Jay Mazelsky: Yes. So let me talk a little bit about inVue and some of the key opinion leader feedback. We’ve had a number of key opinion leaders involved as part of the upfront definition and development of inVue. So there’s — we typically do involve them when we’re bringing something new to the market, new to the world like this. I think the exciting thing from their perspective is that you’re looking at cellular structures, including intracellular structures within their natural state. When you prepare a slide, it’s a 2D, I don’t want to use the word squish, but I’ll use the word you’re sort of squishing it. So you’re getting a non-natural look at it. When you have a three-dimensional view and can interrogate it in that natural state, you see things that you don’t otherwise — you wouldn’t otherwise see and are able to provide differential diagnosis from that.
So they’re very excited by that. I think veterinarians, in general, are very excited by the fact that you don’t have to prepare a slide. They know they spend 10 to 20 minutes on that. It’s technique-sensitive, it’s highly variable. Therefore, the output in interpretation is variable. So having a solution like that, that’s relevant, that’s something that they — is well understood, I think they’re very enthusiastic about that. With respect to innovation this year and announcing innovation, not going to talk about that. At this point, we’re constantly innovating our product development pipeline, and funnel is filled with very interesting activities. And as we get closer to launch of particular assay or software or instrument, then we talk about it and then we’ll disclose more.
Operator: Our next question today comes from Erin Wright of Morgan Stanley.
Erin Wright: Hi. Thanks for taking my question. So I just had another follow-up on inVue and then I have another follow-up after that. But on inVue, could the launch be expedited at all? Or could you do like an earlier soft launch with that with that instrument? And do you still have that other diagnostic platform in the pipeline? Is that more of a 2025 event or later?
Jay Mazelsky: Yes. So with respect to the point-of-care platform launches. We have a very well-defined tried and true method of developing platforms, putting it in the hands of customers, getting feedback in terms of how it works within a real operating environment. We know that there’s a difference between bench-top development and what you see within the clinic when we launch something and begin shipping it. We want to make sure that the average time between support events are four, five, six years. These are world-class levels of performance. And our customers expect that of us. We don’t want to premature launch and maybe have issues that are disruptive to the practice environment. So we’re comfortable with what we’ve guided to in terms of the timing of that and making sure that it fits within software ecosystem and the overall operating environment of the practice itself.
We’re not further disclosing our next point-of-care platform other than what we’ve talked in the past, we have one, it’s outside of the existing testing categories, and when we get closer to launch, we’ll talk about it.
Erin Wright: Okay. Thanks. And then a bigger picture question. Just has there been any sort of changes or evolving opportunities as it relates to the competitive landscape, I guess, particularly in the US? Could disruptions in sort of new ownership of one of your competitors or changes in distribution for the other — one of your competitors is that presenting opportunities for you to take share at this point that you may not have seen previously in either across individual accounts or corporate accounts too? Thanks.
Jay Mazelsky: Yes. Our markets have been very competitive for a long time. I think new ownership hasn’t really changed that dynamic. Some of our competitors were also partners with on the clinical services and equipment side. Customers have a choice. Our focus is on continuing to innovate to help address the challenging problems they have in the practice, whether it’s capacity constraints, whether it’s introducing new testing solutions, to give them better medical results. What we find at the end of the day is customers appreciate the integrated nature of our offering, the ability to generate seamless user-friendly, customer-friendly way these critical insights that inform great medical decisions that help produce outcomes and do it productively. That’s where our focus is and that’s where our focus is going to remain.
Operator: We will now take a question from Jon Block of Stifel Financial.
Jonathan Block: Thanks, guys. Good morning. Brian, maybe just from a modeling perspective. Anyway to think about the gross margin versus op margin expansion this year? Do we get GM expansion because another decent year with price? And then if you look at OpEx, R&D was up for the fourth quarter in a row, actually, the R&D was up 20% year-over-year, G&A down two quarters in a row. So just anything on the GM or OpEx to detail as we sort of sharpen our pencils on ’24?
Brian McKeon: Sure. Thanks for the question, Jon. Just to revisit what we shared was we’re targeting 20 to 70 basis points of comparable improvement net of the 40 bps from — headwind from the customer contract resolution payment. So normalized for that, that’s 60 to 110 basis points. We think that will primarily be driven by gross margin gains, consistent with the progress that we supported our 110 basis point improvement in 2023. We benefit as we help our customers grow faster and CAG Diagnostic recurring revenues grow. That includes price benefits that help us to offset inflationary impacts. We’re also continuing to benefit as we grow our cloud-based software business. It’s an excellent business for us, and we’re doing a great job expanding that business and improving our profitability in the software front.
And also have an ongoing focus on improving our lab operations, including benefits from expanding our business. So we think we have a number of drivers that will help us to build on our gross profit gains. In terms of our investment profile, I think you highlight where our priorities are. We want to support our innovation agenda. That’s an area that’s been very high return for us over time. We obviously have the platform that we’re launching this year and ongoing innovation that we’re supporting. We’re continuing to invest in our commercial operations. We had a US expansion recently that we invested in. And we’ll continue to look at opportunities to enhance our commercial capability globally and be efficient overall and try to manage our OpEx largely in line with revenue growth.
I think that’s a reasonable assumption. I think if we do a better job of growing, grow faster, that always there’s an opportunity to get some leverage on that front. But I think our plans are to sustain the OpEx investment in line with revenue and prioritize the innovation and commercial agenda.
Jonathan Block: Okay. Great. That was very helpful. Thank you for that. And then just sort of a long second question, more clarification. So it seems like the 2024 vet visit growth expectation is zero, if I had that right, at the midpoint of your 7.5% to 10.5% CAG Dx recurring. I just want to make sure I got that right. And then what’s the expectation for 1Q’24 visits. Was that the negative 1% for full quarter? I’m just trying to sort of get at the implied 2Q to 4Q vet visit assumption? And then just sort of a quick miscellaneous tack-on, anything for price to call out US versus international when we think about the 5% global? And then what about days? Do you get an extra day this year? And does that have any tailwind to the growth rates? Thanks, guys/
Brian McKeon: Okay. So just on the first one, maybe a simple way to understand this is post Q1, we’re, I think I said this in my comments, the midpoint assumes largely flat clinical business in the US. So we’re trying to capture that there’s about $10 million of headwind that we saw from January. Whether that’s principally going to impact the US business, it is US risk, and that will — we think we’ll be seeing in the clinical visit numbers. So we’re not trying to estimate that for Q1, but that’s obviously a headwind that we’re trying to factor in. But I think the bigger picture, Jon, is midpoint, is the midpoint assumptions are largely flat, US clinical visits in Q2 to Q4 timeframe. I think you had a question on price US versus international.
