IDEXX Laboratories, Inc. (IDXX) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the IDEXX Laboratories Third Quarter 26 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Mike Erickson, President and Chief Executive Officer Andrew Emerson, Chief Financial Officer and John Cummings, 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 26 results and updated 2026 guidance, Please note all references to growth, organic growth, and comparable growth refer to growth compared to the equivalent prior year period unless otherwise noted. To allow broad participation in the Q&A, we ask that each participant limit their questions to 1 with 1 follow-up as necessary. We appreciate you may have additional questions, so please feel free to get back into the queue. And if time permits, we will take your additional questions. Today's prepared remarks will be posted to the Investor Relations section of our after the earnings conference call concludes. I would now like to turn the call over to Andrew Emerson.

Good morning. I am pleased to take you through our third quarter results and provide an updated outlook for our full year 2026 financial expectations. During the third quarter, IDEXX delivered outstanding financial results driven by strong global execution, the expanding impact of IDEXX Innovations, and continued progress in increasing the medically relevant use of diagnostics across our companion animal business. We also advanced our software, data, and AI capabilities through the acquisition of ezyVet. Revenue increased 10% organically, supported by 11% organic growth in CAG Diagnostics recurring revenues, reflecting nearly 14% gains in international regions and nearly 10% growth in the US. We see strong demand for diagnostic solutions, including IDEXX Innovations, as demonstrated with premium instrument placements of nearly 5.8 thousand units with over 1.9 thousand IDEXX InVue Dx analyzers. Operating performance was excellent with comparable operating margin gains of approximately 60 basis points year over year led by improvement in gross margin, while making ongoing investments in the business, including costs related to the ezyVet acquisition. Strong operating profit gains enabled $4.10 per share in the quarter, an increase of 18% as reported, and 22% on a comparable basis. Strong third quarter performance supports an increase to our full year revenue outlook. We are raising our full year revenue range to $4.741 billion to $4.767 billion, a $32 million increase at midpoint. Reflecting strong third quarter performance and approximately $5 million of revenue from ezyVet, Our updated full year overall organic revenue growth outlook is 9.3% to 10% with organic CAG Diagnostics recurring revenue growth of 10.3% to 11%. These ranges represent an increase of approximately 60 basis points at midpoint along with tightening the low end of the range as we enter the final quarter of the year. We also increased our full year EPS outlook to $14.96 to $15.16 per share. An $0.25 per share increase at midpoint. Reflecting 15% to 16% comparable EPS growth while observing near term dilution related to the ezyVet acquisition. We will provide further details on our updated 2026 financial expectations later in my comments. Let's begin with a review of our third quarter results. Third quarter organic revenue growth of 10% was driven by 10% CAG revenue gains, 8% growth in our water business, and 3% growth in LPD. Strong CAG results were driven by CAG Diagnostics recurring revenue growth of 11% organically which was volume led reflecting strong execution and contributions from innovations. And included approximately 4% global net price improvement. Demand for IDEXX diagnostic solutions remains high, and we have realized benefits from net new customer gains expansion of our premium instrument installed base, and increased utilization of IDEXX Innovations. US organic CAG Diagnostics recurring revenue grew 9.6% in Q3, with solid volume gains and net price realization aligned with our full year expectations. US growth continues to be supported by greater testing frequency and intensity per visit as customers adopt our expanded menu. US same store clinical visits declined an estimated 1.8% in the quarter, reflecting a US CAG Diagnostics reoccurring revenue growth premium of approximately 1.1 thousand basis points. Our fourth consecutive quarter above 1 thousand basis points. Underlying patient dynamics continue to support long term demand for diagnostics. In the quarter, pets aged 5+ years where diagnostic frequency rises contributed to clinical visit growth. With a substantial majority of wellness visits still not including blood work, increased diagnostic inclusion remains a long duration growth lever that does not depend on visit growth. International CAG Diagnostic recurring revenues grew 14% organically in Q3, with double digit gains across major international regions. International performance reflects the success of our strategic focus on developing the sector and strong IDEXX execution. We are also encouraged by the quality of growth reflected by the strong momentum in net new customers and same store sales gains. We have successfully completed expansions highlighted on the second quarter call well ahead of schedule. IDEXX innovation and commercial execution drove strong organic revenue gains across our major testing modalities globally in the quarter. IDEXX Vet Lab consumable revenues increased 15% on an organic basis reflecting double digit growth in both The US and international regions. Consumables growth was supported by the expansion of our premium instrument installed base and broader menu utilization. We benefited from ongoing growth of Catalyst's pancreatic lipase, Catalyst cortisol, and SDMA inclusion in chemistry following the integration of SDMA into our chemistry clips. InVue Dx reoccurring revenue continues to ramp aided by the expanding installed base and broadening of f and a on the platform. We remain in our estimated range of $3.5 thousand to $5.5 thousand of reoccurring revenue per analyzer, while making fine needle aspirate testing with canine mast cell termite detection available across all North America customers at the beginning of Q4. Premium instrument placements reached 5.78 thousand units in the quarter and placement quality remained high. Globally, we placed 1.9 thousand InVue Dx instruments with strong international demand nearly 1.2 thousand competitive and greenfield catalyst placements globally. With over 300 in the U.S. IDEXX Global Reference Lab revenues increased 10% organically in Q3 led by volume gains from net new customers including competitive lab wins in The U. S. And increased same store utilization as customers adopt broader testing menu. The IDEXX CancerDx customer base continued to expand with nearly a quarter of customers ordering in Q3 representing non primary IDEXX reference lab accounts. With the addition of canine mast cell tumor detection, to the panel in late September, we have meaningfully increased the medical value to customers without increasing our price on the panel. Global rapid assay revenues increased 1% in Q3, sustaining modest growth seen during Q2. Veterinary, software and diagnostic imaging organic revenues increased 10%, driven by recurring revenue growth and strong placements of our DR50 Plus platform, including another record quarter of installations in the US. Our cloud native PIMS footprint continues to expand across both independent and corporate owned clinics as well. In September, we acquired ezyVet, a leading and rapidly growing provider of AI native ambient listening and clinical workflow software for veterinary practices. The ezyVet revenue run rate is approximately $20 million annualized and growing at strong double digit rates, creating another revenue growth driver for the software modality and opportunity for further supporting diagnostic utilization. Water revenues increased 8% organically in Q3 and livestock, poultry, and dairy revenues increased 3% organically. Turning to the P&L. Strong recurring revenue growth enabled 13% reported operating profit gains, with reported operating margins of 33.1%, up 100 basis points as reported and approximately 60 basis points on a comparable basis, inclusive of ezyVet related costs. Gross profit increased 12% in the quarter as reported, and gross margins were 62.9%. Up 110 basis points as reported and 90 basis points on a comparable basis. These gains reflect benefits from strong recurring revenue growth in IDEXX Vet consumables and reference lab volumes, operational productivity, and favorable product mix with pricing benefits offsetting inflationary cost pressures. On a reported basis, operating expenses increased 10% year-over-year and 11% on a comparable basis. Including ezyVet related costs. We continue to advance investments in our innovation agenda global commercial expansions, and information technology capabilities. Q3 was $4.01 per share, an increase of 18% as reported and 22% on a comparable basis. EPS in the quarter included a $0.03 per share benefit related to a $3.5 million non-operating gain on an equity investment bringing the year to date benefit to $0.05 per share or $4.7 million. Share-based compensation activity benefited the quarter by $0.01 per share, compared to a $0.17 per share benefit in the prior year period and foreign exchange $4 million to operating profit and $0.04 to EPS in Q3 net of hedge effects. Free cash flow was $421 million in Q3 and $978 million year-to-date. On a trailing 12 month basis, our net income to free cash flow conversion rate was 110%. For the full year, our updated outlook for free cash flow conversion is 95% to 100% of net income. Including updated full year capital spending of approximately $160 million Our balance sheet remains strong, Total debt was aligned with prior year end as strong free cash flow supported repaying $75 million of senior notes in the quarter, and we deployed approximately $335 million of capital towards the Covet acquisition and share repurchases in Q3. Bringing the year to date share repurchases to $85 million and supporting a 2% year-over-year reduction in diluted shares outstanding. Turning to our full year 2026 outlook. As noted, we are increasing our outlook for overall revenue to $4.741 billion to $4.767 billion, a $32 million increase at midpoint. This reflects the flow through benefits of strong third quarter performance ezyVet revenue and relatively consistent foreign exchange effects compared to prior estimates. Our reported revenue growth of 10.1% to 10.8% includes approximately 70-basis-point benefit from foreign exchange at the rates outlined in our press release, and approximately $5 million of ezyVet revenue in 2026. As a sensitivity, a 1% strengthening of the US dollar would reduce revenue by approximately $4 million and EPS by $0.02 per share for the remainder of the year. Our updated overall organic revenue growth outlook of 9.3% to 10% includes organic growth range of 10.3% to 11% for CAG Diagnostics recurring revenue including approximately 4% benefit from global net price realization. Momentum across our innovation portfolio including recent launches of Catalyst ProBNP, broadening of IInVue Dx FNA, and the expanded CancerDx panel together with our larger global commercial footprint supports our outlook. In terms of key financial metrics, we are updating our reported operating margin outlook to 32.1% to 32.3% for 2026 reflecting 50 to 70 basis points of full year comparable operating margin improvement. The updated outlook includes approximately 30 basis points of negative impact related to ezyVet, including integration costs and 1-quarter of estimated amortization. We expect to expand margin off of these levels over the next 12 months aligned with our long term goals. Our updated full year EPS outlook is $14.96 to $15.16 per share, an $0.25-per-share increase at midpoint. This reflects approximately $0.12 per share improvement in our operational outlook along with benefits from a lower effective tax rate now estimated at 20.5% lower net interest expense of approximately $32 million and $0.05 per share benefit from nonoperating gain on an equity investment partially offset by approximately $0.13 per share of dilution related to ezyVet. Full year foreign exchange benefits EPS by $0.25 per share at rates outlined in our press release and our outlook continues to include $19 million or $0.24 per share of share-based compensation benefits. And a 2% reduction in average diluted shares outstanding. For the fourth quarter, our implied reported revenue growth range includes an approximately 70-basis-point headwind from foreign currency partially offset by benefits from the ezyVet acquisition. We expect reported operating margins of 28.4% to 29.3% in the quarter, which benefits from gross margin improvement being offset by ezyVet expenses and ongoing investments in the business. That concludes our financial review. I will now turn the call over to Mike for his comments.

Thank you, Andrew, and good morning. IDEXX delivered an exceptional third quarter. Driven by execution across all growth drivers. Expansion of diagnostic utilization, growth in our global instrument and customer base, and continued delivery against our broad based innovation pipeline. Our innovations work together as a solution. Across point of care, reference labs, and software. To expand care and diagnostics utilization in the hands of our customers. IDEXX Diagnostics and software innovations are enabling more pets around the world to get the high quality care they deserve. This morning, I will focus my comments on 3 areas. Global commercial execution, diagnostics and software innovation delivery and our acquisition of ezyVet. Our commercial execution was strong again this quarter. Reflected in exceptional instrument placements. New customer acquisition and volume driven growth ahead of sector averages. At the point of care, each instrument placement is a long term platform investment by the practice, and every menu addition grows the recurring value of that installed base. Our reference labs delivered another quarter of double digit growth. Led by volume expansion, including strong pull through from CancerDx. And in diagnostic imaging, we delivered a third consecutive quarter of more than 300 digital radiography placements, driven by demand for the DR50 Plus Customer retention in CAG Diagnostics remains in the high-90s globally. Reflecting the trust veterinarians place in IDEXX and the durable value of our integrated solutions. We know from experience that diagnostics is a performance category. Practices that embrace our innovative platforms, point of care, reference labs, software and imaging, see higher growth in both their diagnostics and overall practice revenue. Internationally, demand for IDEXX innovations remains robust. The commercial expansions we announced on the Q2 call for France, Spain, South Korea and Canada were all completed ahead of schedule These investments follow our well proven playbook for accelerated sector development through smaller territories for increased customer proximity. When we work side by side with our customers, to build our innovations into their everyday protocols, we see higher diagnostics adoption and utilization supporting practice growth. Turning to innovation. IInVue Dx momentum is strong. And we are well on track to exceed our placement goal of 5.5 thousand for the year. Nearly half of our Q3 placements were international, showing that the value of this paradigm changing platform resonates with clinicians around world. We added both nucleated red blood cells and echinocytes to blood morphology in Q3. These updates push automatically to our global installed base, of nearly 11 thousand InVueDx instruments, with no action required by the practice. At the start of the fourth quarter, we opened fine needle aspirate, or FNA availability to all North American IInVue Dx customers, and every new North American placement now includes FNA. Every day, veterinarians face dogs with suspicious lumps and bumps, and a pet parent worried about cancer. Today, only around 10% of these masses get assessed. Because of the cost, and the complexity of glass slides sending samples out. Early customers using FNA on InVue Dx are evaluating 2x as many masses. This is IDEXX innovation bending the cost curve to expand care access, and care volume. We have also broadened what FNA can identify, adding lipomas and keratinized growth. Alongside mast cell tumor detection. A mast cell tumor can feel very similar to a lipoma. Which is why examining the cells matters. With InVue Dx, veterinarians can give owners answers and reassurance during the visit and focus on the masses that need attention. And if a mass needs further evaluation, a board certified IDEXX pathologist review is 1 click away. Which also brings more volume to our reference labs. For customers not currently using our lab, IInVue Dx placements also include onboarding to the IDEXX reference lab for a seamless experience. IDEXX CancerDx continues to be 1 of our most important innovations. Filling a critical gap in care for early and specific cancer detection. Cancer is the top cause of mortality in dogs, with more than 25 million at risk dogs globally. Tragically, cancer is often found too late to take action. Early detection expands treatment options and has the potential to extend a pet's life. In the third quarter, we delivered another milestone. Adding K9 mast cell tumor detection alongside canine lymphoma in North America. Taking CancerDx from a test to a multi cancer panel. Mast cell tumors are among the most common cancers in dogs, and are frequently missed. We tune detection toward the more aggressive forms, where early detection makes the greatest difference and a positive result is highly actionable. Mass cell tumor detection also connects directly to InVue Dx, A positive result for mast cell tumor on CancerDx prompts a next step to examine any external masses for cancer using InVue Dx FNA. This is the kind of connected solution IDEXX can deliver across point of care and reference labs. As we shared at Investor Day, we are offering the expanded CancerDx panel at the same affordable price as when we launched. As low as $15 in the U.S., when run with most blood work panels in the IDEXX reference labs. Doctors and pet parents should never have to choose between early cancer screening and wellness blood work These should be run together for at risk dogs. Independent practices and corporate groups alike are welcoming our leadership stance on affordable screening. CancerDx runs on the same blood sample practices already send us for routine blood work. With no change to specimen requirements or workflow. We see strong evidence that our strategy to grow blood work utilization is working. 70% of CancerDx runs are part of a broader blood work panel, and customers who adopt CancerDx see higher routine testing volumes. By the end of the year, CancerDx capabilities will expand further, to include hemangiosarcoma detection and we are planning for broad customer availability in North America beginning in the first quarter. Hemangiosarcomas grow silently inside an organ like the spleen, and are too often discovered only as an emergency. When the mass ruptures and the dog can be lost within hours. This is a heartbreaking experience for owners, and veterinarians alike. With hemangiosarcoma, CancerDx will address approximately 40% of all canine cancers. We believe this marks a tipping point for affordable cancer screening inspiring broader, wellness blood work. Earlier this month, we also advanced our technology for life platform strategy with the North American launch of Catalyst ProBNP. The first and only dual species quantitative cardiac test at the point of care. Heart disease affects approximately 1 in 6 cats and 1 in 10 dogs, yet it remains under assessed in general practice. With only about 24 veterinary cardiologists in The US for more than 23 million affected cats and dogs. Catalyst ProBNP supports screening, diagnosis, and monitoring across multiple clinical scenarios. It delivers quantitative results during the patient visit. With laboratory level accuracy so decisions can be made while the patient is still in the clinic and results appear in VetConnect PLUS with built in interpretive guidance. Catalyst menu additions, such as SDMA inclusive clips, pancreatic lipase, cortisol, and now proBNP, Expand the value of our over 80 thousand Catalysts around the world. We have seen how software, data, and AI are powerful enablers of diagnostic utilization growth. And in September, we strengthened these capabilities with the acquisition of ezyVet, a leading AI clinical assistant purpose built for veterinary practices. ezyVet gives time back to clinical teams, and helps them deliver more complete care. When I visit practices, I see the friction firsthand. Complex caseloads, rising pet parent expectations, and burdensome documentation that pulls clinicians away from their patients. ezyVet automatically captures the exam room and phone conversations builds treatment plans, and supports more personalized client follow-up after the visit. Every minute saved is capacity to see more patients. And in context prompts help with next steps. Practices and groups using ezyVet are seeing measurable gains in team productivity and satisfaction across the care workflow. With ezyVet, we saw a category leading solution along with a talented, AI native team with deep sector knowledge. Covet has rapidly grown adoption across The US, and more than a dozen countries internationally. Combined with IDEXX's software, data, diagnostics, and commercial capabilities, Covet advances our vision for an AI powered connected system that unlocks greater value from information generated throughout the clinical workflow to support expanded patient care. Covet is already integrated with ezyVet, and we will integrate it more deeply with our other software and data assets including VetConnect PLUS and Vello. We will also continue to advance Covet integrations with non IDEXX practice management systems. Covet's international footprint extends our software reach to benefit customers in geographies not currently served by IDEXX practice management systems. Looking ahead, I am energized by the opportunity in front of us. The long term drivers of the animal health sector remain sound. The bonds between people and their pets continues to deepen. Pets are living longer and aging into the years diagnostics matter most. Expectations for quality care keep rising, with diagnostics at the center of clinical decision making. These factors reinforce the durability of sector growth. While practices and corporate groups that embrace innovation and engage their clients realize faster growth. They are leaning into IDEXX Diagnostics and software as growth engines. Combined with IDEXX Execution, this is driving our growth well above sector averages. We are in the early innings of a broad based innovation cycle. InViewDX and FNA CancerDx as a multi cancer panel, Catalyst ProBNP, ezyVet, and our software. Next up is IDEXX Multi-Q. Our next paradigm changing point of care platform designed and built here in Maine, USA. We will share more at an investor event at VMX in Orlando on Monday, January 18th, at 1:00 p.m. Eastern. We will also make this available via live stream on the Investor Relations section of our website. I hope you can join us. To IDEXX employees, around the world, thank you. And a special warm welcome to our new colleagues from ezyVet. Your commitment to innovations that help clinical teams see more and do more is what turns diagnostic and software innovation into long term durable growth for our customers and for IDEXX. With that, I will open the line for Q and A.

And Once again, that is *1 to signal for a question. We will go right to Christopher Schott with JPMorgan.

Great. Thanks so much for the questions. Maybe just first on the guidance side. You started the year with about an 8% organic growth target. Number is looking now closer to 10%, and that is coming despite a bit this environment in U. S. That has not materially improved. So you just elaborate a little bit more on what is enabling this? So how much of this is the new platforms, versus the Salesforce expansion versus maybe visits just not being the proxy for sales growth for your business right now? And then my second question was just on the vet visit trends. Just elaborate a little bit more of what you are seeing both on the puppy side and the older dog side? I am just trying to get a sense of where those cohorts are trending and just implications as you think about longer term visit trends from here. Thanks so much.

Hey, Christopher. Good morning, and thanks for the questions. This is Michael. I will speak to kind of the broader momentum in the business that gets at several of the elements in your questions, and then Andrew round that out talking about guidance and a tie back to, some of the trends. So as we talked about, in the call, we are executing exceptionally well. Our growth is outpacing what we are seeing in terms of broader sector averages. And, Christopher, this is really volume led growth driven by the benefits that we are seeing from our innovations, from commercial execution, and also from higher quality visits that are the result of positive trends when it comes to pet demographics. You know, on the innovation side, keep a note, this is really a broad based set of benefits that we are seeing. And we are in the early stages of seeing this. We talked about InVue Dx, CancerDx. We just launched ProBNP on Catalyst, but even pancreatic lipase which we launched over 2 years ago, is continuing to drive incremental growth in our business. And then commercially, our teams are executing extremely well. You know, this was a record Q3. Terms of instrument placements, and we are seeing really strong new customer growth in the labs. And, of course, all of these things come with long durable revenue tail. So as we bring on new customers, we see the long term benefits in our growth. The other thing is we are not sitting still, of course, and neither are our customers. When we look at practices and groups who are really engaging with IDEXX innovation and focusing on things like demand generation marketing with their clients, working on the customer experience, bringing back labs clients. They. They are they are seeing growth in their businesses as well. And we are also seeing interesting moves when it comes to how pricing is applied to things wellness diagnostics, again, to drive demand. So the bottom line is across innovation, commercial execution, and what we are seeing in terms of aging pets, we see durable growth performance And really, our growth, we does not rely on seeing, positive visits. We can grow irrespective of that. Let me hand it over to Andrew to kinda round that out.

Yeah. Christopher, I think, to your point, you know, we have, executed exceptionally well, here. I think the initial guide that we had, you know, captured a higher end that they were actually above at this point. We have been taking that up over the, like, the course of the year. But, you know, it really comes back a lot of the drivers that Mike highlighted here with strong execution, really in our Companion Animal Diagnostics business. The reoccurring growth really supported by innovation, global expansion, and just strong momentum given the demand that we see for diagnostics at the clinic. We continue to see our customers also be looking for ways to grow volumes And, you know, certainly, an expanded menu is 1 of those ways to provide better care for their clients and, you know, also grow their businesses. And I think we find a nice match up there. So seeing really strong success, and I think we are comfortable with the, updated guide at this point, which, you know, continues to show that we have a lot of momentum in the business, and, yeah, we can continue to work through some of these, pressures on clinical visits. Just in terms of your second question, on the clinical visits themselves, so Certainly we do see, you know, some of the aging cohort continue to add growth within the overall makeup here. While we are seeing some more muted puppy and kitten adoption levels that is not a new theme. I think that is been something that is been playing out. The macro environment continues to remain a little bit more of a challenge, and it is something we are, you know, paying close attention to. But the positive side is the, you know, aging pet population is, you know, continuing to perform well. We see that playing through on the non wellness category. More particularly. We know pets are living longer, and, yeah, I think that creates a lot of opportunity for us to continue to work, you know, with our customers on that age cohort. And then the breed mix that we see is also a positive tailwind for us, over time. But, you know, fundamentally, the, you know, key drivers of the pet population, people loving their pets, remain intact, and I think that is a positive story for the longer term. Thank you.

We will move next to Jonathan Block with Stifel.

Okay. Great. Hey, guys. Good morning. 2 for me. I will break them up. I guess just maybe the first 1, I think the end user 4.6 thousand year-to-date. I think you said now exceed the 5.5 thousand for 2026. But, I mean, also your total since inception, since the launch, seems to be running solidly ahead of near term that expectations. Maybe you are about 11 thousand total. Correct me if I am wrong there. So just how do we think about that 20 thousand analyzers over 5 years but now maybe you knocking out more than half of those within 2 years. Are there any changes to that long term assumption? And then I will ask a follow-up.

John. Good morning. We are really pleased with the momentum and the demand for NVDX really around the world as I noted, we saw close to half our placements coming internationally. And you do have the numbers right. I mean, we have seen just tremendous execution when it comes to, placing end use. You know, we are we are on track, as I said, to exceed our placement goal of 5.5 thousand for the year. And our 5 year goal of 20 thousand placements. We are on we are on track to exceed both of those. And as I also talked about it, we have got more happening with the platform itself. We continue to expand the menu, which brings even more clinical value to our customers. We added to the blood morphology menu with nucleated RBCs and echinocytes and a fine needle aspirate we know is something that is a real and excitement to our customers. And so we have opened up availability to that now broadly in North America, and every new install will now include fine needle aspirate. And we love what that is doing, not just in terms of addressing a real need, in the area of fine needle aspirates, but also opening up more access to care and expanding volume of care as we are seeing these customers doing 2x as many masses. And so we are really pleased with the overall performance and level of customer demand, and we know that this analyzer is fulfilling a key need in the clinical arsenal for our customers around the world.

that is great. that is great. Helpful color. And then, Andrew, the second 1 for you and I think it is an important 1. Hope I can lay it out clearly. The consistent 50 to 100 basis points of annual op margin expansion in the LRP do we have to think about anything differently for 2027 op-margin expansion with the recent acquisition of Covet closing you obviously embedded some dilution for 4Q, 2026 with the OM guidance coming down. We have to think about that dilution for the first 2 to 3 quarters of next year as well until you lap it? And as a result, should we have more reserve 2027 OM expansion assumptions embedded in our models. Thank you.

Thanks, John. Appreciate the question. So as you highlighted, we did include about 30 basis points of operating margin impact from the Covet acquisition really spans both Q3 and Q4. But yes, think from a Q4 and going forward perspective, you know, we have. We have factored that into, you know, the profile, I think, you know, we are still delivering on the full year operating margin results and expectations for our long term growth algorithm, you know, even including, you know, some of that impact and we have been able to increase our overall guidance on revenue and EPS as it relates to those metrics as well. So certainly, as part of the deal, we have some costs, some integration costs, as well as then just the overall business performance, which would include, you know, some of the impact from things like amortization of the deal as well. But keep in mind, we did highlight we expect over the next 12 months, we would grow the total company revenues in line with those longer term expectations of 50 to 100 points of annual operating margin impact here. So as we, you know, get through the integration of the deal itself, and we continue to see success in growing that business, we would build off of the overall operating margin and expand the operating margins of Covet directly. But keep in mind, we would also just be managing this as a portfolio similar to many of our other innovations. You know, we do see multiplier benefits across this deal. So it is both a direct revenue growth driver for the software business itself, but we see opportunities to really expand the use of diagnostics. And so when we think about both of those components, we wanna make sure we are making the right investments. Within the business overall, and we kind of, look to see it play out that way. But we have not come off of, you know, our long term growth algorithm, you know, related to this deal directly, and I think we have opportunity to continue to grow into 2027 as well. Thank you.

Our next question comes from the line of Erin Wilson Wright with Morgan Stanley.

Great. Thanks for taking my questions. I have 1 follow-up on the macro discussion earlier and then also on RefLab. So can you speak to what magnitude of sensitivity that you are baking into guidance at this point from a macro perspective? I guess, you see any shift in that demand throughout the quarter? I am just trying to get gauge in terms of you mentioned for instance, that you are continuing to monitor what you are seeing out there from a macro perspective. Just given that innovation obviously allows you to grow through this. How are you thinking about the macro in the context of launching a new instrument next year and or Multi-Q when you do launch it? Do you think that they are in a position to invest further in innovation? How will Multi-Q, for instance, address some of those pain points at the clinic level? Then just a quick 1 on RefLab. You had another double digit growth quarter in Ref Lab, which tends to be a little bit more tied to vet office visits. So how much of that is attributable to market share gains versus just greater utilization per existing customer given the innovation? Thanks.

Thanks. Good morning, Aaron. Maybe I will address the first question and then Mike can talk about our reference lab growth profile. Just from a macro I think, you know, it is been relatively consistent for us. In terms of what we see play out on clinical visits, certainly, does have an impact here. I think when you look at the overall guide and what we have there, you know, it is a range, but, you know, we have really had, you know, consistent trends here more recently and, you know, really in line with our prior guide estimates as well. So not a lot of, change, you know, just in terms of that expectation as we have not said Q4 at this point. You know, keep in mind, it can be a little bit, you know, choppy quarter to quarter. there is variability, just with the overall metric itself. But, yeah, I think we have captured that. What we are really excited by is the, you know, continued quality of the visits, and that is really what we are focused on is driving that quality. And by quality, we mean, you know, broadening the use of diagnostics you know, using diagnostics more frequently in, the pets that are coming through the door. And both of those metrics remain solid, and, yeah, again, we continue to engage with our customers to look for ways for them to grow overall volumes. that is really our key focus at this point, strategically, and I think we are seeing a lot of success in that. But maybe I will have Mike talk about the, the reference lab piece of this.

Yeah. Good morning, Aaron. Hey, we have been really, really, pleased with the high growth in the reference labs around the world by the way. it is really a global set of performance metrics that we are looking at there. And this is the outcome of investments that we have made over many, many years into really all aspects of the lab experience, certainly the investments that we have made into networks so we can provide very strong local service experience to customers. All around the world, and that is something we continue to invest in to expand that network. And make sure that we are getting closer to customers and we can serve them in a really strong way. And then technology, you know, the backbone of technology in our reference lab very sophisticated and allows us to provide again, a great level of service, but also the types of sophisticated diagnostics that we run. And then innovation in terms of various tests. And that is broad based as well. I mean, we talk a lot about CancerDx, and that is certainly been a very strong driver of lab growth We are seeing, for example, still upwards of 20%+ of CancerDx runs coming from customers that are not primarily using the IDEXX reference labs. And those are opportunities where those customers to experience our lab value proposition and that opens up the door to a conversation. And as we are seeing, as we shared, really strong new customer growth that is in part an outcome of that kind of conversation. But we are also, investing in other areas. We added taenia tapeworms, for example, to our fecal DX antigen panel in the reference lab. So it is really. it is a broad based innovation strategy that includes CancerDx and other areas along with the kind of service experience that we are providing. And we are doing this around the world. So really, really pleased to see the growth in the lab, not just in The US, but also internationally as we engage with customers, you know, not just in 1 modality, but in this total solution approach. That includes point of care diagnostics, reference labs, and software in an even expanded way.

Once again, if you would like to signal for a question, that is We will go next to Matt Delator with Goldman Sachs.

Great. Congrats on the quarter. Maybe first going back to InVue DX. Could you provide a bit more color on just what drove the strong placements in the quarter? Specifically, notable trends you are seeing with regard to uptake or how clinics are utilizing the product across ear, blood or FNA? And then maybe looking ahead to the upcoming VMX event for Multi-Q, could you just give us an idea of maybe what you will share with that disclosure? And then how should we think about the actual launch timing on the back of that? Thanks very much.

Hey, good morning, and thanks for the question. Just coming back on the first part of your question for IInVue Dx, really, it is you look at the instrument and the critical need that it is addressing around cytology. I mean, cytology is a category of diagnostic that is practiced virtually in every practice around the world. They all have a microscope. And it is been done the same way for over a hundred years in a highly manual fashion. It requires a lot of steps. it is pretty messy, and it is technique sensitive. And so InViewDX addresses that core need. It takes out the slide, which is a revolutionary step. it is got advanced optics and AI. And so it is filling a key need, and that is really, I think, at the core of it. Certainly, we have added to the capabilities on the instrument, that makes it even more clinically valuable. And I think 1 of the things that customers have come to appreciate about IDEXX is that we never stand still. We are constantly expanding the value of these platforms. And so, you know, this year alone, we have added like over half a dozen new things to our blood morphology menu, just for example, and 2 just in the last quarter. And we continue to expand, and fine needle aspirate is really early in that part of the innovation journey for InVue Dx. So I think there is a lot of exciting menu and kind of roadmap ahead of us. We have seen strong placements around the world too, as we noticed internationally, That accounted for almost half the placement. So as we have expanded availability of NVDX globally, we have seen really good demand and uptake there. And so I just think this is really it is filling the key need with our customers, and that is what is generating demand. And, certainly, we have really strong commercial teams that are able to engage with customers and support that demand through our commercial execution, and that is resulting in the types of numbers that we have shared. With respect to our events, at Orlando and MultiQDX, we will talk more about, MultiQDX there. We are not providing more information today, but we are certainly excited about it. I hope you can join us at the event. Great. Thank you both.

We go next to Stephen Deckert with KeyBanc Capital Markets.

Hey. Thanks for the question, guys. I guess, first off, I know you have given the cumulative number of clinics that have ordered CancerDx to date since the launch, Just anything on what number of those clinics are recurring? Thanks.

Hi. Yes, we have good morning. Thanks for the cancer Dx question. CancerDx is really proving to be 1 of the most consequential innovations in the history of the company. I mean, this is a category that has just been calling out for innovation. You look at 1 out of 4 dogs being diagnosed with cancer in their lifetime. And there really has been no solution for early and specific detection of cancer. So CancerDx is filling a key need, and we are seeing just a lot of excitement and interest in what it can do in the practice. We have shared some numbers around customer growth. We saw, again, significant expansion in that. We are at over 14 thousand customers having ordered and run CancerDx. We do not split that out further, but I can tell you that we are seeing really great, momentum and demand. And also, as I shared really good multiplier benefits into broader diagnostics with 70% of CancerDx runs being together with the blood work panel in our reference lab. So we are very happy with the momentum. And I would say it is still early days. there is a lot of opportunity ahead of us as we continue to build out the panel and address this key area of clinical need for docs.

Great. Thanks. Our next question comes from Daniel Christopher Clark with Leerink Partners.

Great. Thanks so much, and good morning. I wanted to first ask about the InVue Dx revenue per analyzer given it is already in your $3.5 thousand to $5.5 thousand you know, dollar per, you know, per year, range. Mike how are you thinking about that trending over time given InVue Dx F and A is just rolling out and that feels like an area with significant unmet need. Thanks for the question.

So we are comfortably in the range of the $3.5 thousand to $5.1 thousand annual recurring revenue per instrument that we have shared in the past. And this range, keep in mind, encompassed both ear cytology, blood morphology, and also fine needle aspirate. Most customers, as we rolled out blood morphology and ear cytology, do both was a really complementary care episodes and areas kind of sub modalities. If you will, within cytology, and we expect the same will be true as we roll out fine needle aspirate more broadly. And so, you know, as we do roll out fine needle aspirate, we certainly see additional upside there to drive growth, balanced out by the fact that we continue to broaden availability of the of the instrument around the world. And so the range is meant to encompass various practice sizes as we go more international and all of those things kind of factor into that. So we see long term opportunity here. And we are not done with the menu on InVue DX. I mean, we can look, around the corner and see a 100 million more cytology tests being done around the world in a frankly, manual and suboptimal way. And so we are really excited about the long term opportunity to continue to advance this platform and meet more and more of the needs in cytology in the practice. Got it. Super helpful. And then just a quick follow-up.

You know, on the incremental placement opportunity from here, obviously, international has been quite U. S. Has been a little more stable. So how are you thinking about kind of incremental uptake from here? Is this more of worldwide launch at this point? And maybe where we are in terms of innings for both would be great.

Yes. We are in full worldwide launch mode with within Vue DX. And so we see really meaningful headroom to continue to place instruments around the world.

We will take our next question from Yvonne Tai with BNP Paribas.

Hi, thank you for taking my question. I had a question on pricing, whether you expect pricing in the animal health diagnostics sector to remain resilient versus, the animal health pharma? As we know that the therapeutic market leader has announced pricing action Do you think diagnostics a bit isolated? And do you expect that to continue for IDEXX? Thank you.

Good morning, Yvonne, Thanks for the question. I do not know that I will comment on pricing in the pharmaceutical area. In our area, we certainly know that it is a competitive sector, as it is always been. We focus on price as a measure of the value that we are creating. We are very transparent around how price factors into our overall growth formula, both in the past and going forward. And we put a lot of focus on making sure that when we put forward pricing, it is consistent with the value that we are providing. And then as we have shared, you know, a major part of our strategy also, if you look at what we are doing with cancer DX, for example, $15 for, in the US, an equivalent number around the world for CancerDx when it is run as a screening test together with blood work in our lab. You know, this is just an example of what we are doing to make a bold statement around affordable screening so that more pets have access to care and what we see is that also drives more volume of care. And this is absolutely turning heads with our customers. They really welcome our stance on this. I have shared in the past, we have had a large corporate group that went all in with CancerDx as part of their senior dog wellness program, and they are seeing higher utilization, higher enrollments. it is driving their broader wellness business. I was with a practice, an independent practice, down in the Southern part of The US, and they went all in with CancerDx for all senior dogs. And they are seen up in the high-30s in terms of wellness blood work inclusion in their practice. So we know the strategy works. We want to make sure it is an accessible strategy so that doctors and owners are not having to make this false choice between blood work screening, blood work, you know, running the blood work and finding out if their dog has cancer, and that is. You know, that strategy is working. And just related to the, overall company, we have had very consistent pricing, you know, as starting with our initial guidance, and we have continued to update folks, along the way about that, which really has not changed, you know, in terms of our expectations. You know, to Mike's point, we are constantly focused on, you know, value. We are not looking to maximize price, you know, we are really trying to expand the sector through volume. But we have been very consistent in terms of expectations that we have set early in the part of the year. Thank you both. And maybe just a quick 1. If you have any early feedback on the mast cell tumor addition that was launched in September? Thank you. Yes. That is just getting really, really positive feedback. We are early in the launch process to be clear. But certainly customers really welcome the fact that CancerDx has now turned the corner from a test to a multi cancer panel. And mast cell tumor is 1 of the most common cancers in dogs, and it often gets missed. It can be especially with dogs that have longer coats, it can be really hard to find mast cell tumors. And the connection between CancerDx and InVue Dx is also really exciting. When you get a positive on CancerDx, and if you have, lumps and bumps and masses, you want to go find out which 1 of those is cancerous. And that is where InVue Dx is a natural next step there. So we are seeing really high receptivity to mass cell tumor and a lot of excitement too around hemangiosarcoma, which is coming next.

Okay. So with that, I want to thank, all of you for your questions. We will now conclude the Q and A portion of this morning's call. it is a pleasure to share IDEXX's continued execution against our innovation driven growth strategy while delivering strong financial results in the quarter. Thank you for your participation, and we will now conclude the call.