IDEXX Laboratories, Inc. (IDXX) Earnings Call Transcript & Summary

Good morning, and welcome to IDEXX' 2022 Investor Day. It's a great pleasure to welcome you here in person at our worldwide headquarters in Maine and also welcome those folks who are joining us virtually through webcast. My name is Jay Mazelsky, I'm President and CEO of IDEXX, and we have approximately 4-hour program planned for you this morning. I'll be joined by members of my management team, who will also provide an overview of selected topics. So with that, let's dive right into the agenda. I'll give you a quick overview and then get started. So I'll start with an overview of the IDEXX strategy, the opportunity and selected market trends. I'll be followed by Dr. Tina Hunt, who heads up our franchise-leading point-of-care diagnostics business and Global Operations Group. Tina will provide an update on the business, innovation and what we see as the opportunities. Julie Godon, who heads up Vice President and General Manager of our Rapid Assay business, will provide an update on our innovation agenda, including our most recent product launch in enhanced 4Dx Plus and provide a perspective on vector-borne disease screening, marketplace and the opportunity. We'll take a break. We'll reconvene Mike Lane, who heads up our global reference labs business as well as the IT group will provide a perspective in the role that Reference Labs plays as an extension of the practice, the depth and breadth of our offering, highlight or spotlight, our specialty consulting services with a focus on Teleradiology. And then Michael Schreck, who heads up our software and services business, will really provide a perspective on software and how it's become a strategic enabler for our customers in terms of being able to support a high standard of care as well as practice productivity. And then Jim Polewaczyk, who is our global commercial leader will provide a perspective on the capability and the extension of the capabilities we built commercially in which to engage our customers with subject matter experts and trusted advisers to really drive diagnostics utilization. We'll take a short break and come back. George Fennell, who's our global leader for the Americas commercial organization in CAG, will facilitate a conversation with Dr. Bruce Francke, Dr. Francke, is the owner of the practice at Bay Animal Hospital and Essexville, Michigan will provide perspectives on the dynamics within today's practice environment as well as a partnership with IDEXX. Brian McKeon, our Chief Financial Officer, will provide a financial overview of the business, and then we'll have a short amount of time for Q&A. For those of you who are physically here and plan on staying, we have our special lobster lunch planned, then you'll have a chance to interface with the rest of the management team. So with that, and before getting started, let me remind you that today's event is covered by the safe harbor disclaimer. A copy of this is on our website. So if you wish to familiarize yourself more deeply with it, you can go to our website. Let me get started with the overview of the IDEXX opportunity, our strategy and selected market trends. The focus of today's discussion will be on the enduring growth opportunity we see for IDEXX enabled by our long-term growth strategy. Our focus will primarily be on the companion animal diagnostics and information management businesses since this comprises 90-plus percent of the company by revenue. You'll hear several key themes for me and the management team throughout the morning. First is that we've taken a very consistent strategic approach to the business, the developing the opportunity in terms of bringing relevant innovations to solve challenging patient and business problems within a practice to engage in a high touch, high frequency commercial model form partners with customers and subject matter experts and deliver an exceptional customer experience, not just at the product launch but throughout the lifecycle of the product itself and throughout the relationship with the customer. You'll also hear about a tremendous opportunity. We introduced this model last year. It's a $37 billion total addressable opportunity. We think that's very much intact, and I'll share with you some additional insights on that and that with our compelling strategy and executing strongly, we believe that there's an opportunity to grow our top line double digits with increasing profit margins at a high ROIC. Successful strategies, are often enabled and animated by engaging purposes. We believe we have such a purpose at IDEXX, which is to create exceptional long-term value for our customers, for our employees and for our shareholders. Core to our strategy to be able to do that is innovation. And the key enabler as a growth company behind innovation is talent, talent that's diverse and highly engaged. In one way, and we have several ways in which to really drive a highly engaged workforce, but it's creating workplaces that are dynamic, supportive and reflective of the customers that which we serve and the communities in which we live and work. We also have other corporate objectives. These include: being able to improve access, the patient health care, to be able to ensure safe drinking water and food supplies, the testing solutions and to help create the veterinary workforce of the future. And we think by executing our strategy well and by supporting these corporate responsibilities, we can have a positive and strong impact in the world in which we live and work. For those of you interested in going deeper into our corporate responsibility goals, we just published our 2021 corporate responsibility report. You could access it on our website and learn more about our strategy in that regard. Now as we look at the long-term growth potential in the business, we see for IDEXX a very long-term decades-long organic growth opportunity. This is the $37 billion total addressable opportunity we shared with you last year at Investor Day. Let me just quickly remind you how we built this up as a model. We took a look at the total number of clinical visits that we do today, broke it down by wellness and nonwellness visits. Then we looked at best practices in terms of when would blood work ideally be included as part of a clinical visit. Blood work is defined as chemistry and/or hematology. And we said we can grow those clinical visits from where they are today to a much higher rate to this best practice standard. We did the same thing internationally, though we made some modifications just based on mix, given that it's more of a sick patient testing market than wellness. And then we extended it out by the diagnostics use where on the wellness side, it's $60 to $65 at the non-wellness side, it's $105 to $110. And you get the $37 billion total addressable opportunity. A couple of words or a couple of takeaways or thoughts connected with this slide. First off, if you take a look at where we sell today, about 2/3 of the served market is in the U.S., 2/3 of the opportunity, the addressable opportunity is outside the U.S. in international regions. So it's exactly opposite. And that speaks to where we think some of the future growth can come from. The other thing that I would point out in the -- for our U.S. country or region is we've been at this for 30 years. We've been developing the market. We've been perfecting product fit. We've really worked with our partners, the veterinarians on this belief journey. And so over those decades, only 19% of clinical visits today in the U.S. include blood work, chemistry or hematology, so about 15%. 22% of the U.S. region or country is served. If you take a look at those international regions and countries, it's 7%. So a little bit more than 1/3 of that 19%. So it just gives you a sense of just the scale and scope of the opportunity still before us. And we'll talk about that. Let me give you a slightly different cut in terms of how we look at this. And these are 14 countries, and we picked 14 countries based on the size of CAG Diagnostics revenue. It [ prado-ed ] the amount by the diagnostics on average per practice that's used from left to right. And not surprisingly, what you see is the U.S. on the left-hand side. And about 17% of practice revenues in the U.S. are generated from diagnostics. But if you average the other 13 countries, it's about 5% so it's less than 1/3. It's about 5%. So we think the U.S. represents -- is still early in the use of diagnostics, as I shared with you earlier, but there's just a terrific opportunity going forward based on relevant product fit, working in partnership with customers to create awareness and education and the deeper appreciation that the role of diagnostics can play. And obviously, inspiring higher diagnostics utilization. And so you can see from this slide that as a result of being able to consistently develop this market, 30-plus years in the U.S. more recently, at least a decade plus of really intensive effort in our European regions that we've been able to grow our top line fast, organically fast. And it's even accelerated, as you can see from -- during the pandemic. And this has been a result of our multi-modality innovations. It's been a result of really customer-friendly programs, really allowing the veterinarian to practice she or he wants to. And in part during the pandemic, where you've seen that acceleration in part an expansion of the pet population. CAG Diagnostics revenue, as you can see from the chart, comprises almost 80% of the total revenue of the company. CAG Diagnostics recurring revenue consists of consumables from our in-clinic analyzers, SNAP tests, Reference Labs testing services at specialty consulting. And so this growth has been resilient to different economic cycles. And you can see from the chart in front of you that we've consistently grown 10-plus percent at a long period of time. And with a premium, by the way, the personal consumption expenditure growth. Now there haven't been -- there have been times like in 2008, 2009 when we had the Great Recession that our CAG revenue grew approximately 5%. So this is a very resilient business that's different than saying we're immune to different economic cycles. But keep in mind that 2008, 2009 period, we're a very different company that we're a decade plus later than when we were, much more capable in terms of our overall product portfolio. Catalyst One ProCyte One to SediVue, a full suite of software solutions, a Reference Labs network, which is broad and deep and delivers exceptional service. Our Go-to-market model, direct. We have direct representation and you'll see some slides that just give you a sense of the scale of this commercial model is different. And keep in mind, this humanization of pets, the pet owner, pet bud has never been stronger, he has never been stronger and growing. So we think that we're in a much stronger position as a company than we were back in 2008 and 2009, and that really speaks to the durability of the business. And so let me shift a little bit and now provide some data from the pet owner perspective. These are amazing statistics. This is from HABRI in December of 2021. And this is a survey of pet owners. And you can read the survey data. And from our perspective, what it says is that pet owners consider that the dogs and cats to be indispensable members of their family. This is an attribute of the market that we're blessed to serve that really speaks to these very long-term, sustainable, positive drivers whenever you have this type of affinity. So pretty remarkable, but every survey, we've seen surveys that we've done ourselves have come back with this sort of responsiveness, this sort of attachment to their pets. The other, I think, important aspect from a secular trend standpoint is that when you take a look at share of wallet, and I think about this as ability to pay for pet health care spend in general. Today, across different economic segments, what you see is it's relatively modest as a percentage of personal consumption expenditure, 2% or less across these different economic segments. And you break it down further and what you see is the proportion of health care spend or diagnostics that enables or drives health care spend is even smaller than that. So from at least a capacity standpoint, the amount of money that's spent on pet health care and the health and wellness of the beloved members of our families is small and certainly could be sustained in dynamic economic times. But I think an important question is not just can we spend, but does a pet owner want to spend? Will they prioritize spending on pet health care at the expense of other categories, categories they may spend more money on, whether it's travel or entertainment or personal grooming. And what you see from this data is that pet owners said that they are willing to prioritize that this is something that they would cut back in other areas. In fact, a different survey, but about 20% of pet owners saying, they would sooner spend for the health and well-being of their pet than they would for themselves. So a pretty remarkable data. And again, we think that this is an important set of points within a good economic environment, but also one in which it might be a little more dynamic or uncertain. So let me now take a step back and talk about the pet owner a bit and some of those trends. I want to talk about the practice environment. And we'll have a chance this morning with Dr. Francke to talk about some of the dynamics within the practice environment. But a couple of, I think, important takeaways from this slide, which is that medical services is growing faster than practice revenue. So medical services is growing faster than practice revenue. And that growth rate has accelerated. And you can see on the right-hand side, the columns where we take a 5-year period and then the 5-year latter period, and you see that it's growing. And so the question is, why is that the case? Well, a few reasons. Pet owners want the very best care for their pets and they're willing to pay for it. Veterinarians, this is their passion. This is why they went to veterinary school. This is what they want to be able to do, which is deliver excellent care. So you have this convergence of pet owners and veterinarians on in the same thing. And then keep in mind, there are some other trends. Retail sales within the practices have moved outside the practice environment in part as a result of online stores, e-commerce, those sort of things. So from a profit center or a revenue anchor within the practice, they can't rely on that. And so not surprising, we saw this pre-pandemic. It only accelerated during the pandemic, but there's really a pivot or focus on medical services. And then to be able to treat a patient, the BDO or to assess baseline health, you often need to diagnose before you do that. And the way you diagnose is through diagnostics, what we as a company offer. So what you see is diagnostics, which enables the care envelope is growing faster than medical services, which is growing faster than practice revenue. And so this is something that we think is a durable trend. It makes a lot of sense. There are aligned reasons for it in terms of both pet owner and veterinarian and practice center. So we think it's quite positive for the business. Now let me take a look at Diagnostics growth and break it down by its components: clinical visit growth, frequency and utilization. And so what frequency refers to is when a pet sees a veterinarian, and we define that as a clinical visit. When is diagnostics used? Frequency. Utilization speaks to when it's used, what -- how much is consumed, what's the comprehensiveness of the diagnostics let's say, panel or menu that's used. And what you can see, and we break this out by 3 different periods, it grew strongly during the pandemic. All 3 pieces: clinical visits, frequency and utilization. And the frequency and utilization piece, very much aligned with my earlier story on medical services and the growth in medical services has sustained itself coming out of the pandemic as you can see from the right-hand side of the chart. So let's take another look at the next slide, diagnostics, not just by its component pieces, but by the modality. We often get the question if you use -- if you test in your in-clinic modalities, a VetLab business, does it cannibalize testing in the Reference Labs business and vice versa. And I think what this chart shows you, it demonstrably shows you is that testing begets testing. When customers use more diagnostics in clinic in this example, they use more from a Reference Labs standpoint. And it's not surprising. Let me just maybe just up a level and provide some context. All practices or nearly all practices use both Reference Labs and in-clinic. It's just a question of proportion or mix. And so if I bring my dog in for his annual wellness visit, and he's fine and energetic, chances are we're going to do blood work,and that blood work is going to be sent to the Reference Labs. And why not, there's not a time-sensitive dimension to it. If I get the results back next day or the veterinarian tracks me down 2 days later, that's fine. We can have that conversation. It's not going to change anything in terms of the health trajectory of my dog. Now I bring that same dog in at some point later. He's very sick, he's vomiting, he's lethargic. I'm worried about him. And the veterinarian is worried about him, too. And so they do an in-clinic test in that situation. And they decide that based on the results that have come back, they need to do another test or a follow-up test because the first round was in determinant. So that can drive potentially testing to the Reference Labs or in the -- sort of the best outcome is that they figure out what's going on with Blake, and we begin there therapeutic treatments within that 15-, 20-minute patient window, and he starts getting better immediately. So what you see is that testing does beget testing. It's all part of this care protocol. And in fact, when you go to the top 2% of practices, top 2%. They test diagnostics at a 2x level than the average or mean. And you talk to any of these practices that do that. They'll tell you, we have care protocols. We incorporate diagnostics as part of care protocols because we're convinced based on science and best medicine. So that's the way you deliver the best outcomes. So our focus is on being able to support these customers in their practices and help through awareness and education and this belief journey move those customers from left to right on this chart. Let me talk about a key element of our strategy that builds off that prior slide and discussion. And a key part of the strategy is really to inspire customers to adopt our multimodal solutions, reference labs and our in-clinic solutions. And you can see we've been able to grow this strongly over time, 2021, 55% of our customers used both. And if you double-clicked on that 55%, more than 50% of those customers used our practice information management systems, used our PIM systems. So these are all-in customers. And what they tell us is in using the IDEXX ecosystem, it all just works better together. So we really like it. It's been a consistent source of growth for us as we inspire our customers to use a greater proportion of our solutions over time. The -- an important part of this strategy is to integrate the pieces in a way that works for our customers that supports their workflow and can be configured to their workflow. And you'll hear more about that this morning in terms of what that looks like and steps that we can take and where we think that, that creates a competitive advantage for us. The big thing through the customer lens is we focus within diagnostics utilization as opposed to advocating for one modality or the other. So a key advantage. And so by taking this approach, this is helping us grow faster than the overall sector. This is for a 5-plus year period. And what you see is clinical revenue is growing faster than practice revenue, diagnostics revenue is growing faster than clinical revenue and IDEXX Diagnostics revenue has approximately a 400 basis point premium to the overall diagnostics revenue within the sector. So we think that the substantial premium that we've been able to realize over time is very much a factor of the decades-long investments, our very long track record in innovation, in commercial engagement, our channel, being able to provide testing that's highly relevant and delivered in a very customer-friendly way. So as we look forward, I want to take a step up and really talk about the sector as a whole. And through the framework of trends, both long-term tailwinds as well as some moderating factors on a short-term basis. And so I've spoken to the humanization of pets, this notion of strengthening pet parent bond, which we think is a very important attribute of the industry in which we work, but I also want to talk about innovation. And not just innovation from the standpoint of what IDEXX does as important as that is, and we'll speak to that throughout the morning. But innovation in general, whether it's coming from the therapeutic and pharmaceutical companies, specialty diets, insurance, what have you. Because pet owners want the best medicine for their pets. And because that veterinarians areas want to deliver the best standard of care. There's an incredible appetite for innovation that solves new problems. And when you have something that's relevant and important and does that, there's an appetite for it, and it gets picked up. And we think based on what we're doing and what we see others doing in the industry as a whole that, that trend has a lot of energy and a lot of investment dollars behind it. So we think that's quite exciting. I would also say to that last bullet on the left-hand side, the practices have never been hungrier for technology solutions, whether it's software to support each step of the patient visit, workflow optimization, specialty consulting services that Mike Lane will speak to. There's an incredible appetite for being able to adopt technology solutions that support their missions that act as extensions of their practice. And certainly, there is some near-term moderating factors in a marketplace, practice capacity. We've spoken at length to that in other forms. And the industry, we all work in the same economy, whether it's in the U.S. or outside of the U.S. As a result of the pandemic, there's been challenges in terms of retaining labor, really supporting this huge step-up, which I'll speak to in a minute, during the pandemic. And there's been some reset in terms of what's sustainable and practice has taken some time to really work through creating a more productive model. And then macroeconomic environment certainly creates some uncertainty, dynamics, and we're watching that. I think none of us have a crystal ball, but our focus is on being able to help our customers and our customers through different economic cycles. And over the next couple of slides, I'll speak to this lapping of the pandemic demand step-up as well Brian as part of his presentation. There you go. Let me talk a little bit about the step-up in pet population during the pandemic. But through the lens of who are the pet owners that did this? And what do we think this overall trend means. Very interestingly, 50%, over 50% of the new pet forming households were adopted by younger generation, millennials and generation Z. In fact, if you go out 5 years from now, the majority of pet owners are going to be the younger generation. We think this is an extremely positive development. We know that the younger generation, they look to their veterinarian as trusted partners and advisers. They're willing to spend. You've seen some of the statistics, they're willing to spend for the health and happiness of the member of their family. They consider pets, dogs and cats to be members of their family. So we think that this is an extremely positive trend that will only get stronger and really sustain the type of growth we've seen in the sector. Another cut at this. And this follows, I'm pointing to the right-hand side of the chart where you take a look at the health care spend, over the lifetime of the pet as puppies and kittens become dogs and cats, become senior dogs and cats and geriatrics, that the increase in health care spend follows very directionally or thematically what we see on the human side. That as we get older chronic conditions emerge, we may get sicker, we consume more health care. And in this case, the interesting aspect of this is that the proportion of diagnostics actually grows through the life stages of the pet from about 12% to 20%. So we think that this is, again, a very positive sustaining tailwind to the business. I would also point out that part of our strategy, part of what we do as a company is to help develop the sector. So programs like preventive care, for example, bringing testing earlier into the life of the young adult dog establishing baselines maybe uncovering something that's not clinically obvious or symptomatic so that you can begin monitoring it and treating it. We think that we can positively influence where health care is spent and how it is spent. And so as we talk about the future trajectory, this chart shows the average clinical visits per practice over time, pre-pandemic through the pandemic and then out of it. And I would point to the clinical visit trend in a specific year within the pandemic, Q1 2020 to Q1 2021, 13% step-up in clinical visits. 13%. So that 1-year period. That compares to historical rate, prepandemic we saw between 2% and 3%. So that was a giganteus step-up in terms of patients and pets. And veterinarians and practice owners and their staff, they did an amazing job, heroic job in terms of servicing this need. They worked the nights and through weekends, they put in place special processes. They just -- they left it all on the field. And as we came out of the pandemic, some of this wasn't sustainable. We live in a real world, and so there are labor challenges I think throughout the economies of the western world and Asia Pacific. And there was some pullback as a result of exhaustion and trying to put the practices, trying to put the industry on a more sustainable foot. And so we've seen some of those moderating forces in the first part of this year and clinical visit growth moderated about 2% negative from where it was. But from a much, much higher base. Now interestingly, we think that there is substantial underserved demand. And that's what this chart is showing. Take a look at the dotted line. So there's a dotted line on the right-hand side, the upper one, that shows you, based on this expansion in the number of pets, forget the pandemic, but if you just continue to that the 2% to 3% clinical visit growth we've seen historically. That is an implied visit growth based on the number of pets. The solid line with the negative 2% is where we are. So it's substantial underserved demand based on historically a number of pets and what you'd expect to see from clinical visits. Now we think that's going to resolve itself over time. Practices are working hard. You'll hear about new processes they're putting in place. We think that as a company, we're not waiting for this to just magically get fixed. We're doing things on a really day-to-day basis to help practices really support higher level of capacity with productivity. So let's talk about some of the things we're doing. Software is a strategic piece of our strategy. It's a strategic pace of what practices look to. Now if you think about a practice, whether it's an independent group or part of a corporate group, these are businesses, small businesses. And software is used to run the business, whether you're looking at workflow management, workflow optimization, staff productivity, client communications, pet owner -- all those things matter and software can help. And our cloud-based PIM systems, I think, are contemporary and are leaders in being able to support practice capacity and standard of care objectives that veterinarians have. And Michael will speak to our strategy there. But we have other applications like VetConnect PLUS, which puts the test results in the hands of the veterinarian or at the PIM systems, test results, historical test trending and increasingly, clinical decision support. General practitioners are incredibly busy, general practitioners, they go into the clinic and they may have a wellness visit and a doc comes in who is very sick. They're doing teeth cleaning, surgery. It's just like there's this huge breadth of medical and clinical activities that they're responsible for. And the nice thing about clinical decision support is it can provide next step considerations that could help guide what they may be looking at based on the test results. So it's a very powerful application. And a number of the presenters this morning will share with you how we're thinking about it and how it's used in the real life situation. And then the pet owner engagement application software on the right-hand side. This -- the younger generation of pet owners, they're digital natives. They want to be able to engage the practice differently. They want to be able to make online appointments, they want to be able to communicate with the veterinarian through these digital means and vice versa, the other way is true also. So we think that this suite and the integration of this suite can result in very significant step-ups. So Michael will share with you some interesting data in terms of the percentage of time the veterinarians are spend on, things that are just administrative, not caring for the patients. So we're very excited by that. We're also very excited by our VetLab business, our premium in-clinic instrumentation business and the role that it plays in terms of supporting the practices. We've grown our premium installed base of instruments, 18% CAGR since 2010. Now more recently, that's been driven in part by our new hematology analyzer, ProCyte One, which has a very high attach rate with our chemistry analyzer, CAT One but this is customers, look to these solutions to be able to support the care objectives within their practice. It fits workflow. We'll talk extensively about what we think the differentiation advantages we have with this. And as we shared on our recent earnings calls, we've had record instrument placements over many quarters. And again, this is a result of this hunger we see for technology to be able to support the dynamic upload or up-register in practice capacity. So R&D investment and innovation is really our lifeblood. It's where we put a lot of our investment dollars and passion before. We see tons of unmet clinical, medical business problems yet to be solved. And we believe we have deep competencies as a company in terms of instrumentation and bioassays and software and AI and machine learning to be able to address these problems. So we spent over $160 million in R&D in 2021 and recently shared with you that we spent $80 million discrete R&D spend related to some in-licensing deals. And as it turns out, this has been a good investment. You can see on the right-hand side that engaged diagnostics practices grow diagnostics faster than non-engaged IDEXX practices. And diagnostics drives medical services, our [ care block ]. And you can see from there that clinical revenue of IDEXX-engaged practices also grow faster than clinical revenue in non-engaged practices. So we think that this is a result of a customer-first mindset, really centering our innovation strategy on things that are important to them. And that's the case and they use it and they can improve care that they deliver, they grow faster, and we in turn, grow faster. So the point of care or point-of-care portfolio, our VetLab business, it's an incredibly strategic part of our business portfolio. All things being equal, if a test has a real-time orientation to it, the pet comes in, they're sick. They're in the practice environment for 15, 20 minutes. You want to know if you can, what may be ailing the patient. And so this is something that we've invested in, in decades. We're very good at the animal health, the clinic environment, very demanding. It's demanding from the standpoint of clinical performance, usability, reliability, physical footprint, cost profile, you have to get all of those things right. And we've done that extremely well. We think it's a very compelling being able to test in the clinic for those situations is a very compelling value proposition. It's compelling for the pet owner who wants to know what's wrong, and let's begin treating my dog or cat. It's compelling for the veterinarian. They want to know and begin treatment and they want not to spend a day or 2 in follow-up. And the pet owners want to pay for it. So we had this -- we had an opportunity, and I'll describe a little bit more about how we think about it with the next slide, to make a discrete R&D in-licensing investment and bring 2 new point-of-care platforms and applications to IDEXX. And we took advantage of it because we think it addresses some new testing categories that are very compelling. And when I say new testing categories, they're not substitutes for chemistry, hematology or urine sediment, they're new testing categories. Let me describe a little bit in terms of how we think about product development through the VetLab or premium instrument lens. So very often when there's an unmet clinical need, we look around both internally and the external world, whether it's on the human health side and say, is there a solution out there that we can partner for, adapt and bring to the veterinary marketplace. The veterinary marketplace has some very strict requirements around what does performance look like? How does it workflow? What's the time to result, what's the cost profile? How reliable does it have to be? Animal samples that were all mammals are very challenging and different than human blood samples. And so as we look at those opportunities, if we don't see anything outside of our own walls, we develop it. ProCyte One is a great example of a hematology analyzer, which we didn't think many of the attributes around usability and cost and performance could be found. And so we developed it, and it took about almost 5 years from a product development standpoint. In other cases, and SediVue is a great case of that. There were applications, there were uses within the human health side, which we felt could be adapted. You just can't take it from here and put it into a clinic. The algorithms are very different. And again, some of the performance attributes are different. So we were able to do that and it took a couple of years. But in 2016, we launched the product. And you can see from an installed base standpoint, we have sold over 14,000 SediVues with 40,000 more potential opportunities on a go-forward basis. And this has contributed to the growth of our premium installed base. It contributed -- it's made a contributions to the growth of our recurring revenue stream. And it speaks to on so many different levels, how we think about innovation and a technology for life orientation. So we're now on SediVue Neural Network 6.0. We released 5 releases after the initial one, keeping our customers current with features, leveraging this 800 million image database to be able to improve the accuracy of the algorithm. So I think a great example of how we think about innovation and the different factors or consideration. And so this slide is a slide that shows how it all comes together in an integrated way. Our point-of-care diagnostics business, Rapid Assay, Reference Labs, specialty consulting services, integrated with software solutions, whether it's our practice information system, Web PACS, increasingly overlaid with AI and machine learning for clinical decision support or automating routine tasks and really relentlessly supporting a focus of the customer on the care, their care objectives and the workflow within the practice. And we think that, that this is a great example of these combined innovation offerings, working in a way where the some of the product just delivers a very high level of customer satisfaction as well as loyalty. But you can develop all the best solutions in the world, but you need a way to get them to customers, the physician and in front of customers and help them walk through this belief journey that we've been speaking to. And so our commercial organization is the way in which we do that. And you can see it's an area where we have expanded our capability very significantly over time. We have over 1,100 sales professionals who are subject matter experts who have become trusted advisers to our customers who are in a high touch, high frequency model who talk about our products, who work with our customers as partners, as trusted advisers through this belief journey of using relevant testing. So Jim is going to provide some real detail on the playbook, how we think about this. It's really an ecosystem at the end of the day. And so the net result of this, and you can see from this slide where we're measuring Net Promoter Score, but you could be looking at customer satisfaction or any other measure that customers tell us that they're very pleased in their partnership with us. And these are net promoter scores for the company and for individual products that are at world-class levels. And all the other surveys we use, we get the same type of feedback. And interestingly, what customers say, it's not just the product features as good as they are. It comes down to the fact that we trust your commercial organization. We think that they have our best interest in mind. We love the customer experience that you deliver even during challenging times like the pandemic, we don't worry about product continuity or availability. You're one of the few companies we don't -- we didn't worry about through, that you're flexible in terms of the way we could do business with you and the way we interface and operate. So it's all of those pieces. All of those pieces drive this world-class level of customer satisfaction. And so let me take it up a level as I complete my talk over the next couple of slides, which is we see this amazing enduring opportunity before us. And so there's an opportunity in this sector, but is an opportunity driven by our strategy and others to be able to develop it. And so this is a model where we took a look at over what we think is a multiple decade runway in front of us, 25 years. And we took a look -- we started with clinical visits in the U.S. And we said 19% of political visits today include blood work. Why can't over a 25-year period through innovating and doing our job and executing well. Why can't that average customer in the U.S. do what the top customers are already doing in the U.S. So this -- it's not like it's what's the top 1 or 2 or 5 customers. These are hundreds of customers. And we think that based on -- it's reasonable based on best practice standards based on the trends that we see, they can. And then we took a look at our international regions and we asked the question a little bit differently. We said, today, we know they're using blood work a lot less in each clinical visit. Why over the next 25 years with our strategy, with relevant product fit, with a commercial engagement model, can't we help partner with them to grow use of blood work to what we see on average in the U.S., so 25 years later. And we said that's reasonable. We think that we can. And if you go through that math and sum this up, what you see is there's an opportunity within our sector to grow CAG Diagnostics recurring revenue, 9% for a multi-decade horizon. And we believe that as IDEXX, we can enjoy a premium to that 9% growth that we can grow faster as a result of the compelling advantages we bring from a value proposition standpoint as well as the experience in really developing the sector. So we think we're going to play a key role in being able to do that, and we'll share with you this morning some of the insights and approaches that we have in mind. So in summary, in summary, IDEXX has a very attractive, durable recurring revenue business model and is a leader in the sector with a tremendous long-term growth, organic growth opportunity. We're well positioned to build on decades-long investment in innovation, infrastructure, our commercial capabilities to develop the long-term potential of our core businesses while generating exceptional financial returns. So next, I'd like to introduce Dr. Tina Hunt, who heads up our point-of-care diagnostics business and worldwide operations, who will provide our first overview of business and highlights innovation. So, Tina?

Thank you, Jay. Good morning. Let me build on the context that Jay was setting and give you a hypothetical example to dig deeper into real-time care. Your 7-year-old dog, let's call her Luna, who is usually very active and playful has been very quiet and reserved. She even had an accident in the house, which is very unlike her. You're worried and you call your veterinary clinic to set the first available appointment. At the appointment, you veterinarian examines Luna, but because your pup can't tell her what's wrong, the veterinarian has to rely on diagnostics to figure out what's going on. She asks the technician to run a full set of blood work in your analysis, while she herself goes into the adjacent room -- exam room to get started on the next patient. Less than 10 minutes later, she walks back and goes over Luna's results with you. She shows you a picture of Luna's urine, which is teaming with bacteria. Luna has UTI or urinary tract infection. The good news is that she can get started on antibiotics right away and should feel better soon. Your veterinarian also goes over Luna's blood work with you. Liver looks good, kidneys look good. The glucose is elevated from a previous history. To rule out diabetes, she wants to run fructosamine before you leave. She also wants you to set up another appointment in a few days to make sure that the infection cleared and Luna is -- has no complications. As you're picking up antibiotics upfront and setting the next appointment, the technician walks by and lets you know Luna's fructosamine levels were good. She's clear of diabetes. You leave relieved and with a clear action plan. This access to comprehensive diagnostics in minutes, lets your veterinarian manage Luna's case completely and efficiently in one visit. Not only did it result in a better outcome for Luna, the staff didn't have to call you back later with results and recommendations. A veterinarian can see upwards of 20 patients a day. So these follow-on calls can really add up, taking significant time from the staff. And as we saw in Luna's case, it also results in better economic outcomes for the practice, follow-on diagnostics, diet and pharmacy sales, a higher compliance with the veterinarians recommendations. At IDEXX, we have been executing on a long-standing strategy designing a purpose-designed point-of-care diagnostic suite built from the ground up with a very deep understanding of what our customers need to practice this real-time care. We provide a broad set of diagnostics, which are as good as any reference lab. They have to be for veterinarians to trust the accuracy of the results. Each analyzer is intuitive, easy to operate because the users are not highly trained. Nor do they need to be in order to run a point-of-care suite. The analyzers provide -- they're all very fast. They provide results in minutes with very little hands-on time, resulting in tremendous productivity benefits. As we've talked about, time and efficiency are the most precious commodities in a clinic today. And when new staff is hired, which is often these days, training them is much easier on our intuitive platforms backed by extensive support, education and tools. Our entire suite is connected, digitally connected end-to-end with a broader ecosystem through IDEXX VetLab station, that's the screen that you see in the center there, ensuring automatic charge capture. So no charges are lost because clinics are so busy these days. And all analyzers are also connected via SmartService, our cloud IoT platform. We can monitor the performance of our entire installed base, remote in to resolve any issues if needed, send software upgrades, resulting in a very smooth and frictionless customer experience. This holistic software and diagnostics approach that is a major IDEXX differentiator, really optimizes greatly optimizes the clinic workflow, freeing them up to take care of pets, which only they can do. Nobody else in the industry offers this because it's not easy. This is a result of decades of focused investment. A profound outcome of this investment is that we offer veterinarians the ultimate choice and flexibility to run diagnostics in clinic or in our reference labs, depending on the situation. Since all our solutions are connected to the cloud, irrespective of where the diagnostics were run, the veterinarian can access the complete patient history on VetConnect PLUS, including trends and graphs on any device at any time. In fact, VetConnect PLUS mobile app that we updated last fall has over 30,000 users a month and gets a 4.8 out of 5 star rating on the [ iOS ] store. You will hear us consistently talk about AI-powered clinical decision support tools that we are bringing to veterinarians to translate complex diagnostic results into clinical insights and actionable next steps, helping a veterinarian swiftly move through a case. This results in tremendous productivity benefits for the veterinarians because it takes stuff off their shoulders, gives them time back in their days. Chemistry and hematology are the most frequently run guesting categories, both in clinic and in our reference labs, and they usually run together. Chemistry tells what's going on with the organs and hematology will tell us about the components of the blood and things like anemia, inflammation or blood disorders. For chemistry, we have our phenomenally successful Catalyst platform. ProCyte Dx, our premier hematology offering is highly regarded in the industry and perfectly suits the needs of high volume and specialty clinics to address the needs of a broad segment of customers who wanted affordable access to best-in-class technology, we launched ProCyte One last year, completely redefining ease of use for a category that is extremely complex. Customers love it. Intuitive, elegantly simple to operate, comprehensive menu, smart quality control, exceptional performance. We also offer our innovative pay-per-run model on ProCyte One, enabled by SmartService and our extensive software IT ecosystem. It's very customer friendly. Customers don't pay us until they run the test themselves and get paid. We couldn't be more pleased with the very fast ramp right out the gate with over 5,200 ProCyte Ones placed as of end of June. More than half of them are outside North America. As expected, we are seeing a step-level increase in our total hematology placements with a multiplier impact. 95% of these ProCyte Ones are placed with or next to a catalyst. We're successfully executing on our successful playbook of developing a phenomenal analyzer that hits the sweet spot of menu, performance and affordability. Just like Catalyst One, ProCyte One will also be another game changer. Jay talked about how our customers validate the advocacy of our platforms with Net Promoter Survey, double-blinded Net Promoter Survey year after year. What you see here are the NPS results for hematology analyzers. As a reminder, an NPS of 50 is considered world-class. ProCyte Dx has always received very high NPS results. It is gratifying to see ProCyte One also getting high accolades from our customers even more compelling when compared to other offerings on the market. Clinics are busy. They want easy-to-use analyzers that are ready to go with no downtime. They want broad and advanced menu, accurate results they can trust. They also tell us that they value how we serve and support them. Our technical and medical consulting teams get very high marks for the exceptional service. All this adds up in a customer's mind when they think about how a company is partnering with them. When we launched Catalyst One, our chemistry and immunoassay platform in 2014, we opened broad customer access globally. Our Catalyst installed base is large and continues to grow. Even in the current economic environment, we're seeing high placement success because customers see the immense value of Catalyst One. And our customer loyalty is very high at 99%. A key driver of this is our long-term innovation approach, a long-term view with our technology for life, customer-centric approach. We create platforms that continue to increase in value over time versus one-and-done boxes. An illustration of this strategy is the constant innovation heartbeat of new menu additions on our Catalyst platform. We regularly upgrade the capability of our entire installed base with silent software upgrades sent automatically via SmartService as we increase the depth and breadth of capability of our platforms, they become more valuable to our customers. And it is symbiotic, our customers bring more value to us because they're running broader panels, they're running diagnostics on more patients. We see that on average, customers who adopt a new menu run 7% more core chemistry panels than nonadopters. And these new testing categories, CRP, progesterone, SDMA, these are greenfield opportunities that bring new recurring revenue streams to IDEXX with long runway as customer adoption and utilization continue to increase. Let's double-click and look deeper into one of them. Kidney disease is a very common health issue in both cats and dogs. Before SDMA, which we launched in 2015 in our reference labs, 75%, 75% of kidney function could be lost before a veterinarian knew something was wrong using traditional tests. SDMA completely changed that paradigm with its remarkable ability to flag kidney function decline much earlier. Now veterinarians can intervene when only 25% of the kidney function is lost, having a huge impact on the longevity and quality of life for pets. There is a large and growing number of publications that validate the profound diagnostic importance of SDMA. To further support veterinarians in assessing a patient's kidney health, in addition to new tests, we are launching a clinical decision support module right next to the results, starting with staging of chronic kidney disease and next step considerations. We introduced SDMA on our Catalyst platform in 2018. Over 40,000 customers use it today. 5 million runs last year. While that is great progress in just 4 years, SDMA is included in only 1 out of every 4 chemistry panels on Catalyst. It had such outsized diagnostic utility that from day 1, we included it in every single chemistry panel in our reference labs. We believe that no chemistry panel is complete without it. There is huge potential to realize SDMA's diagnostic importance on the point of care side. To address some of the barriers, we have made it faster and easier to run. It's a truly remarkable technological achievement. We've put all the reagents to run the test on just one single slide, eliminating the need for a separate 3 cup reagent consumable or multiple piped tips. Less steps, faster to run, and it is stored right next to the chem-clips, so clinics remember to run it. We're also reducing our environmental impact, significantly less plastic and a much smaller box. We're going from this to this, dramatically smaller footprint, especially as you think about cold storage and shipping. We're in the process of rolling SDMA out globally, the new test, Europe and Australia are already running it, and we are set to launch it in North America next month across the board, enthusiastic customer response. And SDMA also has multiplier impact on our other diagnostics. For example, further magnifying the clinical utility of urinalysis. Jay shared that we are seeing great progress with SediVue. As yellow bars on the chart show, over 14,500 customers are enjoying SediVue's ability to provide urine sediment results in 3 minutes. Veterinarians really value the ability to share high-resolution images with pet parents real-time as we saw in Luna's case, very powerful to share before and after pictures of a bacterial infection that has cleared by following the treatment recommendations. We also expanded set of use capability. In addition to neural network 6.0 that Jay talked about, by adding -- addressing a key need that veterinarians had in interpreting complex results in front of a client, especially as they're running from one appointment to another. We added result interpretation algorithms to facilitate clinical decisions and next steps to consider. SediVue is playing an important role in our IDEXX 360 program globally helping customers access a broad portfolio of diagnostics. Customers are investing in technology, and they want the best. Even though we are seeing record number of placements, there is huge potential of 230,000 opportunities to place our premium analyzers. As you can see significant runway to place Catalyst, most of it is outside North America. The opportunity for hematology is even greater at over 100,000 because not all clinics have chemistry have hematology today. We've made it very affordable with ProCyte One, tremendous greenfield opportunity for SediVue. Even if we frame it conservatively against our own premium chemistry and hematology customers. VetLab is a fabulous business with extensive and lasting competitive advantage and phenomenal global TAM. The underlying fundamentals that drive the enduring recurring revenue for this business are very strong despite some short-term headwinds. We're executing really well on multiple growth drivers for this business. Our installed base is continuing to expand at an accelerated pace, thanks to the customer partnership approach of our commercial teams and the phenomenal launch of ProCyte One. Utilization of diagnostics is increasing and the IDEXX premium is holding. We are executing on our innovation agenda, bringing new test menu to market and a very robust R&D pipeline. A deep customer focus across the organization earns us high customer loyalty. And we're able to take appropriate level of price increases. The future is very bright. There is incredible global runway to place our best-in-class platform suite, expand the adoption and utilization of our test menu and bring innovations that address unmet customer needs. We are very excited about the platform opportunities that we are developing in our R&D pipeline. We've consistently demonstrated that we know how to develop exceptional products, bring them to market and scale very quickly. Let me quickly pivot and provide a quick update on our global operations. Our global supply chain teams have been successfully managing through an unprecedented and very tough environment over the last 2.5 years, pandemic, volatile demand, widespread supply chain disruptions, labor shortages, geopolitical instability, we have not been immune to the challenges that everyone else is facing. Thanks to the dedication and commitment of our teams, we have maintained exceptional customer experience with 99% product availability delivered on time. As we all see in our daily life, the pandemic has exposed significant vulnerabilities in the global supply chains. We're trying to stay ahead of that by building our capacity and resiliency to multiple shocks in the system. This is an area of intense focus for us as a company as we continue to position ourselves for long-term growth in a very turbulent environment. Our goal is to ensure excellent customer experience and deliver savings to the bottom line by optimizing and getting greater leverage from our investments. We're very dedicated to supporting pets live longer, healthier lives and addressing the challenges of our customers, while at the same time, doing our part in taking care of the planet we all live in. As we continue to grow, we are being intentional about reducing the environmental impact. Our corporate social responsibility report outlines our environmental sustainability road map, which is integrated with our business strategy. We published our science-based targets to reduce Scope 1 and 2 greenhouse gas emissions and source 100% renewable electricity by 2030. We're committed to sustainable packaging and shipping practices. We have industry-leading instrument circularity with our technology for life approach and regional service depots. Our innovations have environmental stewardship as a key design requirement as exemplified by our recent launches of ProCyte One and Catalyst SDMA and our new 4Dx Plus launch. And to tell you more about that, it is my pleasure to introduce Julie Godon, Vice President and General Manager of our Rapid Assay business.

Thank you, Tina. This is a powerful diagnostic tool, lab-accurate results in minutes, and it fits right in the palm of your hand. This is our SNAP platform, and I'll be talking to you about SNAP today. SNAP has been a cornerstone for a veterinary practice for decades, enabling veterinarians to use this as a critical screening tool and advance the standard of care for their pets. I'm going to highlight our 4Dx Plus product today. It's one of our flagship brands in the SNAP line and speak a little bit about vector-borne disease and how 4Dx Plus has really made a big difference. So what is vector-borne, a tick or a mosquito is infected. They bite your dog. They transmit the disease through blood and they -- you therefore have vector-borne illness. And vectors vary depending where you live. So if you're in the Northeast or Mid-Atlantic region, you tend to live in a lyme-endemic region, high prevalence of lyme. If you're down south, more mosquitoes, human climate, we tend to see more heartworm there. So what you're seeing behind me is a map. So we do several survey studies over the years, and you're seeing the time frame from 2010 to 2021. And we've overlaid the vector-borne diseases that we screen for with this product. So that's heartworm, lyme, anaplasma and ehrlichia. And it's pretty impactful when you look at this visual, what you're seeing is these ticks are migrating south, they're migrating west, and there's massive geographic expansion in this visual of the United States. We're seeing this, by the way. We're tracking this in other international regions, and we're seeing similar trends of vector-borne. What was most astounding about this last round of data, when we took a look at it, we saw that all of these diseases that we're tracking, they're showing up in all 50 states. So really remarkable change over the last couple of years. And I think this underscores why prevention and screening for vector-borne is so critical. What's even more remarkable is we've been at this for 30 years. And we've barely scratched the surface in terms of the level of screening that could be done. If we have 97 million dogs out there in the U.S. market and we know that only half -- less than half of them are getting preventive care screening. Only 1 in 5 dogs today is getting a vector-borne screen on an annual basis. So as we focused on heartworm and just look at the heartworm folks, the population of 18% there. And if we just took heartworm and could make sure that they were elevating their care and screening for vector-borne disease, that would be about a $200 million incremental opportunity. So really lots of runway here with vector-borne alone. Our 4Dx Plus brand has such a great story, and it's really a testament to how IDEXX has been a strong thought leader in this space. The path to get to where we sit today is really built off 3 core building blocks. Number one is innovation. So we started out with heartworm 30 years ago. We've continued to innovate, adding breadth to our assays, increasing sensitivity of our markers, adding clinical value to the experience when people are screening. And we're always thinking about innovation as we think about the next product. We've also #2 building black really focused on education and awareness of vector-borne disease. So we've driven the industry forward with good science, clinical publications. We have data surveillance, like I showed you earlier to make sure that we're tracking where are these infectious disease today and where are they headed? And number three, we've invested in commercial capability. So we've really made sure that out on the front line, we have our professional service veterinarians, and they are out there advocating for vector-borne disease screening and preventive care. So this is really a win-win story for all, better outcomes for our pets. Our practices are getting ongoing revenue from screening, and we're collecting that valuable data about these infectious disease. So we don't just have SNAP 4Dx Plus. We have some other offerings as well. We are in wellness and in sick spaces with our SNAP line. We test for feline retrovirus, pancreatitis, cardiac, intestinal parasites to name a few. And our commitment to innovation over these years and our focus on international expansion has really led to some nice healthy growth. You can see 13% CAGR over the last time frame. We're continuing to focus on these growth areas, and we have lots of opportunity in front of us. So our latest innovation, we're really proud about the latest lunch from 4Dx Plus, and we've really taken things to the next level. This is quite pioneering. So we've, for the first time, introduced an integrated solution set. This is really a total product concept. We've built on world-class accuracy, and we're enhancing the sensitivity of the markers. We are adding value to our clinics with clinical decision support so we can give them next step considerations on the path they may take. And we've extended room temperature storage, which makes things more efficient and easy for them in the office. We always start with accuracy first. So our #1 priority is accuracy because this really is a performance category. Why is that? If your pet contracts a vector-borne disease and they're left untreated, they can have adverse outcomes down the line. So we want to catch all those positives. Performance is #1 priority. So if you take a look at the chart on the left, you can see how our test compares to our competitors. And it's been said, not all tests are created equal. And the best just got better with our latest release because we now detect 30% more anaplasma positives. Now recall the map I showed you earlier, we're seeing anaplasma in all 50 states now. Just 10 years ago, it was only in 38 states. So it's an important time to be increasing sensitivity here. This is really coming back to our performance and accuracy. And why does this matter for the veterinarian, let's think about an average practice. So say Dr. Jones screens 800 dogs a year for vector-borne disease on the annual basis. And she lives in a part of the country where there's 5% prevalence of anaplasma. She would be catching about 12 dogs more per year with this new test. And that means she can give them early detection. She can talk about preventive protocols to the client, and she can give them the appropriate treatment. If you extend that to the U.S. based on the number of annual tests for tickborne disease screening, that's about 140,000 more dogs per year that we're catching with this new test. So raising the standard of care with this solution. And Tina and Jay mentioned clinical decision support, but I can't express enough how excited I am about this layer of innovation as part of our solution set. Clinical decision support takes machine learning, it combines it with our deep medical expertise. And the result is pet-specific clinical insights. So it's sort of like a GPS. If you know where you're going, but you need the checks and balances along the way, you are moving along the plan. And the results have been really great. So we've seen that those that use clinical decision support are 2x more likely to use follow-up diagnostics. And if you come back to our 4Dx product here, let's think about a lyme positive, the customer is using our CDS tool, 75% more of those folks are now following up with a Lyme Quant C6 in the lab. That is so important because that's telling them if it's an active infection and if a treatment plan is warranted. So our solution set is great because we've really increased the performance once again, and we've added extra benefits to the clinicians during their experience of screening. We've also built on IDEXX' proven model of using instruments to capture diagnostic results. So we have taken our handheld SNAP and we connected up to our SNAP Pro analyzer. We have 50,000 of these out there. And our customers are using SNAP Pro to run the SNAP test very easily, capture the results and capture those patient charges and invoices as well along the way. We know that our active and connected user base that -- those that use our machines regularly and are connected into our systems. We know they're 4x more loyal to the SNAP franchise. And we see these active and connected numbers ticking up both internationally and in the U.S. So another testament to IDEXX' ecosystem and really listening to what our customers value and what makes it easiest for them. So in closing, Rapid Assay is a growing opportunity. We have been advancing our SNAP line for many years, and we continue to stay true to the tenants of innovation and customer experience. We know there's a growing infectious disease, specifically vector-borne growing today, and there's an untapped opportunity for more screening. And we're bringing solutions like our 4Dx Plus solution set out there to increase performance, add workflow efficiency and bring new tools like clinical decision support. We're going to be moving into a break next. And when we come back, Mike Lane, who's our Executive Vice President and General Manager of the Global Reference Labs, will be talking to you about our deep menu and service in that space in conjunction with in-clinic. Thanks. [Break]

Welcome back from the break. Again, I am Mike Lane, Executive Vice President of Global Reference Laboratories and Information Technology. It's a pleasure to be here with you today to share the tremendous momentum we have in innovating, in executing our reference laboratory and medical consulting capabilities. Veterinarians around the world have never been busier. In our reference laboratories and medical consulting network and expert talent serves as an extension of our customers' practices, providing efficiency, capacity and access. Access to advanced capabilities that we've developed over decades with significant and sustained investment in R&D, IT, logistics and commercial capability, access to the most complete and advanced menu, designed for the needs of both well and sick patients, and this menu continues to expand with 5 significant new menu additions and service improvements this year. Access to over 600 medical specialists that serve as an extension of the practice, providing expert interpretation and support to our customers, generally with their most difficult medical cases, access to end-to-end workflow solutions that make practices more productive and at the same time, make patient care easier and access to numerous growth opportunities as veterinarians around the world work to raise the standard of care. Elevating standards of care is clearly a global opportunity. And delivering exceptional service requires a sophisticated hub-and-spoke network with dozens of day labs that serve as a workforce multiplier for the veterinary practice during the day, regional labs that run throughout the night where veterinarians and their teams are taking a well-deserved rest, so we can have results back to them the next morning. State-of-the-art core labs like our Kornwestheim lab that delivers the full breadth and depth of our diagnostic menu in hundreds of specialists that form a follow-the-sun service network on complete digital platforms, increasingly, 24 hours a day, 7 days a week, 365 days a year to serve as a direct extension of the veterinarians' team. These capabilities allow us to ensure that the sun never sets in serving our customers, and we continue to invest. Current examples include our new state-of-the-art Louisville lab that enables a next-day PCR service for our U.S. customers. And next month, we go live with our Brisbane core lab that will serve as the center of our Australian network. These investments not only enable exceptional service for our customers, it also -- they also enable us to attract the very best talent in the industry. Delivering exceptional service never takes a day off. In fact, during the pandemic, literally, we delivered every day for our customers. And the result is very high customer loyalty, reflected in the high Net Promoter Scores you saw, record retention levels that form the foundation of our recurring revenue growth, which now well exceeds $1 billion, with gross margin consistently expanding to now 50%. High volume drop-through from this volume-led growth allows us to sustain investment and importantly, our unrelenting commitment and investment in menu. We started the year with announcements with advancements in cancer diagnostics. Helping veterinarians with their difficult cancer cases with new tools to aid in diagnosis and treatment decisions, including advanced genomic tests. As Julie described, we then improved the best, the best just got better with Lab 4Dx with improved anaplasma sensitivity and clinical decision support. And next month, we began the rollout of the next 2 breakthrough innovations in diagnostics. IDEXX fecal antigen with flea tapeworm, and FGF-23, a new kidney biomarker. In 2014, we introduced innovative accuracy with routine parasite screening with fecal antigen technology. And we doubled the detection of the most common parasites relative to conventional methods. And now with flea tapeworm, we're going to increase that by 5x versus conventional methods. Conventional methods are with a microscope, whether it's at the lab or in a clinic with the staff spending valuable time or point-of-care instruments that automate a microscope. These all rely on the presence of eggs to detect these infections. Antigen technology does not rely on the presence of eggs and therefore, detects many more infections. Now flea tapeworm is relevant globally because it's relevant wherever there are fleas, which is pretty much everywhere in the world. So tremendous opportunity to continue to grow as 80% of fecal tests are still done in the clinic using valuable staff. And as practices increasingly see the higher standard of care of antigen technology, the benefits of us being an extension of their practice so that their staff can focus. This is one of the fastest-growing categories in the reference laboratory with huge opportunity ahead. Now also next month, we begin the rollout of FGF-23. Kidney disease is an area that is essential, of course, for pet health and also is associated with numerous underlying other diseases. And this is one of the reasons that IDEXX has spent so much time and investment in advancing renal diagnostic solutions for our customers. As Tina described with IDEXX SDMA at the point of care in the reference lab, SediVue at the point of care where urine fresh is best. And now FGF-23, a new tool to help practices with cats with chronic kidney disease in therapy and treatment decisions, including dietary change recommendations for the health and well-being for their cat. And a consistent theme here, we're introducing this along with clinical decision support. Clinical decision support, another layered innovation and efficiency enabling practice productivity and fast, accurate clinical decisions. Now we have a long runway to elevate standards of care globally. We do this along 2 vectors: adoption of the breadth of our testing offering and adoption of the depth of testing. Here, you see the 23,000 U.S. customers that have adopted different diagnostic categories, and we see similar patterns of opportunity internationally. Practices adopt these highly differentiated tests, for example, SDMA in chemistry or 4Dx in immunology or fecal antigen, Parasitology or next-day PCR in molecular diagnostics and grow these testing categories. But you can see in many of these categories, we have more customers that don't yet use us than do. This is particularly true when you look at medical consulting services on the right, medical consulting services is a team of 100 -- 600, highly advanced, highly trained, in many cases, years of additional training beyond veterinary school in specialties, ranging from anatomic pathology and clinical pathology, radiology, cardiology, oncology, internal medicine, dermatology. If you think about the general practitioner, which makes up really the majority of our customer base, general practitioners are incredibly busy dealing with such a wide range of patients and medical conditions and situations, dealing with preventive and sick exams, providing guidance to pet owners on prevention, vaccines, diagnostic, nutrition and dealing with both relatively minor and then also more severe medical cases. And when that general practicer needs to go deep medically, this is when they often access our team of medical specialists. Let me give you an example with our Teleradiology business, how this works. IDEXX Teleradiology is a team of board-certified radiologists that have years of additional training in radiology. And based on our scale, you can imagine that our IDEXX radiologists see hundreds, if not thousands of unique case types, whereas a general practitioner may see something on a radiograph once or twice a year or even every other year in certain circumstances. So they want to access the experts. This is a complete digital platform that forms as a direct extension of their team, where they can transmit the radiographs and we can provide that expert interpretation real-time remotely. Let me further show how this works. Imagine, if you will, this split screen view happening simultaneously on the left. You've got the veterinarian, the general practitioner and their team totally focused on the pet in front of them that's on the table. And on the right, we have our IDEXX board-certified radiologist. This individual could be anywhere in the world, depending on the time of day to provide 24/7, 365 coverage for our customer. And these radiographs are transmitted to the cloud. And in real time, we're providing expert clinical interpretation of those radiographs so that the veterinarian and their team on the left can make the best possible decisions for that pet that's right in front of them. This is why this is one of the fastest-growing businesses at IDEXX. The value that we provide as practices recognize, I can expand my team with experts real-time seamlessly across a digital platform. So since 2009, this has been with 26% compound annual growth, one of the fastest-growing businesses and a scale now reaching close to $100 million. In summary, IDEXX Teleradiology is just one example of our technology-enabled and highly differentiated service platform that brings growth opportunities to the practice to expand standards of care and also profitable growth for the practice. What we do is not easy. We've been at it over 25 years, innovating, investing in reference laboratory and medical consulting capability. 25 years developing the most complete and comprehensive menu. So every patient can experience the highest standard of care. 25 years advancing our highly differentiated lab and consulting capability. So every practice can experience the efficiency and productivity benefits of accessing the reference laboratory and 25 years of assembling an exceptionally talented and dedicated team that wakes up every day totally focused on advancing the health and well-being of pets around the world. Thank you, and I'd like to now introduce Michael Schreck, Michael is Senior Vice President and General Manager, and will discuss how our veterinary software business is also supporting the very busy veterinary practices with our innovative offering.

Thank you. Thank you, Mike. Good morning, everyone. It's great to be with you, real human beings, right, and together. You get ready to talk about some software? I hope so because that's what we're going to do. As Mike said, my name is Michael Schreck, I'm responsible for our global software business. And for the last 2 decades, I've been building vertical SaaS solutions that solve industry problems like unlocking capacity, creating efficiency. And for the last 2 years, I've been at IDEXX, and I joined right after COVID began. So I feel like I have a front row seat, watching an industry recognize and deepen its appreciation for the power of cloud-based software and watching that happen in addition to my previous experience gives me a perspective that I hope you'll appreciate, I'm going to walk through 3 things as we walk through these slides. One is IDEXX' software and artificial intelligence is going to play an outsized role in alleviating -- creating capacity and alleviating our near-term industry issues. Second, software is a fantastic business, and it's a great business here at IDEXX. It has a ton of momentum, and it's having significant impact on our customers. And three, and you've heard it in all of our presentations so far, the IDEXX ecosystem, the software ecosystem touches every part of the practice. And so it can have impact in a way that's unique and powerful. It enables diagnostics, the more software, the more diagnostics you buy. It's a powerful ecosystem, and I'm going to highlight that as well. As a consequence of those things, IDEXX is well positioned to deliver solutions, not products, solutions that our customers need, both to deal with today and the opportunities of tomorrow. So you've heard a lot about and your own research has reinforced there's some things coming at our practices. And that means the industry is at an inflection point. And I think it's a positive inflection point. It's one where software can have a bigger impact than it did before. And let me give you an example. During COVID, if you are on our cloud-based solutions, our mobile-first solutions and you had to go from intake in the lobby to curbside check-in, we could get you that in days. That dynamic workflow change, we could handle in the cloud in days. If you suddenly couldn't take payment at point of sale and you need a text to pay digital wallets, things of that nature, no problem. Our cloud-based PIMs have integrated payment technologies. We can get that to happen in days. And finally, and the Gen-Z-ers in the room, I appreciate this. You've seen our focus on mobile-first technology with VetConnect PLUS, mobile first allows us to have flexible workflow. It lets us not be tethered to a desktop. It even lets these heroic people go home. They get to go home. And that's the power of these technologies. And if you're on our cloud-based systems, mobile first-term systems, that was not a problem. And that's the power of the cloud. And just adding one more quick point. The rising generations you've heard, whether it's Gen-Zs or millennials, they're going to be 50% of our customers by 2026. They will also be over half the pet parents by 2026. They're new pet parts, the first-time pet parents. And as a consequence, they -- these are digital natives, as Jay said. They expect to interact with their phone. I'm convinced Gen-Z-ers came out of the room, right, with an iPhone attached to one hand. And so mobile-first technology is critical to support the way they want to interact with practices. They don't want to call. I've never seen a Gen-Z-er call anybody or receive a call. It just doesn't happen. So that kind of mobile technology is super important. And many of the short-term challenges and big picture opportunities are going to be facilitated by these cloud-based mobile-first technologies. And you have to start there, right? How do you get there? Well, you need a flexible, modern platform. And that's a cloud-based platform. That's why we're all in with cloud. I think practices have enough to worry about to not add IT manager to their job description. I am confident when they went to medical school, they didn't say, I really want to practice IT. Wouldn't that be great? I want to practice IT, right? Doctor I mean I want to practice medicine. And so when you think about the situation, if you visited the practices, you'd know this, right? You've seen it, which is there is a server farm in the closet in a physical location of a practice if you're on an on-prem system. That system is steaming with sensitive data and it doesn't support a mobile environment. And ultimately, you're trying to stitch together a whole bunch of software to make it kind of work. So we look at it and say the reason why we're rolling them for cloud is it's our job. We want to take that off of the practice's shoulders, manage that in the cloud in a seamless ecosystem, which I'll cover in a minute. And that's the power of a vertical SaaS approach, right? Ask Vista, ask Thoma Bravo, ask -- this is a powerful business model because you can go deeper and you can solve more important business problems by going deeper. And we're committed to that vertical SaaS approach to support our customers more deeply, and I'll cover that in a second. But that's why we're committed to cloud because you need the platform to be able to do it. You've heard about our ecosystem. Our software ecosystem is committed to a cloud experience, a frictionless experience, whether you're in diagnostics, practice management or the software that we use to share data with some of the largest corporate groups and consolidators as well as partners who come to us and say, you have the treasure trove of data, which we do. And they get an opportunity to understand it by participating and utilizing our software. This ecosystem touches every part of the practice. And I'll touch a little bit on diagnostic software in a second. But first, I want to focus at the heart of this ecosystem. The heart of this ecosystem is a cloud-based practice management system. And we have 2 premier offerings. We have ezyVet, which is tuned for a segment of the market that's advanced practices. And then we have Neo that's tuned for more general practices, smaller, they need to get up and running quickly. So let me go through ezyVet for a minute and use it as a way to sort of highlight how vertical SaaS works and the power it is for our customers as well as for our business. We acquired this in June of 2021. It was already one of the largest and fastest-growing cloud-based software platforms in the world. Since we've acquired it, it's accelerated even faster. And when you think about its capabilities, you have the platform, right? ezyVet is a platform. It's powerful. It's integrated. It automates a bunch of important things that I'll cover in a second on the diagnostics side, and it deeply integrates a payment experience. Now why does that matter? Well, if you're not using an integrated payment experience, you sometimes forget charges. Sometimes you fat finger things. So you certainly have to have manual reconciliation at the end of the day, which means someone doesn't get to go home on time. So lost charges and manual work. That's the power of having an integrated payment system inside of your cloud network. We basically say, don't worry about it. Whatever happens in the PIMs automatically charges goes to the invoice automatically. And if they want to pay digitally, that's fine. In fact, we added Buy now Pay Later to help our Gen-Z friends deal with the COVID experience. That's what they bought with, was buy now pay later. So we added it and we could do that quickly with a cloud platform. Now with the integrated payments in the platform, we're creating value for our customers' efficiency and ultimately increasing their revenue by avoiding lost charges. That also expands our recurring revenue, right? It's twice as much recurring revenue that comes to us as a result of having those 2 things together. There's a third layer that we've added this past year, which is digital workflow in ezyVet. We have a deeply integrated state-of-the-art digital workflow platform that supports surgical procedures. So you don't have to do that on a whiteboard, which has potential for human air and you get to manage and automate all the things that have to happen in a complex, say, surgery. And that product is just over a year old. And over 15% of the ezyVet customer base has already adopted that technology, which I think says, there's a huge appetite for efficiency through digital software technology. That also has an impact on us. We create more value for our customers. That triples our recurring revenue. So it's a win-win-win. Now Neo, quickly. it's a brilliantly simple solution. It is SaaS in every way. You can buy it and have it up in days. It is simple to understand, it's simple to use. You get online implemented, online trained, and you're ready to go. And as a consequence, 40% of Neo's customers are fresh start customers. That makes sense, right? It's easy to use, quick to get up and running. And so Neo plays in that market really well. And so we have 2 of the fastest-growing cloud-based platforms in the world between ezyVet and Neo. And as a consequence, this is the fastest part -- growing part rather, of our software portfolio. These are growing 50% -- over 50% in revenue -- recurring revenue year-over-year. So we're excited about that. The cloud is coming and cloud is having its moment. We like to say, and IDEXX is leading that parade. You're probably familiar with Moore's "Crossing the Chasm" framework. We're crossed -- we have crossed the Chasm in the last year in terms of cloud adoption. COVID has reinforced that. And you can see that early adoption was slow. That's normal. 2% adoption, sort of slow adoption. Let's try the cloud, let's see if it works. COVID and other factors have reinforced that, no, you need to get to a flexible modern technology, you need to do it now. And so you've seen that adoption rate annually go from 2% to 6%. If you extrapolate that out, the vast majority of the entire industry will be on cloud by the end of the decade. But you can see IDEXX software and our commitment to cloud is growing much faster. As you can see in the last 3 years, our total PIMS placements, the installs have grown 40% on a compound basis. And you can see the mix change, right? I mean we used to be count of 50-50 as recently as 2019, we're now at 80-plus percent, our cloud. That means our global PIMS portfolio, by the end of this year, early '23 will be 50% cloud, probably twice what the industry average will be. That's how we're helping our customers. And maybe just for the analysts in the room or share this with you analysts, the other thing that's exciting about having these 2 premier cloud-based PIMS is when our base -- our on-prem base is ready to move, we're ready to give them the solutions that work best for them. And as a consequence, we're keeping the vast majority of our customers in the family. Our net churn is below 2%. So said another way, we have 98-plus percent customer retention, ezyVet has below 1% user churn. So these are durable recurring revenues. And we look at that when you plug that into a DCF, right? I mean, that's just a fantastic outcome. I'll let the analysts work on that. When you add that plus growing share of wallet, you get the financial impact that you want, right? It's -- you're layering cohort after cohort of durable recurring revenue streams, larger share of wallet, right, the platform, payments, workflow. And so you begin to see the growth that happens in our business, in our software business. And you see the mix increasing in terms of recurring revenue as a consequence. So we're super excited. Our recurring revenues over the last 3 years have grown 22% on a compound basis. And the great thing about software, here's the newsflash, Software is a great business, same code, same team, more customers. It's almost all operating leverage that comes through from a software platform. And so you can see that on the gross margin, right? You're seeing the margins growth as a consequence of having those layers of recurring revenue and expansion of share of wallet. But as you've heard, software is also the way our customers are increasingly experiencing our diagnostics and software lets us innovate in a way you couldn't if they're experiencing it through a paper-based result. So this ecosystem means the more you buy from us, the better it works. It brings it all together for our customers. If you're on our software systems and you buy our diagnostics, you just buy more. Cornerstone is our full-featured on-prem system. ezyVet, as we talked about, is our cloud-based full-featured system. These are some of the most sophisticated advanced practices in the world in the large category, and they just buy more diagnostics. I'll give you just one example of why that might be. In ezyVet, before a procedure -- let's say, a surgical procedure kicks off, it preloads all of the diagnostic testing that's required during that procedure and after. And once the procedure begins, it triggers the order to the diagnostics -- whether it's in-house or reference lab order. And then it automatically puts it on the invoice. And so you have automatic charge capture. Now that may sound -- that's such a big deal. This is one of the biggest places where we lose revenue -- our customers lose revenue, because they're in the middle of a chaotic or busy moment doing surgery, they don't always remember how could they add to diagnostic results to the invoice. So that's just one way you're seeing and there's many other reasons why we see this growth. But we're super excited about the relationship. This just demonstrates the relationship between software and diagnostics. The way our customers are experiencing diagnostics is changing. And you've gotten a flavor from that from everyone who's presented before me. But I want to highlight it maybe from a little different point of view, which is the experience of diagnostics and the innovation that's capable because it's on a software platform allows you to do so many, so many different things. Let me highlight 3 things. We launched this mobile app, on the most recent architecture, most recent language, it's a powerful user experience. It allows personalization. It allows standardization. So our group customers look at that and say, that's great. We can now standardize some of our workflow across our network. Additionally, when we launched this, we did it simultaneously in the fall of last year to the whole globe in 7 languages. And the reception has been terrific. We've had almost 10 million views of results on the platform. And obviously, we have a 96% approval rating in the App Store. So we're super pleased about that. But by having that experience, which is mobile first, it allows CVS, which you've heard a lot about, becoming even more powerful because right there next to the results, are what hundreds of millions of patient records tell us is the right diagnostic interpretation and what is the right next step. As you heard from Mike and others, Someone may see a certain clinical situation once, twice a year, and our models have seen it millions of times. And so we know what the best next step is, we know what the proper interpretation is, and we're here to make that more efficient, unlock capacity for our clinicians and allow them to do so with confidence. That's what CVS does. And so this is one way we're creating capacity in our industry. We're also doing this with pet parents. We're committed to digitizing the pet parent journey, that's what our Gen Z friends would expect. And it's going to unlock a ton of capacity. Because in some practices, 1/3 of their capacity is spent playing phone tag with pet parents. I was in a parking lot with my dog in the emergency room, and my wife called that front desk 6 times in under 2 hours. There were 25 other cars in the park, I mean you can do the math. That was crazy. That was a very disruptive experience. If we had this, which I'll describe where the results that would have told us where the results were, it would have come to us in a consumer-friendly way, we would have not had to ask those questions. It would have allowed our practitioner to just do their job, practice medicine. And so we're now delivering on an automated basis, consumer-friendly summaries. The moment the practice gets their results in a medical environment, the consumers are getting their consumer-friendly results similarly. And that's going to unlock capacity. So let me finish. IDEXX is at the heart of some of the most important issues. And software is going to play an outsized role in unlocking capacity, elevating the standard of care, improving practice efficiency and deepening engagements with pet parents in a digital way. It starts in the cloud, and we're leading that effort. We're all in. And that delivers durable recurring revenue streams. As we go deeper, we get bigger share of wallet and those streams stay with us for a very long time. That yields a very attractive stand-alone software business here at IDEXX. But as I hope you've also gotten a sense for it, it also is a powerful enabler of diagnostics. It's how we -- our customers will experience diagnostics, and it's where we can innovate the most. And so the value of our cloud-based approach is that in our ecosystem, the more you use it, the better it gets and therefore, the more you use it. So we're well positioned really to help deal with the headwinds of today and really the opportunities of tomorrow. Thank you. It's my pleasure to introduce to the stage our Chief Commercial Officer, Jim Polewaczyk.

Thank you, Michael. Great job. Good morning, everyone. It is -- I agree with Michael, it is energizing to have humans back in the room and be doing this in person. So thank you for making the trek to Maine to join us this morning. And certainly, a warm welcome to those of you joining us virtually as well. You just heard from my colleagues relative to our innovation story here at IDEXX. And as a commercial leader in this organization, I get energized every time. I mean, I know the story really well, but I get energized. And the reason I get energized is I understand the value that it holds for our customers as we continue to work globally around the world for the benefit of the pets that we all love so much. And so I'm going to complement that innovation story now with speaking to our global commercial approach. In this approach, at its core is all around driving and influencing sector growth and development, through inspiring and educating veterinarians around the world on the increasing value that diagnostics and software can play relative to the clinical economic and practice efficiency benefits associated with their medical practices. We focus on these efforts through strong commercial execution and an expanding high-touch customer partnership model, and with a lot of this expansion activity now occurring internationally, which I'll touch upon. These efforts really complement the innovation portfolio and ensure that this innovation is represented to our customers with increasing frequency and reach by diagnostic category experts, who are there to educate and form in more regions with more frequency around the world. Jay talked a lot about the opportunity, but I think it's worth reiterating because commercially, we're very fortunate to participate in a sector which such huge opportunity associated with it. The pet health sector and more specifically, the category of diagnostics and information management currently estimated at $6.8 billion, continues to grow as a result of a number of favorable dynamics. These include the humanization of pets; the increasing standards of care around the world; and certainly, in the strengthening bond, we all have with our 4-legged family members, a bond that was no doubt enhanced as a result of COVID-related dynamics. The U.S. continues to be our largest segment with 62% of revenues for Companion Animal Diagnostics and Software coming from it. But international regions continue to grow in size and relevance as this love of pets and treating them as beloved family members is really universal in nature. Jay also touched upon the tremendous long-term potential we have as a result of some of these dynamics. And again, while the majority of the business comes today from the U.S., over time, 2/3 of the $37 billion total addressable opportunity for our business will come from international regions, regions that are much earlier today in their adoption and utilization cycles for diagnostics and software. And so in this context, the major component of our commercial strategy is to expand our commercial presence with a high-touch customer partnership model in more regions around the world. So let me talk a little bit about our approach to commercial expansion internationally. One of the ways we do this in a very thoughtful, efficient manner is we leverage a commercial playbook of best practices that have been developed and refined over a number of years since our go-direct transition here in the U.S. back in 2014. And this commercial playbook of best practices really is all about putting a diagnostic ecosystem of commercial experts in place in a particular region or a country. And this is all focused on that educational component for our customers to drive clinical belief and inspire clinical belief around the utilization of diagnostics. And so this ecosystem consists of a number of talented professionals that we put on ground. This includes what we call veterinary diagnostic consultants. These are the quarterbacks, if you will, the account managers. They're complemented by professional service veterinarians. These are talented clinicians providing peer-to-peer education in the context of clinics. Field support representatives, these are wonderful folks that we have in the field, primarily come from a background as veterinary technicians and/or practice managers. So they truly understand the inner workings of clinics and they do a wonderful job around that entire customer experience, training, onboarding, educating and also helping from a practice workflow perspective because they travel around and see best practices that are happening and they can be there from a consulting perspective with other practices in their particular territories. And finally, specialists. These folks can go as deep as they need to relative to Tina's suite of in-clinic connected analyzers or Mike's expansive reference lab menu as well. So it's really this diagnostic ecosystem that we put in place. And over the past couple of years, we have put this strategic intent into action. And so -- in 2021, we completed 4 major expansions in the midst of the pandemic. So there's a lot going on here behind the scenes, but we expanded our commercial presence in the countries of Germany, France, Spain and South Korea. Earlier this year, we completed some very exciting expansions in the countries of Italy and Brazil. And Japan is another opportunity-rich country for our business for IDEXX, and we're in the midst of an expansion as we speak, which we expect to be completed in the second half of 2022. To make sure each of these expansions are done as efficiently as possible, we also engage 2 other factors. One is this top-down approach, leveraging a commercial playbook works really well. But every country has a little bit of uniqueness associated as well. So we really employ a glocal approach. So we take input from every country and region and ensure that's incorporated into the commercial model to optimize our approach for that particular situation. We also have employed a Global Centers of Excellence approach. And what this ensures is that we're not leaving it to every country to figure out on their own. We have some experts to descend on that country in that region and help with everything from talent acquisition, the development, the training, the onboarding of that talent, ensuring we're equipping these folks with the right systems and tools and analytical insight so that when they're on the ground, calling on customers, we're optimizing their capacity. It's a really important part of our commercial model. And then finally, equipping them with the right customer-centric programs to help inspire and drive demand. So using this sort of playbook of best practices and Global Centers of Excellence, our commercial approach will be continued to take very thoughtful and disciplined steps to expand our commercial presence and execution in key countries around the world over the coming years. As a result of this, Jay highlighted this, but we now have over 1,100 field-based diagnostic category experts, calling on customers around the world each and every day. And from a benchmarking perspective, one of the things we aspire in terms of frequency and reach is to reach 80% of our customers and 90% of our IDEXX revenue in any given quarter. And so you'll see in the U.S., this equates to approximately 125 accounts per VDC, Veterinary Diagnostic Consultant. The ratio varies a little bit internationally. But again, these expansion efforts are all about aspiring to get closer to our customers with the right frequency and reach as we educate and inform on the value of diagnostics and software. This enhanced commercial scale is a perfect complement to the innovation portfolio that you heard about earlier today. And I'm not going to get into details of the products, you've heard about them. But there's an important point that innovation and differentiated innovation provides to our commercial organization, and that is customer access. And so we've talked about how busy clinicians are these days with overwhelming demand for their time and their services. But as my colleague, George Fennell, who you'll hear about in a few minutes, will speak to eloquently, is the best thing for a commercial organization is to be able to going to customers and talk about things that are new, things that benefit customers either clinically, economically or from a practice capacity perspective. And that's what our innovation portfolio allows us to do. It gains us, it earns us access to customers. And so whether customers choose to experience the benefits of our real-time care portfolio or our expansive menu of reference lab offerings, our commercial diagnostic experts are there to provide education, information and ultimately, consideration of the options available to customers, which enable them to practice medicine the way they want to practice medicine. And Michael just spoke very excitedly about our software innovations, but I'm equally as excited. And I want to touch upon VetConnect PLUS for a moment because in a capacity-constrained environment, we're looking for practice efficiencies. When you can take a complete diagnostic ecosystem of tools and services and have those diagnostic results flow into one portal that is then accessible any way you want to see those results, anywhere you are, that is extremely powerful as an efficiency enabler. And then when you add on the additional capabilities of diagnostic tools like our clinical decision support modules, it is -- it's really powerful and it enables improved decision-making at your fingertips. So we're really excited as a commercial organization with the pipeline we have today to speak to customers with and certainly what's coming down the road. The benefits of in-clinic and reference lab testing truly complement each other, testing begets testing, as you heard earlier from Jay. And we design our products and services to seamlessly integrate with each other. And so as we go in commercially to speak with customers and educate, we can talk about a diagnostic ecosystem of tools and services that really complement clinical workflows and how doctors want to practice. And so as a result, this really has led more customers to want to do business with us across modalities. And so it's a core component of our commercial strategy. And we're seeing similar levels of success internationally as well, albeit in an earlier state of maturity, but customers around the world resonate with this total diagnostic approach. Let me touch upon IDEXX 360. This is, I think, a wonderful example of a customer-centric program that really combines our commercial capabilities and our innovation to help accelerate the standards of care around the world. The program essentially allows customers to access our in-clinic connected suite of analyzers with no capital outlay to them, which they essentially fund for with their diagnostics growth over time. Now the beauty about this is that diagnostics growth can come from any one of our modalities, which really speaks the empowerment associated with this program. So whether customers choose to practice medicine through our reference labs or in-clinic through our SNAP family of tests or using some of our software innovations, it all supports customer choice. And so customers truly resonate with this approach. And as a result, we've seen an increasing number of customers here in the U.S. choose to do business with us through our IDEXX 360 program. And obviously, the level of integration and connectivity our products support, really enable a program like this as well. And still, when you look at other regions around the world, including Europe and Asia Pacific, while in an earlier state of maturity, we're seeing an increasing number of customers resonate with this customer centricity, empowerment and flexibility approaches as well. And so we're seeing increasing number of our analyzers across Europe and Asia Pacific being placed as a result of our IDEXX 360 program. Another core component to our commercial strategy is around education. And I think Dr. Bruce Francke would echo this as at the end of the day, veterinarians are scientists, and they want to see clinical data. And they want to be educated around that clinical data that supports the efficacy of products and services and how it fits into their medical protocols. And I think the combination of education, combined with what we do from a commercial capability perspective and innovation is a powerful combination. And it speaks to the opportunity we still have. So you heard earlier that here in the U.S., our most advanced market, it's still only 15% of clinical visits include blood work. That speaks to the enormous runway we have to continue to educate and inspire clinicians both here, but also around the world on the value that diagnostics can bring. And we take an omnichannel approach towards this customer education. This includes everything from the peer-to-peer education that happens in clinics through our professional service veterinarians. It includes major sponsorships at symposiums and conferences. It includes an increasing online presence through webinars. But I do want to highlight our IDEXX Learning Center. This is an online portal that has an expansive library of educational offerings, both from a diagnostics as well as a practice management side of things. It's -- the content is carefully developed and curated and made accessible to our customers around the world, and we're seeing a huge uptake relative to folks engaging with this platform as a source of inspiration around the tools that they have to practice medicine the way they choose to. So education will continue to be a core way that we inspire clinical belief change with our customers. Now underpinning those educational efforts is a very large investment we continue to make in peer-reviewed clinical studies. Again, veterinarians are scientists. They want to see evidence-based data that supports the clinical efficacy of the tools that they're using. And so this has really been at the heart of IDEXX for the 30-plus years we've existed as a company. And so as a result of that, we continue to work with key opinion leaders around the world, both from a regional perspective and a global perspective. And a host of clinical studies in the areas of vector-borne disease, parasitology, nephrology, cardiology, you name it. So education and the clinical data more and more supported by big data studies will continue to be a core part of our commercial strategy around the world. And then finally, let me talk a little bit about the customer experience. You heard it a bit from Tina and Mike relative to NPS results and the satisfaction customers have with our -- the quality of our products and services. But I think that reflects the fact that ensuring in this time and capacity-constrained environment that our customers find themselves in, our ability to provide a wonderful customer experience is paramount. It is a company-wide mission, it's a priority, and it's a responsibility of all of us here at IDEXX. And we measure that in a couple of different dimensions. One is around the relationship that we have with our customers. And you can measure that relationship by the relationship they have with the 1,100-plus diagnostic category experts in there, forming those partnerships, trusted relationships on a daily basis. But I also mentioned the fact that we have over 900 phone-based customer technical and medical support personnel who, in real time, are supporting customers around the world each and every day. So if a customer has an issue, they may have a diagnostic workup that they'd like some medical advice on just some -- some thought partnership, what I might do next, we've got professionals on the phone readily available, providing excellent service levels. Now these customer interactions are increasingly supported by technology as well. We've made a large investment in platforms like a service cloud that has been rolled out globally across all modalities as well as a global telephony system. And this really helps us enable round the clock, follow this on kind of a support strategy here at IDEXX. The other dimension is the responsiveness, and Tina highlighted this as part of the wonderful work our operations, logistics, supply chain folks did during the pandemic. The fact that during the pandemic, despite all the headwinds with supply chain issues and logistics around the world, we are at a point of over 99% product availability. And the same, I would echo for Mike's reference labs teams showing up every day in the midst of a pandemic to process samples and deliver results. It was heroic efforts that I think match the heroic efforts of folks like Dr. Bruce and his team did in clinic. And so this is, again, a key effort for us. It's not a commercial effort. It's an IDEXX-wide responsibility. But as a result of these efforts, the retention rates and the loyalty rates, you heard that are up around 99%. This is a large contributing factor towards the loyalty and retention we see every day. So look, in summary, I've been with this company, I've been fortunate enough to be here for over 15 years. I have never been more optimistic and confident about our ability to continue to influence and develop this wonderful opportunity that we have ahead of us. I think the combination of enhanced commercial capabilities, scale and execution combined with the expanding and differentiated innovation portfolio we have across modalities, certainly, the educational and clinical insight that we can provide to customers will all help us continue to earn a premium to sector growth and get us closer towards that $37 billion total addressable market opportunity we have as IDEXX. So with that, thank you so much for your time today. We're going to now take a 15-minute break. And when we come back, though, we've got probably the most exciting aspect of the agenda, and that's -- we're actually going to hear from one of our customers. So -- we'll have George Fennell, our Senior Vice President and General Manager for our Americas region, facilitating a conversation with Dr. Bruce Francke. Dr. Bruce is a veterinarian and a practice owner in Michigan. And it's a real pleasure to have him join us where he'll speak a bit about his thoughts on his partnership with IDEXX, thoughts on what's happening in practice in real life as well as what's happening in the industry. So with that, we'll see you back in 15. Thank you. [Break]

Well, good morning, and welcome back. My name is George Fennell. I'm the Senior Vice President here at IDEXX. I look after the company's commercial operations in the Americas. On my left, I have the privilege of a virtual fireside chat this morning with Dr. Bruce Francke from Bay Animal Hospital to orient you. We're in the great State of Michigan, and we're about 1.5 miles from Lake Huron. So there's your geography lesson from where we're going to go. Over the course of the next 30 minutes or so, if Bruce and I do our jobs well, we will offer some real practical considerations as to how customers and specifically an IDEXX customer are navigating through the challenges and how they've navigated over the last 2.5 years. And more importantly, what's ahead for veterinarians and veterinary practice teams. So I'm going to start with a bit of an icebreaker, Bruce, welcome.

[indiscernible] happy to be here today.

Good deal. Bruce and I, this is our first time doing this. And so we'll appreciate your indulgence as we dive in. By my count, we go back to the first time we were able to sort of detect something was happening pandemic-wise in very early March of 2020. It's 2.5 years later. And Bruce, I guess the way to break the ice this morning is I'm interested to know how, one, you are doing and the other 31 members of your team at Bay Animal Hospital, how are they doing and how have they held up?

George, when I knew I was coming here, I interviewed several of my team members individually as well as some of my colleagues, my veterinary colleagues from outside of my practice. And what I thought they were going to say is, we're okay, because like we've adjusted our playbook. We've done a lot. We've been very innovative in running out of practice. But the answer that I got instead was, we're exhausted, we're overwhelmed. And it wasn't so much because of what we're doing at the current moment, like we're not working longer hours or anything like that. But it's been 2.5 years of working full blast, which means that I think in most jobs, like you have a little bit of downtime here and there on a daily basis, like maybe it's a half hour where you have a little -- not much to do or something. Our team members are not like that. For 2.5 years, we all have a stack of things that we could be doing at any given moment. We have to triage what's most important and work on that. There is really almost no downtime. On top of that, we were shorthanded most of the time. So like we have -- not only had most of our team have gotten COVID at some time or another, but also they have family members that get COVID. And then they have to isolate from the team, and we'll talk a little bit about what that's meant for us. But -- so we could be down anywhere from 1 or 2 people in a given day to 1 week, we had 7 people out with COVID and 5 of those people were vaccinated. So we were probably 1 or 2 key players at that point from actually having to shut down for a couple of days. And then they've also -- so I've been working shorthanded, full blast for 2.5 years. And because we don't have enough supply to meet the demand right now, they've had to say no to some customers. Yes, patients that we couldn't see. And we're the largest practice in our area. So we've always been the go-to and when you can't get into your own veterinarian for whatever reason, call the animal hospital and they'll get you and we just don't have the capacity to see all of them anymore. People don't realize how emotionally stressful that is on veterinary team members because we want to save the world, we want to -- we don't want to ever say no to an animal that needs our help, and we've had to do that. And I think that over that time, it's just -- it's worn on the team members. But at the same time, I've seen remarkable innovation, remarkable like Herculean attempts to be able to reinvent things and to try to increase capacity and efficiency and all that kind of stuff. So we have a much better playbook now, but it's just that our people kind of need a break and it's not coming.

And well, that's because there's no end in sight for clients there. There's no end in sight. And so I guess one of the questions I want to maybe double click into a bit here, Bruce, is this labor management has -- has to be something you have developed a plan for. How have you kept your team intact for these last couple of years? What strategies have you incorporated to keep them coming back to Bay Animal Hospital to do this important work that there's no end in sight for? Talk to us a little bit about how you just manage the team as its own contained workforce?

Well, I think that people need a couple of things to be happy at work. And some of these things we can give them, some of that we can't. But the things that they really need is they need to feel appreciated. So -- and I think they get that from most of our clients, although I would probably touch on some that don't give them that. But they need to be appreciated by management. So you need to tell them how much you appreciate them on a regular basis. We actually have assigned a person in our hospital for just in charge of staff appreciation and like just try to make sure that we celebrate our wins as much as we sure talk about our challenges. But also work schedules, what we're finding out is sometimes people need to work from home maybe and that's not a traditional thing that small town veterinarian would do is allow work from home. We have -- we allow them now to do their continuing education at home. We'll pay them during that time. We make sure that they get lunches. That seems like a little thing, but like it's very, very hard to do and you have so much demand for your services, but just making sure, like we have a person in charge of that, just making sure that every team gets to go for lunch. We've doubled down on cross-training so that -- and we actually stopped boarding because we're a veterinary clinic first and a boarding facility second, which wasn't very popular with our customers. But it allowed us to take cross-trained individuals that were working in boarding and use them as assistance and that kind of thing, so if we could double down on the medicine, and that cross-train has saved us so many times when people can't show up for work. And I think the big thing with them is that -- we also have increased wages and at a faster pace than we ever had before. And we'll talk a little bit about later, I think, at the end, like what I think that's going to mean for the profession. But -- and that's meant that we've had to increase prices to do that, too. But all these things, we look at what makes a person happy, and we don't want our people fleeing to another industry.

And where staff retention is concerned, I mean, how -- in your order of priorities in charge of this practice, where is staff retention as one of your priorities?

It's my highest priority. We have years and years of training. We have some -- we have -- I'm not at disposal to talk, but we have some of the best veterinary technicians that are in the business. And the assistants that support them are very well trained, too. We've put significant investment into training these people. And we have -- I don't have to go look for the best people. I already have them in my building and to see more of them, and it will cost me more to replace a seasoned technician than it does for me to give them pay raise or to try to rework their working hours or allow them to have a flexible schedule or whatever then -- and so it is the highest priority because turnover is not good for a veterinary hospital.

So when you think about it without divulging anything confidential or overly sensitive, when you think about pay increases to your team members, you've got veterinarians, you've got technicians, you've got staff. Give us an order of magnitude, I mean, I think we're talking about here bigger than a breadbox, smaller than [indiscernible]. It's good enough to give us an idea of when you increase their pay, what's the order of magnitude? What are we talking about here?

Yes. So I think probably everybody -- well, we also increased our entry-level wages, too, by a lot, like probably like 25% or so. And all of the technicians and the assistant managers, everybody has gotten pay raises that maybe -- some of them maybe been as low as like 7% up to maybe in the 20s percent. And some of the ones that were lower, once they get cross-trained, they'll go up, too. But in order to do that, we have to raise revenue. So we have definitely had the highest fee increases that we've ever had because -- business, so it's got to make its own way at the end of the day. And -- but if we don't do that, we're in danger of losing them.

Yes. So let's talk a little bit -- tell the audience, if you will. How are you thinking about fee increases? So this would be fees paid by clients for the services that the team is providing. We talked about wages for a minute. So how do you think about it? And how often do you think about it? How often have you done it?

So ordinarily, we would only have 2 fee increases in a given year. We would do one at the beginning of the year and then one probably after the second quarter. And that's been pretty much the pattern for the 32 years that I've been a veterinarian. This year, we've had 4 already. And I kind of feel like I'm the Fed Chairman and trying to figure out how high I need to raise my fees to make everything work and that caused a negative effect on my business. And so we have had the largest, by far, the largest fee increases I've ever had in my lifetime. But -- the demand is so high that we have not really heard a lot of negatives from our customers about it. And it's allowed us to do what we do for the team and also hopefully have some money to invest in equipment, which I'm probably going to touch on that, too. But it's uncomfortable because you know that most veterinary services are fee-for-service, and there's not a lot of third-party payments. We're doubling down and trying to educate people about pet health insurance because I think the day for pet health insurance is here, even in a small-town America. And so I hope that we're at the point where we don't have to have another fee increase this year, but I'm going to watch the numbers and see what happens, and so that, I think, part is a little uncomfortable sometimes, but I think very necessary, and I think some good things will come from that.

Sure. One of the things I want to pick up on, Bruce, is something you touched on is the labor dynamics of -- it looks like everybody is scheduled to come in on a Tuesday and then it's Wednesday morning and 3 people can't come in. All of a sudden, the paradigm changes. So just talk to us a little bit about the agility you've had to develop in your team to be able to handle these labor dynamics where somebody's COVID positive, it could be a staff member, it could be a family member of a staff member. How do you adapt in real time because everybody is planning to come for an appointment, isn't caring whether or not you've got everybody there. Talk to us about team agility and what strategies you implemented to deal with that?

George, this is right in our wheelhouse now, so we don't really know. I've said my people are very dedicated, but they get sick and they have to be isolated sometimes when they're not sick. And I talk about we kind of show up every morning and work with who's there to work with. And so -- and lately, it's been a little bit better because COVID numbers are lower in our area. But we can go back to curbside like in a heartbeat, 5 minutes. We have that play down. We have all the signage that we need and everything and curbside is more efficient because you don't talk about Sally's softball game or anything. It's just -- you just kind of like do the work, communicate with the clients, sometimes we walk out to the car, sometimes we call them but it's very efficient. It's like clockwork, boom, boom, boom. We can just get a lot of patients through. So when we're short staffed, we go back to curbside and our customers just know that's what we -- they do understand it at this point. And we can do it seamlessly. And then we also will pull people from -- maybe there's some project that doesn't get done that day, but because we've doubled down and cross training all of our employees, we can pull them into an area where they're more needed on that particular day. And that has been remarkable to see like our team is so adaptable now.

So let's just pull the thread a little bit, if you will, on the curbside and the productivity. And maybe just talk to us about the trade-off associated with that in-person interaction that clients often really like. They appreciate hearing from you and unpacking the story of their pet's health versus the trade-offs of curbside, which allows for that productivity. How do you assess that? How do you manage the client experience through that dynamic?

Yes, I think -- It's -- when all said and done, veterinary medicine is not an animal business, it's a people business. And so that bond that we make with the customer is what keeps them coming back, okay? So this is a challenge that we're all trying to deal with. And because people need at least a certain amount of face time or they need at least some communication time with the team members. And so I think one of the things that we really do is we try to use our support staff more to kind of engage with that to, but this is a challenge. This is one of the big challenges that needs to be solved by our profession right now because we don't have a great supply of veterinarian -- veterinary technician time. And so digital, I think, is going to have a lot to do with that.

We heard from Michael just a little earlier about the role that software can play there.

Right. So for instance, I might jump on VetConnect and I did some preventative health care screening or recheck on a patient, and I'll type them up a personal note, hey, [indiscernible] looking great today. Remember, we talked about using that other medication. I'm going to get some of that ready for you. And -- by the way, I hope Sally's softball game went well. So we've got to get creative about this because there's only so many hours in the day, and there isn't a moment in time, and I don't have a stack of phone calls that need to be made. And so we have to find creative ways to deal with that. But still, when we can, I want to have them in face-to-face. And in our playbook, too, is like if you get a little bit too wordy, they'll say, Dr. Francke, I need you in the surgery, please [indiscernible].

Anywhere else in practice, perhaps.

Yes. Yes, because we really don't, we want to make that connection, but we don't have time to spend 0.5 hour to chat with anybody.

So it's -- and you haven't probably for the last couple of years either and there's probably -- and what I'm hearing you say also without saying it is you're not anticipating that you see that end in sight?

Yes. No, no. But the difference is that in the very beginning of the pandemic when we really didn't know what we were allowed to do, we didn't really know how this disease was spread [indiscernible] and all those different types of things. And I kind of described our first couple of weeks as Brownian motion because we're just running around slamming into the sides of the chart. Random ways until we figured out how to make that work, and we did it very quickly, but now we got it down. So we know what to do.

And I think it's amazing that you'd be able to pivot in the morning, in a few minutes to a totally different intake model and clients have adapted to that. So I just -- I wanted to maybe expand in sort of another area. Given the intensity of demand for services and the busyness of the team, there are some trade-offs that you're not going to make clinically as it relates to a client that comes in. Can you maybe just talk to the audience about how you've empowered your staff to use their experience that you've invested in to move cases along without compromising your medical standards?

Yes. The biggest thing is that we don't have time to retrace our steps. So we need as much information as quickly as possible on our cases because we just don't have time to do a half of a work up and then maybe 2 days later, just doing better do another half of the workup or anything like that. So we've empowered our team members, which are very well trained to make certain recommendations on diagnostics before we even see the path. And one of the things, we have a code that we call a stat panel. It's a Chem 15, CBC, SDMA, electrolytes and a urinalysis. Any of our technicians have the power to go ahead and recommend that for a sick pet before we even walk into the room. And then if we need to expand on it, we will. If there was ever a test that I didn't think was necessary, I would just credit it back to the client, but that rarely ever happens because those are basic tests that we need for working up any sick animal, that stat panel is our third most built item in our whole practice. When you look at percentage of growth, it is the third most common thing that we do in our practice. And -- and so I think empowering your team because you just don't have time to go in, you know that if you have a vomiting, diarrhea, animal has not eaten for 2 days that you're going to need all those tests, right? So I don't even know that I have a vomiting, diarrhea, animal hasn't eaten in 2 days, and I already have laboratory tests. So which is really, really important, and it's good medicine. Good medicine is good business.

Can I talk speaking of good business, while still managing in the pandemic, maybe talk to the audience a little bit about investing in the practice, building capabilities. How are you thinking about? And how have you thought about investing in the practice to be able to meet these demands that your clients are having?