[Operator Instructions] We will take our first question from Erin Wright with Morgan Stanley.

Great. So can you speak a little bit about the rollout of FNA and how that's progressing relative to your expectations? Is that helping to fuel some of the inVue placements in the quarter? And can you remind us of just how the consumables flow-through is tracking relative to your expectations for inVue, and the overall consumables number was solid in the quarter. Just can you remind us of, I guess, in terms of potential upside even to the consumables targets that you have, especially as you kind of broadly launch FNA?

Erin, thanks for the question. Yes. So the overall consumable revenue performance on inVue Dx is comfortably within the range that we've discussed around $3,500 to $5,500 per instrument. And so we're really happy with what we're seeing. And just overall, the launch and progression of inVue Dx has been just outstanding, really one of the most successful product rollouts that we've had at the company. As you heard, 2,700 placements in the first half of the year, 9,000 overall. You asked about the progression of FNA. It's going well. It's on track with our controlled launch process that we've talked about in the past. This is the process that we follow to make sure that we really get all the details of the customer experience nailed. That's what our customers expect from us. And it makes sense to do that because we know that these things have very long tails. So we want to make sure we get the flywheel running well. So we broadened the rollout, the controlled rollout of FNA as we headed into Q2. And based on the great feedback that we're getting from customers, we're broadening that again meaningfully as we go into Q3 with planned full availability by the end of the year. And I think it's just worth mentioning, each of these applications on inVue Dx is really a platform within a platform. When we rolled it out, we started with 2 large areas of testing with ear cytology and blood morphology, and we continue to add menu to those. And when we do that, we can just push that out to our customers. FNA is a whole new application. So it's like a platform within the platform of inVue Dx. And so we're taking the time to train customers as we roll this out to make sure that they get the very best experience. And as you heard me share in the comments, we're really excited to see that in the early results with FNA, we're seeing even more masses getting looked at, which just reflects the fact that we're addressing the real challenge in the practice around the cost and complexity of glass slides with this new application. So very excited. And as this continues to roll out, we do see upside in that consumable number over time.

Okay. That's great. And you hit double-digit growth in the Reference Lab for the first time since the beginning of 2023, if I have my numbers right. And I guess, can you break down the components of that growth and the sustained market share gains that you're seeing there? And we always seem to find that segment to be more correlated to vet office visits. And just on that front, there is this swirly narrative out there as well as some supportive analysis from the former CEO and Chairman of IDEXX calling out some sustained pressure in vet visits over the next several years. I guess, how do you think about that in the context of the data that you are seeing and the pushes and pulls you see there from an underlying demand standpoint, given some of the metrics you shared in terms of aging pet population and other metrics as well? How does that fit into your long-term growth algo?

Great, Erin. So I'll talk a little bit about the Reference Lab and then Andrew can talk more about visit trends. So we're really happy with the growth in the lab. It really reflects a broad set of just execution and performance across the team, where we've added, obviously, to the lab offering with what I shared around Fecal Dx, adding taeniid tapeworm and then Cancer Dx has just really hit the mark this critical need for early cancer screening, monitoring and diagnosis. And as I shared, we're seeing 20% of the volume with Cancer Dx coming from practices that have been using a competitive lab. And so that means that they're putting their patients first, prioritizing their patients' needs over whatever existing workflows they have, and that's associated with record lab conversions. And we're seeing that worldwide. And so the growth in the lab really reflects the investments that we're making in innovation, very strong commercial execution, customer conversions and really, overall, the strong volume growth. Again, we're seeing that internationally, which we're very pleased to see.

Yes. And Erin, just on the sector, certainly, I think we've continued to see declines in U.S. same-store clinical visits, 1.3% within the quarter, largely on track with our expectations from our previous guidance. We are continuing to see pressure more on the discretionary areas, wellness visits being down below 3% compared to the prior year. And we're seeing some positive benefits on the non-well side. Certainly, I think the economic pressure that consumers are facing just on broad inflationary dynamics and challenges with things like gas prices and housing prices put pressure on those discretionary categories. But there's also certainly been a more muted puppy impact here just given the pace of adoptions that we have seen. I think we've called that out in the past during these times of economic pressure, we typically see consumers are slower to add or replace pets within their household, and I think that's playing out to some degree. But I think the foundation of the overall pet population continues to be positive. And I think we're paying close attention to that. Ultimately, we'll continue to provide updates for our longer-term growth algorithm at our Investor Day event here coming next week. So we're excited to provide more details at that point.

We will take our next question from Chris Schott with JPMorgan.

Just wanted to come back to vet visits and just a little bit more color on the trends you're seeing. I guess any big differences as you look at the trends that you're seeing from corporate versus independent practices or urban versus suburban locations? And maybe just a secondary question on that same topic. What do you think it's going to take to get wellness visits back to growth given the continued erosion there? It seems like the non-wellness trend is going the right way, but that wellness piece of the business, just any directional outlook of how to think about that going forward?

Chris, we don't see differences looking across different parts of the country or across corporates or independents. And in fact, what we hear from, in particular, talking to CEOs at some of our large corporate partners, they're seeing exactly what Andrew talked about this wave of older pets coming through COVID pets. And by the way, that's driving growth not just in non-well, but in well and non-well within that particular age cohort. I think the key is and what we really focus on is, visit quality. Andrew talked a little bit about that. That's the diagnostic frequency and utilization within the visit. So we're focused on developing the sector to keep enhancing that quality, and that's what we're seeing happen. And that's a combination of innovations that provide new opportunities, new episodes of testing things like Cancer Dx, for example, and then also just commercial execution, working with our customers on education and really honing and optimizing their diagnostic protocols, including their well testing protocols. And there's massive headroom to keep growing this. I mean we know, for example, in the U.S., only around 1 out of 10 wellness visits are getting bloodwork today. And outside the U.S., it's much less, around 1/3 or even less than that in most countries. And so there's substantial headroom through innovation and commercial execution to continue to drive this kind of growth in wellness testing. So that's really where we're focused is driving that quality of visit.

We will take our next question from Jonathan Block with Stifel.

Mike, maybe you could talk a little bit more about these commercial investments that you called out. They've certainly yielded good returns in the past. But why now for the next tranche? I think you just did a recent tranche over the past 4 quarters or so. Are these different international markets? And then maybe most importantly, does it mean anything from an innovation standpoint? In other words, beefing up the sales force in certain areas as maybe that innovation bucket could continue to grow when we look forward?

Jon, thanks for the question. We're just really excited about the opportunity internationally. We know that there's a lot of headroom to grow placements, utilization to develop the sector for diagnostics, particularly around wellness, for example, where that it's just a little less developed than in the U.S. And so we've been consistently making investments really across the board internationally to support that. This includes investing into expanding our field presence. And that ties to a playbook that we have, and we've seen a really reliable return on that. I mean the bottom line is when we're working more closely with customers, when we get our territory sizing dialed in right, then we can help them adopt these new innovations into their protocols. We see higher adoption. We see higher flow-through, stronger relationships, all the sort of positive things that really drive the flywheel for customers and for us. But it's not just innovation on that front. We've also invested significantly to expand our lab network around the world and to make sure our service levels are outstanding. We've invested in the software, for example, with VetConnect PLUS tuned for local geographies. We've invested into innovation specific to the needs around the world with SNAP 4Dx Leishmania, for example, or ProCyte One, which is successful globally, but really was developed in part to address specific kind of performance cost needs in different parts of the world. And then we're seeing things like inVue Dx also really pick up internationally with 40% of our placements coming abroad. So as we step back and look at the international opportunity, we just see a lot of opportunity, and we see a very reliable return on these investments. And so we're going to continue to make these investments to continue to develop the sector and help more pets globally.

Fair enough. And I'll pivot for the second question. Andrew, a recurring theme here. The 2H '26 2-year stacks would not have had to accelerate further if you did not raise the guidance, but once again, you did. So I guess, I got to ask you the silly question that almost penalizes you for raising that guidance. When I look forward, it seems like visits are expected to be more of the same in the back part of the year as the first half; price at 4% is pretty much the same in 2H versus 1H. So like what aids that premium on that stack basis, if the question is making sense? Maybe I'll ask a question and maybe answer it. I mean, do we think those customer wins, which have been solid, they're growing recurring from inVue, Cancer Dx broadening? I'm just looking for maybe some color on the drivers behind that really solid stack 2-year CAG Dx recurring in 2H?

Yes. Jon, so as you highlighted, we are planning for continued strong CAG Diagnostics recurring revenue growth over the balance of the year. We did raise our expectations from our prior guidance. Some of that was certainly the strong Q2 that we had. And we're really continuing to build momentum here within the business, both in the U.S. and on the international region basis. As Mike highlighted, we continue to make investments in reaching our customers being able to translate the value of these innovations to our customers and help them leverage the different diagnostic capabilities and software capabilities in their clinic to support overall pet health. I think when we think about the guidance, certainly, it's a range that we've put out there. There is an increase at midpoint and reflects the strong first half performance that we had. But we also are really excited by some of the recent and upcoming product launches. Mike highlighted a few of them on the call here, both the new menu on SDMA within the CLIP, really simplifies some of the workflow in the clinic and helps with inventory management. We've also added to our Fecal Dx panel, which I think will be beneficial to our customers. We continue to broaden the rollout of FNA on inVue Dx, and we'll be adding mast cell tumor detection to Cancer Dx here. So we have a number of continued innovations that I think will support the back half and we maintain high customer loyalty levels in the high 90s really across our modalities. So the combination of factors here builds a strong case for the second half, and we feel good about the guidance that we have set.

We will take our next question from Ryan Daniels with William Blair.

Sorry about that, guys. Can you hear me now?

We can.

Yes, we got you, Ryan.

Great. A quick question for you regarding the SDMA move to the Catalyst. Do you think that will have any cannibalization on the reference lab?

No, no. What we consistently see, Ryan, is whenever we invest into one modality, for example, at the point of care or vice versa, the reference labs, we actually see that testing begets testing and we drive overall more diagnostics. The types of things when you think about using SDMA at the point of care, certainly, it can include well pet types of situations. But very often, it's a more acute or sick pet kind of use case. And with SDMA combined with the CLIP, customers are able to see up to 1/3 more true renal dysfunction than if they're just using creatinine alone. And that's for a sick pet. So it really is a really valuable medical application. And what we've done is we've taken the SDMA slide on the Catalyst, which we could put manually into the CLIP, and we've just put it there for them. So it takes out all the work of having from a workflow standpoint to do that, streamlines inventory management. And so we're getting a great response from customers to this innovation at the point of care. While at the same time, for many years, we've included SDMA in every single chemistry panel that's run at the reference labs. And so the bottom line with SDMA is that it really is an integral part of every type of chemistry that you'd want to run, whether it's at the point of care or in the reference labs. It's just best medicine.

Okay. Perfect. Very helpful. And then as a follow-up, also on the lab. I think you mentioned 20% of Cancer Dx is coming from competitive labs. And I think that's helping you with some conversions. And we've heard during our conversations that expanding the panel later this year could really be a big Catalyst because it will identify more cancers and make it a more valuable panel. So I'm curious if you could talk a little bit about your expectations for that, both in regards to helping lab growth and then maybe what that could do to market share gains for the lab in the future?

Yes. Thanks, Ryan. We're really excited about Cancer Dx moving from a test to really a multi-cancer panel with the addition of mast cell tumors. These are very common amongst the most common canine cancers, mast cell tumors are. And they often get missed, as I mentioned in my comments, because it can be hard to find them in -- particularly with dogs that have long coats. And so to be able to systemically detect those and to take early action when found. And then, of course, pairing that with inVue Dx because when you find a positive mast cell tumor, you want to know, okay, which of these masses is the one that I want to take action on and actually remove. And that's where FNA on inVue Dx comes in. So that pairing of those 2 is a particularly valuable kind of end-to-end solution tool set, if you will, for the general practice veterinarian. So we do see this as a tipping point, if you will, from a cancer screening standpoint, having multi-cancer screening that's affordable as part of bloodwork for all at-risk dogs. That's all dogs over 7 and at-risk breeds over 4. We really see that as over time becoming the de facto standard. And so yes, and we're hearing this from customers as well. One of our large partners in Australia, for example, has on their own now added Cancer Dx to all of their senior dog premium wellness program participants and has seen just a fantastic uptake, both in terms of enrollments and just overall bloodwork. So this is the type of thing that we think over time will really help to develop the sector further.

We will take our next question from Daniel Clark with Leerink Partners.

I wanted to ask about your second half expectations. How are you kind of thinking about in CAG growth between the U.S. and the international segments just given the strong run we've kind of seen ex-U.S.?

Yes. Thanks for the question here, Dan. This is Andrew. I think we've seen really strong momentum in the regions, both the U.S. and international. Again, as Mike highlighted, I think we see a lot of opportunity internationally to continue to develop the sector. We've made investments both from a commercial perspective as well as within the infrastructure to support our customers more over time. And so I think -- internationally, I think we're now multiple quarters of double-digit growth and continue to see, again, strong momentum across the region in areas like Europe and APO in particular. Overall, on the U.S. side, certainly, the clinical visit challenges that we've seen have been the key constraining factor. But from an overall IDEXX U.S. CAG Diagnostics recurring revenue growth premium to those clinical visits. Yes, we have been actually ramping that up here in the last several quarters and that has a lot to do with our ability to maintain customers with the high loyalty rates and continue to provide solutions for their everyday challenges with new innovations and continue to build out best practices alongside them in a partnership. So no specific kind of direction we're giving on the makeup of growth ranges within those areas. But again, I think we feel confident really across the regions on a global basis.

Okay. Got it. Super helpful. And then just a quick follow-up on kind of the visit trends in pet aged 5 plus, where you said they're contributing to both well and non-wellness positively. Have you seen any changes on a quarterly basis from that cohort? Or is it just generally positive?

It's generally -- Dan, this is Mike. It's generally positive, and we've now seen this trend for multiple quarters in a row. And as I shared also, we're not just seeing it in our data, but we're hearing about it from our customers as well. So we think it's a consistent trend.

We will take our next question from Michael Ryskin with Bank of America.

Great. I want to touch on inVue placements in the quarter, a little over 1,600. You reiterate the full year guide, but it's still a really nice step-up versus your 1Q instrument placement number for inVue. Is this just sort of normal lumpiness that we should expect in the business? Is there anything that you kind of turned back on just related to FNA, lumps and bumps? Just kind of what drove that momentum? Or should we just sort of ignore it and just sort of assume this is the normal noise quarter-to-quarter on placement numbers?

Yes, Mike, this is Andrew. Thanks for the question. For the inVue Dx placements, again, you could see there's been a level of variability here throughout the quarters. I think when it comes to placements, really, it's about when the customer is ready to take on some new instruments and plan for that. We work, again, in partnership with them. And so there's always some level of variability that you're highlighting on the placement metrics. From a year-to-date perspective, about 2,700 placements this year. That puts us essentially 50% of the way towards the full year delivery. And so we didn't guide necessarily on Q3 or Q4 independently for the inVue placements, but we still anticipate about 5,500 for the full year. Q4 tends to be a little bit stronger capital quarter in general for us. And that's just one thing to keep in mind here as you think about the rest of the year just in terms of the placement metrics themselves. But again, it's really about the partnership and the demand that we're seeing pull-through on the inVue Dx analyzer. And I think we continue to see a lot of momentum on that front, both in the U.S. and again, internationally.

And Michael, I think -- look, I think the overall feedback that we're getting is just really positive. I mean every practice does cytology. They're all challenged with the workflow -- hands-on workflow complexity and technique sensitivity of slides and getting repeatable results for things like ear rechecks. And so inVue Dx, it's hitting the mark. And that's why we're seeing overall these very strong results. And ear cytology and blood morphology are very large categories of cytology that we're addressing as we come on and expand with FNA on inVue Dx. We think that just further expands excitement for this, and we keep adding even in our core applications. As I mentioned, we added 2 new red cell morphologies to our blood morphology offering. So each of these platforms within a platform just keeps expanding. And we're really, really happy with the overall performance, and 9,000 placements since launch makes this one of the most successful launches we've ever had.

Okay. That's great. And then maybe a quick follow-up. You talked about the Analyst Day a number of times, looking forward to it, as always. One thing you haven't touched on is Multi-Q. It's something you kind of -- you announced a little while ago, but we haven't had a lot of updates. Maybe I'll just ask sort of conceptually, if you could talk about the bandwidth and the capacity to launch 2 platforms, to ramp 2 platforms. Obviously, you have things like FNA and lumps and bumps and Cancer Dx. So you're not unfamiliar with launching multiple solutions at the same time, but 2 instrument platforms would still be somewhat of a new venture. So just talk about sort of bandwidth and capacity to do that if that was to come about.

Yes. We're very comfortable with our capacity from a commercial standpoint. I mean we -- of course, we keep investing internationally as we shared, which is really focused on sector development, not capacity constraints, if you will. It's really focused on opportunity and developing the sector. And we also make targeted additions here domestically. I shared some of that on the call as well. But overall, we're really comfortable with our capacity to launch and bring forward the innovations that we are, and to support customers as we do this and make sure that they've got the right information and data and workflow and that they can incorporate these into their protocols so that they can be successful.

Yes. I would just highlight, Mike. We do this on a number of fronts today already. We have core analyzers with our Catalyst chemistry analyzer and hematology as well as SediVue and inVue, and that's on top of some broader platforms like Cancer Dx that continue to take sector development work. So I think we've got a model here that we're highly focused on being able to do more than one thing at a time. And I think that's a key focus for us going forward.

We will take our next question from Daniel Grosslight with Citi.

Congrats on a strong quarter here. I wanted to double-click on the margin degradation in the second half of this year. Obviously, you've got investments, which you've outlined here, and you also have FX being a headwind in the second half. But I was hoping you can provide a little bit more detail on the phasing of incremental investments in the second half. And as we think about the split between 3Q and 4Q, how should we be modeling out the margin and investments you're making in the business?

Dan, so just in terms of the margin outlook that we have, I think one of the things I would highlight is we would continue to expect gross margins to really lead our overall operating margin profile here. And I think if you look at the first half of the year, gross margins continue to benefit from the strong recurring revenue growth. We see high incremental margins as we obtain the type of volume growth that we've seen. And we're really expecting that to continue in the second half. And so gross margins will likely lead the operating profit flow-through. But as we highlighted, we're going to continue to make incremental investments in the second half, really for the longer term overall growth projections. And Mike highlighted the different commercial investments we were talking about and there's always some level of variability on project timing within areas like R&D. And we have different dynamics around things like our information technology structure internally, how do we think about really enabling the base of the business and making the right investments in our IT infrastructure. Areas like AI continue to add into that as well. So not necessarily splitting out Q2 versus -- or excuse me, Q3 versus Q4. Here, we did highlight on a comparable basis in Q3, we expect 20 to 50 basis points of operating margin benefit in Q3. So that gives you a sense for how we're thinking about it. But we'll continue to make those investments throughout the second half of the year.

Yes. Makes sense. And you guys also raised your free cash flow conversion, which is great to see. How are you balancing buybacks against potential M&A opportunities? Are there any specific capability gaps or geographic markets where inorganic investment may be more efficient than growing organically?

Yes. I think one of the things we're constantly doing is just making sure we are investing in our organic growth profile. That is the core that we focus on. We have active assessments associated with things outside of our 4 walls and business development continues to be an area that we look at opportunistically as we see assets that may make sense for us. We're highly focused on those core areas within diagnostics and software. We've seen more assets recently in the software space when I think back to the recent deals that we have done in the past, but it's something we continue to pay attention to. And certainly, we're willing to leverage our capital against business development type of opportunities or in-licensing types of targets as well. Any of our excess cash, we really continue to see a conviction in the long-term orientation of the business. And so the best way that we've leveraged share buybacks to kind of deliver capital back to our shareholders. That's been the best way that we've seen so far going forward, but it's something we constantly assess.

Thank you for the questions. Well, thank you very much. I'll wrap up the call now. Thank everybody for the questions. We'll now conclude our Q&A portion of this morning's call. It's a pleasure to share IDEXX's continued strong execution against our organic growth strategy, while delivering strong financial results in the second quarter. And so thank you for your participation this morning. And now we'll conclude the call.

Once again, this will conclude today's call. We thank you for your participation. You may now disconnect.