IDEXX Laboratories, Inc. · NASDAQ:IDXX

IDEXX Laboratories — Investor Day (August 2015)

35 slides from IDEXX Laboratories's investor day presentation, Aug 5, 2015

  1. Slide 1: Analyst Day August 5, 2015

    Analyst Day August 5, 2015 Jonathan Ayers, Chairman and Chief Executive Officer Brian McKeon, Executive Vice President & Chief Financial Officer © 2015 IDEXX Laboratories, Inc. All rights reserved.

  2. Slide 2: Safe Harbor Disclaimer

    Safe Harbor Disclaimer The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations and beliefs, as well as a number of assumptions concerning

  3. Slide 3: IDEXX Laboratories, Inc.

    IDEXX Laboratories, Inc. • Consistent track record of innovation • Expanding opportunity set • A global presence driving market and IDEXX organic growth © 2015 IDEXX Laboratories, Inc. All rights reserved. 3

  4. Slide 4: IDEXX Revenues by Business: Companion Animal Group

    IDEXX Revenues by Business 2015 Revenue: $1.60 – 1.62 Billion1 Companion Animal Group (CAG) 83% • Diagnostic and information technology for pet healthcare providers • Long-term double digit organic growth opportunity 12015 revenue guidance as referenced on July 30, 2015. This slide shall not be deem

  5. Slide 5: US Veterinary Market Trends

    US Veterinary Market Trends Long history of outpacing consumer growth 1980 CAGR 2014 CAGR 2020 (1980-2014) (2014-2020) US Personal $1.8T Consumption Expenditure (“PCE”)1 $11.9T $15.5T 5.8% 4.4% per year per year US Veterinary and Pet Spending2 0.5% 7.3% 0.8% 6.5% 0.9% per year per year Veterinary an

  6. Slide 6: Increasing Pet Care Utilization: 4X Opportunity

    Increasing Pet Care Utilization: 4X Opportunity Lifetime Value of Typical 12 Year Old Dog Projected Total Veterinary Practice Revenue Over 12 Year Life $20,000 100% Compliance of Standards $17,700 AAHA standards High Utilization Practice Estimated $15,000 Compliance of Standards $13,600 Practice wit

  7. Slide 7: Consistent Increases in Diagnostic Utilization

    Consistent Increases in Diagnostic Utilization: Supports annual market growth of 9% U.S. Lab Diagnostics as a percent of Vet Practice Revenue1 17.5% 14.7% 15.3% 13.9% 13.4% 2008 2010 2012 2014 2020 Estimate IDEXX innovations focused on driving market growth through a unique, high value approach to a

  8. Slide 8: 14% of Practices Have >20% of Their Revenue from Diagnostics

    14% of Practices Have >20% of Their Revenue from Diagnostics Best practice in diagnostics suggests that practices have room to grow Sample of U.S. Practices by Diagnostic Utilization Level, 2014 High Diagnostic Utilization 15.3% Average Across Sample 38% 35% 13% 10% 4% 0% to 10% 10% to 15% 15% to 20

  9. Slide 9: International Veterinary Diagnostics Market

    International Veterinary Diagnostics Market Far less developed, growing faster than the U.S. United States International $3.4B 255M $2.0B 150M $1.1B Number of Dx Market Number of Dx Market Dogs & Cats Revenue Dogs & Cats Revenue IDEXX estimate of companion animal diagnostic market if international h

  10. Slide 10: IDEXX: A Growing Presence with Veterinarians Globally

    IDEXX: A Growing Presence with Veterinarians Globally Direct Sales Force Both Direct & Distributor Sales Force Distributor Sales Force © 2015 IDEXX Laboratories, Inc. All rights reserved. 10

  11. Slide 11: Strategy #1: Real-Time Care

    Strategy #1: Real-Time Care 2:00 pm 2:05 pm 2:12 pm 2:21 pm 2:27 pm Check In Exam Test Results & Check Out Treatment Plan Blood work results during the exam enhance medical and client value © 2015 IDEXX Laboratories, Inc. All rights reserved. 11

  12. Slide 12: Strategy #2: Expanding Menu, New Protocols

    Strategy #2: Expanding Menu, New Protocols IDEXX History of innovative, proprietary new test introductions Reference Lab Revenue from IDEXX Proprietary Tests (US Only) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Quant C6 Lab 3Dx Lab 4Dx Spec fPL Canine Cardiopet Lab Whipworm Spec cPL

  13. Slide 13: Strategy #3: An Intelligent Information Ecosystem

    Strategy #3: An Intelligent Information Ecosystem Enabled by Social, Mobile, Analytics, Cloud & Internet enabled devices • Lab diagnostics • Lab images & radiographs • Mobile enablement • Practice workflow and analytics • Pet owner engagement • Preventive Care Plans © 2015 IDEXX Laboratories, Inc. A

  14. Slide 14: Worldwide CAG Diagnostics Recurring Revenue

    Worldwide CAG Diagnostics Recurring Revenue The core engine of enduring growth (annual revenue, $MM) 1,200 Rapid Assay • Enduring market 1,000 growth 800 VetLab®2 • High customer 600 retention 400 • Volume driver, Reference leveraged to 200 Labs expanding profit 0 margins 2010 2011 2012 2013 2014 1

  15. Slide 15: IDEXX LPD, Water Segments

    IDEXX LPD, Water Segments Global market leadership positions Share of IDEXX Revenues • LPD: New products, bovine pregnancy Livestock, Poultry, Dairy opportunity (LPD) 9% • Water: >99% retention in recurring Water 8% revenues, continued global growth © 2015 IDEXX Laboratories, Inc. All rights reserve

  16. Slide 16: IDEXX's Innovation Investment

    IDEXX’s Innovation Investment Over 80% of identifiable industry R&D annually, and for the past decade $ MM Cash R&D Investment3 $120 $100 Million $80 $40 $0 2012 2013 2014 2015 Estimate Leveraging internal innovation and external technology opportunities 3Non-GAAP financial measure please refer to A

  17. Slide 17: IDEXX's Major Innovations

    IDEXX’s Major Innovations Drivers of long-term revenue growth potential ?? ~$50M ~2020 ~$100M IDEXX ~$100M TBD/ Revenue LPD/Bovine ~$200M Future In-House Pregnancy Fecal Urinalysis ~$380M Antigen SDMA ~10%+ ~$500M CAGR 2015 Premium Estimated Chemistry Revenue Expansion $1.6B Greenfield Opportunities

  18. Slide 18: Financial Review

    Financial Review Brian McKeon Executive Vice President & Chief Financial Officer © 2015 IDEXX Laboratories, Inc. All rights reserved. 18

  19. Slide 19: Financial Strategy: Consistent Focus on Attractive Core Businesses

    Financial Strategy: Consistent Focus on Attractive Core Businesses IDEXX Revenue Core Business Characteristics $MM  Global market leadership – grounded in 1600 innovation 1400  Strong underlying market growth 1200  High margin, durable annuity revenue streams 1000  Strong cash generation 800 600

  20. Slide 20: Global Expansion of CAG Diagnostics Annuity Drives Economics

    Global Expansion of CAG Diagnostics Annuity Drives Economics Enduring, Profitable Recurring Revenue Growth (annual revenue, $MM) 1,200 • High customer retention 1,000 Rapid Assay • High marginal profit 800 VetLab®2 contribution 600 • Strong, market driven 400 growth Reference 200 Labs 0 2010 2011 20

  21. Slide 21: Expanding Annuity Supports Durable, High Growth Profile

    Expanding Annuity Supports Durable, High Growth Profile Annual Normalized Organic Revenue Growth4 % 16 14 12 CAG Diagnostics Recurring 10 8 Total Company 6 4 2 0 2009 2010 2011 2012 2013 2014 5 2015 Estimate5 4,5 Non-GAAP financial measure please refer to Appendix for footnotes. © 2015 IDEXX Laborat

  22. Slide 22: Annuity Growth Drivers: Expanding premium instrument base

    Annuity Growth Drivers: Expanding premium instrument base Premium Instrument Install Base LaserCyte® & ProCyte ® Catalyst One® & Catalyst ® Dx © 2015 IDEXX Laboratories, Inc. All rights reserved. 22

  23. Slide 23: Annuity Growth Drivers: Reference lab innovation & commercial capability

    Annuity Growth Drivers: Reference lab innovation & commercial capability Global Reference Lab and Consulting Services Revenue6 $MM 600 SDMA Fecal Antigen Canine Asian Flu 500 Expanded US Sales Force Lab 4Dx Plus Leipzig Direct Lab IDEXX 400 VetConnect PLUS Allergy Canine & Feline Cardiopet #2 300 Co

  24. Slide 24: Annuity Growth Drivers: Accelerating international CAG expansion

    Annuity Growth Drivers: Accelerating international CAG expansion International CAG Revenue $MM  2015 YTD Catalyst placements +92% 500  Global leverage of innovation pipeline  Catalyst One 400  SDMA, Fecal  VetConnect PLUS 300  SediVue Dx® Analyzer  Expanding reference lab network 200 (organic

  25. Slide 25: IDEXX's Major Innovations

    IDEXX’s Major Innovations Drivers of long-term revenue potential ?? ~$50M ~2020 ~$100M IDEXX ~$100M TBD/ Revenue Bovine ~$200M Future In-House Pregnancy Fecal Urinalysis ~$380M Antigen SDMA ~10%+ ~$500M CAGR 2015 Premium Estimated Chemistry Revenue Expansion $1.6B Growth in Base Greenfield Opportuni

  26. Slide 26: 10%+ long-term annual revenue growth potential

    IDEXX: 10%+ long-term annual revenue growth potential IDEXX Portfolio Targeted Multi-Year Revenue Growth Rates Share of 2014 IDEXX Total Revenue LPD/Water CAG Diagnostics +7% - 10% Recurring +9% - 13% CAG Information Management & Drivers: Digital  Global expansion of +10% Instruments premium instru

  27. Slide 27: Long-Term Operating Margin Outlook Supported by Gross Margin Expansion

    Long-Term Operating Margin Outlook Supported by Gross Margin Expansion Margin Drivers Near-Term Longer-Term Gross Margin Expansion CAG Recurring Annuity Growth (Price/Mix) Lab Scale/Productivity Sourcing/Manufacturing (Cost/Mix) Operating Cost Leverage Sales & Marketing R&D IT G & A Other Annual Ope

  28. Slide 28: Foreign Exchange Near-Term Headwind from Strengthening US Dollar

    Foreign Exchange Near-Term “Headwind” from Significant Strengthening of US Dollar Key Currencies Indexed to Dollar (Euro, GBP, CAD, AUD, Yen) 2010-2015  ~25% international revenue sourced in US dollars for export 1.40  2015 impact – 6% revenue growth, 1.30 $0.13 per share (net of hedge 1.20 gains)

  29. Slide 29: Core Business Expansion Will Continue to Generate Substantial Cash Flow

    Focus on Core Business Expansion Will Continue to Generate Substantial Cash Flow Capital Spending Free Cash Flow8 as a % of Net Income $MM $MM 150% IT Operations Facilities Labs All Other 120 100 100% 80 60 50% 40 20 0% 0 2010 2011 2012 2013 2014 9 2015 9 2010 2011 2012 2013 2014 2015 Estimate Estim

  30. Slide 30: Capital Structure and Capital Allocation Strategy Support Shareholder Returns

    Capital Structure and Capital Allocation Strategy Support Shareholder Returns Debt to Adjusted EBITDA10 Ratio Cumulative Share Repurchases $B 3.0 3.5x 3.0x Target Range Gross 2.5x 2.0x Net 2.0 1.5x 1.0x 0.5x 1.0 11 12 2010 2011 2012 2013 2014 2015 YTD 0.0 1999 2003 2007 2011 2015 YTD  $2.6 billion

  31. Slide 31: Long-Term Financial Model: Sustained 15%-20%+ Annual EPS Growth

    Long-Term Financial Model: Potential for Sustained 15%-20%+ Annual EPS Growth $ MM Revenue Operating Capital Long-Term Growth Margin Allocation EPS Growth Expansion Leverage Potential 10%+ (9% - 13%) 50 bps+ +3% - 4% +15% - 20%+ Incremental EPS Growth © 2015 IDEXX Laboratories, Inc. All rights reser

  32. Slide 32: Q&A

    Q&A © 2015 IDEXX Laboratories, Inc. All rights reserved. 32

  33. Slide 33: Appendix

    Appendix © 2015 IDEXX Laboratories, Inc. All rights reserved.

  34. Slide 34: Footnotes

    Footnotes 1Reported revenues adjusted to exclude the impact of distributor inventory draw-down of $25 million in Q4 2014 associated with transition to US all-direct sales strategy. 2 VetLab® includes consumables, service and accessories. 3Cash R&D investment is a non-GAAP financial measure and repre

  35. Slide 35: Footnotes

    Footnotes 8Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, excluding tax benefits attributable to share-based compensation arrangements, reduced by the Company’s investments in fixed assets. Manage

IDEXX Laboratories — Investor Day (August 2015) on 6ix