Good morning, everyone, and welcome to the IDEXX Laboratories Second Quarter 2015 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jon Ayers, Chief Executive Officer; Brian McKeon, 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 risk 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, further 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 measures are provided in our earnings release, which can be found on our website, IDEXX.com. In reviewing our second quarter…

Thank you. And our first question will come from the line of Ryan Daniels with William Blair. Your line is open. Ryan S. Daniels - William Blair & Co. LLC: Yeah. Good morning, guys. Thanks for taking the questions. Jon, let me start with one for you regarding to head-to-head studies. I've seen several of them recently on your website. I guess my curiosity is how quickly do you think you can get that message of the superior sensitivity into the market? And then when that has been presented to veterinarians, have you seen that actually resonate quickly and then switching back to your assays once they understand the sensitivity? Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yes. Ryan, thank you for the question. We just had a – I was with the – our U.S. sales organization all week last week and I'm really impressed. These reps have over 10 years of sales experience. Of course many of them are new to IDEXX, hired last fall. But they're coming up to speed quickly. We talked about the head-to-head studies, including the new peer-reviewed study that I mentioned for ehrlichia, and I think they're going to be quite good at that. The experience we have, even before the peer-reviewed, is that when customers appreciate the differences in sensitivity, they do switch back. Of course, there are a lot of customers to reach. We have a long tail of customers particularly for our feline products, but of course a smaller number but a significant number on our SNAP 4Dx, a fabulous franchise. And so I suspect that we'll be quite effective. But as I mentioned, it will probably take time to reach that group with our normal calling patterns over the next quarter or two. When we do,…

Thank you. Our next question comes from the line of Erin Wilson with Bank of America. Your line is open.

Hey, thanks for taking my questions. You mentioned the change in disclosure on the margin capture and the lower contribution relative to your initial view. So, on a net basis at this point, what are you gaining in the way of economics this year from the direct transition? Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: The – as you mentioned the revenue number, we modified down a bit from the $50 million to $55 million range to the $45 million range. I think on a – it's fully (31:57 – 31:59) with our business now, so it's a little tougher to parse but I think that net flow-through is probably more in the breakeven level to modestly accretive versus the $5 million to $8 million benefit that we had anticipated. Going back in time, we didn't do this for $5 million to $8 million of profitability, obviously this was intended to be a significant step-up in our commercial capability, allow us to fund that, and to position us well for accelerated long-term growth and we feel very good about the progress we're making on that front. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yeah. Erin, I would comment, really building on Brian's comments that if you think for example the SDMA launch, that was a virtually false launch but we couldn't have reached 90% of veterinarians including more than half that learned about it from their representative in the first six months without a direct sales model. And so – and that was a just very, very successful launch. It's an example of what our direct sales organization allows us to do that we haven't been able to do previously. And just a follow-up on Ryan's question, I realize I didn't answer the last part. For customers who send in a full chemistry panel, the average price is, for a chemistry panel, might be $30 to $40, but for an SDMA-only result we offer that for $19.95, so it gives you a sense of the revenue contribution depending on how they submit their sample.

Okay, great. Thanks. And there has been a lot of noise out there and I would just like you to comment I guess or characterize the pricing trends across your business relative to the volume contribution, particularly in the consumable side of the business I guess as well as in instruments? Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: We are a volume-driven business, always have been, but our pricing trends are positive. As we noted in our results, we had actually an improvement in our gross margins in the quarter and our underlying recurring CAG Diagnostic margins also improved. So net-net we are very much focused on growing the volume in our business consistent with our business strategy but we've seen effectively kind of consistent impacts of net pricing changes and we're able to improve our margins as we grow. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yeah, and just a follow-up on that Erin, with regard to the instruments in particular, we have a variety of different types of programs. There really was no change in those programs from prior quarters.

Okay, great. Thanks.

Thank you. We will go the line of Jon Block with Stifel. Your line is open. Jon D. Block - Stifel, Nicolaus & Co., Inc.: Great, thanks, and good morning. I'll try to fit into two questions, maybe the first one will have two parts so just stay with me for a second. Jon, you maintain the guidance for the company but clearly your cornerstone data and our checks show that the industry has really picked up over the past six months. So can you talk about what that means for your implied market share losses so far this year? And as a function of that sort of do you think you are through the noise? I mean, again, I believe you lost share over the past six to nine months. I think that was a cost-sensitive crowd. You put out huge instruments numbers today to be fair. So, what's your conviction that there is sort of – you are through the noise, there is not a broader cost-sensitive crowd out storm to come? That's part one. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: A couple of comments, I believe that our recurring revenue growth was in excess of the market growth in the U.S. and of course we're a global company and then we have pretty strong performance in other businesses like the water business with 8% organic growth. So I'm very pleased with our performance in the U.S. As I mentioned our U.S. lab businesses was higher than our total global lab growth of 12% by a couple points. So, we're very pleased with where we are in the growth of the recurring diagnostic revenues in the U.S. and on a global basis. In addition, I think our – I think we've correctly gauged where…

Thank you. Our next question comes from the line of Nicholas Jansen with Raymond James & Associates. Your line is open. Nicholas M. Jansen - Raymond James & Associates, Inc.: Hey, guys. I just want to get a better sense of CAG gross margins. This is the second consecutive quarter where we've had CAG gross margins down year-over-year and considering that you are seeing double-digit recurring revenue, I would have assumed that we might have seen maybe a bit of improvement there particularly with the margin recapture, just – so I wanted to better understand kind of what's going on in CAG gross margins. Thanks. Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: Yeah, it builds up the question that we just answered which is we have lower product costs flowing through the unallocated segment and if you put that into the CAG picture, they would be actually improved. And the – actually the – keep in mind that as we have very strong instrument placements and the recognition of deferred revenue that has a bit of a negative mix impact on CAG. The underlying CAG recurring margins are improving. So I think the reported segment margin was only down 40 basis points and net-net the underlying CAG recurring margins including the product cost benefits have improved. So we actually see a positive trend on CAG recurring margins. Nicholas M. Jansen - Raymond James & Associates, Inc.: Okay, that's helpful color. And then secondly on the implied 2H organic revenue growth expectations, I think your normalized first half of the year is roughly 11.2%, 11.3% and in the full year it's 12% to 13%. So is there any buckets specifically that you could call out in terms of we expect SNAP Lepto to be a 50-basis-point improvement, we expect SDMA to be this, just wanted to get better comfort because I think there is a lot of concern surrounding the implied acceleration, so any incremental color there would be helpful. Thank you. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yeah. Thank you. It's actually – first of all we have – we do have several new product launches that we've talked about in the last few weeks, all of which will benefit the second half as we've mentioned the T4 slide to our Dx installed base, the SNAP Lepto and the full launch of SDMA in our reference labs. In addition, we have some favorable compares in the second half with regard to some Q4 marketing programs that we had in the U.S. in 2014 associated with our go-direct and a little bit more favorable compare in our livestock and poultry business. Nicholas M. Jansen - Raymond James & Associates, Inc.: Thank you.

Thank you. Our next question will come from Mark Massaro with Canaccord Genuity. Your line is open.

Hey guys. Thanks for the questions. So your rapid test business came in pretty stable and I was wondering if you could maybe talk about some of the competitive dynamics that you are seeing with the competition and lower-priced assays. Jon, can you comment on the 4Dx and your confidence in continuing to – or just clarification that you do not expect to lose share in that segment and really what is driving that? Thanks. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yes. So our rapid assay modality overall tracked our expectations obviously of 4Dx which is by far the largest product in that category (41:32 – 41:34) is – has to be a contributing factor there. Our volume actually in the first half of the year on 4Dx has grown. Sometimes customers use the 4Dx in the lab and sometimes they use it in clinic, sometimes they switch. And so when we look at the volumes across the two modalities, we've seen growth. And I think we've made a lot of progress in understanding the relative performance of our assays in the critical dimension of sensitivity, which of course is the dimension. That's the reason why customers purchase these rapid assay tests, is to determine whether a patient is – has contracted the infectious disease. We've seen some customers in some regions such as those that are more ehrlichia endemic temporarily switch to a competitive offering for ehrlichia. But when they are informed of the difference in – of the pretty dramatic difference in sensitivity, we get them back. And so that's a constant process. There are a lot of customers out there that we've got to talk to. And we've got new assets that are available to us as a result of the work we've done over the last quarter that is now in the hands of our sales organization.

Great. And my second question is we're hearing some rather aggressive commercial tactics from some of your competition and can you maybe just characterize maybe some of the instruments that other providers are throwing in to win business. You've been in this business a long time, so how would you characterize this type of activity? Do you foresee it occurring in many additional quarters? And how do you think you can continue to hold ground given this shift? Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yeah. Thanks for the question. It's always been a competitive market and we sell on really what is a lower cost system solution, when you take all factors into consideration. Our sales force, which was greatly expanded before the beginning of the year, is getting better and better at not only the customer relationships but being able to have that conversation. We are pleased with the premium instrument placement growth we saw in the U.S. in the second quarter over the first quarter. Of course that doesn't even speak to the extraordinary performance we had on a global basis on instrument placements. And there is really – if there is no difference in the economics of our programs as was asked by – in a previous question, and we've got the most complete product line when you look at our full instrument product line and of course our reference labs and when we can do a multimodal profile as we talked about on our in-house chemistry, with our send-out SDMA result. And the T4 is a wonderful addition not only to – of course we had it on Catalyst One but for the Dx which builds further differentiated value. We believe we continue to be unique in the ability to do two-way…

Thank you.

Thank you. And we'll go to the line of Kevin Ellich with Piper Jaffray. Your line is open. Kevin K. Ellich - Piper Jaffray & Co (Broker): Good morning. Thanks for taking the questions. I guess, I wanted to go back to one of the – I think Nick's question on the CAG gross margins, Brian. Could you help explain with the lower product cost that helped drive the unallocated amount, I guess, why would that be in unallocated versus CAG? Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: It's just a methodology we use for where we record it in segment recording for simplicity. For internal management, we use a standard cost for the business areas in terms of how they record their profit performance and if there is variances to performance then they get capitalized into inventory before they get recognized through the P&L. We capture that in the unallocated portion just to – as a way to kind of limit some of the noise on the internal management of the business. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yes, our internal management responsibility accounting is based on standard costs as you would expect and then our global worldwide operations folks are the ones who are doing quite a good job beating those standard costs. Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: And so it's – the numbers were beneficial and that's what you see flowing through and they're somewhat larger than they had been in the past but it's reflective of good underlying business performance and strong volumes. And so that is a – it's a real benefit in that it's supporting improved CAG recurring diagnostic gross margins. Kevin K. Ellich - Piper Jaffray & Co (Broker):…

Thank you. And next we'll go to a follow-up from Jon Block with Stifel. Your line is open. Jon D. Block - Stifel, Nicolaus & Co., Inc.: Great, thanks, and thanks for taking the follow-up. Just two real quick ones, Jon, you gave us a little bit more color on U.S. lab noise out there as well but we certainly haven't thought you were losing share and I think you proved that today. You mentioned a couple of hundred basis points higher than the 12% worldwide, is that still predominantly volume? In the past, you've given us some color that in the U.S. it was vast, vast majority volume. Again broadly speaking, is that mostly a volume driven 14% or so? Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yes that is correct. It's predominantly volume-led. Jon D. Block - Stifel, Nicolaus & Co., Inc.: Okay. And then the flipside, just I want to make sure I've got my arms around the rapid because maybe it's just myself being a curmudgeon but I don't view it as that strong. You print 8.5% organic but 5.9% is from some of the inventory fluctuations. So that gets you I believe to that 3% you sort of detail in the press release. And I know you are not giving the margin capture anymore but if it was anywhere close to last quarter of 9%, that would make the true organic down 6% and the D cell from last quarter is down 3%. So one most importantly, am I thinking it through correctly, and two can you just siphon through the noise and give us what you think is really going on in the trends in your rapid assay business? Thanks guys. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Yeah, thank you for the – I think that's – for the question, Jon. I think that's directionally direct and also consistent with the – our calibration of the business last quarter and the expectations that we set. So I think it's entirely in line with expectations. What we are pleased about is the new assets, an appreciation we have for the differences in our products in the critical area of test sensitivity. And we now have those – recently, obviously this is all very recently, have those resources in the field to be able to have those conversations. So that's I think a positive development from a marketing perspective but with regard to volumes, they are – the volumes were consistent with the expectations that we had them set in our April call. Jon D. Block - Stifel, Nicolaus & Co., Inc.: Perfect. Thanks Jon.

Thank you and we have a follow-up from Nick Jansen with Raymond James & Associates. Your line is open. Nicholas M. Jansen - Raymond James & Associates, Inc.: Hey, one, just quick numbers questions. Brian, I think you said earlier that you thought third quarter organic revenue growth would be up 1 to 2 points relative to the first half. Was that – did I hear that correctly? I just want to confirm that and if that is correct, does that imply kind of 13% to 14% or so in the fourth quarter based on the full-year guide? Thanks. Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: It's 1% to 2% improvement in the normalized organic growth rate. Keep in mind we will have a favorable normalization benefit related to prior-year distributed inventory changes that get factored into that, but it is an improvement and we do to expect improvement in fourth quarter as well kind of building momentum as we are rolling out the new product introductions and that's built into the full-year growth outlook. Nicholas M. Jansen - Raymond James & Associates, Inc.: Great. I just wanted to make sure I heard that correctly. Thanks. Brian P. McKeon - Chief Financial Officer, Treasurer & Executive VP: You did.

Thank you. We have a follow-up from Mark Massaro with Canaccord. Please go ahead.

Hey, guys. I think you've done a nice job with the SDMA in the early goings here especially with competitive accounts. Jon, maybe could you try to quantify the uplift you think SDMA can hit your topline even directionally at roughly $20 per test for those that are not using your full panel. And then can you comment on (53:04 – 53:06) patients of taking share or folks that migrate to your entire reference lab? Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Mark, thank you for the question. Really as a result of years of work, including with the key opinion leaders and six months of preparing the market since we announced SDMA would be part of the core chemistry panel, we concluded a flawless launch earlier this month. And of course it's all in Q3, it's not reflected in our Q2 numbers. And really the excitement and the adoption rate is just quite gratifying. The SDMA will drive our growth on a number of dimensions. Higher loyalty with our current reference lab customers, greater utilization in preventive care, the ability to have greater price realization when we're faced with – a loyal customer who's faced with a competitive offering – a competitive offer that does not include SDMA. Of course, winning new accounts who want to instead of just sending us their – splitting their samples and sending their core to someone else and their SDMA to us and increasing their costs significantly, as a result just sending the entire chemistry panel to us. We have customers who routinely split their business between us and someone else who will, as they understand quickly and adopt SDMA, will be predisposed to seeing their chemistry panels to us if they haven't before. And then, finally, incremental revenue from the 1995 SDMA-only results. To your question about dimensionalizing that, we look forward to doing that next week at our analyst meeting, that is our intent. And I think we'll be able to fully satisfy your question in that regard at that time.

Thank you. And with that, Mr. Ayers, I'd like to turn it back over to you for any closing comments. Jonathan W. Ayers - Chairman, President & Chief Executive Officer: Thank you. I want to thank everybody who's been on the call. I know we also have a number of IDEXXers who are on the call or who will subsequently listen in. And I just want to congratulate our organization here for some extraordinary accomplishments in Q2. It really was an extraordinary quarter for the instrument business on a global basis. Sometimes we have to remind ourselves and everybody else that we are a global organization and Catalyst One is really just a blockbuster instrument. The flawless SDMA launch which we had in Q3, a wave of innovations that we're bringing to the market beyond those two products in terms of T4 on a slide, SDMA, we just introduced images for histo and cyto pathologies that are available on VetConnect PLUS, which is a wonderful advancement in the VetConnect PLUS form of receiving results and unique to IDEXX, and I think we have some great success in getting a better appreciation for the differentiation of our infectious disease assays and an organization globally that is really quite engaged. So my gratitude to everyone at IDEXX who helps deliver these results and we look forward to the Analyst Day next week. We will be broadcasting that in our Reg FD forum for all investors to hear and look forward to detailing the long-term organic growth, double digit that we think will come out of our innovation and our comments on margin expansion over the long term and then going into some detail in some of our strategies. So, with that, we will conclude the call.