Ladies, and gentlemen, the program is about to begin. Reminder that you can submit questions at any time via the Ask Questions tab on the webcast page. At this time, it is my pleasure to turn the program over to your host, Michael Ryskin.
Great. Thank you for joining us, everyone. My name is Michael Ryskin, BofA analyst covering life science tools, diagnostics, and animal health. For our next session, we're excited to be hosting IDEXX Labs. We're joined by Brian McKeon, Executive VP and CFO. We also have Michael Schreck with us, Senior VP and of Veterinary Software and Services and Corporate Accounts. Brian, Michael, thank you for taking the time. Thanks for speaking with us.
Thanks for having us.
Thanks, Mike.
Maybe just to kick things off, I'll start with my, you know, standard intro question. You guys, reported 4Q results. You guided for 2023 just a couple weeks ago. You know, maybe give us a quick rundown of key points both from, you know, recapping 2022 and also how are you seeing the year coming up ahead?
Yeah. Why, why don't I summarize kind of the key messages that came out of our year-end conference call. We had a very solid finish to 2022. As context, during the pandemic, our business, we focus on recurring revenues as a company. Our CAG Diagnostics recurring revenue, they actually expanded by over a third in terms of growth in 2020 and 2021. We were building off of a higher base last year, and we're able to grow our recurring revenues 8% organically, that was despite, you know, some headwinds that I'm sure we'll talk a bit about from pullback in vet clinic capacity and just lapping of some of the step-up in the pet population.
That was supported by very strong execution across our company. We focus on executional drivers that include new business gains, including, you know, sustaining high levels of customer retention, expanding utilization, and, you know, things like net price improvement and, you know, combine those drivers were very healthy from a volume point of view and from a price point of view, which was relatively higher than we've achieved historically. That was reflected in a 1,200 basis point growth premium to U.S. clinical visit growth levels for our U.S. business. We feel very good about that, and that really set the context for heading into 2023. We're looking to build off of that momentum.
We had an outlook at the higher end of the guidance that we shared on the call of targeting 11% CAG diagnostic recurring growth. That is a, you know, will enable us to deliver the, assuming we could hit our goals, you know, the 10%+ kind of long-term organic growth goals that we have as a business. Again, that's centered in driving strong levels of execution and working through some of the comparers that were a headwind for us from a growth point of view in 2022.
Very much our financial goals are very aligned with our long-term profit improvement metrics and, you know, we feel, you know, coming out of the last few years, we feel more optimistic than we've ever been about the long-term potential for diagnostics and veterinary healthcare and looking to build on the momentum that we've had as a business.
Great. That's great. Maybe to dive into that a little bit, there's a bunch of pieces we wanna follow up on there. First, I wanna ask, you know, your CAG Dx recurring outlook 8.5%-11% for fiscal year 2023. Can you sort of just give us, you know, what needs to happen to hit 8.5% versus what needs to happen to hit the 11%? What are the big levers that you see between the low end and the high end of the guide?
Why don't I start with the higher end 'cause again that reflects like what we're targeting to deliver this year. We tried to break that down between U.S. and international goals. The higher end reflects 11.5% growth for the U.S., 10% for International. We're gonna have a healthy level of price improvement this year reflective of the inflationary environment that we've been in and also the value that we're delivering. We built into that as 700-800 basis points of growth realization from pricing. At the higher end, the implied volume growth assumption, you know, roughly 4%, is to achieve that sustaining the strong execution that we've been able to deliver over the last year.
We are assuming that in the U.S. that we see stabilization in clinical visit growth levels. You know, as we work through the year, there will be some comparers earlier in the year to the pullback effects that we saw that kind of transitioned through the first half of 2022, but we're at the higher end assuming that that stabilizes. In international markets that 10% growth is up from about 6% growth in the second half of 2022. We saw about mid-single digit same store growth headwinds. It was somewhat more significant than the U.S.
Again, we're expecting to, you know, at the higher end to see some improvement in that year-over-year and again, the same kind of strong executional drivers that we achieved globally, we're looking to deliver. The lower end of our growth outlook is really just trying to capture that there, you know, there can be executional risk, there can be macroeconomic risk. It's more the latter, candidly. Just reflecting that we're, you know, we, you know, we're in an uncertain environment in terms of just the overall macro outlook.
I think our business has traditionally been very resilient to economic changes and, you know, we, but we are reflecting that we could see some just a range of performance or a range of outcomes, factoring some of those dynamics.
That, I believe you said that the lower end of the outlook assumes no improvement in organic growth, whereas the upper end you said stabilization, the lower end is no improvement. Correct?
We didn't really break it out. I just think our underlying assumptions at the higher end are we see stabilization and so, you know, it could be a number of factors that contribute to, you know, a combination of things that might, you know, transpire. It's more of a risk calibration, if you will, Mike, versus our targeted growth goals.
Okay. All right. That's fair. Anything you can say in terms of pacing through the year? You know, you touched a little bit on comps dynamics last year, both U.S. and OUS. You know, how do you think about first half versus second half?
Yeah, I think there'll be different dynamics going on. I think we will have some relatively tougher comps in the first half, you know, just given the capacity pullback, that occurred kind of through 2022. We'll have some benefits in terms of relatively higher net, European net price realization in the first half. You know, I think, you know, it'll be balanced, and I think we captured that in our outlook that we shared, for the, kind of, directionally for the first quarter in terms of what we talked about on the call.
Got it. That makes sense. Next I wanna touch on, wanna pivot to price. You talked about 700-800 basis points this year, which is well above your historical, what you've been able to take historically, you know, excluding 2022. Can you help us understand, you know, how the vets pass on these price increases to the pet owner? Is it just a, you know, a clean pass-through, or are they having to absorb any of these price increases? What are you seeing in terms of, you know, what happens from that side of the business?
Yeah, no, I think Michael can add some color here. Historically, I think practices have typically had an ability to achieve price realization with pet owners. I think pet owners see the value in veterinary services and that's what we saw in 2022 was a kind of a pass-through of not just our changes, but I think, you know, overall cost changes within the sector. Demands held up quite well. If you look at the dynamics that we try to zero in on and some of the data that we report with things like diagnostic frequency, diagnostic utilization, they actually expanded, built on the expansion, higher than normal expansion we saw during the pandemic.
I think the we saw consistent kind of growth across wellness and non-wellness categories. I think the pricing has been passed through, and we'd anticipate that to continue. I think that we're helping veterinarians to reinforce the value that they deliver, you know, through the services. I think pet owners are willing to pay for care of their loved ones.
Maybe I can add a strategic point of view. We, you may remember in Investor Day, we had Dr. Frank here, and he talked a lot about how he's dealing with his own inflationary pressures, right? Which were around how do I maintain the right staff and keep them here. Our customers obviously are experiencing their own inflationary pressures that are independent, you know, of a diagnostic price change. I don't think we're working in a vacuum in that sense. I think, as Brian said, you know, diagnostic remains a fraction. You know, what is it? 0.1% of consumer spending is spent on diagnostics.
We know that, you know, the younger generations in particular, but most pet owners, you know, will sacrifice much of their consumer spending to make sure that their pets are well cared for. While I don't wanna minimize the inflation that I think, you know, consumers feel broadly, I don't think that this stands out in any particular way.
Got it. That makes sense. Can you talk through the mechanics of the price increases? It's a question we get a lot from investors. It's just sort of, you know, given how many of your customers, how many of your vets are in these long-term five to six-year contracts. You know, let's say, you know, you had a contract with a vet for, you know, $100,000 a year in spend with you, and then you take that 7%- 8% price increase. What are the mechanics of how that flows through, how that's incorporated into the contract? You know, how you can tweak that over time?
We have the ability in our contractual arrangements to raise pricing. I think, you know, that is, we typically do that on an annual basis. There are some variation in different agreements based, you know, based on the specifics of the customer relationship. It's, we do have the ability to raise pricing and, you know, there are some adjustments that are made in terms of the list to net, you know, realization that's, you know, that happens every year. I think that that's reflective of a number of factors, including some of the specifics related to contracts. It could relate to, you know, promotional activity or kind of new business gains or a number of dynamics that go into that.
You know, we even though we are within a contractual kind of setup, we do have the ability to raise pricing and work through that on an annual basis, typically with our customers.
Okay. All that's done on a, you know, relatively customer by customer basis, right? It's not 700-800 basis points everywhere globally across the board. Some get more price, some get less price. It might vary based on various products, reference lab in-house, right? There's a decent amount of customization there or?
Yeah, I think that's fair. There's a lot of... I think we have similar programs that we put in place and we clearly work off of a list price change, you know? I think that, you know, each customer in terms of, you know, what we're doing with them to help them grow their business. You know, the modalities that they're using and the specifics of those business relationships, there can be, you know, a level of customization.
Okay. Last year, I think, was the first year, at least that I can remember, that you implemented a mid-year price increase as well, in August, just given the inflationary environment. It doesn't seem like you're assuming you'll do one this year for now, but that could change. I guess my question is what are you watching to determine if you need to make that price increase or not? Is it, hey, if inflation ticks up again, then we'll revisit it? Is it something economic? Like, what are the deciding factors for another price increase or not?
Yeah, I would say last year was unusual for us. It was, it's not our typical practice. We, you know, candidly kind of I think under clubbed coming out of the year in terms of the price increase with the understanding of the inflationary environment at that time and felt the need to make an adjustment there that I think our customers understood. You know, particularly if you look back at just what happened with CPI and things like that last year was quite, you know, reasonable in that context. We're, we have an annual planning cycle for pricing and, to your point, Michael, we'll always look at if something really changes dramatically different than we expected.
I think we've updated our approach this year and are now planning for a midyear change.
Okay. That makes sense. just on a topic, I got a question coming from a client. Are you expecting to get any of their pricing back once cost inflation normalizes?
You know, I think we'll address that as we go. I think we'll look at those types of factors each year in terms of the context of how we're thinking about pricing, including what we're doing with our products and services and the value that we're bringing. You know, I think we'll, you know, factor that into how we think about that going forward, and we'll share more on that as we get closer to 2024.
Okay. Okay. There's a lot I want to talk about COGS and inflation, but I'll save that, I'll save that for later. We'll circle back here. I want to pivot to something else you talked about, Brian, in your initial comments about 2023, and that's, you know, global macro. You know, let's talk about OUS. Can you talk a little bit about what's going on outside the U.S. ? Just a little bit harder for us to do the channel checks there. Particularly in Europe, what are you seeing? You know, how does it compare to what the economic environment is in the U.S. ? It seems like Europe's been more resilient than people feared maybe six months ago or a year ago, but, you know, what's your take on it?
Yeah, I'll keep the comments more on 2022 or, you know, in terms of the trends that we saw. I think we did see relatively more macro headwind in international markets, starting early last year and kind of throughout the year. I mentioned earlier in our comments that it was more kind of a mid-single digit kind of same-store sale decline. We don't have the same granularity on vet clinic data, you know, that we do in the U.S., but it was relatively more of a headwind on that front. We do think that was, you know, impacted by macro conditions. I think our executional drivers were very strong. We, you know, consistent with what we saw in the U.S., we had globally record instrument placement gains.
Utilization gains sustained by record levels of retention, customer retention, and so real interest in adopting our innovations. I think we feel very good about our, our execution in that dynamic, but it was a relatively, you know, more challenging macro environment. I think that, you know, that's something that we're continuing to monitor. We're obviously targeting a level of improvement, but the level of growth is somewhat below the U.S., and I think it's reflective of us being, you know, a little cautious on that front just given the backdrop that we saw in 2022.
Sorry, I wanna make sure I got that last bit right. You're assuming in your guide framework, what's built into that is some improvement OUS as well, but again, not to the same degree as the U.S.?
Right. The, the high end for CAG Dx recurring 11.5%, 11.5% U.S., 10% International. Usually we would have our long-term objectives are to have higher growth in international. I think that's reflective of the macro. That, that 10% goal is up from roughly a 6% growth trend in the second half of 2022. You know, that is reflective of us working through the growth rate effects in 2022 were off of this higher base, you know, the pandemic step up. We're not expecting that same level of headwind that we saw in 2022 and some of that improves, you know, assume some stabilization trends.
There's a level of headwind that we're expecting to continue, and that's built into our outlook.
Okay. Got it. That helps. Maybe this is a good time to jump into sort of like the broader recession question. I'm sure it's one you get asked all the time. You know, we've looked at the data historically, you know, how IDEXX fared in 2008, 2009, how the entire industry fared. You know, typically think of the space as being resilient in the face of economic pressure. Can you talk about sort of like your contingency plans? You know, what would you implement if, let's say, you know, tomorrow, you know, global recession strikes, how do you change the business? How do you change your approach? You know, what would we see from IDEXX in that scenario?
The guidance that we shared, going back to what we talked about earlier, the lower end for CAG Dx recurring was 8.5%. As I mentioned, we hadn't assumed 7%-8% of pricing in that number. That's basically saying we have a range in terms of what we built our plans for this year that capture a scenario where you'd have limited volume growth. I think going back to your point about what happened in the Great Recession was we were roughly 4%-5% kind of organic revenue growth with less pricing, probably about 100 basis points or so in pricing.
It's actually, I think we're calibrated for a risk scenario, and we have financial goals aligned with, you know, those kind of, those kind of growth ranges. We try to capture that in our planning and our thinking heading into this year. We'll, you know, I think we demonstrated last year, our ability to adapt to. We saw roughly a 600 basis point swing in kind of clinical visit growth levels in a pretty short period of time, and we were able to sustain our profit margins on a comparable basis for the full year by adapting during the year. I think we're very much committed to delivering strong financial performance.
We wanna balance that with making sure that we're investing and supporting the key priorities for the long term. I think we've got a good set of plans to do that this year.
Got it. That's really helpful. Maybe we'll pivot a little bit to you, Michael. You know, wanna touch a little bit on software and technologies and the solutions there. You know, one of the ways that IDEXX has talked about improving practice efficiency, you know, easing some of these capacity constraints that we've seen in the clinic is some of your software, you know, some of your cloud-based PIMS offerings. First, can you give us a little bit of an overview for that? You know, what does IDEXX bring to the table? What are some examples of your software solution set, and how are they used in the vet practice today?
Yeah. No, happy to do that, Mike. Thanks. You know, let me step back for a second, right? We released last week at Western Veterinary Conference a really nice position paper on, and in some ways as a first of its kind in the industry to really look at practice productivity and begin to segment, you know, those that are performing really well and those maybe that aren't performing quite as well and trying to understand the drivers of those differences. You know, I'll summarize quickly, but it's ultimately came down to workflow efficiencies, how technology locks in those workflows, right? To reinforce them, and then ultimately, does the team or staff have the right alignment and culture to support those things?
You know, when you think about our workflow from a diagnostic perspective, and then you add the practice management system, which is driving the workflow of the, of the practice on the front end, you know, we've got. We're really positioned in a strong, it's really a great strong moment for us to bring all of our connected ecosystem to bear against, you know, our customers' needs. I'm not sure we could be better positioned than we are now to do that. To answer your question directly, you know, our commitment, I think it's unique in the industry to be cloud first. You know, we committed to that. We said we're going to be that.
You know, some point early in the first half of this year, 50% of our PIMS base will be cloud, where the rest of the industry is probably somewhere around 1/4. We look at that and say, that's how we can help one way we can help our customers get gain the efficiencies. You know, we call the position paper Finding Time. Whether it's minutes or hours, that's what they need. Small things add up in a big way. I'll give you an example. When you use just a appointment reminder in our systems or one of our integrations that do that alone can reduce no-shows 38%. That's at least one visit more a day, a day for an average small practice.
Whether they use that time, you know, to do better medicine or have another visit or even get a chance to eat lunch, that's a choice, right? It's ultimately giving them time back. We look at our ecosystem and say, look, if you're cloud first, then you can get much more flexible, about how quickly you can integrate payments, right? If you're not integrating payments, as an example, you're asking staff at the end of the day to reconcile hundreds of transactions, and you hope that you don't miss a transaction, for example. You hope that the client experience was positive, where you didn't fat-finger the wrong number and now you've got to go give a refund to a customer. Those kinds of things when you're in the cloud, we can upgrade them in real-time.
I'll give you an example. We know that during the COVID, Gen Zers really flocked towards a buy now, pay later feature, which allowed them to afford things that maybe otherwise they couldn't. And as a consequence of knowing that that was a big deal, we added that quickly to our payment platform, then it was immediately available in our cloud-based PIMS. If you're able to do there, then you can gain that benefit immediately, right? By being on a cloud-based platform. So we look at it and say, it's really not just a PIMS platform. It's PIMS with seamless integration with payments, seamless integration with digital workflow, seamless integration with client communications. Then if you're a corporate group who really understand the value of software, how do they do that?
How do they get analytics and data across the network? Then finally, how does that tie into our incredible diagnostic software suite that's gonna help you figure out, you know, what was the result? You know, what should be the next step? We're using artificial intelligence, which we can talk about more later, to help them interpret and make next step recommendations in a very rapid way. As that is all cloud-based, you know, we can deliver value in a much faster way through that suite, that connected ecosystem, across both the diagnostic-Parameters, but also just how to run a better practice.
As that study suggested, those that have leaned in, by the way, corporate groups in particular have leaned in, recognizing this is critical to their future operational efficiency, they know they've got to get to a cloud-based ecosystem. They just can't get there, using an on-prem approach.
Okay. Yeah, that's really helpful. Wanna follow up on a couple of those points. One is, before we jump to the fourth side of things, 'cause I do wanna ask on that as well is can you talk a little bit about the, again, the contract structure, the payment structure, these annual contracts, you know, sort of like what are the renewal rates? You know, how do you drive that conversion, more onto to PIMS? You know, you mentioned the 50%, how has that trended over time? The vets that aren't on PIMS, that aren't on cloud, what's holding them back?
Yeah. Yeah, good questions. Let me start with, you know, we've seen an acceleration, you know, in the software business, you know, over the last few years in a pretty powerful way. We shared at Investor Day, you know, that we had a 40% compound annual growth rate in terms of PIMS placements since 2019. The mix between what was cloud and on-prem used to be about 50/50, it's now 90/10. Our new customers, whether they're coming from our base or increasingly from others, are leaning in towards cloud. You know, we're seeing an incredible growth in that context. You know, as Brian shared-
90/10. 90/10 is the new placements any given year, 90%-
Are cloud.
Are cloud.
Yeah. That's right, Mike. You know, as Brian shared, in his earnings calls comments, you know, we're seeing rapid revenue growth, no surprise as those recurring revenues stack up. You know, last year, for example, our diagnostic and software reporting segment had 22% growth in the year. Our recurring revenues since 2019 have grown 22% on a compound basis. You're seeing sort of that acceleration as those recurring revenues stack up, which will kinda get to your comment, Mike, about how are these structured. You know, this is a SaaS. I mean, ultimately, this is a SaaS business model, and, you know, we love the recurring revenue part of the business.
This is, you know, as Brian said, we've not only seen net retention, record net retention with diagnostics, we've seen net retention records with software, which is even slightly higher than our diagnostics. We're seeing something very powerful happen in the industry where, you know, folks are realizing the deeper you get, I mean, this is a vertical software play that's been run by, you know, Thoma Bravo or Vista or whatever. It's the deeper you go, the more value you create, the more sticky the program becomes because obviously you're creating more consistent value across the practice. We're seeing that. We're seeing as last year as an example, people are. Our customers are increasingly buying a second or third or fourth product from us because it integrates so tightly with the platform.
You know, not only do we have the retention of the original platform, but now we've got these other recurring revenue flows that play off of it. When you look at it from a retention perspective, you know, the average life of these customers is as far as you can see, and so on average. These are incredibly, you know, durable revenue streams for us. As Brian said, in many cases, these are wrapped into our 360 programs, so they have an imply or an explicit life, but the actual net retention well outstripped even the contractual period for these customers on average.
Got it. I wanna ask, I mean, you touched a little bit there on share gains and ability to cross-sell. You know, how often are you placing software into a clinic that either is greenfield or doesn't do diagnostics at all, or maybe it's in a Abaxis or a Heska customer, and then that gets your foot in the door because of your software offering that allows you over time to convert the, you know, either point of care or reference lab side of things?
No, that's a great question. You know, I'll start with about 40% of our net new ads in a given year are greenfield in some form. Whether that's an expansion of a corporate doing a de novo or whether that's a practice owner or someone who wasn't a practice owner wants to become a practice owner, our two cloud products, Neo, which is our smaller practice, and Animana, which is our flagship advanced practice, both of them have about 40% share of new customers that are greenfield. You know, really interesting to see that continued growth in that mix. I think the other thing that we've seen is every one of those new customers in 2022 compared to 2021 and previous years was buying another product from us simultaneous with the platform purchase.
In the past, it was 30%-40%. It doubled in 2022. As people began to see the value of the connection between the platform and the related applications and the integration became tighter, we ultimately saw our customers going, "Well, I need time, so I better get payments," or, "I need time, so I better get, you know, client communications." Ultimately, you know, and this is true especially with corporate groups, they're recognizing that if they wanna maintain staff who are, you know, younger generations, Gen Z types, you need to have a practice software experience that would be consistent with something they experience outside of work.
If you have an experience at work that's so inconsistent with your iPhone experience, typically, you know, in your real life, that's gonna create staff discontentment. Increasingly our customers are recognizing it's a powerful enabler, but it's also a powerful way to retain staff. Now, to answer your diagnostic competitive opportunity, I'll give you an example. When we acquired ezyVet in 2021, mid-2021, you know, that obviously was an entity that was not affiliated with any particular diagnostic company. Their mix of diagnostic base was different than our core platforms like Cornerstone and Neo at the time. What we're seeing is, probably unsurprisingly, that as our experience like VetConnect PLUS inside of ezyVet is our flagship diagnostic experience. You can order on VetConnect PLUS now in an automated way.
It will go into ezyVet. The charge will be automatically captured on the invoice, and as a consequence, it's a one-step decision to order. That's such a powerful diagnostic experience and unmatched by anyone else in any PIMS anywhere that you know, no surprise that that allows us to have a different conversation with these customers about this is an efficiency benefit, but also better medicine. You also get the benefit of our artificial intelligence helping you drive the next steps or interpret maybe a test you don't see that often. The real efficiencies we can bring come from, you know, that opportunity. No surprise, we're seeing a net gain in that base of ezyVet customers that had a different mix of diagnostic than we had in our core base.
I think the important thing to reinforce as well is the. You know, we talk about, you know, relative to competition, but the bigger part of our strategy, of course, is trying to grow pet healthcare and as part of that, diagnostics. We have compelling, consistent data that as practices engage with our solutions or software solutions, the more they're engaged with the innovations that we can bring, the faster they grow. It's very consistent over time, and it's accelerating now in terms of the, the differentiation that we're able to offer. This is, you know, reflective of, you know, years of investment and integration of information management with diagnostic solutions. I think the.
You know, for us, you know, it all comes back to helping our customers provide better care. Through that process they'll go faster. These, you know, the steps that we've taken have only reinforced that. We're, you know, as we're going through this, we're building a big and successful, profitable software business as well.
Got it. Maybe, one quick one, came in from a client on that topic. What's the penetration rate in U.S. clinics for PIMS software overall, and what is IDEXX market share in PIMS?
We typically don't get too specific on kind of share estimates. I think that most practices I think have PIMS. I think the, you know, solutions of some type. I think what Michael was highlighting is that has transitioned to be, you know, particularly at where the growth dollars are being invested, being cloud-based. I think we're very well positioned to support that ongoing transition, which we think makes a lot of sense for most practices globally in terms of the size of these businesses and the capabilities we can bring. I think that'll help us to continue to grow our software business and our overall presence in practices.
Okay. Fair enough. Mike, I wanna touch on one other part of your gifts of your umbrella at IDEXX, that's corporate practices. You talked on that a little bit. We've seen a, you know, continued drive towards consolidation in veterinary care. By most estimates, we're seeing something like 30%-35% of vet clinics are consolidated and represents 40%-45% of the industry revenue. Can you talk a little bit about, you know, how IDEXX is positioned with corporate practices, you know, your relationship, what are the value adds you provide?
Yeah. Thanks for that, Mike. You know, as you suggest, you know, 40-ish% of revenue in this, in the U.S. market is consolidated. That's a pretty strong market. They've been very aggressive, as you know, in putting equity, you know, checks to work to buy practices and consolidate. You know, given the cost of capital and some of that dynamic, I think it's not surprising that, you know, there'll be a shift. We're sensing a shift as these customers lean in to focus on operationalization of that network that they've built.
The timing, we can just sense from the leadership teams who we have deep relationships with, recognizing that the way they're going to operationalize many of the things, whether it's a medicine, a medical protocol or it's a consumer, you know, practice engagement program or it's a preventive care wellness, environment they wanna deliver, all of those things have to be, in some ways, locked in via software. Those conversations have been really rich for us, in particular in the last six months, where we're just seeing the, those decision makers sense that, you know, they've got a focus there, and they're gonna have to make some decisions on software in particular to support the workflows that they wanna drive across their networks. We just feel really fortunate to be able to help them do that.
Our relationships are really strong, right? We've got deep diagnostic relationships with them. We've got deep software relationships with them. As Brian said, you know, the more you use, the better it gets with us. No surprise, if you use all of our things together, you buy 20%-25% more diagnostics than if you don't. You know, it's just. The corporate groups understand maybe even better than the individual practices that this is a key driver of their business.
Absolutely.
They need growth. You know, we're an increasingly important partner, not only on the diagnostic as a revenue driver and better medicine, but also just software to lock in those workflows on a consistent basis across hundreds, and in some cases, you know, 1000+ hospitals. The only way to do that consistently, you can train and train, and then, you know, people will just go back to the way they do things in some cases. If you do that plus workflow, plus software, plus training, which is really powerful, then you're going to get a more consistent outcome, and that's gonna drive the profitability and growth of our customers.
I'm mute. Got it. That makes sense, Michael. We just have a couple minutes left, so Brian, I'm gonna give you a couple rapid fires on the P&L 'cause I wanna make sure we don't ignore that. You know, anything that we should be mindful of in terms of year-over-year from 2022- 2023 in terms of investment priorities? You know, where are the incremental dollars going? Then I have a couple more specific ones to follow up on there.
Yeah. Consistent with what we've emphasized, throughout our development, I think we lean in on innovation and commercial engagement. That's where you'll see, you know, growth in terms of our investment year-over-year and in terms of what we're prioritizing. I think that that's factored into our financial outlook. You know, I think we'll look forward to sharing, as we always do, progress on those fronts as we work through the year.
We've had a lot of questions specifically on new and new product introductions, R&D. You know, at the Investor Day, you highlighted two new instruments you're focusing on. Realize that's still at some point down the road and you haven't exactly announced them, but any way we could think about launch, you know, develop, you know, historical development or launch examples we can think of, you know, Catalyst, SediVue Dx. Is there a precedent that we should think about in terms of how to think about new boxes coming to market?
Yeah. We've mentioned in the past, it's usually a few year cycle, you know, depending on what you're developing. These are new platforms, in clinic diagnostics, incremental testing categories. You know, we have a great track record of working with, it's not just our own development, but working with other companies that have innovations and we had some investment in in-licensing of technology and that helps us to advance those. You should expect more, you know, on this in the future. These the benefits from these innovations are multi-year, right? We're continuing to see where, you know, the, you know, ProCyte, our hematology platform is, so we have over 8,000 installs to date.
You know, we're tracking towards that 20,000 placement opportunity that we highlighted. These things build on each other and kind of the Technology for Life orientation that we have as a company, you know, enables us to kind of build on the long-term growth and utilization that we continue to see in this business. We're excited about bringing new innovations that'll build on that track record and look forward to sharing more on that as we. You know, we'll typically share more on that as we get close to commercial announcements, and that'll be our timetable for providing information on that front.
Maybe I'll just squeeze in one last quick one just on new products. You've shared some updates in recent months in the area of oncology testing. You've got the OncoK9 that you're offering through the reference lab, and you've also got the Nu. Q test that you started talking about a couple months ago. Can you talk about, you know, cancer diagnostics and companion animal care, how these assays fit in? Sort of what do you see as the opportunity here longer term?
Well, we're excited about the oncology space. You know, it's 6 million senior dogs a year are diagnosed with cancer. Naturally, we'd like to diagnose it earlier 'cause every cancer that gets diagnosed earlier results in a better outcome. And, so, you know, Nu. Q is one of those examples where we're able to get really quality diagnosis early, and it's consistent with our company approach of preventive care, right? It, it reinforces the power of this being a more consistent panel way to run a medical protocol and confirm things earlier rather than waiting for the symptom to become evident. We're super excited about that partnership. It's an expansion of our oncology platforms, and, you know, we think increasingly this is gonna be a growing opportunity for.
Fits in well with our emphasis on preventative care and adding screening capabilities. It's a nice expansion of those offerings.
Got it. Thanks. Thanks, Mike, Brian. I would, you know, keep going. There's a lot more we can talk about, but we're already over time, so I'm gonna have to end it there. Thanks again for joining us. Always great to chat and catch up, and appreciate your time.
Thanks, Mike.
Thanks, Mike.