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IDEXX Laboratories (IDXX)
Q2 2013 Earnings Call
July 23, 2013 9:00 am ET
Jonathan W. Ayers - Chairman, Chief Executive Officer and President
Willard R. Blanche - Interim Chief Financial Officer and Vice President of Finance
Ryan Daniels - William Blair & Company L.L.C., Research Division
David C. Clair - Piper Jaffray Companies, Research Division
Erin E. Wilson - BofA Merrill Lynch, Research Division
Ross Taylor - CL King & Associates, Inc., Research Division
Jonathan D. Block - Stifel, Nicolaus & Co., Inc., Research Division
Ben C. Haynor - Feltl and Company, Inc., Research Division
Nicholas Jansen - Raymond James & Associates, Inc., Research Division
Previous Statements by IDXX
» IDEXX Laboratories, Inc. - Shareholder/Analyst Call
» IDEXX Laboratories Management Discusses Q1 2013 Results - Earnings Call Transcript
» IDEXX Laboratories' CEO Discusses Q4 2012 Results - Earnings Call Transcript
Participating in the call this morning are Jon Ayers, Chief Executive Officer; Will Blanche, Interim Chief Financial Officer; and Ed Garber, Director, Investor Relations.
IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that statements that members of IDEXX management may make on this call regarding IDEXX's future expectations, plans and prospects constitute forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as expects, may, anticipates, intends, would, will, plans, believes, estimates, should and similar words and expressions. Such statements include, but are not limited to, statements regarding management's expectations for financial results for future periods. Investors should be aware that any forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risks factors are explained in detail in the company's filings with the Securities and Exchange Commission. Please refer to these filings for a more detailed discussion of forward-looking statements and the risks and uncertainties of such statements. All forward-looking statements are made as of today and, except as required by law, the company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Also 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 measure is provided in our earnings release, which can be found on our website, idexx.com.
Finally, we plan to end today's call by 10:00 a.m. Eastern.
I would now like to turn the conference over to Jon Ayers. Please go ahead.
Jonathan W. Ayers
Okay. Thank you, Bonnie. With me is Will Blanche, our VP of Finance and Interim CFO; and also Ed Garber, who is coming back into the role, one of our veteran finance executives and coming back into the role of Director of Investor Relations. So I'm going to just turn over to Will now to take you through the numbers, and I'll come back with some color commentary.
Willard R. Blanche
Thanks, Jon. Good morning, and thank you for joining us for today's call. As reported in our press release, our second quarter revenues were $352.6 million, yielding organic growth of 5.5% and fully diluted earnings per share of $0.99, a year-to-year increase of 9%. Second quarter organic revenue growth was driven by very strong increases in instrument consumables and lab services, partially offset by revenue growth associated with capital and system placements. Earnings per share growth exceeded revenue growth due to strong gross margins, resulting from cost efficiencies and favorable product mix along with augmented shared repurchases. Currency had an immaterial impact on EPS.
As for the economic environment, I wanted to share what we are seeing in the U.S. veterinary market based on data from 700 of our own Cornerstone customers. During the second quarter, patient visits were up 0.7% and practice revenues grew 4.9%, representing a modest improvement over patient visits that grew 0.1% and practice revenues that grew 3.5% in Q1. Growth rates for both metrics did accelerate somewhat over the course of Q2. VetLab instrument and consumable revenue of $112 million grew 9% organically. Instrument revenue of $20.7 million declined 10% organically. Chemistry analyzers placed through volume commitment reagent rental programs in Q2 of this year, which were not used in last year's second quarter, negatively impacted our year-over-year instrument revenue growth by roughly 3%. Adjusted for this, chemistry revenues were up slightly in the quarter. Our worldwide chemistry placements and units were very solid for the quarter, with 14% growth versus prior year and more than a 35% step-up versus Q1. This double-digit year-over-year growth reflects increases in both Catalyst and VetTest placements and was driven by our worldwide sales focus on chemistry instruments, given their importance in resultant consumable stream compared to a hematology placement. We are also very pleased with the quality of these placements, with about 55% of our North American and approximately 50% of our worldwide Catalyst placements going to customers new to IDEXX. Both of these metrics are the highest we've reported since the launch of Catalyst in 2008. For the full year 2013, we maintain our projection for chemistry placement growth to be low single digit, similar to our growth in 2012.
Our worldwide hematology placement saw 18% sequential growth and similar to Catalyst, a little over 50% of worldwide ProCyte placements were to customers new to IDEXX. Total hematology placement declined 11% in the quarter compared to a relatively strong quarter in the prior year and contributed the large majority to total instrument revenue decline. For the full year, we now expect hematology unit placements to be flat versus 2012.