IDEXX Laboratories' Q3 2025: Contradictions Emerge on MU Placements, International Diagnostic Growth, and InVue Dx Expectations

Date of Call: None provided

Financials Results

• Revenue: Updated full-year revenue outlook $4,270M-$4,300M; Q3 revenue increased 13% as reported and 12% organically
• EPS: $3.40 per share in Q3 (15% comparable EPS growth); updated full-year EPS outlook $12.81-$13.01, implying 12%-14% comparable EPS growth
• Gross Margin: 61.8% in Q3, up ~80 basis points on a comparable basis (reported gross profit +15%, comparable +13%); reported margins moderated by ~10 bps FX net of hedges
• Operating Margin: Comparable operating margin improved ~120 basis points in Q3; updated full-year reported operating margin outlook 31.6%-31.8% with expected 80-100 bps comparable improvement (includes ~180 bps discrete litigation/FX benefit)

Guidance:

• Updated full-year revenue outlook of $4,270M-$4,300M, implying reported growth of 9.6%-10.3%.
• Overall organic revenue growth guidance 8.8%-9.5%; CAG Diagnostics recurring revenue organic growth 7.5%-8.2% (including 4%-4.5% net price realization).
• Expect ~6,000 MUDX placements in 2025 and >$65M of MUDX instrument revenues.
• Reported operating margin outlook 31.6%-31.8%; EPS outlook $12.81-$13.01.
• Free cash flow conversion expected 95%-100% of net income; capex about $140M; 1% USD strengthening reduces revenue by ~$4M and EPS by ~$0.01.

Business Commentary:

* Revenue Growth and Global Execution: - IDEXX Laboratories reported revenue increased 13% as reported and 12% organically in the third quarter of 2025. - The growth was driven by strong commercial execution in the companion animal business, with benefits from recently launched IDEXX Innovations.

• CAG Diagnostics and Recurring Revenue:
• CAG Diagnostics’ recurring revenues grew over 10% organically, reflecting over 8% gains in the U.S. and double-digit growth internationally.

• Growth was supported by solid volume gains and global net price improvement, despite a decline in U.S. same-store clinical visits.

• Premium Instrument Placements:

• IDEXX placed over 1,750 IDEXX MUDX analyzers in the quarter, resulting in 71% organic growth of CAG instrument revenues.

• The increase in placements is attributed to meeting customer demand for innovative analyzers like MUDX.

• Aging Pets as a Growth Driver:

• IDEXX noted non-wellness visits only declined 30 basis points year-over-year, with non-wellness visits from aging pets showing resilience.
• The aging of pets, particularly those over five years old, is contributing positively to visit trends and diagnostic frequency.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly described "strong financial results" and "outstanding commercial execution," raised full-year revenue and EPS outlooks (revenue +$43M at midpoint; EPS +$0.33 at midpoint), and highlighted Q3 operating margin and EPS comparable gains of ~120 bps and 15%, respectively, supporting a positive tone.

Q&A:

• Question from Erin Wright (Morgan Stanley): Can you unpack the strength in VetLab consumables — how much is MU consumables, lipase, or new contracting terms when placing MUs? Do you have a metric for consumable uplift from MU placements? Also, are you still on track with FNA launch and what are pilots showing?
  Response: Consumables growth is broad-based: driven by 10% install-base growth and specialty tests (pancreatic lipase, Smart QC, Catalyst Cortisol). MU adds incremental consumables (early-stage) and is proceeding to plan; most MU customers using ear cytology/blood morphology are expected to adopt FNA; FNA remains on track.

• Question from Michael Riskin (Bank of America): Are you leveraging MU rollout to uplift the rest of the business (consumables, reference lab, software)? Also, how are end-market visit trends contributing to performance?
  Response: Q3 non-wellness visits were roughly flat (wellness down ~2.5%); aging pets are driving higher diagnostic frequency and utilization. MU provides direct recurring revenue and indirect cross-selling benefits (reference lab, rapid assay, SaaS) via IDEXX360 programs; ~2/3 of MU placements are in North America.

• Question from John Block (Stifel): With the upgraded placement guidance implying ~1,500 systems in Q4, are you caught up with orders? And thoughts on the longer-term 20,000-over-five-years MUDX goal and international CAG recurring strength?
  Response: Still targeting 20,000 MUDX over five years; on track for ~6,000 placements in 2025 (above initial target), Q4 implied ~1,500 placements and trajectory remains strong. International CAG strength reflects early-stage diagnostic adoption, expanded salesforce, reference-lab network and software localization; Q3 included ~100 bps benefit from equivalent days.

• Question from Chris Schott (JP Morgan): Is the aging-pet trend a sustainable tailwind into 2026 for clinical visits, and what are international visit trends?
  Response: International visit visibility is limited but appears stabilized; aging pandemic-era pets should increase non-wellness visits and diagnostic utilization over time—a positive structural tailwind though quarter-to-quarter variability may persist.

• Question from Daniel Clark (Leerink Partners): On a days-adjusted basis CAG recurring grew ~13%; you cited a 13%-16% opportunity range — what specifically drives the upper end (15%-16%)?
  Response: Reaching 15%-16% requires continued disciplined salesforce expansion, reference-lab buildout, localized product-market fit (e.g., ProSite One), and strong in-country customer support — the combination drives higher sustainable growth.

• Question from Brandon Vasquez (William Blair): Can CancerDx be used as a foot in the door to win competitive reference-lab customers and take share? How does that commercial process play out and over what timeframe?
  Response: CancerDx is a differentiator—~17% of submissions currently come from competitors—providing opportunities to re-engage and convert customers; it's a meaningful channel to win share but part of a broader multi-faceted commercial strategy executed over time.

• Question from Andrea Alfonso (UBS): For CancerDx screening adoption, how are vets thinking about age/frequency cutoffs and how is IDEXX engaging vets to initiate screening given wellness visit weakness?
  Response: Two use cases: diagnostic (current majority) and wellness screening (recommended for dogs ≥7 and higher-risk breeds). As the panel expands (adding mast cell and a third cancer), the screening use case will become more compelling and should grow toward parity with diagnostic use over time.

• Question from Keith Davos (Jefferies): With a heavy innovation cadence, how do you avoid overwhelming the market (too much too soon)? Are current reinvestment plans sufficient and how would you adjust if environment improves?
  Response: Innovation agenda is intentionally aggressive and aligned with customer demand; commercial teams can absorb rollouts. Investments are disciplined—commercial hires are short-return, R&D multi-year—and management will adjust resource allocation if conditions change.

Contradiction Point 1

MU Placements and Growth Trajectory

It involves the number of MU placements expected and the trajectory of their growth, which are key for understanding the company's revenue and market penetration strategy.

MU, what are your thoughts on the initial 20,000 placements over five years, and are you caught up in orders? - [John Block](Stifel)

2025Q3: This year, we expect 6,000 placements, well above initial guidance of 4,500. - [Andrew Emerson](CFO)

Can you detail inVue's uptake, the practice types with strongest traction, and whether placements may slow in the remainder of the year? - [Christopher Thomas Schott](JPMorgan Chase & Co)

2025Q2: We are not updating the longer-term outlook for inVue, but we see a potential for 5-year placements of 20,000 instruments. The start with 5,500 placements in 2025 positions us well for growth. - [Andrew Emerson](CFO)

Contradiction Point 2

International Diagnostic Recurring Revenue Growth

It involves the growth expectations for international diagnostic recurring revenue, which is a critical aspect of the company's global expansion strategy.

What's driving the 14% growth in international CAG diagnostic recurring revenue? - [Michael Riskin](Bank of America)

2025Q3: International growth is driven by the embryotic stage of diagnostics usage, expansion of sales reps, and the maturity of the commercial ecosystem. Growth potential is even higher than in the U.S. - [Jay Mazelsky](CEO)

What is driving international market growth, and were there any impacts from tariff-related order pull-forwards in Europe or other markets? - [David Michael Westenberg](Piper Sandler & Co.)

2025Q2: International growth is driven by product market fit and increased diagnostic use. Our portfolio fits well in smaller clinics and supports wellness testing. - [Andrew Emerson](CFO)

Contradiction Point 3

InVue Dx Placement Expectations

It pertains to the expectations and targets for the placement of InVue Dx, which directly impacts revenue growth for the company.

Regarding MU's initial 20,000 placements over five years, are you experiencing order backlogs? - [John Block](Stifel)

2025Q3: In Vue Dx placements are on track to be well above the 4,500 placements we previously communicated in Q1. - [Andrew Emerson](CFO)

What are the updated inVue Dx order numbers, and how were shipment bottlenecks resolved? - [Jonathan Block](Stifel)

2025Q1: We're very pleased with the momentum we're seeing on this as we're fully committed to delivering 4,500 placements this year. - [Jay Mazelsky](CEO)

Contradiction Point 4

Macroeconomic Impact on Veterinary Visits

It highlights the differing perspectives on the impact of macroeconomic conditions on veterinary visits, which directly affects IDEXX's business performance and revenue projections.

Can you break down the impact of macro factors and MU's strength on the company's performance? - [Michael Riskin](Bank of America)

2025Q3: We've seen stability in non-wellness visits, driven by aging pets, while wellness visits continue to decline due to macroeconomic pressures. - [Andrew Emerson](CFO)

Why were certain details not specified in the transcript? - Not specified in the transcript.

2024Q4: Pet ownership and pet care spending remain strong despite broader macroeconomic headwinds. - [Jay Mazelsky](CEO)

Contradiction Point 5

Innovation and Investment Strategy

It involves differing statements about the company's innovation strategy and investment plans, which are crucial for long-term growth and competitive positioning.

How do you ensure innovation keeps up with market adoption, and are current reinvestment plans sufficient? - [Keith Davos](Jefferies)

2025Q3: Innovation is aggressive but intentional, driven by customer needs and market opportunities. The sector development model relies on innovation to drive growth. Our investment plans seem adequate, and adjustments can be made if needed. - [Jay Mazelsky](CEO)

Were there any questions omitted from the call transcript? - Not specified in the transcript.

2024Q4: IDEXX is planning to deliver solid organic revenue growth and profit gains led by strong execution and benefits from new innovation. - [Andrew Emerson](CFO)