IDEXX Laboratories, Inc. (NASDAQ:IDXX) Q2 2020 Earnings Conference Call - Final Transcript
Jul 31, 2020 • 08:30 am ET
Good morning, and welcome to the IDEXX Laboratories Second Quarter 2020 Earnings Conference Call. As a reminder, today's conference is being recorded. Participating in the call this morning are Jay Mazelsky, President and Chief Executive Officer; Brian McKeon, Chief Financial Officer; and John Ravis, Senior Director, Investor Relations. IDEXX would like to preface the discussion today with a caution regarding forward-looking statements. Listeners are reminded that our discussion during the call will include forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today.
Additional information regarding these risks and uncertainties is available under the forward-looking statements notice in our press release issued this morning as well as in our periodic filings with the Securities and Exchange Commission, which can be obtained from the SEC or by visiting the Investor Relations section of our website, idexx.com. During this call, we will be discussing certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our earnings release, which may also be found by visiting the Investor Relations section of our website. In reviewing our second quarter 2020 results, please note all references to growth, organic growth, constant currency growth and comparable constant currency growth refer to growth compared to the equivalent period in 2019, unless otherwise noted. [Operator Instructions]
I would now like to turn the call over to Brian McKeon.
Brian P. McKeon
Good morning, everyone. IDEXX delivered excellent financial results in the second quarter. We benefited from a V-shaped recovery in our CAG business and flow-through profit benefits from favorable product mix and disciplined cost controls. In terms of highlights, revenue increased 3% as reported and 4% organically, supported by 7% growth in CAG Diagnostic recurring revenues. Following a period of significant pressure on CAG Diagnostic testing volumes in late March through mid-April, we saw a sharp recovery in market demand for diagnostics globally in the second quarter, including very high-growth levels in June, supported by pent-up demand for wellness and nonwellness testing. Better than expected, CAG Diagnostics recurring revenue growth and benefits from proactive cost controls drove a 410 basis point improvement in constant currency operating margins in the quarter. This enabled delivery of $1.72 in earnings per share, an increase of 23% on a comparable constant currency basis.
For the first half of 2020, we delivered EPS of $3.01, up 18% on a comparable constant currency basis despite headwinds related to the COVID pandemic. As we'll discuss, solid health care market growth trends have continued in July, pointing to a foundation for continued solid revenue growth for our core CAG business. We're also well-positioned in terms of our financial management approach, aligned with our goal to deliver operating profit gains at or above the rate of revenue growth in the second half of 2020. While we're very encouraged by recent market trends and our ability to manage through the COVID