IDEXX Announces Several Milestones in its U.S. All-Direct CAG Distribution Strategy
- IDEXX selects UPS to support its US all-direct product distribution capability, providing IDEXX a cost effective, logistics solution for the entire continental US
- IDEXX opens significantly expanded US direct customer sales center, offers free shipping and next day delivery for IDEXX direct orders; on track for 100% direct order and fulfillment capability over the course of Q4
- Strong business growth momentum continues in the US Companion Animal Group, reflected in continued strong veterinary diagnostic instrument placements in Q3
- Company announces expectation for earlier reduction of distributor inventories and reduced transitional impacts
WESTBROOK, Maine, October 01, 2014—IDEXX Laboratories, Inc. (NASDAQ: IDXX) today reported that it had selected United Parcel Service (UPS) to provide third party logistic services in support of its strategy to go all-direct with US companion animal veterinary practices. This agreement builds on IDEXX’s distribution and logistics capability, and provides for five warehouse and shipping locations strategically located across the US, three of which are provided by UPS’ third party logistics services.
“Our selection of UPS, the world’s largest package delivery company, builds on our existing distribution and logistics capability to provide cost effective free shipping and next-day delivery for diagnostic kits and instrument consumables to companion animal veterinary practices in the continental US,” said Jonathan Ayers, the Company’s Chairman and Chief Executive Officer.
“We are also very pleased to have launched a staffed, fully trained and significantly expanded US customer sales center, commencing our transition to all-direct product distribution in the continental United States. Customers who order direct from IDEXX in Q4 of 2014 and beyond will receive free shipping and next day delivery, fulfilling our ongoing commitment to excellent customer service.”
“We continue to see strong business momentum in the US as a result of our sales transformation completed a year ago. In the third quarter, placements of Catalyst and hematology analyzers with US customers each grew approximately 30% over prior year.”
“This strong instrument placement growth is in advance of our planned launch of Catalyst One™ in Q4, which expands the IDEXX point-of-care chemistry market by offering premium Catalyst Dx® technology at a significantly lower entry price. Catalyst Dx and Catalyst One offer the broadest, most complete and flexible test menu, lowest cost per test, fastest time to results, unmatched accuracy, full integration with leading practice management software systems and, through its internet capability, access to IDEXX’s free VetConnect® PLUS cloud-based diagnostic portal. VetConnect PLUS now supports instant notification of completed patient results run on our in-house lab equipment and with IDEXX Reference Laboratories, with both iPhone® and Android™ apps,” added Ayers.
“We also placed over 3,200 SNAP Pros in Q3, bringing year-to-date placements to over 6,000 in our first seven months since launch, and providing an ever increasing number of our rapid assay customers the unique convenience, workflow and electronic medical record benefits of this mobile device.”
“Our momentum in instrument placement will be further strengthened by ongoing expansion of our direct sales presence. Since July, we have hired almost 100 sales and field support representatives, over 80% of our goal to be fully staffed in the expanded sales and support model by November 1, 2014. This expansion builds upon our successful North American sales transformation and expansion undertaken in mid 2013.”
“We continue to work with our US distributors to ensure a smooth transition through the balance of the contract and calendar year, as we both support our mutual customers’ requirements for IDEXX’s unique diagnostic kits and instrument consumables. We plan to support our distributors with supply for their order volume through the end of the year with a combination of inventory and drop-ship direct from IDEXX. This approach enables us to substantially reduce the expected inventory levels held by distributors at the end of 2014 and the related carryover transitional impacts in 2015, ” added Ayers.
Update to Timing and Amount of Transitional Impacts Related to One-Time Drawdown of Inventory Held by Distributors
Previously, the Company noted that transitional impacts in 2015 would be primarily related to the drawdown of inventory held by distributors at the end of the year. The Company had estimated that the drawdown of inventory held by distributors at year-end would occur primarily in the first quarter of 2015 and would result in a one-time reduction in revenue of $30 million to $35 million, and in operating profit of $23 million to $27 million. The Company also had expected to incur $2 million to $3 million in remaining project management expenses in early 2015.
Given progress in advancing operational plans to support the transition to an all-direct product distribution model, the Company now expects one-time transitional impacts related to the drawdown of distributor inventories will occur primarily in Q4 of 2014. We now expect the drawdown of distributor inventories will result in a one-time reduction in revenue and operating profit of approximately $20 million to $25 million and $16 million to $20 million, respectively, in the fourth quarter. The higher end of the estimated impact range corresponds with the full estimated impact of the inventory drawdown impact related to the move to the all-direct product distribution approach in the US. To the degree that impacts are below the high end of the estimated impact range in 2014, there may be limited carryover revenue and operating profit impact in Q1 of 2015. The Company now expects limited remaining project management expenses in early 2015.
About IDEXX Laboratories
IDEXX Laboratories, Inc. is a leader in pet healthcare innovation, serving practicing veterinarians around the world with a broad range of diagnostic and information technology-based products and services. IDEXX products enhance the ability of veterinarians to provide advanced medical care, improve staff efficiency and build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for livestock and poultry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 7,000 people and offers products to customers in over 175 countries.
Note Regarding Forward-Looking Statements
This news release contains or may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” and similar words and expressions. These forward-looking statements are based on management's current expectations and beliefs, as well as a number of assumptions concerning future events. These statements are subject to risks, uncertainties, assumptions and other important factors. Readers are cautioned not to put undue reliance on such forward-looking statements because actual results may vary materially from those expressed or implied. The reports filed by the Company pursuant to United States securities laws contain discussions of these risks and uncertainties. The Company assumes no obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are advised to review the Company’s filings with the United States Securities and Exchange Commission (which are available from the SEC’s EDGAR database at sec.gov, at various SEC reference facilities in the United States and via the Company’s website at idexx.com).