And in addition to innovation and education, it is powered by consistent presence. It doesn't matter where in the world you are, relationships fuel growth, and the best way to grow relationships is through presence. Today, many of our international sales territories are too large to fully support customer success. As Jay highlighted, we are making focused investments in 4 regions, 3 international and a modest expansion in U.S. These are investments in our people, processes and productivity, all designed to deepen relationship through presence.

When we show up, we help clinics grow, and their commitment to IDEXX strengthens. That link between presence and performance is very clear. These examples from 3 international countries make the case. When we engage consistently and directly with customers, clinics grow faster. Why? Because we're not just selling products, we're building trust. We're uncovering needs. We're helping teams get more from the diagnostics in their care protocols. This kind of partnership leads to better care for more pets around the world and helps us deliver on our shared mission with our customers.

[indiscernible] care is entering a new era, and IDEXX is helping shape what comes next by enabling health care teams to scale care, meet the rising demand without compromising quality, equip, enable clinicians to do more, especially in cancer care, extending our reach to more clinics, more regions, more pets, and helping clinics deliver the modern personalized experience that is more aligned with expectations of today's and tomorrow's pet parents. This is how we deliver strong, sustainable growth, by advancing care for pets and expanding access globally.

Now I'll invite Dr. Martin Smith to share how we are accelerating the innovation that powers this growth for both the clinics and the sector.

Thank you, Tina. Hello, everyone. I'm Martin Smith. I head up R&D and operations here at IDEXX. And it's my immense pleasure today to stand here and represent the many amazing teams that contribute to our innovation agenda.

Over the past 3 years, we have more than doubled the rate of new product launches. We've taken out 10 months on average from our development project time lines. And at the same time, we've built capacity so that we can work on multiple breakthrough technologies simultaneously, inVue, Cancer, Multi-Q. Now my job today is to take you through some of the ways in which we delivered that performance, tell you about some of our capabilities and the insights that we've built that are setting us up for now and as we go into the future.

Now you've seen slides like this before. This is a snapshot of some of our recent launches. And there's several examples of accelerated innovation on this page. I draw your attention to the bottom left. Catalyst Pancreatic Lipase, Cortisol, SmartQC. Three launches in less than a year, not one launch a year, three. This is the kind of innovation pace we are striving for.

Jay showed you this slide earlier. I've modified it slightly. I got Multi-Q there. It's no surprise that an increase in investment accelerates innovation. And as Jay pointed out, we focus our innovation investments into key core competencies that it describes. But we're also building new capabilities. We're installing new and breakthrough and state-of-the-art infrastructure, and we're building more and more insights as we build ever greater returns on investments for our projects as we go faster and faster.

Now we've always had great products at IDEXX, breakthrough technologies throughout the years, as Tina described, but we want more. We create problems for ourselves on purpose. We ask specific questions. How can we go faster? How can we do more at the same time? How can we extract more from that invested dollar? This is continuous improvement. And like all good continuous improvement programs, you need a framework.

I describe some of those framework pillars here, starting with talent and culture, the right leadership, the right teams, the right organizations, all established to deliver a mission. We've installed from scratch in some cases, areas like data science and AI, molecular diagnostics and also manufacturing technology capabilities, all propped up by a world-class engagement campaign. We strive for the best place, the best people with the culture and metrics and meaning, performance and people, results and recognition. Metrics drive behaviors, behaviors drive our culture. This is a go-get team that come to work every day to win. Additionally, we invest, as Jay described, in tools. Those breakthrough and capable state-of-the-art technologies that help us solve our problems every day. Now I'll talk about a couple of those in a few slides, biomarkers, pilot infrastructure. And then, of course, no surprise, everything is propped up and underpinned with process.

The active product development or net new product development called NPD is really, really complicated. Multitudes of teams coming together for a singular mission: launch. You need a disciplined program management capability, really, really robust processes that are continually revamped, and the introduction of risk assessments so that we're able to identify when risks may occur and actually mitigate them before they cause delay to our projects. Process underpins everything that we do. Absolutely a key enabler.

And one of the process schemes that we're spending a lot of time on, and Tina talked about this, is bringing that exquisite customer intimacy into our new product development, NPD processes. Now we operate with a process what's known as quality function deployment. And within that is a process called customer critical to quality CTQ. This is identifying and translating those parameters that customers expect from our products, performance, turnaround time, quality, consistency, precision. And the active CTQ mapping allows us to take those parameters of interest and importance for that customer directly into our NPD programs and even to the level of the factory floor. What do I mean? Those parameters that the customer expects from us, we can actually translate directly to the levers and knobs that we turn on our manufacturing equipment, even the raw material tolerances that we need to produce our products. Really, really powerful, early engagement of the customer, driving our requirements down to the factory floor.

Now I mentioned quality. A key dynamic in the delivery of quality is another area that we've invested quite heavily in known as design for manufacturing and assembly, DFMA. DFMA is a way in which you can organize workflow ease, manufacturing simplicity, reduction of error, reduction of rework, you design for manufacturability, you design for serviceability, you design for inventory plan, you design for spare part management. It actually drives the quality that we're expecting.

Now let me give you an example here. If you look into the middle of the page, you can see the gray box there, that is our Catalyst One instrument, an absolutely outstanding instrument. It operates with somewhere in the region of 71 months mean time between failures. That means for almost 6 years, I think, over 6 years, it doesn't break down. Used every day, multiple times, world-class exquisite performance that you would expect with the types of instruments coming from IDEXX. Now the 650 components in that instrument, motors, circuit boards, wires, engines, chassis, you name it, screws. They're all in there, you get the picture.

Now let's roll on to inVue. Through DFMA, that instrument is built with 150 components. That's DFMA at its zenith. With just 150 components, we control quality. We really reduce rework. We increase our yields and we deliver the quality that's expected through that CTQ program that I described. And not only that, DFMA and the reliability and consistency that we're driving production, allows us to deliver those unprecedented availability time lines that Jay talked about. We operate with 99% on-time delivery for customer requests. Customers never ever have to think about where their product from IDEXX is coming from.

Now another way to accelerate is with the identification and the installation of what I'll call technology platforms or technology flywheels, really straightforward concept, identify and invest into a technology base. You do it and invest once, and then you use it as a flywheel going forward for the downstream product developments from that, reusing those technology bases. And we've got a variety of these technology platforms here at IDEXX that we use over and over again for our product development. I list a few here on the left-hand side, hardware components, consumables, chemistry, algorithm designs we can reuse these technologies over and over again for our product development. Again, another straightforward example. ProCyte One into inVue.

We've reused a variety of technologies that were once developed for ProCyte One that we now redeploy within inVue. About 40% of the embedded software is taken from ProCyte One and into inVue. We have the same central processing unit in control centers from one instrument to the next. The same design convention, chassis, layout, again from one instrument to the next. We do it once and we don't have to spend time doing it again. This type of reuse of technology platforms is one of the ways we were able to bring as a product development project IDEXX, 2 years faster than the project that was ProCyte One. inVue is really leveraging the technology reuse as I've described, really, really key enabler for our pace.

Perhaps the biggest breakthrough that we've had over the last 3 years is what I'll call a biomarker engine or a biomarker factory. The installation of this capability has slashed unbelievable amounts of times from our delivery. And remember, biomarkers feed the pipeline for the assay content that we deliver, really, really breakthrough capabilities. And like all good engines or factories, I can depict it in terms of unit operations. I can show within that process where I'm using tools like AI, driving greater insights, faster decision-making, more accurate analysis. I can also identify in this factory where I use automation, speed up the process, higher throughput, really, really important.

Now we're showing here a Cancer Dx biomarker engine, as an example. But before I go into some of the step descriptions here, let me just describe for you what a biomarker is. A biomarker is a molecule. It could be a protein, an antibody, a metabolite, chemical, piece of RNA, piece of DNA, all these types of biological molecule content. And what we do in discovery, we take a healthy sample and an unhealthy sample, a diseased sample, and we're actually looking at the profile differences between those biomarkers, a biomarker in disease may be upregulated, get more of it, or down regulated or it may change. And we're looking for those differences between healthy and disease.

Now I mentioned samples. You don't get any process without samples. Samples are the lifeblood of a biomarker campaign. And we're really fortunate here at IDEXX, and I think this is a key differentiator. We have hundreds of thousands of samples going through our reference labs every day. I can wake up in the morning, check my e-mail. Hey, there was a positive lymphoma in Australia yesterday. I have the opportunity to get that sample right there. In effect, 80-plus reference lab network across the globe is our biobank. It's unbelievable, the power that, that drives for us.

This is a cancer example, as I've described. So the second step is unique to cancer diagnostic biomarker discovery, is what I'll call primary cell culture. We've worked out how to take the progenitor cells that are the last moment and normal cell before it turns into a cancer cell through a process called transformation. We can literally watch that once normal cell transform to cancer. And we can take that cell, and we have single cell capability and sensitivities with our analytics. I can take that normal progenitor. I can compare it to the now transform cell and I'm looking for biomarker differences between the 2. This is not a dog limping into a clinic with Stage 4 cancer. If I take those samples from that patient, what am I going to get? I'm going to get biomarker discovery for a late-stage disease. As Tina described, we think that's too late. We want literally the earliest stages of disease onset. And that's what we're doing with this primary cell capability that we've created. It's our true belief and you'll hear this again from Mike Lane, the early detection, and we're delivering that. plus early treatment equals better life outcomes.

Now once a biomarker is identified, we have to create the reagent that can see that biomarker in a relevant test and also in relevant test formats. Stage 6 here. You can see reagent marker formatting. I show a 96-well plate here, a higher throughput format, the types of content that we will put into reference labs. We validate through clinical study. That's how we generate our claims. You saw some of the data that Jay described, came out of clinical study and then into manufacturing. Absolutely breakthrough capabilities that we've invested into here and are now delivering, slashing years of our original campaigns now down to months.

Now we're really fortunate here at IDEXX and that we have direct co-location of R&D and manufacturing. Certainly makes my job easier in what I do. I can actually spend time with my teams under the same roof, sharing the same rooms, the same laboratories in some cases. We have that deep organic synergy and connection, propped up with the types of process that I described.

Now new product development, NPD, yes, it's about the cool science. I described some of that with biomarkers. But at its heart, the definition of new product development is the creation, validation and turnover of a capable manufacturing process. That's it. That's my definition of new product development. And why do I say that? Sometimes we have to make millions of these tests a year. I got to know the Lot 1 and Lot 147 3 years later are working identically, the same quality, the same consistency, the same yields, the same cycle times, the same cost. Really, really important that we have that capability. So that organic and process drive that we have, and we can enjoy here with our colocation. That's great. But we take it further.

In our R&D labs here at IDEXX, we've invested into what I will call [ pilot ] line infrastructure. We have recreated and have direct and exact simulants of manufacturing processes in our R&D labs. What does that mean? It means that I can develop directly for performance with the product development and at the same time and in parallel design for manufacturability. In parallel, I don't have to do that in a sequential way. I'm saving that time. It's a pace and scale accelerator for us. And it doesn't stop there. We can supercharge our pace if we choose under the right conditions. We can actually launch from those pilot lines and not go through the steps of formal manufacturing, which we could actually do later on. All of the pilot lines we have here at IDEXX are on our quality management system and support it to our ISO standards.

Now Jay showed a version of this slide. I was talking about our test modalities and franchises, the areas that we concentrate on. Knowing our areas of concentration is also an accelerator to innovation. Why so? You can build deep, deep bench specifically for the franchise, the right scientific scale, the right medical skill, the right product management capabilities, the deep external networks that drive our credibility into the marketplace, taking at pace unmet needs, translating them for our product development. Taking those unmet needs and through a CTQ process that I described, turning those unmet needs into requirements that we drive in our product development programs. That's pace.

But as you'll notice, there's differences between these areas, and we have to be very careful to make sure we devise skill and capability along those lines. So you see parasitology here, very, very interesting and complicated. Often really, really difficult sample types. Very common that we're handling fecal samples here. And as you can imagine, the range and shape and size of different samples from a stool standpoint is very, very variable. And not only that, we've actually got to drive those tests into a very high throughput format. So you've got to build a test that can work in 96-, 384-well plates. And there's also pet behaviors like coprophagia that can actually confound results and we have to mitigate against those as well. And by the way, an extra donut for anyone who can tell me in the break what coprophagia means.

When you look at oncology, deep overlay between oncology and hematology, expertise sitting together, working together, driving outcomes. Jay showed, I also showed that biomarker discovery for this type of complex disease is complicated. We don't have one biomarker that says everything about a single type of cancer. We have panels. Those panels come together, they work in tandem and drive a singular output of result, absolutely essential. And then, of course, the biobank. You can't do anything in cancer without well and qualified samples that are diseased and understood what disease level and aggression and then certified healthy samples. You need that absolute certainty as you drive an oncology campaign. And I've already described our network of reference labs that act as our bio bank.

Now this is a slide that gets me to work every day. We've always had great technologies at IDEXX, as I've described. What we're talking about here is impact. I'm really, really fortunate in what I do. I get to work on the coolest technologies every day. I get to see those turn into manufacturing products, and I get them to see them being used very quickly by our customer base. But seeing the impact that, that drives from an organic revenue standpoint is really, really meaningful. You can see, we do always and will have revenue contribution from our existing and historic technologies. Again, breakthrough items, always providing revenue for us. But we're on the cusp now. We're translating these new innovations, these transformational innovations into oversized growth opportunity, transformational products, Cancer, inVue, Multi-Q. Transformational in that they are new to industry, new to clinic, new to IDEXX and in sometimes creating new medicine. Absolutely, the reasons we as innovators come to work every day. We want to know and see the impact.

Now it would be remiss of me to give a science and technology talk at a forum like this without giving a little bit of a nod towards data and AI. It's our strong belief here at IDEXX that winners in the data space need to have a variety of attributes available to them. First, large and very clear access to diverse and historic databases. I already mentioned the hundreds of thousands of samples that go through our reference labs, and we've been collecting that for decades, giant data lakes of relevance. You need to be able to collect and deliver new data every day. And again, what I just described happens every day, not in the reference lab alone, but also in the clinic. We're collecting all of that data. And in collaboration with our customers, we're also accruing [ PIMS ] customer and pet parent data as well.

And then lastly, the place in which data and AI derived insights are consumed. It's no good having all this data if you think can't use it, see it and engage in it. And we have that too. Michael Schreck will talk about VetConnect PLUS and Vello, these are the chosen forums that our customers enjoy and how they consume their data inquiries and AI-induced portals.

Now the purpose of this slide is not to go through it. But just to describe to you a little bit about how we're thinking about our execution here. Like all good MPD, you asked the question right at the beginning, where does the technology come from? We're going to make it. We're going to buy it. We're going to co-collaborate. You can do the same in data science and AI as well. In the blue bars here, I describe the tech, the types of tech that we're going to use and map it across the application use cases that we have, Cancer, inVue Dx, it's plenty of others as well. And the types of outcomes that we want to drive for ourselves internally and also for our customer experience and enhancement. A total mapping of tech to use case sequenced and on a road map, knowing that is again another enabler for pace.

Now I do have to show one example. Tina described this. Mike Lane is going to describe it as well. What we're talking about here is Cancer Dx, the test completely enveloped in a data and AI ecosystem. Driving further, as Tina described, the episode of care for cancer management with the GP. Think about all this data that we have and being able to, in real time, ask questions of it through AI tools. Set me up with a patient summary before the visit. What sort of things do I need to be looking out for? The patient's arrived, I test, I get a result. What do I do now? Is this what I expected? What sort of therapy should I have? How do I think about dosing? When should I see the animal again? You send the animal on its way, and now we're into monitoring. What are the clinical signs I should be looking out for? What should I advise the pet parent on to look out for? It's fluffy drinking, eating, et cetera, et cetera. These are the data -- derived data questions we can have DBMs in the moment during their episode of care ask of our data sets.

And then lastly, and Tina described this, too, there are going to be occasions you have to refer to an oncology specialists. So let's ask the data in the moment and in real time to prepare a referral package, of meaning, of consistency and thereby driving efficiency. And at the same time, get that same package but written in the way that a customer or a pet parent will be able to understand. This is a test enveloped with a data ecosystem, changing and transforming cancer care management.

So hopefully, you've got a little bit of an insight on how we do things, how we've been able to deliver new-to-world transformational content at record pace. We're innovating across a variety of areas, from biomarkers, to instruments, to AI and data science. We really do drive the customer intimacy into our process, as I hope you've seen, even to the level of the factory floor. This key integration between R&D and manufacturing is absolutely essential. And of course, we utilize customer relevant data pools. All this driving insights so that we're able to deliver today and go faster and faster into the future.

So with that, we'll have Mike Lane next. He'll describe to you some of our reference lab details and also take you through our oncology strategies. But before then, we'll have a 10-minute break. Thank you very much.

[Break]

Good morning, and welcome back from break. It's a pleasure to be here with you this morning to share an update on our global reference laboratory strategy. And as we pursue the tremendous opportunity that both Jay and Tina shared, and to update you on our enterprise oncology strategy and the significant progress that we're making.

Today, I'll share an update on our global reference lab capabilities that we've been developing for over 30 years. I'll share how we take a customer-first approach to innovation, in service delivery, focused on a 5-star customer experience. As Dr. Smith described, I'll share with this acceleration in innovation means to the reference laboratory into our reference laboratory customers. And I'm really excited to share an update on Cancer Dx in our broader oncology offering, just a handful of months since the introduction of Cancer Dx with lymphoma. And then I'll translate this into the results that it's delivering.

IDEXX reference labs has 3 reinforcing layers of competitive advantage that we've been building for 30 years. The foundation is a focus on operational excellence, with the customer experience at the core and performance excellence across a global network. We've had a track record of delivering highly differentiated innovative, new menu, and these build on each other. In partnership with our customers, we have a tremendous opportunity to advance the standard of care, elevating patient care. We take a technology and talent approach to innovation.

For example, with 800 medical specialists that are around the world and support our customers in a follow-the-sun network. This is all supported by highly talented teams, leveraging differentiated lab technology platforms, all part of a fully integrated IDEXX diagnostic and software solution. It begins with a global network. To deliver exceptional service requires dozens of day labs that operate throughout the day as an extension of the veterinary practice. Regional labs that operate throughout the night to deliver results by next morning by 8 a.m., especially for sick patient testing. Core labs, like I've shared before, core west time and other core labs throughout our major markets that deliver the full breadth and depth of our differentiated diagnostic menu. Global network in logistics, automation and technology, each of our laboratory departments utilizes a combination of automation, digitization in AI and to deliver the most comprehensive, timely diagnostic results in customer experience.

And this is what I mean by exceptional customer experience. Here you see the Net Promoter Score for reference laboratory that Jay mentioned, 64, well above a world-class level. We work every day to deliver a 5-star experience from courier pickup, through chain of custody through our logistics network in laboratory network, through the diagnostic results and interpretation and support for our customers. This supports, in addition, 97% customer retention rate.

You may be wondering why is the VetConnect PLUS Net Promoter Score here, even higher at 71. VetConnect PLUS is foundational to how we deliver the customer experience in the reference lab. Just take a look at this picture with the veterinarian and the pet parent. How easy it is for the veterinarian to share the diagnostic results, to share high-resolution images, to share interpretation support so the pet parent can lean in and make the best decision for their loved patent.

VetConnect PLUS is of a kind, combining and unifying diagnostic results across modalities, point of care, reference lab. And from a reference lab perspective, VetConnect PLUS plays an added role. If you think about reference lab services, different than point of care with point of care we're delivering results in the patient window in that 15-minute window. With reference labs, results may be due later the same day or next morning or during the next day or even in the next couple of days. And so we keep our customers updated every step of the way to ensure their confidence, to ensure they can keep the pet parent updated, to ensure they can care for that pet in their hands. They can add on through our ecosystem.

Additional testing. Why that sample is in-flight, already left through our logistics network, add on additional testing. This is a seamless end-to-end digital workflow that we're building in VetConnect PLUS for reference labs, from ordering, to results, to support communications with the pet parent, embedded in the practice management software, but also in the palm of the staff and the veterinarian to know where those results are. The ability to trend and compare these results in patient contact, access, support for interpretation. This is how our customers consume our differentiated diagnostic experience across a very broad set of diagnostic categories in the laboratory that you see here, from chemistry to urine analysis in microbiology to cardiology.

We have about 65,000 practices, customers around the world, about 27,000 you see represented. Here, this is a U.S. view in the gray bar. Almost all the U.S. veterinary practices access something, some testing from the IDEXX Reference Lab. But you can see that they've adopted the breadth and depth of this deep menu at different levels, highlighting the tremendous growth opportunity that we have in front of us. In these diagnostic categories, combined with some of the differentiated assays that we've already talked about today, and that we'll continue to add. Form integrated disease franchises. As you heard, renal health, parasitology, vector-borne disease. And of course, we're doing it again with oncology.

We're just beginning to serve the $11 billion TAM that you see represented by just these 4 disease franchises. So let's take a closer look at renal health. We've been at this for over a decade, adding SDMA to every chemistry panel at no additional charge. That was intentional. Monitoring kidney health is so important that by design, we set a requirement to be able to add it to every panel. Adding Cystatin B to sick patient panels. Additionally, by design, being able to do that at no additional charge. FGF-23, forming an integrated disease franchise, well recognized by veterinarians given the importance that they know of renal health as well as highly respected key opinion leaders. Here's a quote out read from [ Dr. Larry Hauge ]. IDEXX has been at the forefront of kidney health through diagnostic innovation for the past decade.

Parasitology, redefining as well what's possible. This is a huge diagnostic category. The largest therapeutic category, essential for dog and cat, well, non-well, diagnostic testing. And we fundamentally redefine fecal testing. For over a century, the method had been to look through a microscope for eggs. And whether or not you're looking through a traditional microscope or a more automated instrument microscope today, if you're looking for eggs, you're going to miss infections. And thanks to what Martin shared, we just changed the game by looking for the protein. I didn't need to find the egg. Sometimes the eggs aren't present or visible based on the infection cycle. And you can see here discovering as much as twice as many infections as a result of this breakthrough technology. And you can also see the acceleration in innovation with flea tapeworm in '22, [indiscernible] in '24, and we'll be introducing our next biomarker to this already highly differentiated panel next year.

So let's turn now to oncology and Cancer Dx. Sadly, cancer impacts so many pets. The pet parents that love them and the caregivers, general practitioners and specialists that are caring for them. I've had 4 dogs, 2 of them died from cancer. We estimate 1 in 4 dogs, 1 in 5 cats will develop cancer in their lifetime. And you can see on the right side, by far, cancer as the leading cause of death in adult dogs. As Jay noted, this tremendous disease burden represents a $2.5 billion TAM.

Jay also highlighted how excited we are about the progress with the start with canine lymphoma. The performance, the price. You may be asking yourself, how is it that IDEXX is able to deliver such an accurate, affordable, actionable, available diagnostic screen in any diagnosis? I think Dr. Martin Smith just highlighted some of the elements. I'll amplify on that from a reference lab perspective.

When we innovate, we don't just innovate on the biomarker, as you just heard. We innovate on the platform. And we do this in the reference laboratory as well. At the point of care, you see our highly differentiated platforms in the form of [indiscernible] inVue or Multi-Q, SediVue. Similarly, we have highly differentiated platforms in the reference laboratory, leveraging our expertise in instrumentation, automation, information technology, multiplexing, reagent manufacturing. And by design, just like we did it with SDMA just like we did it with Fecal Dx, [indiscernible]. By design, we have developed a platform for cancer that allows us to have a cost profile in the lab to have an affordable price to the vet. And in turn, to the pet parent, that allows us to deliver the turnaround time. By design, it allows us to expand, as Jay noted, and extend in scale globally. With the addition of mast cell, as you heard in 2026 in one more and simultaneously leveraging our global network, beginning the expansion internationally in 2026.

Now importantly, Cancer Dx and inVue Dx, [ FNA ], starting with mast cell are highly complementary. They're not only highly complementary together, and I'll show in a moment the integrated disease protocols, diagnostic protocols between themselves. But inVue Dx is also highly complementary with our global pathology network. We have hundreds of pathologists globally, 6 continents. They form a fall the sun network. In the inVue installed base of customers. When they want additional information, personalized support, perhaps a deeper set of information from a board-certified pathologist, at the touch of a button, they'll be able to send those images, 24/7, 365 to an IDEXX pathologists to support them. This combination of an elegant load-and-go point-of-care instrument with a personalized pathology service is going to be a multiplier for reference lab growth.

So here's the integrated diagnostic protocol that I referenced. And importantly, this empowers the general practitioner to diagnose, to screen, to rule in, rule out, to access the broader services from the reference laboratory, the anatomic pathology and histopathology and clinical pathology, to care, to then further monitor. This is tailor-made for the general practitioner by design.

Why is it so important? Jay referenced it's so important that we empower the general practitioner. And why is this particularly important for mast cell. We mast cell is top of mind, right up there with lymphoma. These are the top 2. When you ask a veterinarian, what are the most commonly diagnosed cancers that we're dealing with in the practice? General practitioners, say mast cell, lymphoma. But mast cell often forms, not always, sometimes, it's not visible with a lump or bump, but often can form with a lump or bump, which results in a very concerned pet parent, I've been one of them, that's in the practice and the general practitioner has a lot of questions coming at them about is this lump or bump okay? Is it cancerous? Is it benign? So they get a tremendous amount of questions. And with this integrated diagnostic protocol that I shared with IDEXX Cancer Dx with mast cell, inVue Dx, FNA. They can bring peace of mind to that pet parent very quickly. They've got the tools at the general practitioner level. And if they identify something of concern, they'll identify it early when something can be done about it.

There's another reason to empower the general practitioner. They're just simply are not enough oncology specialists. If you take a look at the U.S. line here, hundreds of oncology specialists, and we estimate millions of dogs in this case, living with cancer. Of course, there are cats as well. The disease burden just cannot be fully served by the oncologist. And we're empowering the general practitioner with the tools, the technology, the support to help address this disease burden. And they're eager to do it. And our goal is to support them every step of the way.

Now here is the good news. Actually, the great news. Earlier detection improves patient outcomes. Mast cell is a great example. If you look at these studies. If found early, a single tumor, 6 -- these are median survival times prognosis. Six years or more. But you can see as the disease progresses to 5 years, to 2 years, to just a matter of months. Early detection will improve outcomes. And pet parents know this. In fact, we surveyed them. 94% agree with this. And why is that? Well, they've seen it. They've seen it in human health. They've seen it with breast cancer and colon cancer and melanoma and lymphoma. And they're ready to have this conversation with the general practitioner to include cancer screening as part of the wellness testing in the care for their pets.

There's even more good news. When caught early, especially, it's highly actionable. Here, you see existing therapeutic approaches in blue for lymphoma, green for mast cell. In addition for mast cell surgical removal is certainly one of the steps. Highly actionable. And in purple, you see relatively recent innovations in therapeutics, and we fully expect, based on the advancements in diagnostics that we're bringing, that we'll see an acceleration in therapeutic innovation. The outlook for this tremendous disease burden is very positive to be able to improve it and improve the outcomes for patients.

Now when you take these first-in-world innovations, you combine it with affordably priced by design menu that's cost-effective. And you add in the motivation and the emotional connection that pet parents have with cancer. We believe there's an opportunity to unlock the preventive care opportunity. And you can see that on the slide on the left, we've been making steady progress. But if you look at the demonstrated best practice of the top 30% of practices, they're including blood work and wellness visits at 2x the level, highlighting the tremendous opportunity in front of us. And when we partner with practices to advanced wellness care as well as non-well with these new-to-world innovations, we support their growth. And when our customers grow, we grow. And when we grow, we have high profit drop-through based on this capability that we've developed in reference labs. And we have steady margin expansion. And importantly, it allows us to reinvest in the strategies that I've shared with you today, customer experience, innovation, technology and talent.

In summary, we are inspired by the unmet needs of pets around the world. The pet parents that love them, the GPs and the specialists that care for them. We continue to advance this highly already advanced capability that we have in global reference laboratories. As a technology-enabled global services platform, this -- what we do is not easy. But every day, we are focused on a 5-star customer experience. From courier pickup through logistics and laboratory network, to results in interpretation and personalized support. And we see Cancer Dx and our broader oncology offering as ready to unlock this preventive care and utilization opportunity.

In closing, I'd like to thank the thousands of reference lab employees in -- more broadly across IDEXX that are supporting our customers every day, working alongside them. And in turn, supporting the delivery of the innovation, the customer experience and the results that I've shared today.

Thank you. And I'd like to now introduce Dr. Mike Erickson, Dr. Erickson leads our point of care business, and will share the tremendous innovations that we have happening at the point of care and the value that they bring our customers. Mike?

Okay. Thank you very much, Mike, and good morning, everybody. It's great to be back with you to share an update on our point-of-care diagnostic strategy. So today, I'll build on what you've heard already this morning. Focused on how we're harnessing transformative innovation to shape the future of point-of-care diagnostics and drive growth together with our customers. I'll talk about our new-to-world point-of-care platforms and how they drive step function boost to diagnostic quality and to practice productivity. I'll talk more about how we've significantly accelerated catalyst technology for life menu expansion. I'll also take some time to spotlight innovations in our diagnostic imaging and our rapid assay businesses, which stand alongside VetLab as key parts of our overall point-of-care solution suite. And finally, I'll describe how all of this innovation fuels significant growth and value creation for our customers and also for IDEXX across multiple lines of business.

So I always like to anchor the conversation in the importance of point-of-care diagnostics as viewed through the practice lens. So I want you to picture that beloved family pet being rushed into the practice. The pet and its human pet parents, they're in deep distress. And of course, the pet can't explain what's wrong and the pet can't tell the doctor where it hurts. And in this moment, the veterinarian is facing a cascade of high-stakes questions. What's making this pet sick? Should I start aggressive therapy now or should I wait? Is it safe to go into surgery? The doctor needs trusted diagnostic answers, and there is not time or capacity for complicated, messy sample workflows. The wrong call in this moment could lead to delayed treatment or bad outcomes.

Our IDEXX point-of-care diagnostic solutions bring our world-class reference laboratory performance standards right into this unequal one practice environment that I'm talking about, providing the veterinarian with trusted answers in real time, and the confidence to take the right medical action while the pet is still in the practice. And we're arming practice teams with in-clinic diagnostic capabilities that they've never had before, packaged into small footprint, high technology platforms with high accuracy, elegant load and go workflow, complete end-to-end integration across the suite and into the practice ecosystem and technology for life platform expansion. And we delivered to these very high standards that we've set all around the world more than 500,000 times every day and on behalf of more than 0.5 million practice team members. And we continue to drive this kind of execution across the business.

Last year was an exceptional year for premium analyzer placements, and rec replacements continue to get into this year, setting a new high watermark in the second quarter, with strength across VetLab, including competitive catalyst and led by inVue Dx with 2,400 placements in the quarter and elevated expectations for 5,500 placements this year. Our global installed base of premium analyzers now exceeds 155,000. And this combination of high-quality placements, expanding menu and utilization and very high levels of loyalty together drive our consistent double-digit growth in our VetLab consumable annuity stream. And we see a lot of runway to continue propelling this kind of growth. We have line of sight to over 400,000 premium placement opportunities around the world. Collectively, this represents a more than 3.5-fold expansion over where we stand today.

And we know how to go after this kind of opportunity. With our commercial team members working in the field side-by-side with our customers in their practices, helping them to adopt these innovations into their practice protocols. And we just keep setting the bar higher, shaping the future of point-of-care diagnostics together with our customers. This includes new-to-world platforms, purpose-built by IDEXX to transform the intended category of veterinary diagnostics. So talk a little bit more about inVue Dx here shortly. With respect to Multi-Q Dx, I'll simply say, that you can be sure it will address diagnostic categories of high relevance to our customers in a manner that sets new performance standards, and it will be completely additive to our existing VetLab suite.

Now across these platforms, we continuously bring forth new clinically relevant test menu and big leaps forward in the software and workflow. And all of this that I'm describing, all of this innovation is only possible because of our deeply integrated IDEXX innovation and manufacturing platform capabilities that you heard Martin talk about a little bit earlier this morning.

And we aren't slowing down. We're accelerating. Take for example, Technology for Life on catalyst. We have a multi-decade track record of bringing new IDEXX-developed test menu to Catalyst. And we've significantly accelerated the strategy, as you heard Jay describe, delivering 3 new valuable additions to Catalyst in the last 12 months. And we have a full road map looking into next year and years beyond that.

Now you may be asking how does that create value? Well, you have to start with the fact that the Catalyst is the most versatile and high-performing analyzer platform in the sector, providing 42 parameters and 6 preloaded clips across chemistry, electrolyte and immunoassay testing. If you don't have Catalyst, this array of testing modalities requires 2 or 3 disparate instruments. And then we keep expanding this menu of high-value specialty slides like pancreatic lipase. And all of this drives more reasons to test on Catalyst, more utilization, more recurring revenue across the entire installed base and with every new placement. It also drives more competitive catalyst placements, more second catalyst placements and deep customer loyalty. And when we roll out a new test across our large Catalyst installed base, we consistently see rapid uptake.

The latest example of this is catalyst pancreatic lipase. We're not even 12 months into this launch and already more than half the customers are running this test.

[Audio Gap]

to transform the category. And that's what inVue Dx is doing in cytology. Cytology has been done the same way for well over 100 years, requiring manual preparation of a glass slide. We made the giant leap to eliminate the slide, and we built a platform that see cells like never before. And it's hard to overstate just how game-changing this is when compared to conventional cytology. inVue Dx's advanced optics in AI unlock deep cellular insights and drive actionable diagnostic interpretations. Unlike microscopes, inVue Dx is constantly learning with AI updates coming every 2 weeks. And because it sees more, one run on inVue Dx provides the diagnostic content equivalent of fully preparing, staining and reading 10 to 20 glass slides. And there are literally hundreds of variations on how to make slides in the practice. There are no standards for this, and that can drive a lot of variability.

And finally, when slides are made, they're staying with repeated dips into a jar stain that's used oftentimes for days or sometimes weeks, and we've looked at this. We know these jars can be right with contamination like bacteria. With inVue Dx, there's 0 contamination, sample preparation and the workflow is 100% consistent every time. This drives diagnostic quality and it drives repeatability, which is really important for things like rechecks when you want to be able to compare the results between visits to see if there's an improvement in the patient condition.

And of course, going slide free also eliminates all the time-consuming work of actually making the slide. It transforms the workflow into an intuitive load-and-go experience with accurate results in around 10 minutes and no specialized training required. 10 to 20 minutes, say, per patient, well over 90% of the hands-on time freed up for more valuable tasks. This is like giving a practice. 1 to 2 hours of technician time back every single week. For a corporate group with 1,000 practices, this is like handing them 50 veterinary technicians that they can deploy into revenue-generating activities.

Now inVue Dx, as I mentioned, addresses a large array of applications. Blood morphology, ear cytology, fine needle aspirates or FNA coming later this year and wide potential for future expansion. All of this ensures that there are multiple complementary reasons for using inVue Dx. The vast majority of our customers are running both gear cytology and blood morphology, our overall utilization and revenue per instrument are tracking right to our assumptions with FNA still to come. And looking through a longer-term Technology for Life lens. Everything that you see up here on the screen, there are over 150 million cytologies being done today all around the world that could benefit from this breakthrough technology. I mean you think about that, the sheer amount of trapped capacity from all of that manual slide making is, it's pretty staggering as is the opportunity to really elevate the quality of the diagnostics being done.

Now I mentioned blood morphology because inVue Dx is an integral part of the VetLab suite, it was purpose-built to pair, hand in glove with ProCyte to provide the industry's first comprehensive hematology assessment at the point of care. This combines blood morphology with the complete blood count or CBC. Now this is an area where again, the challenge of doing blood morphology with a glass slide is it's just been a barrier to this standard of care, quite frankly. But with inVue Dx and ProCyte, there's no glass slide, and this is completely automated. And in fact, over 95% of the morphologies being run in inVue Dx are run together with CDC on ProCyte. And I should also add that demand for ProCyte Dx and ProCyte One is very strong all around the world with high attach to Catalyst as part of the VetLab suite. And specifically for ProCyte One, as you can see on this chart here. We beat our stated 5-year placement goal by a full year, and we've just kept growing since then.

Now the coming addition of FNA will add another reason for using inVue Dx. Today, there are well over 12 million FNAs being done annually. We know though that, that dramatically underrepresents the true opportunity. Most pets when they come in, have multiple skin masses. We know that only around 10% get aspirated. Again, it's the challenge of doing FNAs on a glass slide. It's a limit to timely insights that could potentially leave cancerous masses undetected and delay access to life-extending therapy.

inVue Dx FNA provides actionable insights on every FNA sample with an initial focus on the identification of mast cell cell tumors. This is the top concern when it comes to skin masses and where early detection is just super critical. And for complex cases, as Mike Lane referenced, FNA on inVue Dx will also offer in optional one-click digital review by an IDEXX board-certified pathologist, with additional insights being integrated back into the patient record in as little as 2 hours, no glass slide required, and this also drives incremental revenue in the IDEXX Reference Lab.

So let's just -- let's take another quick look at that mast cell cancer workflow that Mike shared. Whether mast cell cancer is detected by Cancer Dx as part of wellness screening or prompted by a concerned pet parent who discovers bumps while snuggling with their pet at home. In either of these cases, the GP faces this critical question of which of these masses is cancerous. And that's where inVue Dx automates the identification of mast cell tumors. It eliminates the guesswork and with that one click pathology review option that I mentioned. And usually, as Jay spoke to, treatment entails surgical removal of the mass, they may opt for histopathology or additional treatment, and then Cancer Dx provides ongoing monitoring for recurrence. Across all of this, this combination of FNA on inVue Dx and CancerDX in the IDEXX Reference Laboratory provides integrated multi-modality tools for GPs to be able to manage these high stakes mast cell cancer cases. This is a giant leap forward in cancer care for pets.

Okay. I now want to turn to another part of our point of care solution offering, IDEXX SNAP. And this is another area where we're advancing diagnostic standards through innovations to assays and multimodality workflow. Now there's no question, the SNAP is the trusted standard for rapid testing in the over $1 billion vector-borne disease screening category.

It's backed by over 350 peer-reviewed studies. It's loved by customers all around the world. And there are more than 750 million SNAPs that have been run since the platform's inception nearly 3 decades ago. On average, a SNAP is run every second of every day. Now you may know that SNAP has played an outsized role in helping to establish regular preventive care blood work here as part of a wellness screen. started with screening for heartworm and Lyme with SNAP. And then over time, we expanded that protocol to include full blood work.

And last year, I shared how we're bringing that same strategy to Europe, only focused on canine leishmania in replace of Lyme. Now as a reminder, leishmania is -- it's a devastating zoonotic disease. It's endemic to Southern Europe, particularly the south of France, Spain and Italy. And any dog that's living in or traveling to these really popular regions needs to be tested at least every year. And the protocol, by the way, is any positives found with screening, they need to be sent to a reference lab for confirmation testing prior to starting treatment.

And last year, we launched SNAP, leish 4Dx, and this is providing the first ever end-to-end solution in the category, accurate point-of-care screening for leishmania and 3 other vector-borne diseases with a single sample. Full compatibility with the IDEXX SNAP Pro analyzer, hands-free SNAP workflow, full charge capture, results on VetConnect PLUS and all of those benefits. And then finally, a streamlined process for confirmation testing in the IDEXX reference labs that's built into the price of the SNAP. This is what we call IDEXX Anywhere Lymania. And we've been very pleased to see early success with this that's been helping to drive double-digit growth in our European vector-borne disease business.

So I've talked about rapid assay. I talked about VetLab. I also promised you an update on diagnostic imaging. This is another example of our ecosystem approach to shaping the future of point-of-care diagnostics. Our IDEXX digital radiography or DR imaging systems, they're a valuable part of our overall point-of-care solution suite. And it turns out for veterinary imaging, a top issue is radiation safety in the practice. And that's particularly true when you consider that over 75% of veterinary technicians are women of child-bearing age.

Our IDEXX DR systems are benchmarked to have unmatched image quality and lowest radiation dose. And our customers really appreciate our leadership on radiation safety, and they value our integrated approach that combines DR systems together with valuable software and service extensions. We've seen strong growth here, as Jay shared on the Q2 call, and we have over a 95% attach of our cloud imaging workflow software called Web PAs, and that drives solid SaaS revenue growth in our software and diagnostic imaging line. And we also have very high attach of our teleradiology consulting services, which, by the way, embed AI in the loop with our incredibly talented IDEXX radiologists and cardiologists all around the world, driving next level quality and accuracy and workflow efficiency. And that drives recurring revenue growth in the reference labs.

So this is another example of innovative point-of-care platforms, elevating the standard of care for diagnostics in the practice, but also driving recurring revenue growth across multiple IDEXX lines of business. And so in closing, I want to thank all the IDEXX teams that support our point-of-care businesses around the world. I'm inspired by what they do every day to expand access to these higher standards of point-of-care diagnostics.

Our strategy of innovation fueled growth across new platforms, new assays, new software, AI, it's driving substantial value for customers and for IDEXX. And we see enormous long-term runway to continue driving this kind of innovation and growth and delivering the future of point-of-care diagnostics.

So with that, I want to thank you, and I'd like to invite my colleague, Michael Schreck, to the stage. Michael Schreck is the Executive Vice President and General Manager for Veterinary Software, Corporate Accounts and Customer Experience. Michael?

Thank you. Thank you. Is my mic on? Well, it's great to be with you. For the third year in a row, I'm the caboose to the mic train, and I hope to bring it home. Every minute across the IDEXX network, there are over 500 diagnostic tests being processed. And as you've heard from my colleagues, they're increasingly being contextualized via VetConnect PLUS, enriched via AI and ultimately actioned in our software workflow. And that's the transformation that I'm excited to share with you today, which is this powerful intersection between world-class software and world-class diagnostics. It's a combination that historically has delivered an enriched diagnostic experience. But what I'm going to share with you today is how it's reshaping the dynamics in the visit, both frequency of and quality of, and that drives accelerated growth for our customers.

So let's dive in. I don't normally quote Bob Dillon in things like this, but times they are changing. And they get it, how do they do? The importance of software in this industry has elevated. And practices and corporates are turning to us with huge demand for modern software. And consequently, what we're seeing is an acceleration of cloud growth, moving from on-prem to a cloud-based software system. And that makes sense. because there's just benefits that I'll talk about in a minute that are important to making that migration.

Now as you know, IDEXX has prepared for this moment. We declared that we would be a cloud-first software company in 2021. And we knew that there would be literally tens of thousands of practices that would be making this migration, and we needed to be ready to support that type of industry transition, and it's happening. And of course, I'll talk a little bit about artificial intelligence, like my colleagues have as well. We have deep digital assets at IDEXX that are proprietary and powerful. And we obviously have digital workflow in an integrated ecosystem. And so as a consequence, our software ecosystem brings more diagnostics, more insight, more impact with every visit.

Here's a bit of a road map for my presentation today. I'm going to hit these 5 themes. And ultimately, I'm going to talk about what Jay referenced, which is the first vertical SaaS platform purpose-built for animal health and how that platform unlocks practice growth, elevated practice productivity and that, that's especially true when it's combined with our world-class diagnostics. This triple Arch highlights how we've approached the platform differently than anyone else in the industry. It addresses all 3 user types in one integrated stack. And as you can see, the inner arch, which is the practice, is where everyone else's PIMS begin and end.

We've added an enterprise layer to support our corporates who I'll touch on in a minute, need support for organic growth. And we've now added a pet parent layer, all integrated in the customer experience. And you'll note, and as you've heard from my colleagues, this is deeply embedded in our global diagnostic ecosystem so that no matter who you are as a persona in our software, it feels connected and integrated.

Now this has resulted in a platform that we've built that is the first of its kind that supports enterprise and pet parents and means that the digital workflow can support an entire visit cycle that if the clinician and the pet parents want to stay in a digital experience, they can. And we know increasingly that rising generations, as I've shared in the past, don't know how to answer the phone. So we know this is critical. And more importantly, it adds incredible productivity.

We've also built this platform so that it's expandable, modern and capable of new partners through a plug-and-play API and that our unique data assets will give -- and models will allow us to deliver personalized insight directly to the clinician, directly to the pet parent at the most relevant moment. And this whole program of creating this platform allows us to add more and more value in support of our customers. And obviously, when we do that, that creates opportunities for IDEXX as well. This is an illustration of our vertical SaaS suite and the integrated key elements in it.

You can get a sense for each new cloud customer we add and each step up this stair step creates incredible value for our customers because they get a fully integrated experience as opposed to stitching together a bunch of applications on their own and storing that in the lunch room on a server. This is different. And it starts with payments. Jay touched on that. This is critical because practices miss charges, real charges. They deliver services and don't get paid if they don't have integrated payments at a surprisingly high rate.

Similarly, pet parents need affordability. So we've added financing capabilities to the platform so that the pet parent doesn't feel like they can't show up for the visit because they can't pay the bill. And as you heard, we believe in digital workflow. We think that's how you deliver AI, enriched experiences, and that shouldn't stop at the exam room. It should go all the way into the surgical domain. And our workflow allows that to happen and orchestrates an entire practice staff to deliver care in life -- sometimes life and death situations. And this also automates diagnostic triggers. And so these are the kinds of things that we're integrating more deeply into our platform.

And I'll touch on Vello, which is our pet parent application that I mentioned last year. And I'll give you an example of artificial intelligence being embedded in our workflow. So where are we in this industry migration from on-prem to cloud? Practices and corporates are moving faster than ever, and that's because these benefits matter. They now have anywhere access, right? They can now make sure they're on the latest versions without having to do anything. And for our corporates, we've now delivered a level of deep security that's consistent with their enterprise nature. And we have multi-location capability so that corporates can push out important things to their practices.

Now the results speak for themselves. We're seeing a 2x acceleration in practices who want to switch. And they want to move from an on-prem to a cloud-based in a higher degree. And this is no longer an early adoption story. We're now in the early majority. And that's why we prepared for this moment to support cloud migration at scale. So where are these migrations coming from? And where are they going? Our research suggests there's real pressure building with legacy on-prem providers.

And this example, it's one representative player, gives you a sense for the percentage of the base that's considering switching. That's enormous to have 42% of your base considering switching in the next 2 years. And you contrast that with ezyVet, where it's almost a nominal percentage of people that would be thinking about switching from ezyVet. And that's really a powerful thing that gets to where are they going? Well, ezyVet has been the #1 choice since we've been measuring this, and they continue to be the #1 choice for those intending to switch. And that lead has actually expanded as we grew 8 points on this metric in the last year.

When you put these 2 data sets together, it gives you a sense for why IDEXX is experiencing such rapid cloud growth. And as we talk about as a team, we're gratified by that, but we're never satisfied. It's kind of an IDEXX thing. And we're more committed than ever to strengthening this platform to support our customers in this time and this level and this scale of migration. So where are we seeing that happening the most? It's with our corporate customers. Their landscape has totally changed where they were driving their growth inorganically. That's not an option today.

The cost of capital is high, multiples have remained high. And as a consequence, M&A is not an engine for expansion anymore. And so there's a real operational pivot that these leadership teams are making, and they need to drive organic growth. And they recognize that a disparate set of legacy PIMS across hundreds, if not thousands of practices will not allow them to deliver an organic growth platform. And also, the corporate buyers are more discerning than ever about the level of software that they're buying. And we like that because they're raising the bar. And they're looking for proven partners who will deliver on what Mike Erickson talked about, which is technology for life.

Software is all about technology for life. It can change tomorrow, and it will change 10 years from now. And that's how corporates are looking at it and not only today, but tomorrow. And this is all good news for IDEXX because we built an enterprise layer on our platform and ezyVet is the most advanced enterprise platform available. Also, IDEXX made an extraordinary and unrivaled commitment to be a world-class software provider. And so we also know that corporates are looking and saying, that's a team I want to bet on long term. And so consequently, you can see that our new sales to corporates has gone up 6x in just 3 years. And it's doubled in terms of acceleration in the last 12 months.

When you combine independent migration with that kind of corporate acceleration, you see growth like this. You can get a sense for how committed we are to cloud in that this year, we're approaching 100% of everything that we placed is cloud. And when you do that for 4 years in a row, it radically changes your installed base, both in size and in mix. And so you get a sense here where 5 years ago, we were a little over 1/4 of our base was cloud and exiting 2025, we'll be closer to 2/3. And this is the flywheel we anticipated and prepared for, where cloud adoption at scale, combined with suite expansion, buying more of that integrated platform from us would create more customer value, whether you're an independent or a corporate.

What I'm really excited about is I'm going to share data that we've never shared before about what happens when you add diagnostics to this equation. This is a really interesting example. Jay shared this version -- a version of this concept, which is EzyVet was acquired in the middle of 2021. And as you can see, only a little more than 1/3 of those users were using both of our diagnostics. And in just a short period of time, 4 years, we're approaching half of that same cohort, we're approaching half are using both of our diagnostics. And to give you context, that lift represents $17 million of incremental recurring revenue for the company. We think this is driven by 2 key factors.

One is, as has been shared and Mike shared -- Mike Lane shared earlier, the VetConnect PLUS experience is world-class inside of the ezyVet platform. And it also does something that no other platform can do, which is it programs in the standard of care and then automates that workflow and then automatically triggers diagnostics through that workflow. That's an extraordinary thing, and it's naturally something that's very valuable to our customers. And our field teams and our corporate sales teams are increasingly seeing software as a way to reinforce an elevated standard of care and amplify the IDEXX innovations that we've been talking about. And there's more runway to go.

To give you context, Cornerstone on this metric is at 59% -- this is the more traditional view we share with you, which is what happens when you have our software and our modalities. You grow faster. And in this case, almost twice as fast. And obviously, in turn, that supports IDEXX's growth. And when customers pair best-in-class software with best-in-class diagnostics, we all grow faster. I promised to share an example, a real-life example of AI. This is a heat map and you get a sense, this is when clinicians are completing their post-visit notes. And they're doing it outside of work time, whether it's on the weekend or after hours.

So we rolled out last quarter an AI-capable note-taking automation tool. It will listen to the visit and in real time, populate that health record. And the staff feedback has been phenomenal with quotes like, "This is a game changer or thank you for not having any more pajama time." And so this is regifting time back to the practice and they're saving on average 6 hours per week per clinician. That's like 15% more capacity without adding staff. And as you've heard from my colleagues, we're very committed to artificial intelligence across the enterprise. And our goal is to create intelligent workflows and customer experiences across all of our touch points.

Let me turn to Vello for a moment. You may remember, this is our differentiated pet owner engagement application that we introduced last year to you. You may recall, it's built uniquely to support an entire visit cycle that can be digitally supported between the pet parent and the practice, both before, during and after the visit. And it reduces time wasted chasing pet parents and playing telephone tag. And Vello, in particular, changes the wellness visit dynamics. And let me show you how. Before the visit, every one of the pet parents will receive an invitation to add a higher level of diagnostics to their screening package, whether it's blood work and in the future cancer.

So we know, as Tina talked about the supply problem, we're changing that entire dynamic because once the pet parent interacts with that invitation, a signal goes to the practice management system to tell the clinician the state of mind of that pet parent, creating more confidence and clarity in that clinician to have a discussion about the importance of preventive care. And practices are seeing positive visit growth even with the industry backdrop that we have. And they're seeing better quality of visits where the pet comes fasting. They didn't forget the fecal sample. And so we're getting both frequency uplift and quality. And this all translates to better practice revenue growth and in turn, IDEXX's growth.

I'm really excited. This is what's coming next. We're going to launch our next-generation version of Vello early next year. And that will accelerate wellness adoption through personalization, deep personalization. And as my colleagues have talked about, Cancer Dx messaging directly to the pet parent. We believe cancer, as Tina shared, is an emotional gateway to the preventive care adoption. Pet parents want it, we know. And we know with Cancer Dx, they want it even more if they were just asked. And clinicians, I think there was near 90-plus percent said they would add this to a wellness panel.

So this is an example where Abby gets a very personalized message to her breed, her age and her medical history. And with one touch, the pet parent can add that to a visit or say I'm interested in learning more about that or even I'm not interested, which again gives the clinician clarity about the visit. And during the visit, we can deliver value with our partners that support therapies or nutrition to make care more affordable. Maybe most importantly, we're going to celebrate the negative test. And those pet parents will be able to post that on social media, which our research says is the #1 thing that the pet parent wants to do after a visit that they're good, solid pet parents.

And in this case, they'll be celebrating that AbbVie is cancer-free. And we then add a personalized care plan that the vet has configured. And with one touch of a button, that plan gets activated. And in this case, forward book, which is a huge opportunity in this industry. And as Tina said, our ultimate mission is to create more birthdays for AbbVie and all the pets that we serve. So we're honored that so many customers have responded positively to our vertical SaaS efforts. It's powered a high-growth, high margin, high gross profit software and imaging business. And this happened, thanks to our 1,000-plus now software professionals around the world. And together, we've built something that's a powerful stand-alone business, but more importantly, can power diagnostics and better standard of care. I want to close with this.

Our cloud platform helps practices be more productive and grow faster. And this is the headline. When IDEXX diagnostics and software come together, customers see more visits, better visits and faster growth. And we're just getting started. We think we're still in the early innings of the power of a vertical SaaS platform in transforming the future of animal health. Thank you.

Next, George Fennell will be having a conversation with Dr. Greenfield. But before we do that, we're going to take a 10-minute break. Thank you.

[Break]

Good morning, everybody, and welcome back. We are going to continue our Investor Day program here and break up the presentations with a bit of a fireside chat. So if you can imagine a clicker or a wood pile in front of us. My name is George Fennell. I work with our commercial organization around the world. These are the teams that interact directly with our customers. What I'm about to do for the next 25 minutes is just that interact with one of our customers.

I am joined here on the stage and virtually by Dr. Brian Greenfield of Animal Clinic Northview. And he and I are going to have a proper conversation about a number of the topics that my colleagues spoke about this morning, but really an understanding of the state of the state and what he's seeing in his practice in Cleveland, Ohio. But I'm going to first have Brian introduce himself and a little bit about the team at Animal Clinic Northview and maybe an interesting educational background about Michigan and the Ohio State, a very interesting combination.

So yes, thank you, George. I appreciate it. Thanks for having me. I did go to the University of Michigan undergrad and then from there to Ohio State University for veterinary school. So any of you out there know that combination is like oil and water. So anyway, it's an interesting tidbit. I live with it, I deal with it. I'm pretty normal other than that. So I joined Animal Clinic Northview in 1998 when I graduated, I think I was a fifth or sixth vet there. We had about 25 people.

Now we are 34 vets, about 175 strong. The building that you see behind you -- behind me is about 36,000 square feet. We're a hybrid practice, which is a little bit unusual in the space. We do general practice. We're a 24-hour ER, and we do a good amount of advanced care. So I think this really fits well with a lot of what IDEXX is trying to do, especially with the shortage of specialists out there, which we definitely see. And so it really creates opportunity for practices like mine to continue to grow and perform advanced care as well as be people's everyday vet.

So I've been there for 27 years, and my partner, Dr. Randy and I run this place. It's crazy tow. Everything that you guys are saying about time and pressure and stress and what's happening in the veterinary world, it's true. The slide that was shown with the lab tech earlier on...

Mike Erickson [indiscernible]

Mike Erickson, yes. The lab was way cleaner than any lab ever is, by the way. But the lab tech's hair was blurred in the slide. And I said -- I leaned over to George, I said that's exactly how it is in practice. I mean people are flying in 1 million directions. We've got hundreds of people in the building at any given time, a full ICU, 6 surgeries going on and 34 exam rooms, and it's crazy pants. So any of these things that can help with efficiencies are super important to us.

Brian, thanks for sharing that. There's not many practices that expand 8 exam rooms at a time, but Animal Clinic Northview does that because of those ambitions. I'd like to maybe start by just having you share with the gathering here this morning, what are some of the trends that you are noticing as it relates to care intensity, clinic visits is often a backdrop of discussion. What are you seeing with your clientele at the hospital and maybe even in the last 6 to 12 months, if you're detecting anything differently?

Yes. I mean there certainly has been a lot written about decreasing numbers of client visits in the last year or so. We haven't really appreciated that too much at our practice, maybe but we've maybe flattened a little bit. So in our world, that's probably -- we did experience it. a lot of people ask, well, how do you respond to that? Some of it, you can respond to it through some surgical price changes, right? But really, the best way to respond to that and what we really have done is just to continue to focus on best medicine for clients.

And so what we've found is that we've continued to have practice growth because maybe if you did have 1 or 2 less clients that day, you're still spending the same amount of time with your existing clients. And so this happened in 2007. I don't know, there's not a lot of people in here that were doing what they do today in 2007, but I remember it. And I remember it flattened a little bit for about a year, and then it came right back.

And my general sense is, especially, I would say, even over the last 3 to 4 weeks, we're seeing visits really start to ramp, especially in urgent care and emergency. The past month at our office has been pretty crazy. And so I think some of these trends that we've read about, we've heard about, you guys have run metrics on, my general sense is that's changing.

Yes. The -- in Tina's setup, she talked about this dynamic with pandemic puppies and kittens that are sort of moving through this health care continuum, Brian, sort of facing middle age and getting into senior status. I'd like your perspective on sort of 2 dynamics, sort of the clinical trends, what happens clinically as patients age? And then what implications does that have for you as you look forward over the next several years and think about the health care that might be arriving at Animal Clinic Northview.

Right. Well, I first look back to the pandemic period, right, which nobody wants to live through again. And business was nuts during that period and you're getting people in and out through drop-offs and a window. But remember the volume of new puppies that we saw during that period. And so certainly, as these patients are starting to age, they're certainly going to be needing more diagnostics. There's going to be more problems. There's definitely going to be a blip.

I've actually -- a lot of the Gen Zers that adopted these pets, it's my opinion that they are incredibly dedicated to these pets. I think a lot of them -- these were puppies that they bonded with during the pandemic. It's part of their families. And I think we're going to find that this generation is absolutely ready to run the test, do the diagnostic what does it take, doc? I think it's coming. I think it's around the corner. I think we've put some thoughts into it in our practice as far as what do we need to do to prepare for that. But I think it's going to be a reality.

You share with me just sort of an interesting lens on this. We bring charts and graphs and tables and economics to these kinds of trends as a business, but your staff members made an interesting observation about the profile of that pet owner and the bond that they formed during that pandemic period. Can you share their impression, a different lens than maybe we would look at.

Yes. some discussions I was having at the practice prior to flying out here, I was speaking with some of my lab technicians. And I just said, "Hey, what do you guys think about this dynamic, these people, these pet owners are they committed to -- were these puppies adopted and they're just not going to be cared for very well? Or are these people committed? And by overall impression, far majority of people said, no, we actually think these people are more prepared than the existing pet owner. And the bonds that they've formed with these puppies and now with adult dogs is that strong that they are going to request the care, demand the care. Several of my lab techs said that to me.

Yes. It's interesting. I think we some of us remember the pandemic and some of us don't want to remember the pandemic. But that was a tough time for society to navigate through. And so we're talking really now about the profile of the new pet owner who formed a very, very special and close bond during a very turbulent time, and they're now facing those health care decisions in the years ahead. So as you've begun to think about it without disclosing anything proprietary at the hospital, how are you beginning to think about how we would prepare ourselves and the teams to be able to really meet the needs of those clients?

Yes. Well, I mean, capacity is going to be the first one completely. You need to have enough DBMs and enough techs, enough support staff ready to go. I mean, no question, that's number one. How do we decide when to hire? We hire when nobody can get an appointment when all our urgent care and our ER slots are full because people can't get in for routine stuff. So it's time to hire.

But I think this is a good opportunity to look ahead on that, make sure you have exam room space, make sure you have ORs, makes you have enough catalysts sitting around...

Plural.

Plural, which we do, and they're churning all day long, and it's a valuable tool for us.

Can we talk a little bit about sort of what are the expectations of those clients? I mean, look, I'm not trying to date you or me, candidly. But over 27 years, you've seen the expectations of clients evolve. As you look ahead, where are those clients' expectations for you and the health care team at Animal Clinic Northview? What do they want? What do they expect?

Yes. People walk in wanting best medicine, number one. you're not doing them a service if you're not offering that. If you're making assumptions about what they can -- what you think they can afford, you're absolutely doing a miss service to them. And this has been a chronic problem in the profession, in my opinion. But these clients are expecting best medicine. They're expecting accurate estimates. They're expecting very clear communication, and they like to be communicated with regularly, e-mail, text, when we refill meds for people, we will send text right out of ezyVet and say, "Hey, your meds are ready. if you have a patient in the hospital, they want regular updates, and it doesn't have to be a phone call.

It's fine to communicate electronically, whether it's tax electronic and app. So they're expecting transparency. They're expecting accurate diagnosis. They're expecting the ability to send records to them, show them pictures. They want all of that, and they want to be communicated with regularly. That's what they require. It's what they do now in every other aspect of their life.

Right. And what they expect in veterinary medicine isn't any different than they would expect outside of veterinary.

Like when you go to the car dealership. They send you a picture of your car and then they send you an accurate estimate and video. That's what they want from the vet.

Yes. So an interesting notion because you touched on this, but let's get into it now. You had ezyVet before we had ezyVet. Okay. So ezyVet's enablement to meet those service requirements. Take us through that exam. And what does the software do to empower you guys clinically? But then what's the client expecting while you're in the exam room?

Yes. It's fabulous software. We went live on it in 2018. So we were one of the earlier adopters of it, and our practice was growing. We still were -- even though we were digital and electronic, we were still using some paper. And as you expand and get bigger, it becomes completely inefficient to not have software like ezyVet. So we can manage a case from anywhere in the hospital. especially linked with the digital whiteboard technology, like which was SmartFlow and is now Radar. So everybody in the hospital can look into a case. They know where it is, what it's doing, how long they've been somewhere.

From a client experience, we're walking into a room, the room tech has already triaged the case, put information right in the room. We have a screen in every room and you can -- iPads, you can use whatever you want. One of the beautiful things of it is all the integrations. The integrations are unbelievable. We can draw blood work, get urine, grab a fecal, whatever we're doing. I can literally be in the exam room talking to a client about their kids, about what's happening in their life. And behind me on the screen, the results are starting to pop up. And it's fabulous.

People want to come to the clinic and get the results. Gone are the days of, I'll call you in 2 days with the results. I mean nobody wants that anymore. And so we get them in, we keep them there as we get -- we can often get diagnosis and treatment started while they're there. And they love that. We don't book 15-minute appointments. We book half hour appointments because we know we want to have -- give the client that full experience there.

And how do they respond when you can -- let's say, you advance medical information to them. Is that in alignment with their expectations these days? Is that a special surprise? I mean how would you gauge the ability to transmit what happens in exam room to clients.

It's -- people go to their own doctor and don't have blood results back for a week, right? And this is the same blood work that we're running, and we have it in 20 minutes, if not less, in some cases.

So they love it, they're surprised. The interaction is there. They're there. They don't have to bring their dog to the vet in a second time, maybe they need treatment, maybe you're diagnosing something and you'll get surgery scheduled right there, while on that experience and move on. It's a one-stop shop. The integration from a veterinary standpoint is fantastic. We get a memo that pops up, hey, you got a test result back. And it streamlines everything, I mean it's an unbelievable time saver for the vet and for the client. And when you think about the time savings in the moment, that can obviously be repurposed, but some of the time savings may be needed for the future wave of pet health care that's coming. And so the fact that you guys have that automated now is probably a bit of a tailwind anticipated.

I mean radiographs show up. We can show. Clients love pictures, right? We can show them cells. The dog has a UTI, we can show them the bacteria and the white cells, just these are things that clients like to see. And they understand what you're telling them when you give them a visual aspect of it. And then you can e-mail it to them as well, right, from the room. In a way, it sort of empowers them, right, because they are going to then go see the front desk staff, they're going to check out. They're going to get a bill, but they've been empowered in that 30-minute appointment, and that's what all of this technology working together really does for them, right?

We like to get them answers, and that's the thing, like let's get to the answer. And then they can make a valuable decision for their pet. But let's not guess at it, right?

Let me touch on this notion. I know how unwavering your medical expectations are this notion of always wanting to recommend what you believe is in the patient's interest first without thought for the economic profile or as Tina noted, the perceived economic profile of the client. How have you culturally instill that notion with such a big team, Brian, at this point. How do you guys do that?

Yes. It's the way everybody practices at the practice. So when we get new students in. In many cases, they've already rotated through our system they know, how we practice. All I can say is you should never make assumptions about people. And at the end of the day, we recommend to all of our staff that you treat that pet the same way you would treat it if it were your own. And that is really the end of the day. If you're not doing that, you're doing them a disservice. And that's your job. That's your job, and that's why they're here. They're not here for this work, they're here for answers.

And so that's what we do with everybody and not everybody says, do this that or the other thing. But everybody's been offered it. And if we miss something because a test wasn't run, at least we offered it right? But I would say the vast majority of our clients, take out recommendations.

Yes. And I think there's -- Jay talked about his own notion of first principles. This sounds like an animal clinic Northview first principle is that we recommend what we believe is best for the vet without screening that might happen.

Yes. And I think the new vets that are graduating from Vet School these days, I believe that they're coming out with that mentality more than it used to be that way. I think it's a little bit of an old school mentality well. We don't need to run this your unlikely to have this that or the other thing. I think the new students that are coming out, we started 2 in Ohio state and one from [indiscernible] this year. And they're incredibly short and they come out ready to run diagnostics, they take to the ezyVet platform very, very quickly. It's like learning a new language, but once you learn it, you know it forever.

And it's -- we communicate through it. And I think that I don't think it's difficult really as long as you're in a room, you're honest with people. you tell them what you -- you're nice about it. And you have a conversation.

Yes. makes that's great. I want to maybe just turn the page just slightly. I know that a lot of the information that you're receiving back there sitting next to me was also new to you this morning. It's very clear. You and I have talked a little bit about [indiscernible] unwavering commitment to oncology, and cancer and if you you heard that from all of us today. Can you just talk a little bit about cancer diagnostics in primary care? And what you see and maybe even some reflections from what you've heard just in the last several hours here.

I mean it is 100% true that oncologists are in short supply, right? I mean, everybody knows that. And while they are very valuable in certain cases, general practice needs to absorb the majority of those cases. And we see tons of lumps and bumps. I don't remember the numbers that you quoted, but it's true all the time. And when you guys [indiscernible] digital catalog machine, that was very helpful. We could get a nice response within a couple of hours in most cases. But it's a big part of dogs like. We see a lot of mass cell tumors. We see a lot of sarcomas. And it's very, very common. I can tell you, I mean, in the last 10 years in my career, how many clients come to me and say, don't you just answer [indiscernible].test. And the answer is no, we don't have a cancer test. We didn't have a cancer test. We're looking at kidneys and livers and calciums and white counts, and we're maybe our suspicion of cancer goes up, and then we do additional diagnostics.

But actually the availability of a true cancer marker is new for us. And I think that's exciting. I think clients are going to be very appreciative that they can stream and feel good about it or if we find something then from there. I'm especially excited about the needle aspirates coming, that's something that I think will be [indiscernible].

The client interesting curiosity about cancer. Can you say more about that? They're aware of this, aren't they? The pet owner who has a Boxer, the pet owner who has [indiscernible].

They know they know their risk, their breed high risk for this data or the other thing. I mean most clients are very now and they come in and they have some preconceived notions and they say, "Boy, wouldn't it be nice to know if my dog has something I need to. And everybody's unfortunately known somebody a person or a pet in their live who's had cancer, right? So it's something that everybody can relate to. And early detection is key 100% of the time. So it is a very relatable conversation. And if you can offer a screening test that's cost-effective I think a lot of people are very happy about that.

Yes. That's good. And I think this is something that [indiscernible] one with the profession on developing. I mean as this comes out of the the factory or the bench as Martin would describe out through the commercial teams to you, it's something we want to help educate everybody about and going forward. So thank you for sharing that. I just want to touch just very briefly in a couple of minutes about your IDEXX relationship. We've had a a long and growing relationship I know that it's an important one to you. Would you mind just sort of sharing a few words about why that relationship is important to you.

It's important to us because I think IDEXX from the beginning, did focus on best medicine, which is our tenant of ours. 6, 7 years ago when you were [indiscernible] your progesterone slide, we did a lot of reproductive work at our office. And so that test was of interest to us. And we had a lot of collaboration with IDEXX, setting same back and forth and validating. And that was actually the last time I was here to meet that team. That was -- and now -- we've had a lot more collaboration. The tech at our lab have sent you, I don't know how many thousands of samples to help put development of lasting. And I will tell you, the best part of that is that they feel like they're part of something bigger. This isn't like send you the samples, so we get price on something. Yes, not that at all. My staff, you pay people well you've got good benefits, but the intangible is if you can -- they can come into a day and feel like they're making a difference in the animal health world that's way beyond anything you can pay them or that they even care about.

A strong sense of purpose.

Yes. They love it. And there's a lot of give and take with your client service reps and the people developing the test. It's just creates excitement and buzz. We also appreciate hearing about things that are paying soon. We like that.

Why you were here.

Yes. Yes. That's right. It's pretty cool. It's a good way to go. We're not just punch of the clock. We're having a good time.

I think it's one of the most underappreciated aspects of veterinary medicine is that very strong threat of purpose. It's bigger than all of us. We're recognizing patients and pets are part of families. And it's part of the bond that they formed. It's how they experience life.

People don't want to go home at the end of the day, even though some days in this profession are very difficult. But you want to go home at the end of the day and feel like you made a difference in some way. And that relationship has been part of that for us.

That's excellent. Maybe, Brian, just in the remaining minute, any pearls of wisdom or thoughts that have that you're thinking about relative to your profession more broadly, stepping out of Animal Clinic Northview for a moment, what's ahead for the veterinary profession as you think about this business 7 years of experience you're not a rookie anymore. How are you thinking about the business going forward?

I think in a very positive way for sure. there's certainly incredible demand for our services. People are still getting pets. They're going to continue to get pets. The business itself, if you take the time to educate your people, to train your people to find the best people when you're hiring and then you employ technology and cutting-edge and continuing education and communication and never forget that you that the pet in front of you is somebody's pet as part of their family. They're there for that reason. And so I think the profession is incredibly healthy. I think that bond between the pet owner and the vet is very strong. And I think that the -- we've seen massive demand. I think it's going to continue to expand.

Okay. Maybe we'll leave it there and we'll thank Dr. Greenfield for his productive this morning, enriching our Investor Day for all of you and at this the program, I'll introduce IDEXX's Chief Financial Officer, Andrew Emerson, to move the program forward.

Thank you, guys. And thank you, George, and Dr. Greenfield. Good morning, everyone. I am Andrew Emerson, IDEXX's CFO. And as you can see, my family has a number of pets that are really important to our household. And as it turns out, when you have 6 pets, not only I, but my wife are very well steeped in animal health finances. But as we transition to IDEXX, I think, hopefully, what you took away from today is we operate a great business in a really attractive sector with significant long-term opportunity. And I'm pleased to take you through the financial review, where we'll focus really on the growth strategy and the financial approach that we have associated with that. Overall, our mission is really to improve pet health care through the use of expanding diagnostics and cloud-based software. And we have a focus on innovation, integration and commercialization.

This strategy really contributes and delivers durable long-term recurring revenue streams that benefit from scale to drive high ROIC and strong earnings potential over time. And this focused, consistent strategy that we have has delivered outstanding financial results over a long period. In the last 5 years alone, we've outperformed all of our key financial metrics on a multiyear basis. and we continue to grow off of this space into the future. This really is focused on our Companion Animal Group, which is our largest segment of the business and is a set of attractive core businesses that really have a long-term opportunity to continue to grow and contribute high profitability.

And a key driver of that success over time has been the global expansion of our CAG diagnostic revenue annuity. This represents approximately 80% of the overall company and grew to about $3 billion in 2024. We've had a long track record of double-digit growth in both the U.S. and our international regions over this time period. And again, we can -- we believe we can continue to grow off of this base. Now this really stems from those strong customer relationships that we have and the ability for IDEXX to provide high-quality diagnostic insight about the patient health. That remains our focus, and you'll hear more about that as part of our transition and focus on transformational innovation today.

But we've been able to grow off of this base in the U.S. and sustained double-digit growth in our international business even through a period of macro and sector headwinds. And our customers value the IDEXX integration that we have, which is really enabled through our cloud-based software approach. As Michael described, we have a vertical SaaS model that's specifically designed for the animal health industry. So that has supported high growth overall, but also expanded reoccurring revenue streams.

And when we think about the opportunity in front of us, adding additional services will help increase AR, things like integrated payment solutions, [indiscernible], which will help us reach our end consumer as well as web packs in managing diagnostic imaging workflow. And we'll continue to add technology and to support productivity in the clinic, which adds incremental value to our customers. But as we think about looking forward, certainly, one of the impacts that we've had more recently that's constrained our overall revenue growth has been around clinical visits. And many of you are familiar with this story.

We saw an exceptional step-up during the pandemic period of clinical visits. And since 2022, we've had declines on this metric impacting the industry. That really stemmed from staffing challenges within the clinic itself as well as broad inflation on the consumer that's put pressure on this metric. But as you can see, we've also sustained at a clinic level visits that are above the pre-pandemic period. And this gives us a base to grow off into the future. We have a strong longer-term dimensions that you just heard about from Dr. Greenfield as well around an expanded and aging population, pet owner demographics that support that long-term humanization of pets.

And IDEXX continues to focus on strategies like personalization with [indiscernible], and all of this points to increased patient traffic over time. And for those seeking veterinary services, as Tina described earlier, we continue to see an increasingly important role of diagnostics in the clinic. So this steady expansion that we've seen over time of 50 basis points of blood work inclusion per clinical visits has led us to 20% in 2024. But U.S. benchmarks would highlight there's opportunity to double this over time. And what we know is, internationally, we're even in earlier stages of this progress.

For every 50 basis points on an annual basis that we get this expansion, that's the opportunity for us to deliver 1% to 1.5% global CAG diagnostic recurring revenue growth. And senior pets, those age 7 + often have higher inclusion levels within the clinical visit that they have. This provides an opportunity in coming years to outpace that historical norm over time. and strategies with IDEXX like our cancer DX pricing, further inspire more comprehensive diagnostic testing over a longer period. So that brings me in more of the innovation side. And what you heard earlier today was our focus on transformational innovation, and we're really excited by the momentum that we're building with recent launches.

We've created new platforms with VDX and cancer DX and in the future, multi-cDx and these are truly incremental greenfield opportunities, which will be additive to our overall CAG Diagnostic recurring revenues over time. There are also extensible platforms, meaning we see opportunity for continued menu expansion that drives new diagnostic insight over time to the clinician and continues to build a deeper understanding of patient health. Similar for our Technology for Life strategy, which Mike talked about earlier, where we continued to deliver new menu on our core catalyst as well. So this helps reinforce the belief in diagnostics, being able to discover more and detect disease earlier allows clinicians to use these tools for better outcomes in the patient. And overall, we expect innovation to be able to drive 2-plus percent incremental revenue growth to CAG Diagnostic recurring revenues over time. But innovation also supports our ability to expand our customer relationships.

So while we have over 100% headroom on our core analyzers with Catalyst, ProCyte and SediVue, and we have commercial plans well aligned with the significant opportunity that you see internationally. In VDX and multi-QDX provide the opportunity to leverage our relationships with customers for broader diagnostic testing. And what we see is when they take advantage of this broader ecosystem of IDEXX, we do find testing begets testing. They use more diagnostics, they understand what's happening at a deeper level with the patient. This is also a really important base for us. This creates a large loyal base of customers that, as we talked about earlier, has rapid adoption on new menu and specialty testing like cortisol that we launched recently. So bringing this all together, IDEXX execution, coupled with our innovation agenda, supports the long-term potential for CAG Diagnostic recurring revenue growth. Now this chart represents the building blocks for the business overall. But what I'd highlight is even in this period, where we've had macro in sector headwinds with broad inflation and challenges with staffing, IDEXX execution has continued to deliver solid volume and pricing gains through that period. Now as inflation eases, we expect price realization to moderate to 2.5% to 4% of revenue growth contribution, more aligned with our historical standard as well as really building value that we're delivering to customers. And we see a steady pathway for us to continue to build new customer relationships over time and place core instruments as well.

This benefits from high retention and loyalty within our customer base. The more dramatic step-up that you see on this chart is really related to the utilization and innovation. And that comes back to our transformational approach focused on these platform technologies. And as we build momentum with things like Inview DX and cancer DX, we see the opportunity to continue to expand in this area, and we have a robust pipeline for the future, as Martin highlighted. And while we have many positive factors that lead us to believe it's a matter of when, not if, clinic visits return to growth, even if they were flat, we see the opportunity to grow this portion of the business by 8.5% to 11% over time.

So the strong growth in CAG seeking revenues really forms the foundation of our overall business growth expectation to plus. In software, as you can see on this page, that's focused on solving clinic needs like productivity, workflow enhancements, client engagement, provides the opportunity to grow even faster. And we can continue to place analyzers, which benefit our CAG instrument revenues. And Water and LPD also operate in attractive sectors within their areas where we think we can grow mid- to high digits over time in these categories, additive companion animal, but also synergistic. And as we grow, we benefit from high incremental gross margins in the CAG business itself. Gross margin expansion is a really important element for our overall profitability improvement over time.

So we benefit from a business model and a business being at scale where we get natural tailwinds that as we grow these recurring revenues to see high flow-through on the drop through associated with that. But we're also not focused only on that growth. We continue to have lab and operational improvement agendas, automation and DFMA in order to continue to enhance this potential over time. And combined with net price realization, we see the opportunity to inflationary cost pressures through this approach. And our focus on gross margin expansion, and operational efficiency really allows us to continue to invest in the long-term nature of the business. R&D as an example where we expect to remain 5-plus percent of revenues overall is focused on the pace and breadth of our innovation agenda. We're advancing capabilities that we've built over decades, and we're establishing new ones as technology evolves, and this is in support of having a robust pipeline of innovation supporting customer solutions.

And sales and marketing is about commercial enablement and customer intimacy where we're translating the value of diagnostics and software to our customers and building strong, trusted long-term relationships. And as we advance commercial expansions, we often see these as fast and higher returns because they're focused on growing that diagnostic recurring revenue. In G&A, we expect to continue to advance some leverage in our back office functions while we invest in areas like IT and data in order to maintain this broader integrated network effect. And we have a disciplined capital allocation and resource allocation approach. This starts with our strategic growth priorities. Our focus on clinically relevant diagnostic insights, delivering a modern customer experience through software and AI and ensuring we have reach to the global customers that we operate with a other it's organic investment or M&A, we use the same principles.

It starts with our core businesses and solving veterinary clinic challenges. We have often find opportunities that flow directly into our extensive ecosystem. This allows for high profitability and accretive revenue growth potential. And while many of the opportunities that we invest in have significantly longer lives through 5 years, we do look for a return above our cost of capital within that time period. And under this philosophy, C-17, we've invested $1.7 billion in R&D and M&A alone. And this is really focused on enhancing the capabilities we have in diagnostics, in software over time. We often see more inorganic opportunities on the software side, and that's where we'll continue to pay attention closely as opportunities arise that we make the appropriate investments to advance our capability set.

And through the same time period, we've been able to deliver meaningful growth in ROIC at the same time. So as we continue to invest in the business, we will target incremental operating margin improvement. We've had a steady track record of outperforming our goal of 50 to 100 basis points average comparable operating margin gains, and that maintains our goal going forward. We're focused on continuing to drive profitability over time and believe we can do that, which will be gross margin led as we invest back into the longer-term nature of our growth agenda. And in 2025, we're on track with that. We're expecting, as we highlighted in our recent guidance to deliver 50 to 80 basis points of comparable operating margin improvement this year. And because we're able to continue to expand our operating margin profile and grow the business meaningfully, that provides the potential for strong free cash flow generation.

We also have a long history in this area, where we continued high levels of conversion from net income to free cash flow. Again, we benefit from a scale business where capital intensity is relatively low. We typically provide 4% to 5% of revenues towards capital spending, and that's largely on our growth agenda. So we see over time, the potential to continue at this pace and maintain net income to free cash flow conversion of 80% to 90% over the longer term. Now our capital allocation principles are really remaining consistent.

Our priorities are focused on driving our organic growth business. And as we identify M&A opportunities, we continue to invest in that path. However, because of our significant free cash flow generation, we typically have excess capital in regards to the business requirements that we have. And we've been able to redeploy that through share repurchases over time very effectively. Since 2015, we're expecting to actually overdeliver our share repurchase level of capital deployment versus our free cash flow, and at levels that are significantly discounted to today's price.

So while we'd be thoughtful as we continue down this path about our capital allocation methodology, we've seen this as a really good opportunity to continue to leverage how we deploy capital and expect to do that into the future. So we're optimistic about the long-term nature of the business. We see the opportunity and potential to continue to grow 10-plus percent. We're going to continue to maintain our focus on operational efficiency and capital allocation methodology is consistent with our past -- and that can all deliver 15-plus percent earnings per share on a comparable basis over time. That's really the foundation building off of our strategies with strong secular tailwinds. And the expanded an aging pet population, pet-owner demographics and our robust innovation pipeline that we see a clear pathway to deliver this. So that concludes our financial review. I'd like to thank everybody, and welcome, Jay, back on stage for Q&A.

[indiscernible] Can you talk a little bit talk a little bit about and some of the near-term, longer-term opportunity there? Is the 20,000, a 5-year target hold in consumable [indiscernible] from a dollar perspective, and we extrapolate that increment $100 million tax volume opportunity, basically, i.e. [indiscernible] kind of annual flow-through from a consumables perspective. Is that the right way to think about it in terms of that incremental opportunity for InView. And then the second question is also kind of numbers, too. But just the 15% to 20% EPS growth that you had previously in terms of the long-term guidance, it went to 15 plus. Just comment on that

Do you want to take the first one?

Sure. I'll take the financial one. So just in terms of our earnings per share, 15-plus percent is still largely in line with the 15% to 20% as you highlighted. Our focus is on making sure that we advance investments for the longer-term potential right? At the margin profiles that we're at, we can continue to create significant value by ensuring we have this long-term ability to grow the business. into the potential that we see for the $45 billion opportunity in front of us. So we're highly focused on that and finding that right balance over time. And I wouldn't look at this as a major change. As you could see, all the other benchmarks that we have in financial characteristics are right in line with what we would have expected. We're just making sure that we have the capacity and investment cycle to support the long-term potential of the company.

In terms of the placement goal of 20,000 units in 5 years, we're not updating that at this point. We're just early in the cycle right now. And as we have begun more recently to expand outside the U.S., I think we'll get a better picture of what the end market goes. The model we've done suggests there's 90,000 or so units of opportunity. We think that's -- we think that's a good model over time as we expand the menu that could potentially go up. But I think that remains to be seen. From a menu standpoint, the focus is really on the 3 right now. of the ear cytology blood morphology and then F&A for lumps and bumps as Dr. Erickson indicated, there's a lot of runway in terms of cytology that you can do. That's a multiple of the number of tests today being run. And I think we'll look at that over time. And we always -- from a technology for life standpoint, they may extensibility standpoint, I see a lot of very interesting opportunity. .

[indiscernible]. You've got several new platforms ramping. You've had an aging pet population. Can you just talk about the potential for this kind of acceleration in the percent of visits that have a diagnostic tied to them. I think you laid out, it's been about 50 basis points per year. How much of a step-up could but as this plays out? Is it a percent a year or something like that? Is that within the realm of possibilities? And maybe your second question kind of tied to this, asking about stepping up a percent of visits with Diagnostics stepping up? Are vet practices equipped to deal with this acceleration it plays out, so can this actually flow through numbers to volumes, et cetera?

The earlier discussion, the 50 basis points has been a good benchmark. And during the pandemic, as we have shared, it did step up for a while to 100 basis points, and we didn't necessarily see that give back. Some of this comes down to -- if you take a look at the top quartiles. They're definitely using blood work conclusion at a much higher level. So the blade system is there it's not like there's just a couple of practices. There's very broad adoption. So a lot of our sector development strategies are really based on continuing to drive that.

As I had mentioned in the earlier part of my talk, the -- we want to let all boats because we think that its diagnostics is underused. And then the top half or already have this notational belief and can use more. Part of our strategy, both innovation and on the commercial engagement side is to drive that faster I hesitate right now to speculate how much faster we can drive that. But as Andrew showed in his slide, just within the U.S., every 50 basis points translates to a global diagnostics occurred, revenue uplift of between 1 point and 1.5 points. So that's pretty significant. We're highly motivated to figure out how to do that. I think we shared with the group, some potential strategies that we think are very promising. I do think that the tailwinds of an aging pet population to the earlier part of your question, is going to help a lot. As we know, just the level of medicalization as a pet ages is substantial. It really steps up.

And I would just add that international is again significantly earlier in that, right? So Jay shared some of that information on his slide, which is on an international front, we're about 8% of bloodwork inclusion per clinical visit verus the 20 in the U.S. And so again, an opportunity for us to continue to partner with our customers and expand the use of diagnostics over time.

Mike Ryskin, Bank of America. On the cancer DX, the 3,400 clinics purchasing it, anything you say in terms of utilization per clinic, if that's still growing or starting to get a sense for how many tests they run a day, a week, a month, how often are they reordering. Just any metrics you can give us answer the DX adoption there? And then the second one is going to be on the commercial expansion. You talked about a couple of regions internationally, some expansion in the U.S. I think a point you guys have harped on in the past. Our customers do more testing when we call on them more. So as you've got such a big innovation cycle now in terms of view, in terms of cancer DX in terms of multi-cup, do you feel like maybe you need to do a little bit more commercial expansion than you would have in the past just because every salesperson is going to have that much more menu to talk about, you're going to need to shrink their customer base to give them more time handle that.

Yes. Let me take that second part of the question first. We're definitely not done from a commercial expansion standpoint, to your point, broader portfolio of innovation the need to really, I think, call on more customers. Really, I think indicates that we would benefit from international expansion. There's the pace that we're very disciplined. We want to make sure we have all the pieces in place. It's -- there's a tendency to think about this is just adding heads. In fact, you need to make sure your reference hub network is built out, you need to make sure your software systems are appropriately localized. You have the right model that's matured in these geographies. And so there's a practical limit in terms of how fast you could do that. Otherwise, we'd be expanding at 10% a year, and we're certainly not doing that. But I would say there's a lot of opportunity to continue to drive footprint. Dr. Hunt shared some numbers and we're about half of where we want to be outside the U.S. Now that's also a function of utilization and how fast that utilization increases. .

To your -- the first part of your question in terms of cancer diagnostics usage, we do track that. We haven't shared that yes, just because it's earlier. As we -- as you might guess, the agent diagnosis is where the first focus is, but we're starting to see a shift into inclusion in preventive care. We think a broader venue will accelerate that shift. And it's pretty much developing as we thought we would. And customers, they order once they may order again, and it builds it builds steadily over time. And that's just the adoption cycle, the long tail you see in this industry. So all signs positive and we'll share Boreas time goes on.

David Westenberg from Piper Sandler. So I want to talk about the European opportunity. I think you had a graph out there that said you're taking 20% of clinics, I didn't realize how underpenetrated 13% to 16% international growth. I also thought the Mike Lanes slides on the margin expansion in reference very interesting as well as the contribution margin slide that Andrew had. So can you talk about your underpenetration in Europe and how that correlate, how that is going to impact margin expansion opportunity if that is growing faster I have to imagine maybe the fixed costs are lower there. I mean are higher there. But I just want to think about margin potential between like international and U.S.? And then just can you clarify that 26 per tonne touch in Europe, is that actually core with market share? Because I would assume your market share is actually higher than 26%.

Maybe just a clarification on that metric. They reach the revenue metric and has reached a customer metric. The reach to revenue is these are IDEXX customers and Dr. Hutch, much higher numbers in the 70s with that metric. The reach to customer is the overall geography or country market. These may be smaller clinics, they don't use agnostics as much. Certainly, they're not IDEXX customers. And that's the 26 brand. And I think what that indicates is just a much big opportunity as we expand to really reach the entire market, whether or not they use IDEXX or not.

And that -- again, that comes back down to the commercial footprint. It comes back down to really being able to, over time, do what we did in the U.S. and drive diagnostics utilization, which is about a little bit over 1/3 of what we see in the U.S. that much faster level. Did you want to talk about margins?

Yes, just sit on the margin piece of this. So in terms of what I shared is we really do benefit by having a business at scale already, right? We have an extensive ecosystem both in the U.S. and in places like Europe where we can really leverage that infrastructure and continue to grow our margins at incremental levels as we grow over time. But again, we're not solely focused on just that growth. We want to make sure we keep an operational discipline in place. where we're looking for efficiencies. We're leveraging automation, digitization, AI, creating new capabilities within that infrastructure. So we see long-term potential to grow margin overall through gross margins.

Jon Block at Stifel. I was told to limit it to one. So the cancer DX TAMs, maybe if you can just share what are the ASP assumptions behind those. I would just think screening would be better. So is it that $15 for screening and higher 45 to 60 for the diagnosis, maybe if you can clarify that, and I'll keep it to one.

Yes, it is, and that's going to evolve over time, obviously, it assumes it's based on a certain amount of mix shift between diagnosis and screening and then as the panel expands, there's some built-in inflation in there. We haven't broken out all the different elements of the model. .

But I think the 1.1 Iliadis, also is -- includes all our diet includes all our cancer diagnostic cast, including pathology, including telemedicine, those pieces. So it's the broadest possible look.

Yes. The $2.5 billion is a broad kind of number for oncology in general. And then to Jay's point, we've broken that down for Cancer DX specifically. And we haven't, again, shared all of the details behind that. But I think in terms of the pricing, you would see some differential between the screening and the ad and diagnostics based on what we're trying to do from a pricing perspective.

Okay. And so with that, we're out of time, and we're going to conclude the program. Thank you again for joining us and look forward to following up with you in a number of different forms over time. So thank you again, and have safe time. .

Good morning, and welcome to the IDEXX Laboratories Second 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 second 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 in 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 update on our full year 2025 financial outlook. In terms of highlights, IDEXX delivered another quarter of strong financial results supported by continued strong global execution in our companion animal business with momentum building in the adoption of IDEXX innovations. Revenue increased 11% as reported and 9% organically, supported by nearly 7.5% organic growth in CAG diagnostic recurring revenues, reflecting continued gains in the U.S. and double-digit expansion in the international regions. Overall, organic revenue benefited by approximately 200 basis points from CAG instrument revenues, delivering a record quarter of premium instrument placements, including nearly 2,400 IDEXX inVue DX instruments. Partially offsetting these benefits, CAG Diagnostic recurring revenue growth in Q2 was constrained by impacts from macro in sector headwinds, leading to a 2.5% decline in U.S. same-store clinical visit growth levels in the quarter. IDEXX's operating performance continued to be strong in Q2, reflected in operating profit growth of 14% on a comparable basis net of approximately 27% benefit from lapping a discrete litigation expense in Q2 2024. Operating profit benefited from solid revenue growth and operating margin gains, which were led by gross margin expansion. High operating profit gains enabled earnings per share of $3.63 in the quarter, resulting in EPS growth of 17% on a comparable basis net of $0.56 EPS growth benefit related to the comparison of the prior year period discrete litigation expense and a $0.10 benefit from share-based compensation. IDEXX execution remains strong as we advance our innovation agenda in the CAG businesses while continuing to work through pressure on clinical visit levels. We're increasing our full year revenue outlook by $90 million at midpoint with an updated range of $4.25 billion to $4.29 billion. This reflects an outlook for overall reported revenue growth of 7.7% to 9.7%, including strong Q2 performance and increased inVue DX instrument revenue, along with favorable impacts from foreign exchange updates.

Our updated full year overall organic revenue growth outlook is for 7% to 9% with organic CAG Diagnostic recurring revenue growth of 5.8% to 8%. These organic growth ranges represent 0.5% increase at midpoint to our previous outlook supported by strong global execution in our CAG business. We're increasing our EPS outlook to $12.40 to $12.76 per share, up $0.40 per share at midpoint, reflecting 9% to 13% full year comparable EPS growth. We'll discuss our updated 2025 financial outlook later in my comments.

Let's begin with a review of our second quarter results and recent sector trends. Second quarter organic revenue growth of 9% was driven by 10% CAG revenue gains, 8% growth in our Water business and 3% gains in LPD. Strong CAG results were supported by CAG Diagnostic recurring revenues, which increased nearly 7.5% organically, including global average net price improvement of approximately 4% and benefits from CAG Diagnostic instrument revenues increasing 62% organically aided by inVue Dx placements. CAG Diagnostic recurring revenue growth in Q2 was supported by 11% organic gains in international regions, another quarter of double-digit expansion. Strong international performance continues to be driven by IDEXX execution reflected in solid volume gains, benefiting from new business and double-digit year-over-year expansion of our premium instrument installed base as well as benefits from net price realization. U.S. organic CAG Diagnostic recurring revenues grew 6% in Q2, supported by solid volume gains and 3.5% benefit from net price realization. U.S. clinical visits declined 2.5% in the quarter, reflecting an IDEXX U.S. CAG Diagnostic recurring revenue growth premium to U.S. clinical visits of approximately 800 basis points up modestly from the first quarter.

Diagnostic frequency and utilization for clinical visit continued to expand solidly at the clinic level, highlighting the important and expanding role of diagnostics for those seeking veterinary services. IDEXX innovation and commercial execution delivered organic revenue gains in our major testing modalities globally in the second quarter. IDEXX VetLab consumable revenues increased 14% on an organic basis in the second quarter, reflecting double-digit growth in both the U.S. and internationally. Consumable revenue expansion is supported by testing utilization across regions, including benefits from recent product launches and high customer retention levels, while our commercial teams further build our global premium instrument installed base. CAG instrument placements increased significantly in Q2 compared to prior year levels, reaching a quarterly record aided by broad availability of inVue Dx. Total premium placements reached 6,070 units, an increase of 23% year-over-year. The quality of CAG instrument placements remains excellent, reflected in 1,091 global new and competitive Catalyst placements, including 346 new and competitive placements in North America. IDEXX inVue Dx placements of 2,388 were driven by strong demand for our new highly differentiated platform. These new placements and high customer retention levels supported a 10% year-over-year growth in our premium instrument installed base, and we're looking forward to building on this momentum during the second half of the year.

IDEXX Global Reference Lab revenues increased 5% organically in Q2, an increase of approximately 2% from the first quarter on a days adjusted basis. Global reference lab gains continued to be driven by solid volume growth, including initial benefits from IDEXX Cancer DX. Global Rapid assay revenues declined 3% organically in Q2, and Rapid Assay results were constrained by customers shifting pancreatic lipase testing to our Catalyst instrument platform, which we estimated to be a 5% headwind in Q2 revenue growth. Veterinary Software and Diagnostic Imaging organic revenues increased 9%, driven by recurring revenues, reflecting benefits from ongoing momentum in our cloud-based software installations.

Water revenues increased 8% organically in Q2 with growth driven by double-digit revenue expansion in our international regions and solid mid-single-digit growth in the U.S. Livestock, Poultry and Dairy revenues increased 3% organically in the quarter, led by commercial execution in North America and Asia Pacific.

Turning to the P&L. We had another quarter of strong profit gains in Q2 reflected in 130 basis points of comparable operating margin expansion, net of approximately basis points benefit from lapping a now concluded discrete litigation expense in Q2 2024. Gross profit increased 12% in the quarter as reported and 11% on a comparable basis. Gross margins were 62.6%, up approximately 110 basis points on a comparable basis. These gains reflected benefits from IDEXX VetLab consumable growth, lab productivity and operational improvements and pricing, which offset inflationary cost effects. Reported gross margin gains were moderated by a 20 basis point negative impact related to foreign exchange changes, net of our hedge positions. On a reported basis, operating expenses decreased 9% year-over-year, reflecting a 19% favorable growth rate impact from comparison to prior year levels, which included a $61.5 million expense in the now concluded litigation matter. Adjusting for this effect, operating expense growth was modestly below revenue growth at 9% as we continue to invest in innovation and commercial capabilities while supporting operating margin gains.

Q2 EPS was $3.63 per share, including benefit of $8 million or $0.10 per share related to share-based compensation activity, and $0.07 from a discrete tax reserve release. Foreign exchange added $3 million to operating profit and $0.03 to EPS in Q2, net of hedge effects reflecting comparable EPS increase of 17%. Free cash flow was $152 million in Q2 and $360 million in the first half of 2025. On a trailing 12-month basis, our net income to free cash flow conversion rate was 80%, including approximately 8% unfavorable impact from the approximately $80 million judgment payment related to the now concluded litigation noted on prior calls.

For full year, we're maintaining our outlook for free cash flow conversion of 80% to 85%, reflecting consistent outlook for full year capital spending of approximately $160 million. Our balance sheet remains strong. We finished the period with leverage ratios of 0.8x gross and 0.6x net of cash. During the quarter, we repaid approximately $103 million of long-term notes and continued to deploy capital towards share repurchases, allocating $329 million during the second quarter. For the first half of the year, we've allocated $744 million of capital to share repurchases, supporting a 2.7% year-over-year reduction in diluted shares outstanding for this period aligned with our previously stated expectations.

Turning to our full year 2025 outlook. As noted, we're increasing our projected range for overall revenue to $4.25 billion to $4.2 billion. At midpoint, this reflects approximately $20 million operational improvement, building on strong second quarter performance and increased InVue Dx revenue expectations along with approximately $70 million benefit from updated foreign exchange impacts at the rates outlined in our press release. Our updated revenue growth outlook is 7.7% to 9.7% as reported, including approximately 0.7% for full year growth benefit from foreign exchange. As a sensitivity, a 1% strengthening of the U.S. dollar would reduce revenue by approximately $8 million and EPS by $0.03 for the year.

Our updated overall organic revenue growth outlook of 7% to 9% reflects an estimated organic growth range of 5.8% to 8% for CAG diagnostic recurring revenues, including consistent 4% to 4.5% benefit of global net price realization and U.S. clinical visit declines aligned with more recent trends at midpoint. We're increasing our expectations for inVue Dx to 5,500 placements during the year, with instrument revenue expected to be over $60 million, building off strong demand signals for the platform.

In terms of key financial metrics, we're increasing our reported operating margin outlook for 2025 to 31.3% to 31.6%, reflecting increased expectations for 50 to 80 basis points for full year comparable operating margin improvement, net of 180 basis point operating margin benefit related to the discrete litigation expense impacts an updated foreign exchange effects. This outlook also incorporates commercial expansions in 4 countries during the second half of the year, including a modest expansion in the U.S. to support our growing portfolio of diagnostic solutions.

With respect to the dynamic trade environment, we remain well positioned to navigate the changing tariff landscape with our best estimates included in our outlook. Our primary objectives and ongoing efforts remain focused on continuous supply to customers and minimizing impacts through operational planning. Our updated full year EPS outlook is $12.40 to $12.76 per share, an increase of $0.40 per share at midpoint. Our EPS outlook incorporates increased projections for operational performance of $0.11 and foreign exchange benefit of $0.22 at midpoint compared to our prior guide. We've also updated our tax benefit related to share-based compensation activity, now $15 million for the full year, an increase of $0.09 per share compared to our prior estimate. This is partially offset by $0.02 per share unfavorable tax impacts compared to our prior projections including benefits from the discrete tax reserve release and updated outlook for our base rate.

For the third quarter, we're planning for reported revenue growth in line with the implied second half growth range, including approximately 1% growth benefit from foreign exchange. At midpoint, the organic revenue growth outlook includes U.S. clinical visit growth in line with recent trends and expanding benefits from innovation including the Cortisol slide, which began shipping last week. We're planning for modest comparable operating margin expansion aligned with advancing additional commercial investments and timing of project spend. That now concludes our financial review.

I'll turn the call over to Jay for his comments.

Thank you, Andrew, and good morning. IDEXX delivered a very strong quarter of performance as reflected in solid execution across all key drivers of our strategy. Our focus on supporting our customers [indiscernible] resulted in a rapid uptake of new innovations and the broader adoption of software tools that support practice workflow and staff. The demand for diagnostics reflects its foundational role in assessing the health of the patient. While macroeconomic pressures persist in many of our key regions, veterinary practices continued to prioritize investments in diagnostics and software that enhance efficiency to deliver clinical insight and support better outcomes. At the same time, pet owners are demonstrating a strong desire for a high standard of care; particularly for an aging pet population. In Q2, diagnostics frequency, the percentage of clinical visits that included a diagnostic test sustained at 50 basis points year-on-year in growth, an important metric we track.

The continued growth in diagnostics use underscores pet owners focus on early detection and comprehensive treatment to support longevity welding. It also highlights the willingness to pay for advanced veterinary services where complex health issues may be of concern. IDEXX is extremely well positioned to support these broad care objectives with our expanding menu of innovative diagnostics, testing platforms and our cloud-native software solutions that provides advantages in detecting disease and supporting patient workflow, helping practices support more patient visits productively comes at a time when many still face staffing and client service challenges. Our commercial teams again demonstrated outstanding execution delivering record premium instrument placements globally and driving solid growth in recurring revenues.

In Q2, we delivered double-digit growth in our premium instrument installed base compared to the prior year, led by the ramping of IDEXX inVue Dx placements and high sustained momentum in our chemistry and hematology solutions. North America delivered a historic record Q2 quarter placements and economic value, supported by the unrestrained launch of inVue Dx and well over 300 competitive and greenfield catalysts. We continue to see significant engagement across new greenfield and competitive accounts, reflecting practices desire to invest in best-in-breed innovative solutions that improve patient care and clinic productivity. Supporting this, there was a strong trend in new practice formation in Q2 with IDEXX selected in a high number of instances as the partner of choice in outfitting these practices with a full portfolio of IDEXX solutions.

Internationally, our teams achieved double-digit growth in CAG Diagnostics recurring revenue, supported by the tenth consecutive quarter of double-digit installed base growth. This success is a result of peripheral strategies tailored for local country circumstances with excellent product market fit and network of reference labs supporting high service levels and an expanding commercial footprint. As Andrew mentioned in his full year guidance, we are making commercial investments to expand 3 more international country organizations as well as modestly enhancing the U.S. commercial team. These high-return investments are a reflection of the confidence we have in growing these geographies and supporting a broader portfolio of diagnostic products that are resonating strongly with customers. These expansions are key enablers to support an expanding set of innovations ranging from the launch of IDEXX Cancer Dx and inVue Dx to new additions like catalyst cortisol and pancreatic lipase. Each of these products represents a meaningful advancement in our veterinary diagnostics offering and their successful adoption supports long-term growth. There are also significant benefits to decreasing the number of customers that each account manager is responsible for. As our experience is that customers use more diagnostics as part of their care protocols when we visit them more often.

We expect to have these expanded organizations in place by the start of 2026. A key focus of our commercial organization is ensuring that placements are high quality and positioned to drive strong recurring revenues over time. We continue to prioritize placements and practices where IDEXX solutions can deliver the most value to both clinicians and their clients. With inVue Dx as in addition to our premium instrument offering, we are seeing very strong double-digit growth in EV amongst our field teams as they have an opportunity to place both larger dollar value suites for a single inVue Dx addition to an existing IDEXX customer. As a testament to the value we deliver, Customer retention remained in the high 90s across diagnostic modalities. This enduring loyalty reflects the confidence veterinarians place in IDEXX to be their partner in providing excellent patient care and the ongoing investments we make to keep their solutions at the leading edge. IDEXX inVue Dx continues to be a transformational platform that is reshaping point-of-care cytology testing since broad commercial availability commenced in April. Demand has exceeded expectations. We have now placed nearly 2,700 instruments globally this year through June, giving us confidence to increase our 2025 placement estimate by 1,000 units from 4,500 to 5,500.

Feedback from early adopters remains highly positive. Practices consistently highlight the Slide 3 intuitive workflow, rapid turnaround time and diagnostics confidence provided by inVue DX in its advanced AI-powered insights. Early consumables usage driven by testing in both ear cytology and blood morphology is highly encouraging. And with our expected launch of F&A for lumps and bumps later this year, inVue Dx will play an important role in supporting our long-term recurring revenue goals. InVue Dx also playing an important role in our recontracting activity as we saw a very high number of customers in Q2 and extend their relationship with us, often in advance of the date required to do so. A cornerstone of our strategy remains delivering differentiated diagnostic insights that elevate care and strengthen our leadership in the sector. The IDEXX Cancer Dx panel launched in late March through our North American reference laboratories have continued to gain traction among general practice and areas as well as oncology specialists. Since launch, over 2,500 practices have ordered the test. Moreover, of these customers adopting the test, almost 15% of sample submissions are coming from competitive Bob customers. The broad adoption of IDEXX Cancer DX is indicative of the value clinicians see in this test and the underserved need of early cancer screening. Cancer remains one of the leading causes of mortality among dogs, and IDEXX Cancer Dx provides veterinarians with a cost-effective, highly sensitive tool to detect canine lymphoma earlier. This enables earlier intervention and the possibility of significantly improved outcomes.

Initial utilization patterns are consistent with our expectations, with customers using the test as both in aiding diagnosis and a small but growing number of practices more broadly incorporating Cancer Dx into most wellness screening panels. As awareness grows and we brought in a test and menu over time to incorporate new cancer types, we expect a multiplier to our reference lab testing volumes. Building off this early success we've seen in North America, we are preparing for the international roll out of Cancer DX in 2026. Early excitement from veterinarians in these regions underscores a significant global need for affordable and accessible cancer diagnostics. Last week, we launched Catalyst cortisol in North America, our third new catalyst test in less than a year, underscoring our commitment to expanding the platform's menu and our technology for live promise. Catalyst cortisol enables veterinarians to measure cortisol levels rapidly at the point of care, supporting the diagnosis and monitoring of adrenal conditions such as Cushing's disease and Addison's disease. The addition of cortisol to Catalyst is the most frequently requested menu expansion from our customers. Early customer response has been highly enthusiastic, highlighting the value of real-time results to guide treatment decisions during the patient visit.

Catalyst pancreatic lipase launched globally last year, continues to perform well and meet strong customer demand. This innovative test offers a quantitative single-side solution that delivers rapid reliable results for both canine and feline patients suspected pancreatitis, a common and often challenging condition to diagnose early. Adoption has been robust with over 40% of our global Catalyst installed base already utilizing the test where available. This strong uptake reflects the test's clinical utility the value veterinarians place on speed and accuracy and diagnostic workflows and the continued expansion of our Catalyst menu to address important unmet needs in veterinary care. The Catalyst Smart which began shipping late last year, is also seeing strong adoption. Customers value the load and go monthly quality control process that ensures accurate results and instrument reliability.

New innovations made meaningful contributions to the growth of IDEXX VetLab consumables in the quarter. Our software ecosystem continues to be an essential component of IDEXX' differentiated value proposition. By delivering intuitive cloud dative solutions that integrate diagnostics, imaging, client engagement and practice operations, IDEXX software helps clinics improve efficiency in patient care while driving incremental recurring revenues for our business. Our cloud-based PIMS platforms such as ezyVet and Neo delivered solid double-digit installed base growth. with particularly strong demand for multi-location practices and corporate accounts. Clinics are choosing these solutions for their modern user experience, scalability and robust integration with the IDEXX Diagnostics ecosystem.

Vello, our pet owner engagement application saw continued momentum in Q2 with double-digit sequential growth in active users compared to Q1. Bell's integrated communication tools are helping clinics approve appointment adherence and drive compliance with recommended care. Early customer data shows that practices using Vello Experience increased visit volume, higher diagnostic serialization and better treatment plant compliance positive indicators that support our thesis that digital engagement drives better clinical outcomes. Our Diagnostic Imaging business continues to demonstrate strong momentum, too. extending clinical capability and streamlining imaging workflows, our low dose, high image quality radiographic imaging systems paired with our IDEXX Web PACS software provides seamless image viewing sharing and storage fully integrated into veterinary practice workflows. In the second quarter, we surpassed an installed base of 10,000 imaging systems in North America, with a comparable number of customers subscribing to IDEXX Web PACS, highlighting strong alignment between hardware adoption and recurring software engagement. While macroeconomic and sector dynamics remain fluid, including lingering, inflationary impact, pressuring clinical visits. We are confident in the durability of the veterinary market and the resilience of pet health care demand.

Pet ownership remains elevated and the aging pet population continues to expand, supporting higher levels of diagnostics utilization over time. Our focus remains on executing with discipline, supporting our customers through innovative solutions and investing in capabilities that position IDEXX to capture our significant long-term opportunity. Diagnostics sit at the center of the system of care and pet owner expectations for quality care continues to rise. IDEXX is well positioned to lead and our focus is on exceptional execution to deliver solid growth and profit gains. As I conclude our prepared remarks, I want to express my deep appreciation for our 11,000 IDEXX employees worldwide. The commitment to innovation, customer partnership and operational excellence, it's what enables us to deliver these results quarter after quarter. I'd also like to remind you that we will be hosting our annual Investor Day on August 14 at our global headquarters in Westbrook, Maine. This session will be streamlined for those unable to attend in person.

With that, we'll conclude the prepared portion of our call and open the line for questions.

[Operator Instructions] We will take our first question from Chris Schott with JPMorgan.

I was hoping you could just elaborate a bit more on the inVue uptake. And maybe specifically, what type of practices are you seeing the greatest amount of traction here, and then maybe the second part of that, just obviously some very good trends here with placements. But when I look at that 5,500 placements for the year, I do think it implies a bit of a slowdown from what we saw in 2Q for the quarterly placements. Anything notable we should think about in terms of just the gating of placements through the rest of the year?

Chris, thanks for the question on inVue. From just a high-level standpoint, the feedback we're getting from customers on inVue is excellent. It's really along 2 lines. One is it helps them with workflow. As we know, both ear cytology and blood morphology are things that are done in the practice today. They tend to be time intensive using microscope. So that's 15 to 20 minutes. The results are often inconsistent. And so what customers tell us is they appreciate not only the workflow benefits, but also the performance, getting consistent highly accurate results is important. And therefore, there's been a lot of demand from it. We did update, as you mentioned, the 5,500 placement forecast. We think that that's a reasonable assumption to take the consumables usage across both euro cytology and blood morphology, tracking very well to the forecasted usage, we think when we release the F&A lumps and bumps later on in the year. It will continue to drive interest in the platform and continue to drive higher consumables usage. The placement in terms of the overall profile of where we're placing just as you would expect, it's a competition of suites for customers who don't have to pay our chemistry and hematology because it fits extremely well with hematology solutions, but also existing ibex customers who have our sweet but see the chance of doing or cytology, both on the blood morphology side and also as a complement to hematology and CBC, but also a new testing category in ear cytology is very promising.

We will take our next question from Erin Wright with Morgan Stanley.

Okay. Great. I'll keep it on in view here. So -- can you talk a little bit about the contracts that coincide with the placements in terms of consumables agreements and the consumables flow-through there on, like what's surprising you in terms of utilization and are you seeing better uptake from the mom-and-pops versus some chunkier corporate accounts in terms of how we think about that cadence in terms of Chris's question earlier. And then what I'm getting at here, too, is that look, the consumables revenue growth kind of on an organic basis, was probably the strongest in 2 years. I mean how much was inVue contributor to that?

Yes. So let me take the last part of your question first. We don't break out the consumables usage between the inVue and pancreatic lipase and some of the new catalyst specialty tests that we have I did mention that those were important contributors to our overall results. We have seen nice volume growth, and I think it's a tester reflection. But we have a very large installed base of like catalyst, for example, and our ability to ramp that we come out with a new test is something that over time with our commercial organization, we've gotten better at. In terms of placements, getting back to independent practices versus corporate practices, for corporate practices, there tends to be a little bit of a longer lead time in terms of they want to first pilot that could be a fairly sizable number of instruments that they want to pilot before they decide to place, let's say, a new instrument like inVue at all of their practices. Independent practices tend to move much more quickly. And that's not surprising. It's really just [indiscernible] and could assess what they need. In terms of usage, it's just as you would expect for -- these are very common clinical use cases. So if you take a look at ear cytology, most practices of a reasonable size, 3 or 4 veterinarians will tell you that's something that they do pretty much on a daily basis. For blood morphology, most practices, let's say, an average practice in the U.S. is doing approximately 2 chemistry and hematology tests a day, and we know in majority of cases, they would benefit from also adding a blood morphology to a CDC, where they get an aberrant result or something indicating the need to investigate further. So overall, consumables usage is positive. It's in line with where we thought it would be. And the F&A lumps and bumps will only, I think, improve that over time when we come out with it.

Okay. Great. And then on guidance, what's reflected in terms of bed office visit trends now what gets you to the high end, low end of the range? And what's -- given what's implied in the second half, how should we be thinking about the quarterly cadence here?

Just in terms of the guide itself, we did highlight in the prepared remarks that we have updated clinical visits more in line with the recent trends that we've had for the past several quarters, we've been trending more in about the 2.5% range. I think about the midpoint reflecting approximately that amount. As you look at the Q2 to Q3 or Q4 as an example with our second half implied growth expectations, really, it's not a meaningful step up. I think we'll continue to benefit from the building momentum that we have on innovation, as Jay highlighted, I think there's a lot of excitement around inVue. We launched Cortisol test last week within North America. We're still building on pancreatic lipase and Cancer Dx as well. So we feel really good about kind of the momentum that we're building from an innovation and volume perspective within the business. and there's not a material step-up in CAG Diagnostic recurring revenue that I think we've captured in our outlook.

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

Great. Just had a question on how you're thinking about the longer-term launch trajectory of inVue. Obviously, you took up the placement guide for this year. But is there any reason to think more positively about the trajectory here relative to SediVue as an outlook.

So we're not updating anything longer term at this point. We have highlighted that we see an opportunity for a 5-year placement of approximately 20,000 for in view I think we're off to a really exciting start here within 2025, having a starting point within the year of 5,500 instruments, positions us really well for that. Some of our other instruments as SediVue or hematology may be slightly different just in terms of the categories that they support. So we feel good about the longer term. We may provide updates within our Investor Day in a couple of weeks.

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

Great. I want to tie together a couple of small follow-ups. So first, just on the guide, I think you called out $90 million increase reported, $70 million of which is FX of the remaining $20 million placements because you're saying $60 million instead of $50 million for that, if I've got my math right. Just the remaining $10 million? Is it just a combination of different moving pieces. I know that you just said you're assuming visits a little bit weaker. It seems like price you reiterated. Just anything you can talk through on that last little bridge of the revenue guide, so we can tie that off.

Mike, this is Andrew. Yes, just in terms of how we think about the go forward, you highlighted it correctly. We have about $70 million related to foreign exchange impacts aligned with the rates that we have published in our press release specifically. Yes, the other $20 million is really operationally driven. We certainly performed exceptionally well in Q2. We're really thinking about that continuing as we move forward. And we're expecting some momentum built with the innovation and the execution we are investing back into the business as well as Jay highlighted. We do plan to expand in 3 additional countries as well as modest expansion in the U.S. to continue to support our customers and grow volumes. And we see that as a pathway to achieve the other $20 million of operational growth between our performance in Q2 and our outlook for the full year despite the fact that it does remain fairly dynamic. Clinical visits haven't been pressured. We saw a decline of about 2.5% in Q2. And again, we're anticipating that, that trend continues for the remainder of the year.

Okay. And then on the inVue consumables side, I know you don't break it out and you're not going to quantify, but you talked about the 350, 5,500 range previously. But just when you place the instrument in the vet clinic, is there an initial both the consumables that goes with that, that's sort of like sold in tandem with it? Do you start taking orders right away? Have you noticed -- is there -- can you talk about either the initial placement or maybe the initial ramp-up of utilization I know you gave the 35% to 55% range previously. But just trying to think through how that bleed out in the quarter, given the massive box placements. I'm trying to see if there was anything tied on the consumables revenue for that.

A couple of things, Mike. The inVue Dx has a paper run in auto replenishment capability with it so that as the customer -- they make purchase a couple of sleeves to get started of the different cartridge types. But as the customer uses the cartridges and as part of paper run we are able to track that and then obviously, auto ship replacements to it. So it's -- you don't typically see a big bolus at launch. One thing that we have gotten, I think, very good at as a company as part of the onboarding and training process. We're spending quality time with the customer, making sure that the customer develops muscle memory in terms of how to use the instrument and get very comfortable with it. So there's not typically a longer ramp to get comfortable and train everybody perhaps relative to historical benchmarks.

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

Maybe just first one, any color on how things trended throughout the second quarter. And then maybe if you can just talk about the ongoing CAG Dx recurring divergence, if you would, in the results between international and U.S. International continues to be really solid U.S. I don't want to see stuck in mid-single digits, but still sort of mid-single-digit-ish even though I believe some of the innovation is maybe more prominent U.S. versus the early days of international. And then I'll just ask my follow-up.

John, nothing specific to call on trends within the quarter. I think on our Q1 earnings call, we did highlight we were off to a solid start within inVue with [indiscernible] placements I think beyond that, nothing specific there that would indicate any material difference within the months or within the weeks specifically. So I think where we feel like we're largely on track from an expectation standpoint compared to our results here. And then on CAG Diagnostic reoccurring, again, we do see really strong international growth. They're still dealing with some macro and sector headwinds. I think similar to the U.S., we don't have metrics to provide on some of the headwinds by country or within the international region there, but execution continues to perform exceptionally well as we commercialize some of the new products. And in the U.S., we have seen an improvement. I think if you look even on a days adjusted basis compared to Q1, we've seen well over 150 basis point increase in Q2. And again, I think that's largely the result of innovation ramping and our focus on really supporting our customers to drive testing. And you see that play out within the diagnostic frequency and utilization within the sector metrics as well. We delivered about 50 basis point improvement on diagnostic frequency in Q2. So I think it comes back to what we're focused on, which is executing across the diagnostic solution set that we have and continue to partner with our customers on how to leverage diagnostics more effectively.

John, maybe just one comment on U.S. versus international. Typically, with the product launch, we started in the U.S., so you do see some -- the first traction is in our North American market and then international and with some tests, there may be regulatory or license requirements before we can sell in those country markets. What I would say is that for a lot of our specialty tests like pancreatic lipase and it's probably going to be true for cortisol, this very rapid uptake in our international markets. These are very technical markets with DBM sales organization. And so you can't immediately compartmentalize between U.S. and some of these international country markets. So there's really, I think, broad interest.

Got it. That was helpful. And then maybe just a follow-up with -- if you can follow the different numbers. With price of 4 visits down 2.5% in the quarter, the 2Q '25 IDEXX premium as we define it, it was up a solid 6% for 2Q. So can you talk to what reaccelerated the premium in 2Q? And then arguably like why the guidance assumes this does not stick in the back part of 25%, considering you've got these new innovations, right? And they should be ramping like the incremental from those innovations should be greater in 2H specific to 2Q as they build momentum yet the premium, again, as we define it, seems to be more modest in 2H versus 2Q. And hopefully, some of that real-time math made sense.

Yes, John, I'm not entirely sure I follow all the math, but let me just take a step back and highlight. I think if you take a look at how we performed in the second quarter, and then the implied second half guide, really, we're still in the same range, right? Our midpoint would suggest about a 9% growth on overall organic revenue CAG diagnostic recurring revenue of about 7.8% versus Q2 of about 7.4%. So we do anticipate that we'll see some ramping benefits here in the second half. I think we've calibrated the impact of innovations as well as adjusted for the more recent trends for clinical visits. It does remain dynamic from a clinical visit perspective. We're not anticipating that's going to change at this point. But we are excited by the innovation that we're launching, including cortisol, which didn't have an impact in the second quarter. We began shipping that last week. So we're really focused on strong execution within our areas of focus within diagnostic and software. I think we've factored that into our outlook overall. We do expect some pricing benefit in the second half compared to the first half as well. We had noted on prior calls that we were going to begin lapping some of the larger agreements that we have last year in the second quarter specifically, which should give us a little bit of uplift on that as well. So I think, overall, we're well positioned. It does remain to be a pretty dynamic environment that we're operating within, and we're just staying calibrated for that.

[Operator Instructions] We'll take our next question from Ryan Daniels with William Blair.

Can you go a little bit more in depth about some of the investments you're making in the sales force. I think it's the first time, maybe in 1.5 years or 2 years, you're investing in the U.S. And then for the other 3 markets, are those just additional investments? Or are those new countries that you're moving into?

Yes, Ryan. So for the international country markets, those are existing markets that we participate in. And what we're doing with those investments is we continue to increase the commercial density. Our international account management coverage tends to be much higher than what we see in the U.S. In the U.S., it's between 110, 120 accounts per BDC or manager. Internationally, it's much higher than that. It obviously varies by country. We know that just like in the U.S. and North America, when we call on customers, they grow faster. They use more diagnostics. Of course, we benefit from that. These are investments in the entire ecosystem, so not just the VDCs, but also professional service veterinarians and the field service representatives. And they go hand-in-hand with investments that we've made in our reference lab network and software solutions like VetConnect PLUS in terms of expanding menu in these international countries so that all the pieces are in place for good growth. And what we typically find is we have a playbook. It's obviously localized by different country markets, but that we're able to get a very nice ROI on these investments in a fairly short period of time. In the U.S., we have good account coverage. We do find that as we have increased the size of our overall portfolio in terms of point of care and reference labs and software, being able to support that selectively. We've done that, I guess, it's been about 18 months or so. We'll continue to do that. It makes a lot of sense. It supports the productivity of our U.S. commercial organization, which is also very, very high and enables us to really commercialize just a very rapid pace and breadth of innovation that we've had over the last couple of years.

Okay. Perfect. And then as a follow-up, I wanted to turn to the other kind of innovation this year in Cancer Dx. And just hear your early feedback. I know you shared some commentary in your prepared comments, but curious if there's anything that surprised you about how it's being used either as part of a broader panel at a lower price or are they seeing more stand-alone use as an individual diagnostic. It sounds like that might be coming from some competitive accounts, in particular, I assume where they're just purchasing that. So I'd love to get some color there.

Sure. So we've had a lot of enthusiasm from customers and veterinarians, but also pet owners, a little bit surprising because we don't directly market to pet owners. And I'd say we're right about where we thought we'd be. The initial weighting is probably a bit more heavily weighted towards in aiding diagnosis. And this isn't really surprising is with these type of novel new tests, what customers have to do is they test the test for performance. And the feedback has been very, very positive. Specificity is we've gotten more data is over 99% sensitivity as we've disclosed earlier, is 79%, and we're achieving the published turnaround times, which is super, super important because pet owners don't want to have to wait more than a couple of days for results. I'd say that the number of independent practices and corporate groups are using the tests broadly in wellness screens. It's still low. It's very [indiscernible] days. But I would say that they also have plans to be able to do that, and it's growing. And they see that as a way of really pulling through broader wellness blood work. As we have disclosed, we have over 2,500 practices now using this. Very, I think, pleased with the fact that about 15% of the submissions are coming from competitive practices. So there's a fairly rapid uptake across the entire marketplace. Now keep in mind that this is -- canine lymphoma is just the first test of this broader menu. So as this panel expands, the offers can only grow in value and we think becoming even more compelling.

We will take our next question from Navann Ty with BNP Paribas.

One more in view. I'm curious whether the sales force has communicated to customers in future that the F&A expansion was imminent. And then if possible, can you discuss revenue contribution for the first full quarter of cancer diagnostics, and maybe one last one, how is competition reacting to inVue and cancer diagnostics.

Yes. So I think Andrew and I will share this question. I'd say that we have broadly communicated to our customers that our video will grow over time with F&A for lumps and bumps coming later this year. So that's a lot of secrets. Customers are buying inVue based on existing and available menu, which is the ear cytology and blood morphology. In terms of the Cancer Dx, we don't break out the revenue. As I mentioned, though, it's right about where we thought it would be. We're very pleased with the uptake, and it's only growing, and we think it will have a multiplier benefit over time.

Yes. I think to Jay's point, we haven't broken out any of the specifics associated with some of these newer innovations on the recurring revenue side. We'll continue to monitor that. And if it makes sense, we may in the future. But at this point, we're early in the launches. And yes, I think we're seeing really solid results that we expected play out here, as Jay highlighted, but nothing additional to add at this time.

And maybe on competition, how they are reacting to IDEXX innovation, any near-term launches in different or same areas?

Yes. I mean, that hasn't really changed. It's a very competitive landscape. We have to continue to earn our customers' loyalty. We compete on every deal that's out there as do they. Our growth algorithm really, I think, anticipates being able to grow by expanding the portfolio of testing solutions we offer our customers -- the existing customers having -- being able to provide this broader portfolio and being able to grow with us is the primary means growing, and we continue to focus on that. But the overall competitive landscape hasn't changed much.

We will take our last question from David Westenberg with Piper Sandler.

So I just wanted to ask maybe on international markets, great job there. Can you talk about what's essentially been driving it between market growth share gains versus just higher utilization customer support? If you can give us kind of a flavor of which ones are maybe impacting that growth a little bit more. And then as a lot of people have pointed out, the utilization consumables was great in the quarter. Did you see any tariff-related pull forward in Europe maybe or in internal markets that happened in Q2 and just how we might think about that for the rest of the year?

Andrew, why don't you take the tariff question and I'll take the international.

Yes, Dave, this is Andrew. On the tariff side, I don't think we saw any meaningful change in order patterns from our customers, as Jay had highlighted related to things like inVue Dx, we do have a paper run approach, which means even if they were to bring in some consumables, it's really at the time that they run it that we will record the revenue. So I think from that perspective, that's not necessarily something we've seen. And then on the lab side, Certainly, it's more local for local type of revenue anyway. So I think we're not necessarily seeing any major impacts related to the trade landscape from a customer perspective at this point.

Yes. Just in terms of the international opportunity. Keep in mind, just using blood work [indiscernible] as a benchmark. It's a bit over 1/3 of what we see in the U.S. But the opportunity is just more embryonic in terms of really working with customers supporting their priorities and then driving the use of diagnostics. It tends to be weighted a bit more towards sick patient testing versus wellness. So that varies by market. And I think being able to bring these solutions at individual independent clinics that may just have a veterinarian or 2 veterinarians. Our point-of-care solutions tend to be tailor-made for that. I think we've done a very nice job from a product market fit. If you take a look at ProCyte One, just from a cost and performance standpoint, it's very economical at lower usage rates, which fits our international markets very well. So I think it's a combination of -- it's earlier days there. We have great product market fit. We've built out an infrastructure of both commercial reference labs, customer-facing software tools like VetConnect PLUS and really have -- I think, like we've seen in the U.S. over the last decade, driven a growing belief in the use of diagnostics that help them achieve their practice priorities. And so with that, we'll now conclude the Q&A portion of the call. Thank you for your participation and engagement this morning. Once again, my pleasure to share how IDEXX executed against our organic growth strategy while delivering strong financial results in the second 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.