IDEXX Laboratories Announces Second Quarter Results

Rhea-AI Summary

IDEXX Laboratories (NASDAQ: IDXX) reported Q2 2024 results with revenue of $1,004 million, a 6% increase as reported and 7% organic growth. Companion Animal Group (CAG) revenue grew 6% as reported and 7% organic, while Water revenue increased 9% as reported and 10% organic. CAG Diagnostics recurring revenue grew 6% as reported and 7% organic. EPS was $2.44, down 9% as reported but up 15% on a comparable basis, excluding a $0.56 per share impact from a litigation expense accrual.

The company updated its 2024 guidance, projecting revenue of $3,885 - $3,945 million (6.2% - 7.8% growth) and EPS of $10.31 - $10.59. The EPS outlook was reduced by $0.56 at midpoint due to the litigation expense accrual. IDEXX maintains a strong position in pet healthcare innovation, with record Q2 premium instrument placements and 11% annual growth in its global premium instrument installed base.

Positive

• Revenue growth of 6% as reported and 7% organic, reaching $1,004 million in Q2 2024
• CAG Diagnostics recurring revenue growth of 6% as reported and 7% organic
• Water revenue growth of 9% as reported and 10% organic
• Record second quarter premium instrument placements
• 11% annual growth in IDEXX's global premium instrument installed base
• EPS increased 15% on a comparable basis, excluding litigation expense impact
• Gross margin increased 100 basis points to 61.7%
• Comparable operating margins increased 110 basis points, excluding litigation expense and foreign exchange effects

Negative

• $62 million discrete expense accrual related to ongoing litigation matter, impacting EPS by $0.56 per share
• Reported EPS decreased by 9% to $2.44
• Operating margin decreased by 510 basis points to 26.3% due to litigation expense impact
• Downward revision of 2024 revenue guidance by $15 million at midpoint
• Reduction in 2024 EPS outlook by $0.56 at midpoint due to litigation expense accrual

Insights

Financial Analyst

IDEXX's Q2 results show solid growth despite challenging market conditions. Revenue increased 6% as reported and 7% organic, driven by strong CAG Diagnostics recurring revenue. The global premium instrument installed base grew 11% year-over-year, indicating continued market penetration.

However, the $0.56 per share impact from a litigation expense accrual is concerning. Excluding this, EPS grew 15% on a comparable basis, demonstrating underlying profitability improvements. The company's updated guidance, while slightly lower, still projects 6.2% - 7.8% organic growth for the full year, suggesting confidence in their business model despite economic headwinds.

Investors should monitor the ongoing litigation and its potential long-term impacts on IDEXX's financials and reputation.

Market Research Analyst

IDEXX's performance reflects the resilience of the pet healthcare market. The 7% organic growth in CAG Diagnostics recurring revenue, particularly the 10% organic growth in international markets, indicates strong global demand for veterinary diagnostics.

The company's success in placing premium instruments and growing its installed base by 11% annually is a positive indicator for future recurring revenue. This strategy of expanding the instrument footprint should drive long-term growth in consumables and services.

However, the slight reduction in full-year guidance, citing recent trends in U.S. clinical visit levels, warrants attention. This could signal a potential softening in the U.S. pet healthcare market, which investors should monitor closely in the coming quarters.

Legal Expert

The $62 million discrete expense accrual related to ongoing litigation is a significant concern. This substantial legal provision suggests IDEXX is facing a potentially serious legal challenge. While the nature of the litigation isn't disclosed, its magnitude implies it could have material implications for the company.

Investors should seek more information about this legal issue, as it not only impacts current financials but could also pose reputational and operational risks. The 6% reduction in EPS growth due to this accrual underscores its significance.

Moving forward, it's important to monitor any developments in this litigation and assess potential long-term impacts on IDEXX's business model or market position. The company's handling of this legal matter could influence investor confidence and regulatory scrutiny.

• Achieves second quarter revenue growth of 6% as reported and 7% organic, supported by CAG Diagnostics recurring revenue growth of 6% as reported and 7% organic.

• Solid growth supported by continued benefits from IDEXX execution drivers, including record second quarter premium instrument placements and double-digit year-over-year global premium instrument installed base growth.

• Delivers EPS of $2.44, a decline of 9% as reported reflecting a $62 million, $0.56 per share discrete expense accrual related to an ongoing litigation matter. On a comparable basis, excluding this impact, EPS increased 15%.

• Updates 2024 revenue guidance to $3,885 million - $3,945 million, reflecting 6.2% - 7.8% growth as reported and 6.2% - 7.8% organic, driven by projected CAG Diagnostics recurring revenue growth of 5.7% - 7.3% as reported and 6.2% - 7.8% organic.

• Adjusts 2024 EPS outlook to $10.31 - $10.59, a reduction of $0.56 per share at midpoint reflecting impacts from the $0.56 per share discrete litigation expense accrual and consistent expectations for solid comparable operating margin improvement.

WESTBROOK, Maine--(BUSINESS WIRE)-- IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced second quarter results.

Second Quarter Results

The Company reports revenues of $1,004 million for the second quarter of 2024, an increase of 6% as reported and 7% organic, driven by Companion Animal Group ("CAG") growth of 6% as reported and 7% organic, and Water revenue growth of 9% as reported and 10% organic. CAG Diagnostics recurring revenue growth of 6% as reported and 7% organic was supported by strong growth in international regions and sustained global benefits from IDEXX execution drivers. IDEXX veterinary software, services and diagnostic imaging systems revenue increased 12% as reported and 8% organic, reflecting high recurring revenue growth and continued momentum in cloud-based software placements. Strong interest in IDEXX solutions supported record second quarter premium instrument placements and 11% annual growth in IDEXX's global premium instrument installed base.

Second quarter earnings per diluted share (“EPS”) were $2.44, a decrease of 9% as reported and an increase of 15% on a comparable basis excluding a $0.56 per share impact related to a discrete expense accrual for an ongoing litigation matter.

"Continued high levels of execution from IDEXX teams drove solid global growth and strong operational performance in the second quarter,” said Jay Mazelsky, President and Chief Executive Officer. “These results reflect the benefits that IDEXX customers gain from adopting our innovative, multi-modality testing platforms and solutions. Veterinarians appreciate the deep diagnostics insights generated by IDEXX solutions, which help them deliver better patient outcomes and seamless workflow for better business results. This value-added partnership, supported by IDEXX innovation, sets a strong foundation for long-term growth through higher standards of pet healthcare."

Second Quarter Performance Highlights

Companion Animal Group

The Companion Animal Group generated revenue growth of 6% as reported and 7% organic for the quarter. Solid growth was supported by CAG Diagnostics recurring revenue growth of 6% as reported and 7% organic. CAG Diagnostics recurring revenue growth was supported by 8% reported and 10% organic gains in international regions. U.S. CAG Diagnostics recurring revenue growth of 5% as reported and organic remained solidly above sector growth levels in the second quarter.

Additional U.S. companion animal practice key metrics are available in the Q2 2024 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors.

Solid global growth was achieved across IDEXX's testing modalities.

• IDEXX VetLab® consumables generated 7% reported and 8% organic revenue growth, with solid gains in the U.S. and continued double-digit organic gains internationally supported by strong installed base growth across premium instrument platforms.

• Reference laboratory diagnostic and consulting services generated 5% reported and 6% organic revenue growth, driven by solid U.S. gains and high single-digit organic growth in international regions.

• Rapid assay products revenues grew 6% as reported and organic, driven by solid gains in the U.S., supported by benefits from higher net price realization.

Veterinary software, services and diagnostic imaging systems revenues grew 12% as reported and 8% organically, driven by continued high levels of organic growth in software and diagnostic imaging recurring revenues and benefits from a recent software and data platform acquisition.

Water

Water revenues grew 9% as reported and 10% organic for the quarter, reflecting strong growth in the U.S. and Europe.

Livestock, Poultry and Dairy (“LPD”)

LPD revenues grew 1% as reported and 3% organically for the quarter. Solid gains in the U.S. and Europe were partially offset by lower Asia Pacific revenues, including impacts from reduced swine testing and herd health screening levels.

Gross Profit and Operating Profit

Gross profits increased 8% as reported and 9% on a comparable basis. Gross margin of 61.7% increased 100 basis points as reported and 90 basis points on a comparable basis, supported by benefits from net price realization offsetting inflationary cost impacts, software service margin gains and favorable business mix.

Operating margin was 26.3% for the quarter, lower than the prior year by 510 basis points including ~610 basis point negative impact from $62 million of expense related to a discrete litigation expense accrual. On a comparable basis excluding this item and foreign exchange effects, operating margins increased 110 basis points. Operating margin results reflect 28% operating expense growth as reported and 7% on a comparable basis excluding expense related to the discrete litigation accrual.

2024 Growth and Financial Performance Outlook

The Company is updating its full year revenue growth guidance range to $3,885 million to $3,945 million, or reported growth of 6.2% - 7.8%, a reduction of $15 million at midpoint. This reflects an adjustment of ~1% at midpoint to full year estimates for organic revenue growth, which is now projected at 6.2% to 7.8%, reflecting recent trends in U.S. clinical visit levels. The updated guidance range includes ~$15 million of favorable impact from more recent foreign exchange estimates.

The Company updated its full year reported operating margin outlook to reflect consistent midpoint goals for comparable operating margin improvement and to incorporate the expenses related to an ongoing litigation matter. The Company's reported operating margin outlook is 28.7% - 29.0%, including ~160 basis points of impact related to the discrete litigation expense accrual. At midpoint, projected full year comparable operating profit margin expansion of 30 - 60 basis points includes a ~40 basis point negative growth impact from lapping a customer contract resolution payment in the first quarter of 2023.

The Company updated its EPS outlook range to $10.31 - $10.59, a reduction of $0.56 at midpoint, reflecting a $0.56 negative impact from a discrete litigation expense accrual. Adjustments to the organic revenue outlook were offset by $0.04 in favorable adjustments to foreign exchange estimates and favorable refinements to interest expense and effective tax rate estimates. The updated EPS growth outlook is 2% - 5% as reported and 9% - 12% on comparable basis, including a ~2% negative growth impact from lapping a customer contract resolution payment in the first quarter of 2023.

The following table provides the Company's updated outlook for annual key financial metrics in 2024 with a comparison to the prior outlook:

Amounts in millions except per share data and percentages

2024 Growth and Financial Performance Outlook
		Updated				Prior
Revenue		$3,885	-	$3,945		$3,895	-	$3,965
Reported growth		6.2%	-	7.8%		6.5%	-	8.5%
Organic growth		6.2%	-	7.8%		7.0%	-	9.0%
CAG Diagnostics Recurring Revenue Growth
Reported growth		5.7%	-	7.3%		6.5%	-	8.5%
Organic growth		6.2%	-	7.8%		7.5%	-	9.5%
Operating Margin		28.7%	-	29.0%		30.2%	-	30.7%
Operating margin expansion		(130 bps)	-	(100 bps)		20 bps	-	70 bps
Negative impact of ongoing litigation matter		~160 bps
Comparable margin expansion		30 bps	-	60 bps		20 bps	-	70 bps
Negative impact of 2023 customer contract resolution payment		~ 40 bps				~ 40 bps
EPS		$10.31	-	$10.59		$10.82	-	$11.20
Reported growth		2%	-	5%		8%	-	11%
Negative impact of ongoing litigation matter		~ 6%
Comparable growth		9%	-	12%		9%	-	13%
Negative impact of 2023 customer contract resolution payment		~ 2%				~ 2%
Other Key Metrics
Net interest expense		~ $20				~ $21
Share-based compensation tax benefit		~ $10				~ $10
Share-based compensation tax rate benefit		~ 1%				~ 1%
Effective tax rate		~ 21.5%				~ 22%
Share-based compensation EPS impact		~ $0.12				~ $0.12
Reduction in average shares outstanding		0.5%	-	1%		0.5%	-	1%
Operating Cash Flow (% of Net Income)		110% - 115%				110% - 115%
Free Cash Flow (% of Net Income)		90% - 95%				90% - 95%
Capital Expenditures		~ $180 million				~ $180 million

The following table outlines estimates of foreign currency exchange rate impacts, net of foreign currency hedging transactions, and foreign currency exchange rate assumptions reflected in the above financial performance outlook for 2024.

Estimated Foreign Currency Exchange Rate Impacts		2024
Revenue growth rate impact		(~ 50 bps)
CAG Diagnostics recurring revenue growth rate impact		(~ 50 bps)
Operating margin growth impact		~ 0 bps
EPS impact		(~ $0.05)
EPS growth impact		(~ 1%)
Go-Forward Foreign Currency Exchange Rate Assumptions		2024
In U.S. dollars
euro		$1.07
British pound		$1.26
Canadian dollar		$0.72
Australian dollar		$0.66
Relative to the U.S. dollar
Japanese yen		¥163
Chinese renminbi		¥7.38
Brazilian real		R$5.55

Conference Call and Webcast Information

IDEXX Laboratories, Inc. will be hosting a conference call today at 9:00 a.m. (EDT) to discuss its second quarter 2024 results and management’s outlook. To participate in the conference call, dial 1-800-289-0459 or 1-773-305-6837 and reference passcode 399723. Individuals can access a live webcast of the conference call through a link on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (EDT) on that day via the same link and will remain available for one year.

2024 Investor Day

IDEXX Laboratories, Inc. will host its 2024 Investor Day on Thursday, August 15, 2024 from 8:00 am to approximately 12:00 pm (EDT). A live audio webcast and accompanying slide presentations will be available at www.idexx.com/investors. An archived webcast replay of the event will be available approximately one hour following the event at www.idexx.com/investors. For additional information contact investorrelations@idexx.com.

About IDEXX Laboratories, Inc.

IDEXX is a global leader in pet healthcare innovation. Our diagnostic and software products and services create clarity in the complex, constantly evolving world of veterinary medicine. We support longer, fuller lives for pets by delivering insights and solutions that help the veterinary community around the world make confident decisions—to advance medical care, improve efficiency, and build thriving practices. Our innovations also help ensure the safety of milk and water across the world and maintain the health and well-being of people and livestock. IDEXX Laboratories, Inc. is a member of the S&P 500® Index. Headquartered in Maine, IDEXX employs approximately 11,000 people and offers solutions and products to customers in more than 175 countries and territories. For more information about IDEXX, visit www.idexx.com.

Note Regarding Forward-Looking Statements

This earnings release and the statements to be made in the accompanying earnings conference call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the Company’s business prospects and estimates of the Company’s financial results for future periods. Forward-looking statements are included above under "2024 Growth and Financial Performance Outlook" and elsewhere and can be identified by the use of words such as "expects", "may", "anticipates", "intends", "would", "will", "plans", "believes", "estimates", "projected", "should", and similar words and expressions. Our forward-looking statements include statements relating to our expectations regarding financial performance; revenue growth and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates and interest rates; projected operating margins and expenses and capital expenditures; projected tax, tax rate and EPS benefits from share-based compensation arrangements; projected effective tax rates, reduction of average shares outstanding and net interest expense; U.S. clinical visit trends; net price realization improvement; product launches; and the ongoing litigation matter. These statements are intended to provide management's expectation of future events as of the date of this earnings release; are based on management's estimates, projections, beliefs, and assumptions as of the date of this earnings release; and are not guarantees of future performance. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things, the matters described under the headings "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the quarter ended March 31, 2024 and June 30, 2024, as well as those described from time to time in the Company’s other filings with the U.S. Securities and Exchange Commission available at www.sec.gov. The Company specifically disclaims any obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise.

Statement Regarding Non-GAAP Financial Measures

The following defines terms and conventions and provides reconciliations regarding certain measures used in this earnings release and/or the accompanying earnings conference call that are not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"), otherwise referred to as non-GAAP financial measures. To supplement the Company’s consolidated results presented in accordance with GAAP, the Company has disclosed non-GAAP financial measures that exclude or adjust certain items. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors’ evaluation of the Company’s business performance and liquidity and are useful for period-over-period comparisons of the performance of the Company’s business and its liquidity and to the performance and liquidity of our peers. While management believes that these non-GAAP financial measures are useful in evaluating the Company’s business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.

Constant currency - Constant currency references are non-GAAP financial measures which exclude the impact of changes in foreign currency exchange rates and are consistent with how management evaluates our performance and comparisons with prior and future periods. We estimated the net impacts of currency on our revenue, gross profit, operating profit, and EPS results by restating results to the average exchange rates or exchange rate assumptions for the comparative period, which includes adjusting for the estimated impacts of foreign currency hedging transactions and certain impacts on our effective tax rates. These estimated currency changes impacted second quarter 2024 results as follows: decreased gross profit growth by 0.7%, increased gross margin growth by 10 basis points, decreased operating expense growth by 0.4%, decreased operating profit growth by 0.9%, decreased operating profit margin growth by 10 basis points, and decreased EPS growth by 0.7%. Constant currency revenue growth represents the percentage change in revenue during the applicable period, as compared to the prior year period, excluding the impact of changes in foreign currency exchange rates. See the supplementary analysis of results below for revenue percentage change from currency for the three and six months ended June 30, 2024 and refer to the 2024 Growth and Financial Performance Outlook section of this earnings release for estimated foreign currency exchange rate impacts on 2024 projections and estimates.

Growth and organic revenue growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted. Organic revenue growth is a non-GAAP financial measure that represents the percent change in revenue, as compared to the same period for the prior year, net of the impact of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers. Organic revenue growth should be considered in addition to, and not as a replacement of or a superior measure to, revenue growth reported in accordance with GAAP. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three and six months ended June 30, 2024. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Please refer to the 2024 Growth and Financial Performance Outlook section of this earnings release for estimated full year 2024 organic revenue growth for the Company and CAG Diagnostics recurring revenue growth. The percentage change in revenue resulting from acquisitions represents revenues during the current year period, limited to the initial 12 months from the date of the acquisition, that are directly attributable to business acquisitions. Revenue from acquisitions is not expected to have benefit projected full year 2024 revenue growth by 0.5% and have no impact on CAG Diagnostics recurring revenue growth.

Comparable growth metrics - Comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) are non-GAAP financial measures and exclude the impact of changes in foreign currency exchange rates and non-recurring or unusual items (if any). Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Management believes that reporting comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) provides useful information to investors because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding key metrics used by management. Comparable gross profit growth, comparable gross margin gain (or growth), comparable operating expense growth, comparable operating profit growth and comparable operating margin gain (or growth) should be considered in addition to, and not as replacements of or superior measures to, gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain reported in accordance with GAAP.

The reconciliation of these non-GAAP financial measures is as follows:

		Three Months Ended							Year-over-Year			Six Months Ended							Year-over-Year
		June 30,				June 30,			Change			June 30,				June 30,			Change
Dollar amounts in thousands		2024				2023						2024				2023
Gross Profit (as reported)		$	619,159			$	572,850		8%			$	1,212,229			$	1,115,821		9%
Gross margin			61.7	%			60.7	%	100 bps				61.6	%			60.5	%	110 bps
Less: comparability adjustments
Change from currency			(3,777	)			—						(3,121	)			—
Comparable gross profit growth		$	622,936			$	572,850		9%			$	1,215,350			$	1,115,821		9%
Comparable gross margin and gross margin gain (or growth)			61.6	%			60.7	%	90 bps				61.6	%			60.5	%	100 bps
Operating expenses (as reported)		$	355,358			$	276,706		28%			$	649,470			$	539,278		20%
Less: comparability adjustments
Change from currency			(1,164	)			—						(305	)			—
Ongoing litigation matter			61,500				—						61,500				—
Comparable operating expense growth		$	295,022			$	276,706		7%			$	588,275			$	539,278		9%
Income from operations (as reported)		$	263,801			$	296,144		(11)%			$	562,759			$	576,543		(2)%
Operating margin			26.3	%			31.4	%	(510) bps				28.6	%			31.3	%	(270) bps
Less: comparability adjustments
Change from currency			(2,613	)			—						(2,816	)			—
Ongoing litigation matter			(61,500	)			—						(61,500	)			—
Comparable operating profit growth		$	327,914			$	296,144		11%			$	627,075			$	576,543		9%
Comparable operating margin and operating margin gain (or growth)			32.4	%			31.4	%	110 bps				31.8	%			31.3	%	50 bps
Amounts presented may not recalculate due to rounding.

Projected 2024 comparable operating margin expansion outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects: (i) projected full year 2024 reported operating margin is adjusted for impacts of the discrete expense accrual related to an ongoing litigation matter in the second quarter of 2024; and (ii) projected full year 2024 reported operating margin includes an immaterial impact from year-over-year foreign currency exchange rate changes at noted exchange rates.

These impacts described above reconcile reported gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain (including projected 2024 operating margin expansion) to comparable gross profit growth, comparable gross margin gain, comparable operating expense growth, comparable operating profit growth and comparable operating margin gain for the Company.

Comparable EPS growth - Comparable EPS growth is a non-GAAP financial measure that represents the percentage change in earnings per share (diluted) ("EPS") for a measurement period, as compared to the prior base period, net of the impact of changes in foreign currency exchange rates from the prior base period and excluding the tax benefits of share-based compensation activity under ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and non-recurring or unusual items (if any). Management believes comparable EPS growth is a more useful way to measure the Company’s business performance than EPS growth because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding a key metric used by management. Comparable EPS growth should be considered in addition to, and not as a replacement of or a superior measure to, EPS growth reported in accordance with GAAP. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts.

The reconciliation of this non-GAAP financial measure is as follows:

		Three Months Ended							Year-over-Year			Six Months Ended							Year-over-Year
		June 30,				June 30,			Growth			June 30,				June 30,			Growth
		2024				2023						2024				2023
Earnings per share (diluted)		$	2.44			$	2.67		(9)%			$	5.24			$	5.22		—%
Less: comparability adjustments
Share-based compensation activity			0.00				0.04						0.10				0.10
Ongoing litigation matter			(0.56	)			—						(0.56	)			—
Change from currency			(0.02	)			—						(0.03	)			—
Comparable EPS growth			3.02				2.63		15%				5.73				5.12		12%
Amounts presented may not recalculate due to rounding.

Projected 2024 comparable EPS growth outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects adjustments to projected full year 2024 reported EPS for: (i) estimated positive share-based compensation activity of ~$0.12; (ii) a negative $0.56 impact from a discrete expense accrual related to an ongoing litigation matter in the second quarter of 2024; and (iii) estimated negative year-over-year foreign currency exchange rate change impact of ~$0.05 at noted exchange rates.

These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2024 reported EPS growth) to comparable EPS growth for the Company.

Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Free cash flow should be considered in addition to, and not as a replacement of or a superior measure to, net cash provided by operating activities. See the supplementary analysis of results below for our calculation of free cash flow for the three and six months ended June 30, 2024 and 2023. To estimate projected 2024 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of approximately $180. Free cash flow conversion, or the net income to free cash flow ratio, is a non-GAAP financial measure that is defined as free cash flow, with respect to a measurement period, divided by net income for the same period. To calculate trailing twelve-month net income to free cash flow ratio for the twelve months ended June 30, 2024, we have deducted purchases of property and equipment of approximately $130 million from net cash provided from operating activities of approximately $969 million, divided by net income of approximately $846 million.

Debt to Adjusted EBITDA (Leverage Ratios) - Adjusted EBITDA, gross debt, and net debt are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure of earnings before interest, taxes, depreciation, amortization, non-recurring transaction

expenses incurred in connection with acquisitions, share-based compensation expense, and certain other non-cash losses and charges. Management believes that reporting Adjusted EBITDA, gross debt, and net debt in the Debt to Adjusted EBITDA ratios provides

supplemental analysis to help investors further evaluate the Company's business performance and available borrowing capacity under

the Company's credit facility. Adjusted EBITDA, gross debt, and net debt should be considered in addition to, and not as replacements of or superior measures to, net income or total debt reported in accordance with GAAP. For further information on how Adjusted EBITDA and the Debt to Adjusted EBITDA Ratios are calculated, see the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

Notes and Definitions

Discrete litigation expense accrual - During the second quarter of 2024, the Company increased its previously established $27.5 million accrual related to an ongoing litigation matter by $61.5 million.

Ongoing litigation matter - The Company is a defendant in an ongoing litigation matter involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement. The Company's total accrual of $89.0 million for this matter includes the discrete $61.5 million litigation expense accrual recorded in the second quarter of 2024 and represents our best estimate of the amount of the probable loss. The actual loss associated with this matter may be higher or lower than the accrued amount depending on the ultimate outcome of this matter. For further information, see the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
Amounts in thousands except per share data (Unaudited)
				Three Months Ended						Six Months Ended
				June 30,			June 30,			June 30,			June 30,
				2024			2023			2024			2023
Revenue:		Revenue		$1,003,578			$943,630			$1,967,673			$1,843,825
Expenses and Income:		Cost of revenue		384,419			370,780			755,444			728,004
		Gross profit		619,159			572,850			1,212,229			1,115,821
		Sales and marketing		142,665			140,532			292,118			288,336
		General and administrative		157,243			89,669			249,267			159,770
		Research and development		55,450			46,505			108,085			91,172
		Income from operations		263,801			296,144			562,759			576,543
		Interest expense, net		(4,745	)		(10,215	)		(8,224	)		(22,926	)
		Income before provision for income taxes		259,056			285,929			554,535			553,617
		Provision for income taxes		55,758			61,693			115,658			115,327
Net Income:		Net income attributable to stockholders		$203,298			$224,236			$438,877			$438,290
		Earnings per share: Basic		$2.46			$2.70			$5.30			$5.28
		Earnings per share: Diluted		$2.44			$2.67			$5.24			$5.22
		Shares outstanding: Basic		82,630			83,086			82,863			83,039
		Shares outstanding: Diluted		83,393			83,983			83,684			83,980

IDEXX Laboratories, Inc. and Subsidiaries
Selected Operating Information (Unaudited)
				Three Months Ended				Six Months Ended
				June 30,		June 30,		June 30,		June 30,
				2024		2023		2024		2023
Operating Ratios		Gross profit		61.7%		60.7%		61.6%		60.5%
(as a percentage of revenue):		Sales, marketing, general and administrative expense		29.9%		24.4%		27.5%		24.3%
		Research and development expense		5.5%		4.9%		5.5%		4.9%
		Income from operations1		26.3%		31.4%		28.6%		31.3%
1Amounts presented may not recalculate due to rounding.

IDEXX Laboratories, Inc. and Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
				Three Months Ended
				June 30, 2024			Percent of Revenue			June 30, 2023			Percent of Revenue
Revenue:		CAG		$922,298						$866,652
		Water		46,726						43,029
		LPD		30,306						29,911
		Other		4,248						4,038
		Total		$1,003,578						$943,630
Gross Profit:		CAG		$569,071			61.7	%		$525,709			60.7	%
		Water		32,074			68.6	%		30,319			70.5	%
		LPD		15,558			51.3	%		16,086			53.8	%
		Other		2,456			57.8	%		736			18.2	%
		Total		$619,159			61.7	%		$572,850			60.7	%
Income from Operations:		CAG		$241,550			26.2	%		$275,509			31.8	%
		Water		20,504			43.9	%		19,820			46.1	%
		LPD		1,499			4.9	%		1,951			6.5	%
		Other		248			5.8	%		(1,136	)		(28.1	)%
		Total		$263,801			26.3	%		$296,144			31.4	%

				Six Months Ended
				June 30, 2024			Percent of Revenue			June 30, 2023			Percent of Revenue
Revenue:		CAG		$1,811,583						$1,693,931
		Water		89,797						81,912
		LPD		58,511						59,119
		Other		7,782						8,863
		Total		$1,967,673						$1,843,825
Gross Profit:		CAG		$1,115,307			61.6	%		$1,024,466			60.5	%
		Water		62,571			69.7	%		57,587			70.3	%
		LPD		30,792			52.6	%		31,139			52.7	%
		Other		3,559			45.7	%		2,629			29.7	%
		Total		$1,212,229			61.6	%		$1,115,821			60.5	%
Income from Operations:		CAG		$521,246			28.8	%		$537,259			31.7	%
		Water		39,934			44.5	%		36,791			44.9	%
		LPD		2,365			4.0	%		3,259			5.5	%
		Other		(786	)		(10.1	)%		(766	)		(8.6	)%
		Total		$562,759			28.6	%		$576,543			31.3	%

IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories and by Domestic and International Markets
Amounts in thousands (Unaudited)
		Three Months Ended
		June 30, 2024		June 30, 2023		Dollar Change			Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions			Organic Revenue Growth1
Net Revenue
CAG		$922,298		$866,652		$55,646			6.4	%		(0.7	%)		0.4	%		6.7	%
United States		628,684		594,395		34,289			5.8	%		—			0.5	%		5.2	%
International		293,614		272,257		21,357			7.8	%		(2.2	%)		—			10.1	%
Water		46,726		43,029		3,697			8.6	%		(0.9	%)		—			9.5	%
United States		24,461		21,208		3,253			15.3	%		—			—			15.3	%
International		22,265		21,821		444			2.0	%		(1.8	%)		—			3.8	%
LPD		30,306		29,911		395			1.3	%		(1.6	%)		—			2.9	%
United States		5,115		4,422		693			15.7	%		—			—			15.7	%
International		25,191		25,489		(298	)		(1.2	%)		(1.8	%)		—			0.7	%
Other		4,248		4,038		210			5.2	%		—			—			5.2	%
Total Company		$1,003,578		$943,630		$59,948			6.4	%		(0.7	%)		0.3	%		6.7	%
United States		660,146		621,607		38,539			6.2	%		—			0.5	%		5.7	%
International		343,432		322,023		21,409			6.6	%		(2.1	%)		—			8.8	%

		Three Months Ended
		June 30, 2024		June 30, 2023		Dollar Change			Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions			Organic Revenue Growth1
Net CAG Revenue
CAG Diagnostics recurring revenue:		$808,454		$762,476		$45,978			6.0	%		(0.7	%)		—			6.7	%
IDEXX VetLab consumables		325,348		303,735		21,613			7.1	%		(1.0	%)		—			8.1	%
Rapid assay products		103,290		97,340		5,950			6.1	%		(0.4	%)		—			6.5	%
Reference laboratory diagnostic and consulting services		347,373		330,106		17,267			5.2	%		(0.5	%)		—			5.8	%
CAG Diagnostics services and accessories		32,443		31,295		1,148			3.7	%		(1.0	%)		—			4.7	%
CAG Diagnostics capital – instruments		35,292		34,054		1,238			3.6	%		(1.2	%)		—			4.8	%
Veterinary software, services and diagnostic imaging systems:		78,552		70,122		8,430			12.0	%		(0.1	%)		4.5	%		7.6	%
Recurring revenue		63,117		53,725		9,392			17.5	%		(0.1	%)		5.9	%		11.7	%
Systems and hardware		15,435		16,397		(962	)		(5.9	%)		(0.1	%)		—			(5.8	%)
Net CAG revenue		$922,298		$866,652		$55,646			6.4	%		(0.7	%)		0.4	%		6.7	%

		Three Months Ended
		June 30, 2024		June 30, 2023		Dollar Change		Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions		Organic Revenue Growth1
CAG Diagnostics recurring revenue:		$808,454		$762,476		$45,978		6.0	%		(0.7	%)		—		6.7	%
United States		544,466		517,388		27,078		5.2	%		—			—		5.2	%
International		263,988		245,088		18,900		7.7	%		(2.2	%)		—		10.0	%
1See Statements Regarding Non-GAAP Financial Measures, above. Amounts presented may not recalculate due to rounding.

IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories and by Domestic and International Markets
Amounts in thousands (Unaudited)
		Six Months Ended
		June 30, 2024		June 30, 2023		Dollar Change			Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions			Organic Revenue Growth1
Net Revenue
CAG		$1,811,583		$1,693,931		$117,652			6.9	%		(0.3	%)		0.3	%		7.0	%
United States		1,230,879		1,158,922		71,957			6.2	%		—			0.5	%		5.7	%
International		580,704		535,009		45,695			8.5	%		(1.1	%)		—			9.7	%
Water		89,797		81,912		7,885			9.6	%		(0.4	%)		—			10.0	%
United States		46,660		41,128		5,532			13.5	%		—			—			13.5	%
International		43,137		40,784		2,353			5.8	%		(0.8	%)		—			6.6	%
LPD		58,511		59,119		(608	)		(1.0	%)		(0.8	%)		—			(0.2	%)
United States		10,279		8,965		1,314			14.7	%		—			—			14.7	%
International		48,232		50,154		(1,922	)		(3.8	%)		(1.0	%)		—			(2.9	%)
Other		7,782		8,863		(1,081	)		(12.2	%)		—			—			(12.2	%)
Total Company		$1,967,673		$1,843,825		$123,848			6.7	%		(0.4	%)		0.3	%		6.8	%
United States		1,291,155		1,212,020		79,135			6.5	%		—			0.4	%		6.1	%
International		676,518		631,805		44,713			7.1	%		(1.1	%)		—			8.1	%

		Six Months Ended
		June 30, 2024		June 30, 2023		Dollar Change			Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions			Organic Revenue Growth1
Net CAG Revenue
CAG Diagnostics recurring revenue:		$1,588,598		$1,489,378		$99,220			6.7	%		(0.3	%)		—			7.0	%
IDEXX VetLab consumables		642,277		594,849		47,428			8.0	%		(0.5	%)		—			8.5	%
Rapid assay products		189,605		179,372		10,233			5.7	%		(0.2	%)		—			5.9	%
Reference laboratory diagnostic and consulting services		691,711		653,286		38,425			5.9	%		(0.2	%)		—			6.1	%
CAG Diagnostics services and accessories		65,005		61,871		3,134			5.1	%		(0.7	%)		—			5.7	%
CAG Diagnostics capital – instruments		69,384		67,198		2,186			3.3	%		(0.8	%)		—			4.0	%
Veterinary software, services and diagnostic imaging systems:		153,601		137,355		16,246			11.8	%		(0.1	%)		3.9	%		8.0	%
Recurring revenue		122,817		105,432		17,385			16.5	%		(0.1	%)		5.1	%		11.5	%
Systems and hardware		30,784		31,923		(1,139	)		(3.6	%)		(0.1	%)		—			(3.5	%)
Net CAG revenue		$1,811,583		$1,693,931		$117,652			6.9	%		(0.3	%)		0.3	%		7.0	%

		Six Months Ended
		June 30, 2024		June 30, 2023		Dollar Change		Reported Revenue Growth1			Percentage Change from Currency			Percentage Change from Acquisitions		Organic Revenue Growth1
CAG Diagnostics recurring revenue:		$1,588,598		$1,489,378		$99,220		6.7	%		(0.3	%)		—		7.0	%
United States		1,067,507		1,008,728		58,779		5.8	%		—			—		5.8	%
International		521,091		480,650		40,441		8.4	%		(1.1	%)		—		9.5	%
1See Statements Regarding Non-GAAP Financial Measures, above. Amounts presented may not recalculate due to rounding.

IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
Amounts in thousands (Unaudited)
				June 30, 2024		December 31, 2023
Assets:		Current Assets:
		Cash and cash equivalents		$401,590		$453,932
		Accounts receivable, net		533,606		457,445
		Inventories		379,958		380,282
		Other current assets		213,458		203,595
		Total current assets		1,528,612		1,495,254
		Property and equipment, net		708,178		702,177
		Other long-term assets, net		1,178,077		1,062,494
		Total assets		$3,414,867		$3,259,925
Liabilities and Stockholders'
Equity:		Current Liabilities:
		Accounts payable		$117,468		$110,643
		Accrued liabilities		541,124		478,712
		Line of credit		250,000		250,000
		Current portion of long-term debt		170,112		74,997
		Deferred revenue		37,998		37,195
		Total current liabilities		1,116,702		951,547
		Long-term debt, net of current portion		524,743		622,883
		Other long-term liabilities, net		193,169		200,965
		Total long-term liabilities		717,912		823,848
		Total stockholders' equity		1,580,253		1,484,530
		Total liabilities and stockholders' equity		$3,414,867		$3,259,925

IDEXX Laboratories, Inc. and Subsidiaries
Selected Balance Sheet Information (Unaudited)
				June 30, 2024		March 31, 2024		December 31, 2023		September 30, 2023		June 30, 2023
Selected Balance Sheet Information:		Days sales outstanding1		47.3		45.7		46.1		45.6		43.9
		Inventory turns2		1.4		1.3		1.3		1.3		1.3
1Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.
2Inventory turns are calculated as the ratio of four times our inventory-related cost of product revenue for the quarter, divided by the average inventory balances at the beginning and end of each quarter.

IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
Amounts in thousands (Unaudited)
				Six Months Ended
				June 30, 2024			June 30, 2023
Operating:		Cash Flows from Operating Activities:
		Net income		$438,877			$438,290
		Non-cash adjustments to net income		75,155			76,246
		Changes in assets and liabilities		(67,135	)		(130,310	)
		Net cash provided by operating activities		446,897			384,226
Investing:		Cash Flows from Investing Activities:
		Purchases of property and equipment		(63,578	)		(66,981	)
		Acquisition of a business		(77,000	)		—
		Proceeds from net investment hedges		727			—
		Net cash used by investing activities		(139,851	)		(66,981	)
Financing:		Cash Flows from Financing Activities:
		Repayments under credit facility, net		—			(315,000	)
		Payments for the acquisition-related holdbacks		—			(1,780	)
		Repurchases of common stock		(370,285	)		—
		Proceeds from exercises of stock options and employee stock purchase plans		26,241			23,086
		Shares withheld for statutory tax withholding payments on restricted stock		(10,268	)		(9,676	)
		Other		—			6,256
		Net cash used by financing activities		(354,312	)		(297,114	)
		Net effect of changes in exchange rates on cash		(5,076	)		161
		Net (decrease) increase in cash and cash equivalents		(52,342	)		20,292
		Cash and cash equivalents, beginning of period		453,932			112,546
		Cash and cash equivalents, end of period		$401,590			$132,838

IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow
Amounts in thousands (Unaudited)
				Three Months Ended						Six Months Ended
				June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023
Free Cash Flow:		Net cash provided by operating activities		$248,312			$200,314			$446,897			$384,226
		Investing cash flows attributable to purchases of property and equipment		(33,305	)		(27,470	)		(63,578	)		(66,981	)
		Free cash flow1		$215,007			$172,844			$383,319			$317,245
1See Statements Regarding Non-GAAP Financial Measures, above.

IDEXX Laboratories, Inc. and Subsidiaries
Common Stock Repurchases
Amounts in thousands except per share data (Unaudited)
		Three Months Ended				Six Months Ended
		June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023
Shares repurchased in the open market		415		—		718		—
Shares acquired through employee surrender for statutory tax withholding		—		—		18		19
Total shares repurchased		415		—		736		19
Cost of shares repurchased in the open market		$208,169		$—		$375,271		$—
Cost of shares for employee surrenders		79		79		10,268		9,676
Total cost of shares		$208,248		$79		$385,539		$9,676
Average cost per share – open market repurchases		$501.44		$—		$522.32		$—
Average cost per share – employee surrenders		$496.95		$469.84		$560.01		$503.35
Average cost per share – total		$501.44		$469.84		$523.26		$503.35

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240805524587/en/

John Ravis, Investor Relations, 1-207-556-8155

Source: IDEXX Laboratories, Inc.

FAQ

What was IDEXX Laboratories' (IDXX) revenue for Q2 2024?

IDEXX Laboratories reported revenue of $1,004 million for Q2 2024, representing a 6% increase as reported and 7% organic growth.

How did IDEXX's (IDXX) EPS perform in Q2 2024?

IDEXX's Q2 2024 EPS was $2.44, down 9% as reported but up 15% on a comparable basis, excluding a $0.56 per share impact from a litigation expense accrual.

What is IDEXX's (IDXX) updated revenue guidance for 2024?

IDEXX updated its 2024 revenue guidance to $3,885 - $3,945 million, representing 6.2% - 7.8% growth as reported and organic.

How did IDEXX's (IDXX) Companion Animal Group perform in Q2 2024?

IDEXX's Companion Animal Group revenue grew 6% as reported and 7% organic in Q2 2024, with CAG Diagnostics recurring revenue growing at the same rates.

What impact did the litigation expense have on IDEXX's (IDXX) Q2 2024 results?

The litigation expense accrual of $62 million impacted IDEXX's EPS by $0.56 per share and reduced the operating margin by approximately 610 basis points in Q2 2024.