A dog’s wet nose and cat’s head butt are warming the market for veterinary medicines, with Westbrook-based IDEXX Laboratories expecting an average 10 percent revenue growth each year from now until 2023.
Behind that growth is the way humans feel about their companion animals and how much they’re willing to spend on them. About 98 percent of pet owners feel their pet is an important family member, and 95 percent couldn’t imagine giving up their pet for any reason, IDEXX Chairman and CEO Jonathan Ayers told securities analysts on Wednesday, citing various pet-owner surveys.
The company disclosed its growth plans and financial goals to securities analysts during a two-day briefing made available Wednesday and Thursday via webcasts on the company’s website.
The 10 percent is the compound annual growth rate, which essentially averages the yearly ups and downs from 2018 to 2023.
The company, which had close to $2 billion in revenue in 2017, expects to end this year with $2.21 billion.
The U.S. market for diagnostic tests, software for veterinary practices and water testing is $2.6 billion, Ayers said. It is $4.2 billion internationally.
Mainers are near the top nationally when it comes to opening their homes to four-legged friends.
Mainers have a marked preference for cats, with 46.4 percent of households owning felines, making the state the second most cat-loving in the nation. The percentage of households owning dogs in the Pine Tree State didn’t make the Top 10 nationally.
Millennials own the most pets among animal lovers, a big factor in the pet and veterinary medicine markets, Ayers said, citing various studies of pet owners.
About 43 percent of millennials refer to their pet as their “fur baby,” while another 71 percent would take a pay cut to take their pet to work every day.
Ayers said about 33 percent of millennials buying their first home cite better space or a yard for their dog as the biggest decision-maker for their purchase over getting married or having children.
Millennials and Generation Z (those up to about 21 years old) are far more likely to celebrate with their pets than baby boomers. Only 48 percent of baby boomers celebrate their pet’s birthday, while 83 percent of millennials and 93 percent of Gen Zers do, Ayers said.
When it comes to Valentine’s Day, only 18 percent of baby boomers shelled out money to show special love to their companion animal, while 44 percent of millennials and 67 percent of Gen Zers did.
Keeping pets healthy
As Ayers sees it, there’s also plenty of growth for spending on health care for pets.
The American Veterinary Medical Association estimated the average household spent $375 on veterinary expenses in 2011.
But IDEXX’s revenues are showing an upward swing in its biggest money earner, veterinary diagnostics, in the past eight years. In 2010, 81 percent of the company’s $1.1 billion in total revenue came from diagnostics for pets. That grew to 88 percent of the $2 billion in revenue in 2017, CEO Ayers said.
Ayers said pet owners spend only 1 percent of their total personal consumption on vet services and pet products, and only 0.3 percent on health care, so there is large potential to grow that revenue, he said.
And that revenue for companion animal diagnostics is recurring, he said, meaning the company can count on it every year to contribute a large chunk of revenue. The other revenue comes from veterinary software and services, livestock testing and water testing.
IDEXX also expects this year to experience what Brian McKeon, executive vice president and chief financial officer, told investors on Wednesday is “substantial” benefit from U.S. tax reforms.
He said the company’s corporate tax rate was 30.9 percent in 2017, but he expects that to drop to 19 percent to 20 percent by the end of this year as a result of the federal tax reforms. That money can be used to increase investment in the company, he said.
IDEXX, which was the only Maine company this year to make Fortune magazine’s Fortune 1000 list of the largest publicly traded U.S. companies, is one of several veterinary medicine companies clustered in the Portland area. The others are Vets First Choice, ImmuCell Corp. and Putney Inc., which was acquired a couple years ago.
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