Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries IDEXX Laboratories Announces Third Quarter Results By: IDEXX Laboratories, Inc. via Business Wire November 01, 2023 at 06:30 AM EDT Achieves third quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 10% reported and 9% organic Solid revenue growth reflects benefits from IDEXX execution drivers including double-digit year-over-year installed base growth across global premium instrument platforms Delivers EPS of $2.53, representing 18% growth as reported and 16% on a comparable basis, supported by operating margin expansion of 100 basis points as reported and 140 basis points on a comparable basis Adjusts 2023 revenue guidance to $3,635 million - $3,650 million, reflecting 7.9% - 8.4% growth as reported and 8.3% - 8.8% organically, driven by projected CAG Diagnostics recurring revenue growth of 9.4% - 9.9% as reported and 9.8% - 10.3% organically Updates 2023 EPS outlook to $9.74 - $9.90, a year-over-year increase of 21% - 23% as reported and 25% - 27% on a comparable basis, including ~12% combined EPS growth benefit from a customer contract resolution payment in Q1 2023 and lapping of discrete 2022 R&D investments IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced third quarter results. Third Quarter Results The Company reports revenues of $916 million for the third quarter of 2023, an increase of 9% reported and 8% organic, driven by Companion Animal Group ("CAG") growth of 9% reported and 8% organic and Water revenue growth of 9% reported and 7% organic. CAG Diagnostics recurring revenue growth of 10% reported and 9% organic was supported by sustained benefits from IDEXX execution drivers and reflects high single-digit organic growth in the U.S. and double-digit organic growth internationally. Commercial engagement and sustained high interest in adopting IDEXX innovation drove high levels of premium instrument placements, supporting 11% annual growth in IDEXX's global premium instrument installed base. Veterinary software, services and diagnostic imaging systems revenue grew 14% as reported and 13% organically, reflecting high recurring revenue growth and ongoing momentum in cloud-based software placements. Third quarter earnings per diluted share (“EPS”) were $2.53, an increase of 18% as reported and 16% on a comparable basis, including $0.04 per share in tax benefits from share-based compensation and $0.01 per share negative impact from currency changes. "Strong execution by IDEXX teams and sustained interest in adopting IDEXX's differentiated multi-modality testing and workflow solutions helped deliver solid organic revenue gains and strong financial results in the third quarter," said Jay Mazelsky, President and Chief Executive Officer. "Busy veterinarians appreciate that they must very often first test before they can determine the most optimal treatment course, which drives the medical services activity in their practice. They also want these testing solutions to seamlessly connect to a modern cloud-based PIMS, and have shown an increased appetite to invest in software that supports higher staff productivity and client communications. IDEXX remains very well positioned to address these needs while driving development of the companion animal diagnostics sector through relevant innovation and commercial engagement." Third Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated revenue growth of 9% as reported and 8% organic for the quarter. Solid growth was supported by CAG Diagnostics recurring revenue growth of 10% on a reported basis and 9% organically. U.S. CAG Diagnostics recurring revenue organic growth of 8.3% included an ~50 basis point negative impact from fewer equivalent selling days and remained solidly above sector growth levels in the third quarter, reflected in an ~1,100 basis point growth premium to U.S. same store clinical visit growth. Additional U.S. companion animal practice key metrics are available in the Q3 2023 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors. Strong global growth was achieved across IDEXX's testing modalities. IDEXX VetLab® consumables generated 13% reported and 11% organic revenue growth, with double-digit gains across U.S. and international regions supported by benefits from higher net price realization and an expanded global premium instrument installed base. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, driven by high single-digit gains in the U.S. and improved, mid-to-high single-digit growth in international regions. Rapid assay products revenues grew 9% as reported and 8% organically, driven by strong growth in the U.S., supported by benefits from higher net price realization. Veterinary software, services and diagnostic imaging systems revenues grew 14% as reported and 13% organically, driven by continued high levels of organic gains in recurring software and diagnostic imaging revenues. Strong demand for cloud-based products continues to support momentum in software solution placements and customer gains. Water Water revenues grew 9% on a reported basis and 7% on an organic basis for the quarter, reflecting solid gains across regions, including benefits from net price improvement. Livestock, Poultry and Dairy (“LPD”) LPD revenues grew 5% on a reported basis and grew 2% organically for the quarter, as solid gains in the U.S. were offset by lower herd health screening levels internationally. Gross Profit and Operating Profit Gross profits increased 8% as reported and on a comparable basis. Gross margin of 59.9% decreased 30 basis points as reported and increased 30 basis points on a comparable basis, supported by benefits from net price gains, business mix and improvement in software service gross margins. Operating margin was 30.1% in the quarter, higher than the prior year by 100 basis points as reported and 140 basis points on a comparable basis. Operating margin expansion reflects gross margin gains benefiting from strong CAG Diagnostics recurring revenue growth and operating expense growth of 4% as reported and on a comparable basis. Reported operating expense growth reflects benefits from cost controls and lapping of prior year R&D and commercial investments. 2023 Growth and Financial Performance Outlook The Company is updating its full year revenue growth outlook range to 7.9% - 8.4% as reported and 8.3% - 8.8% organically. This updated outlook is centered on the lower end of the Company's most recent full year guidance range and at the midpoint of its original full year organic growth estimates, reflecting third quarter results and continued headwinds to clinical visit growth rates globally. The overall reported revenue range was decreased by $20 million for updated foreign exchange impact estimates compared to earlier guidance estimates, reflecting the recent strengthening of the U.S. dollar. The Company raised its full year reported operating margin outlook to 29.6% - 29.8%, incorporating strong year-to-date profit performance. Operating margin guidance includes an increased ~70 basis points in year-over-year unfavorable net margin impact from updated foreign currency exchange rate changes, including effects from comparisons to prior year foreign exchange hedge gains. The Company updated its EPS outlook range to $9.74 - $9.90, increasing midpoint estimates by $0.05 per share and maintaining its high end EPS outlook. The Company is maintaining a similar operational outlook at midpoint, as positive revisions to the Company's operating margin outlook offset adjustments to organic revenue growth estimates. Positive adjustments of ~$0.11 per share to projections for interest expense and effective tax rates, including share-based compensation tax benefits, offset an ~$0.05 negative EPS impact related to updated foreign currency exchange rate estimates — which is now estimated to provide a $0.25 per share headwind to full year EPS results. The following table provides the Company's updated outlook for annual key financial metrics in 2023: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2023 Revenue $3,635 - $3,650 Reported growth 7.9% - 8.4% Organic growth 8.3% - 8.8% CAG Diagnostics Recurring Revenue Growth Reported growth 9.4% - 9.9% Organic growth 9.8% - 10.3% Operating Margin 29.6% - 29.8% Operating margin expansion 290 bps - 310 bps Negative impact of foreign exchange ~ 70 bps Comparable margin expansion 360 bps - 380 bps Positive impact of discrete in-license of technology and customer contract resolution ~ 280 bps EPS $9.74 - $9.90 Reported growth 21% - 23% Comparable growth 25% - 27% Positive impact of discrete in-license of technology and customer contract resolution ~ 12% Other Key Metrics Net interest expense ~ $37 Share-based compensation tax benefit ~ $12 Share-based compensation tax rate benefit ~ 1% Effective tax rate 21% - 21.5% Share-based compensation EPS impact ~ $0.14 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 100% - 110% of net income Free Cash Flow 85% - 90% of net income Capital Expenditures $160 - $180 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 2023. Estimated Foreign Currency Exchange Rate Impacts 2023 Revenue growth rate impact (~ 40 bps) CAG Diagnostics recurring revenue growth rate impact (~ 40 bps) Operating margin growth impact (~ 70 bps) EPS impact (~ $0.25) EPS growth impact (~ 3%) Go-Forward Foreign Currency Exchange Rate Assumptions 2023 In U.S. dollars euro $1.05 British pound $1.21 Canadian dollar $0.73 Australian dollar $0.63 Relative to the U.S. dollar Japanese yen ¥151 Chinese renminbi ¥7.40 Brazilian real R$5.14 Conference Call and Webcast Information IDEXX Laboratories, Inc. will be hosting a conference call today at 8:30 a.m. (EDT) to discuss its third quarter 2023 results and management’s outlook. To participate in the conference call, dial 1-800-289-0459 or 1-773-377-9037 and reference passcode 917383. 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. 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 nearly 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 contains statements about the Company’s business prospects and estimates of the Company’s financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are included above under "2023 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; and projected effective tax rates, reduction of average shares outstanding and net interest expense. 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, 2022 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, 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 third quarter 2023 results as follows: decreased gross profit growth by 0%, decreased gross margin growth by 60 basis points, increased operating expense growth by 0%, decreased operating profit growth by 1%, decreased operating profit margin growth by 40 basis points, and decreased EPS growth by 0%. 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 months and nine months ended September 30, 2023 and refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated foreign currency exchange rate impacts on 2023 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 months and nine months ended September 30, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Please refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated full year 2023 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 an impact on projected full year 2023 revenue growth or 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 Nine Months Ended Year-over-Year September 30, September 30, Change September 30, September 30, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 547,982 $ 506,626 8 % $ 1,663,803 $ 1,519,411 10 % Gross margin 59.9 % 60.2 % (30 )bps 60.3 % 59.8 % 40 bps Less: comparability adjustments Change from currency (290 ) — (24,793 ) — Comparable gross profit growth $ 548,272 $ 506,626 8 % $ 1,688,596 $ 1,519,411 11 % Comparable gross margin and gross margin gain (or growth) 60.5 % 60.2 % 30 bps 60.9 % 59.8 % 100 bps Operating expenses (as reported) $ 272,699 $ 261,798 4 % $ 811,977 $ 847,173 (4 )% Less: comparability adjustments Change from currency 1,008 — (3,797 ) — Comparable operating expense growth $ 271,691 $ 261,798 4 % $ 815,774 $ 847,173 (4 )% Income from operations (as reported) $ 275,283 $ 244,828 12 % $ 851,826 $ 672,238 27 % Operating margin 30.1 % 29.1 % 100 bps 30.9 % 26.5 % 440 bps Less: comparability adjustments Change from currency (1,298 ) — (20,996 ) — Comparable operating profit growth $ 276,581 $ 244,828 13 % $ 872,822 $ 672,238 30 % Comparable operating margin and operating margin gain (or growth) 30.5 % 29.1 % 140 bps 31.5 % 26.5 % 500 bps Amounts presented may not recalculate due to rounding. Projected 2023 comparable operating margin expansion outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects projected full year 2023 reported operating margin adjusted for estimated negative year-over-year foreign currency exchange rate change impact of approximately 70 basis points. These impacts described above reconcile reported gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain (including projected 2023 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 Nine Months Ended Year-over-Year September 30, September 30, Growth September 30, September 30, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.53 $ 2.15 18 % $ 7.75 $ 5.97 30 % Less: comparability adjustments Share-based compensation activity 0.04 — 0.14 0.10 Change from currency (0.01 ) — (0.19 ) — Comparable EPS growth 2.50 2.15 16 % 7.80 5.87 33 % Amounts presented may not recalculate due to rounding. Projected 2023 comparable EPS growth outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects adjustments including estimated positive share-based compensation activity of $0.14 and estimated negative year-over-year foreign currency exchange rate change impact of $0.25. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2023 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 nine months ended September 30, 2023 and 2022. To estimate projected 2023 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of approximately $160 - $180 million. 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 September 30, 2023, we have deducted purchases of property and equipment of approximately $150 million from net cash provided from operating activities of approximately $830 million, divided by net income of approximately $823 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, 2022 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Revenue: Revenue $ 915,527 $ 841,661 $ 2,759,352 $ 2,538,756 Expenses and Income: Cost of revenue 367,545 335,035 1,095,549 1,019,345 Gross profit 547,982 506,626 1,663,803 1,519,411 Sales and marketing 135,698 130,021 424,034 392,570 General and administrative 89,034 83,764 248,804 243,201 Research and development 47,967 48,013 139,139 211,402 Income from operations 275,283 244,828 851,826 672,238 Interest expense, net (7,392 ) (10,645 ) (30,318 ) (25,481 ) Income before provision for income taxes 267,891 234,183 821,508 646,757 Provision for income taxes 55,660 53,245 170,987 139,875 Net Income: Net income attributable to stockholders $ 212,231 $ 180,938 $ 650,521 $ 506,882 Earnings per share: Basic $ 2.55 $ 2.17 $ 7.83 $ 6.04 Earnings per share: Diluted $ 2.53 $ 2.15 $ 7.75 $ 5.97 Shares outstanding: Basic 83,097 83,247 83,058 83,855 Shares outstanding: Diluted 83,993 84,113 83,990 84,858 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Operating Ratios Gross profit 59.9 % 60.2 % 60.3 % 59.8 % (as a percentage of revenue): Sales, marketing, general and administrative expense 24.5 % 25.4 % 24.4 % 25.0 % Research and development expense 5.2 % 5.7 % 5.0 % 8.3 % Income from operations1 30.1 % 29.1 % 30.9 % 26.5 % 1Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 837,160 $ 764,990 Water 44,450 40,840 LPD 29,747 28,452 Other 4,170 7,379 Total $ 915,527 $ 841,661 Gross Profit: CAG $ 499,291 59.6 % $ 456,334 59.7 % Water 31,034 69.8 % 29,406 72.0 % LPD 15,836 53.2 % 17,462 61.4 % Other 1,821 43.7 % 3,424 46.4 % Total $ 547,982 59.9 % $ 506,626 60.2 % Income from Operations: CAG $ 253,358 30.3 % $ 221,454 28.9 % Water 20,328 45.7 % 19,924 48.8 % LPD 2,405 8.1 % 4,480 15.7 % Other (808 ) (19.4 )% (1,030 ) (14.0 )% Total $ 275,283 30.1 % $ 244,828 29.1 % Nine Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 2,531,091 $ 2,310,261 Water 126,362 116,406 LPD 88,866 89,211 Other 13,033 22,878 Total $ 2,759,352 $ 2,538,756 Gross Profit: CAG $ 1,523,757 60.2 % $ 1,371,687 59.4 % Water 88,621 70.1 % 82,502 70.9 % LPD 46,975 52.9 % 54,005 60.5 % Other 4,450 34.1 % 11,217 49.0 % Total $ 1,663,803 60.3 % $ 1,519,411 59.8 % Income from Operations: CAG $ 790,617 31.2 % $ 601,105 26.0 % Water 57,119 45.2 % 54,498 46.8 % LPD 5,664 6.4 % 14,447 16.2 % Other (1,574 ) (12.1 )% 2,188 9.6 % Total $ 851,826 30.9 % $ 672,238 26.5 % 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 September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % United States 573,830 530,758 43,072 8.1 % — — 8.1 % International 263,330 234,232 29,098 12.4 % 3.4 % — 9.0 % Water 44,450 40,840 3,610 8.8 % 1.2 % 1.1 % 6.6 % United States 22,804 20,940 1,864 8.9 % — 0.7 % 8.2 % International 21,646 19,900 1,746 8.8 % 2.4 % 1.5 % 4.9 % LPD 29,747 28,452 1,295 4.6 % 2.5 % — 2.0 % United States 5,040 4,452 588 13.2 % — — 13.2 % International 24,707 24,000 707 2.9 % 2.9 % — — Other 4,170 7,379 (3,209 ) (43.5 %) 0.1 % — (43.5 %) Total Company $ 915,527 $ 841,661 $ 73,866 8.8 % 1.1 % 0.1 % 7.6 % United States 603,046 560,292 42,754 7.6 % — — 7.6 % International 312,481 281,369 31,112 11.1 % 3.3 % 0.1 % 7.7 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % IDEXX VetLab consumables 296,042 262,820 33,222 12.6 % 1.2 % — 11.4 % Rapid assay products 87,562 80,542 7,020 8.7 % 0.5 % — 8.2 % Reference laboratory diagnostic and consulting services 320,294 295,590 24,704 8.4 % 1.0 % — 7.3 % CAG Diagnostics services and accessories 30,060 28,357 1,703 6.0 % 1.3 % — 4.7 % CAG Diagnostics capital – instruments 32,254 35,176 (2,922 ) (8.3 %) 1.9 % — (10.2 %) Veterinary software, services and diagnostic imaging systems 70,948 62,505 8,443 13.5 % 0.2 % — 13.3 % Net CAG revenue $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % United States 497,109 459,077 38,032 8.3 % — — 8.3 % International 236,849 208,232 28,617 13.7 % 3.4 % — 10.3 % 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) Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % United States 1,732,752 1,563,150 169,602 10.8 % — — 10.8 % International 798,339 747,111 51,228 6.9 % (1.6 %) — 8.5 % Water 126,362 116,406 9,956 8.6 % (0.9 %) 1.5 % 8.0 % United States 63,932 58,304 5,628 9.7 % — 0.7 % 8.9 % International 62,430 58,102 4,328 7.4 % (1.8 %) 2.2 % 7.0 % LPD 88,866 89,211 (345 ) (0.4 %) (0.7 %) — 0.3 % United States 14,005 12,054 1,951 16.2 % — — 16.2 % International 74,861 77,157 (2,296 ) (3.0 %) (0.8 %) — (2.2 %) Other 13,033 22,878 (9,845 ) (43.0 %) — — (43.0 %) Total Company $ 2,759,352 $ 2,538,756 $ 220,596 8.7 % (0.6 %) 0.1 % 9.2 % United States 1,815,066 1,646,023 169,043 10.3 % — — 10.2 % International 944,286 892,733 51,553 5.8 % (1.5 %) 0.1 % 7.2 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % IDEXX VetLab consumables 890,891 796,072 94,819 11.9 % (0.8 %) — 12.7 % Rapid assay products 266,934 242,542 24,392 10.1 % (0.4 %) — 10.4 % Reference laboratory diagnostic and consulting services 973,580 894,795 78,785 8.8 % (0.4 %) — 9.2 % CAG Diagnostics services and accessories 91,931 84,123 7,808 9.3 % (0.8 %) — 10.1 % CAG Diagnostics capital – instruments 99,452 108,400 (8,948 ) (8.3 %) (0.4 %) — (7.8 %) Veterinary software, services and diagnostic imaging systems 208,303 184,329 23,974 13.0 % (0.3 %) — 13.3 % Net CAG revenue $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % United States 1,505,837 1,351,936 153,901 11.4 % — — 11.4 % International 717,499 665,596 51,903 7.8 % (1.7 %) — 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) September 30, 2023 December 31, 2022 Assets: Current Assets: Cash and cash equivalents $ 331,696 $ 112,546 Accounts receivable, net 452,699 400,619 Inventories 393,974 367,823 Other current assets 205,861 220,489 Total current assets 1,384,230 1,101,477 Property and equipment, net 687,101 649,474 Other long-term assets, net 1,015,073 995,814 Total assets $ 3,086,404 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 112,609 $ 110,221 Accrued liabilities 420,312 433,662 Line of credit 250,000 579,000 Current portion of long-term debt 149,990 74,982 Deferred revenue 37,282 37,938 Total current liabilities 970,193 1,235,803 Long-term debt, net of current portion 618,813 694,387 Other long-term liabilities, net 199,991 207,838 Total long-term liabilities 818,804 902,225 Total stockholders' equity 1,297,407 608,737 Total liabilities and stockholders' equity $ 3,086,404 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Selected Balance Sheet Information: Days sales outstanding1 45.6 43.9 42.9 43.4 43.4 Inventory turns2 1.3 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 represent inventory-related cost of product revenue for the twelve months preceding each quarter-end 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) Nine Months Ended September 30, 2023 September 30, 2022 Operating: Cash Flows from Operating Activities: Net income $ 650,521 $ 506,882 Non-cash adjustments to net income 120,390 92,271 Changes in assets and liabilities (114,252 ) (229,597 ) Net cash provided by operating activities 656,659 369,556 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (101,075 ) (99,609 ) Equity investment — (25,000 ) Acquisition of intangible assets — (10,000 ) Acquisition of a business, net of cash acquired — (11,512 ) Proceeds from net investment hedges 6,256 — Net cash used by investing activities (94,819 ) (146,121 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings under credit facility, net (329,000 ) 559,500 Payment of senior debt — (75,000 ) Payments for the acquisition-related contingent consideration and holdbacks (1,879 ) (5,730 ) Repurchases of common stock (35,070 ) (745,691 ) Proceeds from exercises of stock options and employee stock purchase plans 35,704 23,257 Shares withheld for statutory tax withholding payments on restricted stock (9,907 ) (10,552 ) Net cash used by financing activities (340,152 ) (254,216 ) Net effect of changes in exchange rates on cash (2,538 ) (14,497 ) Net increase (decrease) in cash and cash equivalents 219,150 (45,278 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 331,696 $ 99,176 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Free Cash Flow: Net cash provided by operating activities $ 272,433 $ 189,000 $ 656,659 $ 369,556 Investing cash flows attributable to purchases of property and equipment (34,094 ) (37,685 ) (101,075 ) (99,609 ) Free cash flow1 $ 238,339 $ 151,315 $ 555,584 $ 269,947 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 Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Shares repurchased in the open market 65 453 65 1,764 Shares acquired through employee surrender for statutory tax withholding 1 — 20 21 Total shares repurchased 66 453 85 1,785 Cost of shares repurchased in the open market $ 35,070 $ 166,423 $ 35,070 $ 742,661 Cost of shares for employee surrenders 231 162 9,907 10,552 Total cost of shares $ 35,301 $ 166,585 $ 44,977 $ 753,213 Average cost per share – open market repurchases $ 536.03 $ 367.55 $ 536.03 $ 421.12 Average cost per share – employee surrenders $ 506.74 $ 387.07 $ 503.43 $ 502.26 Average cost per share – total $ 535.83 $ 367.56 $ 528.49 $ 422.07 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031725061/en/Contacts John Ravis, Investor Relations, 1-207-556-8155 Data & News supplied by www.cloudquote.io Stock quotes supplied by Barchart Quotes delayed at least 20 minutes. 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IDEXX Laboratories Announces Third Quarter Results By: IDEXX Laboratories, Inc. via Business Wire November 01, 2023 at 06:30 AM EDT Achieves third quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 10% reported and 9% organic Solid revenue growth reflects benefits from IDEXX execution drivers including double-digit year-over-year installed base growth across global premium instrument platforms Delivers EPS of $2.53, representing 18% growth as reported and 16% on a comparable basis, supported by operating margin expansion of 100 basis points as reported and 140 basis points on a comparable basis Adjusts 2023 revenue guidance to $3,635 million - $3,650 million, reflecting 7.9% - 8.4% growth as reported and 8.3% - 8.8% organically, driven by projected CAG Diagnostics recurring revenue growth of 9.4% - 9.9% as reported and 9.8% - 10.3% organically Updates 2023 EPS outlook to $9.74 - $9.90, a year-over-year increase of 21% - 23% as reported and 25% - 27% on a comparable basis, including ~12% combined EPS growth benefit from a customer contract resolution payment in Q1 2023 and lapping of discrete 2022 R&D investments IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced third quarter results. Third Quarter Results The Company reports revenues of $916 million for the third quarter of 2023, an increase of 9% reported and 8% organic, driven by Companion Animal Group ("CAG") growth of 9% reported and 8% organic and Water revenue growth of 9% reported and 7% organic. CAG Diagnostics recurring revenue growth of 10% reported and 9% organic was supported by sustained benefits from IDEXX execution drivers and reflects high single-digit organic growth in the U.S. and double-digit organic growth internationally. Commercial engagement and sustained high interest in adopting IDEXX innovation drove high levels of premium instrument placements, supporting 11% annual growth in IDEXX's global premium instrument installed base. Veterinary software, services and diagnostic imaging systems revenue grew 14% as reported and 13% organically, reflecting high recurring revenue growth and ongoing momentum in cloud-based software placements. Third quarter earnings per diluted share (“EPS”) were $2.53, an increase of 18% as reported and 16% on a comparable basis, including $0.04 per share in tax benefits from share-based compensation and $0.01 per share negative impact from currency changes. "Strong execution by IDEXX teams and sustained interest in adopting IDEXX's differentiated multi-modality testing and workflow solutions helped deliver solid organic revenue gains and strong financial results in the third quarter," said Jay Mazelsky, President and Chief Executive Officer. "Busy veterinarians appreciate that they must very often first test before they can determine the most optimal treatment course, which drives the medical services activity in their practice. They also want these testing solutions to seamlessly connect to a modern cloud-based PIMS, and have shown an increased appetite to invest in software that supports higher staff productivity and client communications. IDEXX remains very well positioned to address these needs while driving development of the companion animal diagnostics sector through relevant innovation and commercial engagement." Third Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated revenue growth of 9% as reported and 8% organic for the quarter. Solid growth was supported by CAG Diagnostics recurring revenue growth of 10% on a reported basis and 9% organically. U.S. CAG Diagnostics recurring revenue organic growth of 8.3% included an ~50 basis point negative impact from fewer equivalent selling days and remained solidly above sector growth levels in the third quarter, reflected in an ~1,100 basis point growth premium to U.S. same store clinical visit growth. Additional U.S. companion animal practice key metrics are available in the Q3 2023 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors. Strong global growth was achieved across IDEXX's testing modalities. IDEXX VetLab® consumables generated 13% reported and 11% organic revenue growth, with double-digit gains across U.S. and international regions supported by benefits from higher net price realization and an expanded global premium instrument installed base. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, driven by high single-digit gains in the U.S. and improved, mid-to-high single-digit growth in international regions. Rapid assay products revenues grew 9% as reported and 8% organically, driven by strong growth in the U.S., supported by benefits from higher net price realization. Veterinary software, services and diagnostic imaging systems revenues grew 14% as reported and 13% organically, driven by continued high levels of organic gains in recurring software and diagnostic imaging revenues. Strong demand for cloud-based products continues to support momentum in software solution placements and customer gains. Water Water revenues grew 9% on a reported basis and 7% on an organic basis for the quarter, reflecting solid gains across regions, including benefits from net price improvement. Livestock, Poultry and Dairy (“LPD”) LPD revenues grew 5% on a reported basis and grew 2% organically for the quarter, as solid gains in the U.S. were offset by lower herd health screening levels internationally. Gross Profit and Operating Profit Gross profits increased 8% as reported and on a comparable basis. Gross margin of 59.9% decreased 30 basis points as reported and increased 30 basis points on a comparable basis, supported by benefits from net price gains, business mix and improvement in software service gross margins. Operating margin was 30.1% in the quarter, higher than the prior year by 100 basis points as reported and 140 basis points on a comparable basis. Operating margin expansion reflects gross margin gains benefiting from strong CAG Diagnostics recurring revenue growth and operating expense growth of 4% as reported and on a comparable basis. Reported operating expense growth reflects benefits from cost controls and lapping of prior year R&D and commercial investments. 2023 Growth and Financial Performance Outlook The Company is updating its full year revenue growth outlook range to 7.9% - 8.4% as reported and 8.3% - 8.8% organically. This updated outlook is centered on the lower end of the Company's most recent full year guidance range and at the midpoint of its original full year organic growth estimates, reflecting third quarter results and continued headwinds to clinical visit growth rates globally. The overall reported revenue range was decreased by $20 million for updated foreign exchange impact estimates compared to earlier guidance estimates, reflecting the recent strengthening of the U.S. dollar. The Company raised its full year reported operating margin outlook to 29.6% - 29.8%, incorporating strong year-to-date profit performance. Operating margin guidance includes an increased ~70 basis points in year-over-year unfavorable net margin impact from updated foreign currency exchange rate changes, including effects from comparisons to prior year foreign exchange hedge gains. The Company updated its EPS outlook range to $9.74 - $9.90, increasing midpoint estimates by $0.05 per share and maintaining its high end EPS outlook. The Company is maintaining a similar operational outlook at midpoint, as positive revisions to the Company's operating margin outlook offset adjustments to organic revenue growth estimates. Positive adjustments of ~$0.11 per share to projections for interest expense and effective tax rates, including share-based compensation tax benefits, offset an ~$0.05 negative EPS impact related to updated foreign currency exchange rate estimates — which is now estimated to provide a $0.25 per share headwind to full year EPS results. The following table provides the Company's updated outlook for annual key financial metrics in 2023: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2023 Revenue $3,635 - $3,650 Reported growth 7.9% - 8.4% Organic growth 8.3% - 8.8% CAG Diagnostics Recurring Revenue Growth Reported growth 9.4% - 9.9% Organic growth 9.8% - 10.3% Operating Margin 29.6% - 29.8% Operating margin expansion 290 bps - 310 bps Negative impact of foreign exchange ~ 70 bps Comparable margin expansion 360 bps - 380 bps Positive impact of discrete in-license of technology and customer contract resolution ~ 280 bps EPS $9.74 - $9.90 Reported growth 21% - 23% Comparable growth 25% - 27% Positive impact of discrete in-license of technology and customer contract resolution ~ 12% Other Key Metrics Net interest expense ~ $37 Share-based compensation tax benefit ~ $12 Share-based compensation tax rate benefit ~ 1% Effective tax rate 21% - 21.5% Share-based compensation EPS impact ~ $0.14 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 100% - 110% of net income Free Cash Flow 85% - 90% of net income Capital Expenditures $160 - $180 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 2023. Estimated Foreign Currency Exchange Rate Impacts 2023 Revenue growth rate impact (~ 40 bps) CAG Diagnostics recurring revenue growth rate impact (~ 40 bps) Operating margin growth impact (~ 70 bps) EPS impact (~ $0.25) EPS growth impact (~ 3%) Go-Forward Foreign Currency Exchange Rate Assumptions 2023 In U.S. dollars euro $1.05 British pound $1.21 Canadian dollar $0.73 Australian dollar $0.63 Relative to the U.S. dollar Japanese yen ¥151 Chinese renminbi ¥7.40 Brazilian real R$5.14 Conference Call and Webcast Information IDEXX Laboratories, Inc. will be hosting a conference call today at 8:30 a.m. (EDT) to discuss its third quarter 2023 results and management’s outlook. To participate in the conference call, dial 1-800-289-0459 or 1-773-377-9037 and reference passcode 917383. 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. 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 nearly 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 contains statements about the Company’s business prospects and estimates of the Company’s financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are included above under "2023 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; and projected effective tax rates, reduction of average shares outstanding and net interest expense. 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, 2022 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, 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 third quarter 2023 results as follows: decreased gross profit growth by 0%, decreased gross margin growth by 60 basis points, increased operating expense growth by 0%, decreased operating profit growth by 1%, decreased operating profit margin growth by 40 basis points, and decreased EPS growth by 0%. 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 months and nine months ended September 30, 2023 and refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated foreign currency exchange rate impacts on 2023 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 months and nine months ended September 30, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Please refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated full year 2023 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 an impact on projected full year 2023 revenue growth or 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 Nine Months Ended Year-over-Year September 30, September 30, Change September 30, September 30, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 547,982 $ 506,626 8 % $ 1,663,803 $ 1,519,411 10 % Gross margin 59.9 % 60.2 % (30 )bps 60.3 % 59.8 % 40 bps Less: comparability adjustments Change from currency (290 ) — (24,793 ) — Comparable gross profit growth $ 548,272 $ 506,626 8 % $ 1,688,596 $ 1,519,411 11 % Comparable gross margin and gross margin gain (or growth) 60.5 % 60.2 % 30 bps 60.9 % 59.8 % 100 bps Operating expenses (as reported) $ 272,699 $ 261,798 4 % $ 811,977 $ 847,173 (4 )% Less: comparability adjustments Change from currency 1,008 — (3,797 ) — Comparable operating expense growth $ 271,691 $ 261,798 4 % $ 815,774 $ 847,173 (4 )% Income from operations (as reported) $ 275,283 $ 244,828 12 % $ 851,826 $ 672,238 27 % Operating margin 30.1 % 29.1 % 100 bps 30.9 % 26.5 % 440 bps Less: comparability adjustments Change from currency (1,298 ) — (20,996 ) — Comparable operating profit growth $ 276,581 $ 244,828 13 % $ 872,822 $ 672,238 30 % Comparable operating margin and operating margin gain (or growth) 30.5 % 29.1 % 140 bps 31.5 % 26.5 % 500 bps Amounts presented may not recalculate due to rounding. Projected 2023 comparable operating margin expansion outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects projected full year 2023 reported operating margin adjusted for estimated negative year-over-year foreign currency exchange rate change impact of approximately 70 basis points. These impacts described above reconcile reported gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain (including projected 2023 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 Nine Months Ended Year-over-Year September 30, September 30, Growth September 30, September 30, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.53 $ 2.15 18 % $ 7.75 $ 5.97 30 % Less: comparability adjustments Share-based compensation activity 0.04 — 0.14 0.10 Change from currency (0.01 ) — (0.19 ) — Comparable EPS growth 2.50 2.15 16 % 7.80 5.87 33 % Amounts presented may not recalculate due to rounding. Projected 2023 comparable EPS growth outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects adjustments including estimated positive share-based compensation activity of $0.14 and estimated negative year-over-year foreign currency exchange rate change impact of $0.25. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2023 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 nine months ended September 30, 2023 and 2022. To estimate projected 2023 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of approximately $160 - $180 million. 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 September 30, 2023, we have deducted purchases of property and equipment of approximately $150 million from net cash provided from operating activities of approximately $830 million, divided by net income of approximately $823 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, 2022 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Revenue: Revenue $ 915,527 $ 841,661 $ 2,759,352 $ 2,538,756 Expenses and Income: Cost of revenue 367,545 335,035 1,095,549 1,019,345 Gross profit 547,982 506,626 1,663,803 1,519,411 Sales and marketing 135,698 130,021 424,034 392,570 General and administrative 89,034 83,764 248,804 243,201 Research and development 47,967 48,013 139,139 211,402 Income from operations 275,283 244,828 851,826 672,238 Interest expense, net (7,392 ) (10,645 ) (30,318 ) (25,481 ) Income before provision for income taxes 267,891 234,183 821,508 646,757 Provision for income taxes 55,660 53,245 170,987 139,875 Net Income: Net income attributable to stockholders $ 212,231 $ 180,938 $ 650,521 $ 506,882 Earnings per share: Basic $ 2.55 $ 2.17 $ 7.83 $ 6.04 Earnings per share: Diluted $ 2.53 $ 2.15 $ 7.75 $ 5.97 Shares outstanding: Basic 83,097 83,247 83,058 83,855 Shares outstanding: Diluted 83,993 84,113 83,990 84,858 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Operating Ratios Gross profit 59.9 % 60.2 % 60.3 % 59.8 % (as a percentage of revenue): Sales, marketing, general and administrative expense 24.5 % 25.4 % 24.4 % 25.0 % Research and development expense 5.2 % 5.7 % 5.0 % 8.3 % Income from operations1 30.1 % 29.1 % 30.9 % 26.5 % 1Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 837,160 $ 764,990 Water 44,450 40,840 LPD 29,747 28,452 Other 4,170 7,379 Total $ 915,527 $ 841,661 Gross Profit: CAG $ 499,291 59.6 % $ 456,334 59.7 % Water 31,034 69.8 % 29,406 72.0 % LPD 15,836 53.2 % 17,462 61.4 % Other 1,821 43.7 % 3,424 46.4 % Total $ 547,982 59.9 % $ 506,626 60.2 % Income from Operations: CAG $ 253,358 30.3 % $ 221,454 28.9 % Water 20,328 45.7 % 19,924 48.8 % LPD 2,405 8.1 % 4,480 15.7 % Other (808 ) (19.4 )% (1,030 ) (14.0 )% Total $ 275,283 30.1 % $ 244,828 29.1 % Nine Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 2,531,091 $ 2,310,261 Water 126,362 116,406 LPD 88,866 89,211 Other 13,033 22,878 Total $ 2,759,352 $ 2,538,756 Gross Profit: CAG $ 1,523,757 60.2 % $ 1,371,687 59.4 % Water 88,621 70.1 % 82,502 70.9 % LPD 46,975 52.9 % 54,005 60.5 % Other 4,450 34.1 % 11,217 49.0 % Total $ 1,663,803 60.3 % $ 1,519,411 59.8 % Income from Operations: CAG $ 790,617 31.2 % $ 601,105 26.0 % Water 57,119 45.2 % 54,498 46.8 % LPD 5,664 6.4 % 14,447 16.2 % Other (1,574 ) (12.1 )% 2,188 9.6 % Total $ 851,826 30.9 % $ 672,238 26.5 % 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 September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % United States 573,830 530,758 43,072 8.1 % — — 8.1 % International 263,330 234,232 29,098 12.4 % 3.4 % — 9.0 % Water 44,450 40,840 3,610 8.8 % 1.2 % 1.1 % 6.6 % United States 22,804 20,940 1,864 8.9 % — 0.7 % 8.2 % International 21,646 19,900 1,746 8.8 % 2.4 % 1.5 % 4.9 % LPD 29,747 28,452 1,295 4.6 % 2.5 % — 2.0 % United States 5,040 4,452 588 13.2 % — — 13.2 % International 24,707 24,000 707 2.9 % 2.9 % — — Other 4,170 7,379 (3,209 ) (43.5 %) 0.1 % — (43.5 %) Total Company $ 915,527 $ 841,661 $ 73,866 8.8 % 1.1 % 0.1 % 7.6 % United States 603,046 560,292 42,754 7.6 % — — 7.6 % International 312,481 281,369 31,112 11.1 % 3.3 % 0.1 % 7.7 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % IDEXX VetLab consumables 296,042 262,820 33,222 12.6 % 1.2 % — 11.4 % Rapid assay products 87,562 80,542 7,020 8.7 % 0.5 % — 8.2 % Reference laboratory diagnostic and consulting services 320,294 295,590 24,704 8.4 % 1.0 % — 7.3 % CAG Diagnostics services and accessories 30,060 28,357 1,703 6.0 % 1.3 % — 4.7 % CAG Diagnostics capital – instruments 32,254 35,176 (2,922 ) (8.3 %) 1.9 % — (10.2 %) Veterinary software, services and diagnostic imaging systems 70,948 62,505 8,443 13.5 % 0.2 % — 13.3 % Net CAG revenue $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % United States 497,109 459,077 38,032 8.3 % — — 8.3 % International 236,849 208,232 28,617 13.7 % 3.4 % — 10.3 % 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) Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % United States 1,732,752 1,563,150 169,602 10.8 % — — 10.8 % International 798,339 747,111 51,228 6.9 % (1.6 %) — 8.5 % Water 126,362 116,406 9,956 8.6 % (0.9 %) 1.5 % 8.0 % United States 63,932 58,304 5,628 9.7 % — 0.7 % 8.9 % International 62,430 58,102 4,328 7.4 % (1.8 %) 2.2 % 7.0 % LPD 88,866 89,211 (345 ) (0.4 %) (0.7 %) — 0.3 % United States 14,005 12,054 1,951 16.2 % — — 16.2 % International 74,861 77,157 (2,296 ) (3.0 %) (0.8 %) — (2.2 %) Other 13,033 22,878 (9,845 ) (43.0 %) — — (43.0 %) Total Company $ 2,759,352 $ 2,538,756 $ 220,596 8.7 % (0.6 %) 0.1 % 9.2 % United States 1,815,066 1,646,023 169,043 10.3 % — — 10.2 % International 944,286 892,733 51,553 5.8 % (1.5 %) 0.1 % 7.2 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % IDEXX VetLab consumables 890,891 796,072 94,819 11.9 % (0.8 %) — 12.7 % Rapid assay products 266,934 242,542 24,392 10.1 % (0.4 %) — 10.4 % Reference laboratory diagnostic and consulting services 973,580 894,795 78,785 8.8 % (0.4 %) — 9.2 % CAG Diagnostics services and accessories 91,931 84,123 7,808 9.3 % (0.8 %) — 10.1 % CAG Diagnostics capital – instruments 99,452 108,400 (8,948 ) (8.3 %) (0.4 %) — (7.8 %) Veterinary software, services and diagnostic imaging systems 208,303 184,329 23,974 13.0 % (0.3 %) — 13.3 % Net CAG revenue $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % United States 1,505,837 1,351,936 153,901 11.4 % — — 11.4 % International 717,499 665,596 51,903 7.8 % (1.7 %) — 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) September 30, 2023 December 31, 2022 Assets: Current Assets: Cash and cash equivalents $ 331,696 $ 112,546 Accounts receivable, net 452,699 400,619 Inventories 393,974 367,823 Other current assets 205,861 220,489 Total current assets 1,384,230 1,101,477 Property and equipment, net 687,101 649,474 Other long-term assets, net 1,015,073 995,814 Total assets $ 3,086,404 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 112,609 $ 110,221 Accrued liabilities 420,312 433,662 Line of credit 250,000 579,000 Current portion of long-term debt 149,990 74,982 Deferred revenue 37,282 37,938 Total current liabilities 970,193 1,235,803 Long-term debt, net of current portion 618,813 694,387 Other long-term liabilities, net 199,991 207,838 Total long-term liabilities 818,804 902,225 Total stockholders' equity 1,297,407 608,737 Total liabilities and stockholders' equity $ 3,086,404 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Selected Balance Sheet Information: Days sales outstanding1 45.6 43.9 42.9 43.4 43.4 Inventory turns2 1.3 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 represent inventory-related cost of product revenue for the twelve months preceding each quarter-end 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) Nine Months Ended September 30, 2023 September 30, 2022 Operating: Cash Flows from Operating Activities: Net income $ 650,521 $ 506,882 Non-cash adjustments to net income 120,390 92,271 Changes in assets and liabilities (114,252 ) (229,597 ) Net cash provided by operating activities 656,659 369,556 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (101,075 ) (99,609 ) Equity investment — (25,000 ) Acquisition of intangible assets — (10,000 ) Acquisition of a business, net of cash acquired — (11,512 ) Proceeds from net investment hedges 6,256 — Net cash used by investing activities (94,819 ) (146,121 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings under credit facility, net (329,000 ) 559,500 Payment of senior debt — (75,000 ) Payments for the acquisition-related contingent consideration and holdbacks (1,879 ) (5,730 ) Repurchases of common stock (35,070 ) (745,691 ) Proceeds from exercises of stock options and employee stock purchase plans 35,704 23,257 Shares withheld for statutory tax withholding payments on restricted stock (9,907 ) (10,552 ) Net cash used by financing activities (340,152 ) (254,216 ) Net effect of changes in exchange rates on cash (2,538 ) (14,497 ) Net increase (decrease) in cash and cash equivalents 219,150 (45,278 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 331,696 $ 99,176 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Free Cash Flow: Net cash provided by operating activities $ 272,433 $ 189,000 $ 656,659 $ 369,556 Investing cash flows attributable to purchases of property and equipment (34,094 ) (37,685 ) (101,075 ) (99,609 ) Free cash flow1 $ 238,339 $ 151,315 $ 555,584 $ 269,947 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 Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Shares repurchased in the open market 65 453 65 1,764 Shares acquired through employee surrender for statutory tax withholding 1 — 20 21 Total shares repurchased 66 453 85 1,785 Cost of shares repurchased in the open market $ 35,070 $ 166,423 $ 35,070 $ 742,661 Cost of shares for employee surrenders 231 162 9,907 10,552 Total cost of shares $ 35,301 $ 166,585 $ 44,977 $ 753,213 Average cost per share – open market repurchases $ 536.03 $ 367.55 $ 536.03 $ 421.12 Average cost per share – employee surrenders $ 506.74 $ 387.07 $ 503.43 $ 502.26 Average cost per share – total $ 535.83 $ 367.56 $ 528.49 $ 422.07 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031725061/en/Contacts John Ravis, Investor Relations, 1-207-556-8155
Achieves third quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 10% reported and 9% organic Solid revenue growth reflects benefits from IDEXX execution drivers including double-digit year-over-year installed base growth across global premium instrument platforms Delivers EPS of $2.53, representing 18% growth as reported and 16% on a comparable basis, supported by operating margin expansion of 100 basis points as reported and 140 basis points on a comparable basis Adjusts 2023 revenue guidance to $3,635 million - $3,650 million, reflecting 7.9% - 8.4% growth as reported and 8.3% - 8.8% organically, driven by projected CAG Diagnostics recurring revenue growth of 9.4% - 9.9% as reported and 9.8% - 10.3% organically Updates 2023 EPS outlook to $9.74 - $9.90, a year-over-year increase of 21% - 23% as reported and 25% - 27% on a comparable basis, including ~12% combined EPS growth benefit from a customer contract resolution payment in Q1 2023 and lapping of discrete 2022 R&D investments
IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced third quarter results. Third Quarter Results The Company reports revenues of $916 million for the third quarter of 2023, an increase of 9% reported and 8% organic, driven by Companion Animal Group ("CAG") growth of 9% reported and 8% organic and Water revenue growth of 9% reported and 7% organic. CAG Diagnostics recurring revenue growth of 10% reported and 9% organic was supported by sustained benefits from IDEXX execution drivers and reflects high single-digit organic growth in the U.S. and double-digit organic growth internationally. Commercial engagement and sustained high interest in adopting IDEXX innovation drove high levels of premium instrument placements, supporting 11% annual growth in IDEXX's global premium instrument installed base. Veterinary software, services and diagnostic imaging systems revenue grew 14% as reported and 13% organically, reflecting high recurring revenue growth and ongoing momentum in cloud-based software placements. Third quarter earnings per diluted share (“EPS”) were $2.53, an increase of 18% as reported and 16% on a comparable basis, including $0.04 per share in tax benefits from share-based compensation and $0.01 per share negative impact from currency changes. "Strong execution by IDEXX teams and sustained interest in adopting IDEXX's differentiated multi-modality testing and workflow solutions helped deliver solid organic revenue gains and strong financial results in the third quarter," said Jay Mazelsky, President and Chief Executive Officer. "Busy veterinarians appreciate that they must very often first test before they can determine the most optimal treatment course, which drives the medical services activity in their practice. They also want these testing solutions to seamlessly connect to a modern cloud-based PIMS, and have shown an increased appetite to invest in software that supports higher staff productivity and client communications. IDEXX remains very well positioned to address these needs while driving development of the companion animal diagnostics sector through relevant innovation and commercial engagement." Third Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated revenue growth of 9% as reported and 8% organic for the quarter. Solid growth was supported by CAG Diagnostics recurring revenue growth of 10% on a reported basis and 9% organically. U.S. CAG Diagnostics recurring revenue organic growth of 8.3% included an ~50 basis point negative impact from fewer equivalent selling days and remained solidly above sector growth levels in the third quarter, reflected in an ~1,100 basis point growth premium to U.S. same store clinical visit growth. Additional U.S. companion animal practice key metrics are available in the Q3 2023 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors. Strong global growth was achieved across IDEXX's testing modalities. IDEXX VetLab® consumables generated 13% reported and 11% organic revenue growth, with double-digit gains across U.S. and international regions supported by benefits from higher net price realization and an expanded global premium instrument installed base. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, driven by high single-digit gains in the U.S. and improved, mid-to-high single-digit growth in international regions. Rapid assay products revenues grew 9% as reported and 8% organically, driven by strong growth in the U.S., supported by benefits from higher net price realization. Veterinary software, services and diagnostic imaging systems revenues grew 14% as reported and 13% organically, driven by continued high levels of organic gains in recurring software and diagnostic imaging revenues. Strong demand for cloud-based products continues to support momentum in software solution placements and customer gains. Water Water revenues grew 9% on a reported basis and 7% on an organic basis for the quarter, reflecting solid gains across regions, including benefits from net price improvement. Livestock, Poultry and Dairy (“LPD”) LPD revenues grew 5% on a reported basis and grew 2% organically for the quarter, as solid gains in the U.S. were offset by lower herd health screening levels internationally. Gross Profit and Operating Profit Gross profits increased 8% as reported and on a comparable basis. Gross margin of 59.9% decreased 30 basis points as reported and increased 30 basis points on a comparable basis, supported by benefits from net price gains, business mix and improvement in software service gross margins. Operating margin was 30.1% in the quarter, higher than the prior year by 100 basis points as reported and 140 basis points on a comparable basis. Operating margin expansion reflects gross margin gains benefiting from strong CAG Diagnostics recurring revenue growth and operating expense growth of 4% as reported and on a comparable basis. Reported operating expense growth reflects benefits from cost controls and lapping of prior year R&D and commercial investments. 2023 Growth and Financial Performance Outlook The Company is updating its full year revenue growth outlook range to 7.9% - 8.4% as reported and 8.3% - 8.8% organically. This updated outlook is centered on the lower end of the Company's most recent full year guidance range and at the midpoint of its original full year organic growth estimates, reflecting third quarter results and continued headwinds to clinical visit growth rates globally. The overall reported revenue range was decreased by $20 million for updated foreign exchange impact estimates compared to earlier guidance estimates, reflecting the recent strengthening of the U.S. dollar. The Company raised its full year reported operating margin outlook to 29.6% - 29.8%, incorporating strong year-to-date profit performance. Operating margin guidance includes an increased ~70 basis points in year-over-year unfavorable net margin impact from updated foreign currency exchange rate changes, including effects from comparisons to prior year foreign exchange hedge gains. The Company updated its EPS outlook range to $9.74 - $9.90, increasing midpoint estimates by $0.05 per share and maintaining its high end EPS outlook. The Company is maintaining a similar operational outlook at midpoint, as positive revisions to the Company's operating margin outlook offset adjustments to organic revenue growth estimates. Positive adjustments of ~$0.11 per share to projections for interest expense and effective tax rates, including share-based compensation tax benefits, offset an ~$0.05 negative EPS impact related to updated foreign currency exchange rate estimates — which is now estimated to provide a $0.25 per share headwind to full year EPS results. The following table provides the Company's updated outlook for annual key financial metrics in 2023: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2023 Revenue $3,635 - $3,650 Reported growth 7.9% - 8.4% Organic growth 8.3% - 8.8% CAG Diagnostics Recurring Revenue Growth Reported growth 9.4% - 9.9% Organic growth 9.8% - 10.3% Operating Margin 29.6% - 29.8% Operating margin expansion 290 bps - 310 bps Negative impact of foreign exchange ~ 70 bps Comparable margin expansion 360 bps - 380 bps Positive impact of discrete in-license of technology and customer contract resolution ~ 280 bps EPS $9.74 - $9.90 Reported growth 21% - 23% Comparable growth 25% - 27% Positive impact of discrete in-license of technology and customer contract resolution ~ 12% Other Key Metrics Net interest expense ~ $37 Share-based compensation tax benefit ~ $12 Share-based compensation tax rate benefit ~ 1% Effective tax rate 21% - 21.5% Share-based compensation EPS impact ~ $0.14 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 100% - 110% of net income Free Cash Flow 85% - 90% of net income Capital Expenditures $160 - $180 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 2023. Estimated Foreign Currency Exchange Rate Impacts 2023 Revenue growth rate impact (~ 40 bps) CAG Diagnostics recurring revenue growth rate impact (~ 40 bps) Operating margin growth impact (~ 70 bps) EPS impact (~ $0.25) EPS growth impact (~ 3%) Go-Forward Foreign Currency Exchange Rate Assumptions 2023 In U.S. dollars euro $1.05 British pound $1.21 Canadian dollar $0.73 Australian dollar $0.63 Relative to the U.S. dollar Japanese yen ¥151 Chinese renminbi ¥7.40 Brazilian real R$5.14 Conference Call and Webcast Information IDEXX Laboratories, Inc. will be hosting a conference call today at 8:30 a.m. (EDT) to discuss its third quarter 2023 results and management’s outlook. To participate in the conference call, dial 1-800-289-0459 or 1-773-377-9037 and reference passcode 917383. 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. 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 nearly 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 contains statements about the Company’s business prospects and estimates of the Company’s financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are included above under "2023 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; and projected effective tax rates, reduction of average shares outstanding and net interest expense. 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, 2022 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, June 30, 2023 and September 30, 2023, 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 third quarter 2023 results as follows: decreased gross profit growth by 0%, decreased gross margin growth by 60 basis points, increased operating expense growth by 0%, decreased operating profit growth by 1%, decreased operating profit margin growth by 40 basis points, and decreased EPS growth by 0%. 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 months and nine months ended September 30, 2023 and refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated foreign currency exchange rate impacts on 2023 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 months and nine months ended September 30, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. Please refer to the 2023 Growth and Financial Performance Outlook section of this earnings release for estimated full year 2023 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 an impact on projected full year 2023 revenue growth or 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 Nine Months Ended Year-over-Year September 30, September 30, Change September 30, September 30, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 547,982 $ 506,626 8 % $ 1,663,803 $ 1,519,411 10 % Gross margin 59.9 % 60.2 % (30 )bps 60.3 % 59.8 % 40 bps Less: comparability adjustments Change from currency (290 ) — (24,793 ) — Comparable gross profit growth $ 548,272 $ 506,626 8 % $ 1,688,596 $ 1,519,411 11 % Comparable gross margin and gross margin gain (or growth) 60.5 % 60.2 % 30 bps 60.9 % 59.8 % 100 bps Operating expenses (as reported) $ 272,699 $ 261,798 4 % $ 811,977 $ 847,173 (4 )% Less: comparability adjustments Change from currency 1,008 — (3,797 ) — Comparable operating expense growth $ 271,691 $ 261,798 4 % $ 815,774 $ 847,173 (4 )% Income from operations (as reported) $ 275,283 $ 244,828 12 % $ 851,826 $ 672,238 27 % Operating margin 30.1 % 29.1 % 100 bps 30.9 % 26.5 % 440 bps Less: comparability adjustments Change from currency (1,298 ) — (20,996 ) — Comparable operating profit growth $ 276,581 $ 244,828 13 % $ 872,822 $ 672,238 30 % Comparable operating margin and operating margin gain (or growth) 30.5 % 29.1 % 140 bps 31.5 % 26.5 % 500 bps Amounts presented may not recalculate due to rounding. Projected 2023 comparable operating margin expansion outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects projected full year 2023 reported operating margin adjusted for estimated negative year-over-year foreign currency exchange rate change impact of approximately 70 basis points. These impacts described above reconcile reported gross profit growth, gross margin gain, operating expense growth, operating profit growth and operating margin gain (including projected 2023 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 Nine Months Ended Year-over-Year September 30, September 30, Growth September 30, September 30, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.53 $ 2.15 18 % $ 7.75 $ 5.97 30 % Less: comparability adjustments Share-based compensation activity 0.04 — 0.14 0.10 Change from currency (0.01 ) — (0.19 ) — Comparable EPS growth 2.50 2.15 16 % 7.80 5.87 33 % Amounts presented may not recalculate due to rounding. Projected 2023 comparable EPS growth outlined in the 2023 Growth and Financial Performance Outlook section of this earnings release reflects adjustments including estimated positive share-based compensation activity of $0.14 and estimated negative year-over-year foreign currency exchange rate change impact of $0.25. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2023 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 nine months ended September 30, 2023 and 2022. To estimate projected 2023 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of approximately $160 - $180 million. 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 September 30, 2023, we have deducted purchases of property and equipment of approximately $150 million from net cash provided from operating activities of approximately $830 million, divided by net income of approximately $823 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, 2022 and Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Revenue: Revenue $ 915,527 $ 841,661 $ 2,759,352 $ 2,538,756 Expenses and Income: Cost of revenue 367,545 335,035 1,095,549 1,019,345 Gross profit 547,982 506,626 1,663,803 1,519,411 Sales and marketing 135,698 130,021 424,034 392,570 General and administrative 89,034 83,764 248,804 243,201 Research and development 47,967 48,013 139,139 211,402 Income from operations 275,283 244,828 851,826 672,238 Interest expense, net (7,392 ) (10,645 ) (30,318 ) (25,481 ) Income before provision for income taxes 267,891 234,183 821,508 646,757 Provision for income taxes 55,660 53,245 170,987 139,875 Net Income: Net income attributable to stockholders $ 212,231 $ 180,938 $ 650,521 $ 506,882 Earnings per share: Basic $ 2.55 $ 2.17 $ 7.83 $ 6.04 Earnings per share: Diluted $ 2.53 $ 2.15 $ 7.75 $ 5.97 Shares outstanding: Basic 83,097 83,247 83,058 83,855 Shares outstanding: Diluted 83,993 84,113 83,990 84,858 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2023 2022 2023 2022 Operating Ratios Gross profit 59.9 % 60.2 % 60.3 % 59.8 % (as a percentage of revenue): Sales, marketing, general and administrative expense 24.5 % 25.4 % 24.4 % 25.0 % Research and development expense 5.2 % 5.7 % 5.0 % 8.3 % Income from operations1 30.1 % 29.1 % 30.9 % 26.5 % 1Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 837,160 $ 764,990 Water 44,450 40,840 LPD 29,747 28,452 Other 4,170 7,379 Total $ 915,527 $ 841,661 Gross Profit: CAG $ 499,291 59.6 % $ 456,334 59.7 % Water 31,034 69.8 % 29,406 72.0 % LPD 15,836 53.2 % 17,462 61.4 % Other 1,821 43.7 % 3,424 46.4 % Total $ 547,982 59.9 % $ 506,626 60.2 % Income from Operations: CAG $ 253,358 30.3 % $ 221,454 28.9 % Water 20,328 45.7 % 19,924 48.8 % LPD 2,405 8.1 % 4,480 15.7 % Other (808 ) (19.4 )% (1,030 ) (14.0 )% Total $ 275,283 30.1 % $ 244,828 29.1 % Nine Months Ended September 30, 2023 Percent of Revenue September 30, 2022 Percent of Revenue Revenue: CAG $ 2,531,091 $ 2,310,261 Water 126,362 116,406 LPD 88,866 89,211 Other 13,033 22,878 Total $ 2,759,352 $ 2,538,756 Gross Profit: CAG $ 1,523,757 60.2 % $ 1,371,687 59.4 % Water 88,621 70.1 % 82,502 70.9 % LPD 46,975 52.9 % 54,005 60.5 % Other 4,450 34.1 % 11,217 49.0 % Total $ 1,663,803 60.3 % $ 1,519,411 59.8 % Income from Operations: CAG $ 790,617 31.2 % $ 601,105 26.0 % Water 57,119 45.2 % 54,498 46.8 % LPD 5,664 6.4 % 14,447 16.2 % Other (1,574 ) (12.1 )% 2,188 9.6 % Total $ 851,826 30.9 % $ 672,238 26.5 % 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 September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % United States 573,830 530,758 43,072 8.1 % — — 8.1 % International 263,330 234,232 29,098 12.4 % 3.4 % — 9.0 % Water 44,450 40,840 3,610 8.8 % 1.2 % 1.1 % 6.6 % United States 22,804 20,940 1,864 8.9 % — 0.7 % 8.2 % International 21,646 19,900 1,746 8.8 % 2.4 % 1.5 % 4.9 % LPD 29,747 28,452 1,295 4.6 % 2.5 % — 2.0 % United States 5,040 4,452 588 13.2 % — — 13.2 % International 24,707 24,000 707 2.9 % 2.9 % — — Other 4,170 7,379 (3,209 ) (43.5 %) 0.1 % — (43.5 %) Total Company $ 915,527 $ 841,661 $ 73,866 8.8 % 1.1 % 0.1 % 7.6 % United States 603,046 560,292 42,754 7.6 % — — 7.6 % International 312,481 281,369 31,112 11.1 % 3.3 % 0.1 % 7.7 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % IDEXX VetLab consumables 296,042 262,820 33,222 12.6 % 1.2 % — 11.4 % Rapid assay products 87,562 80,542 7,020 8.7 % 0.5 % — 8.2 % Reference laboratory diagnostic and consulting services 320,294 295,590 24,704 8.4 % 1.0 % — 7.3 % CAG Diagnostics services and accessories 30,060 28,357 1,703 6.0 % 1.3 % — 4.7 % CAG Diagnostics capital – instruments 32,254 35,176 (2,922 ) (8.3 %) 1.9 % — (10.2 %) Veterinary software, services and diagnostic imaging systems 70,948 62,505 8,443 13.5 % 0.2 % — 13.3 % Net CAG revenue $ 837,160 $ 764,990 $ 72,170 9.4 % 1.0 % — 8.4 % Three Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 733,958 $ 667,309 $ 66,649 10.0 % 1.1 % — 8.9 % United States 497,109 459,077 38,032 8.3 % — — 8.3 % International 236,849 208,232 28,617 13.7 % 3.4 % — 10.3 % 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) Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net Revenue CAG $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % United States 1,732,752 1,563,150 169,602 10.8 % — — 10.8 % International 798,339 747,111 51,228 6.9 % (1.6 %) — 8.5 % Water 126,362 116,406 9,956 8.6 % (0.9 %) 1.5 % 8.0 % United States 63,932 58,304 5,628 9.7 % — 0.7 % 8.9 % International 62,430 58,102 4,328 7.4 % (1.8 %) 2.2 % 7.0 % LPD 88,866 89,211 (345 ) (0.4 %) (0.7 %) — 0.3 % United States 14,005 12,054 1,951 16.2 % — — 16.2 % International 74,861 77,157 (2,296 ) (3.0 %) (0.8 %) — (2.2 %) Other 13,033 22,878 (9,845 ) (43.0 %) — — (43.0 %) Total Company $ 2,759,352 $ 2,538,756 $ 220,596 8.7 % (0.6 %) 0.1 % 9.2 % United States 1,815,066 1,646,023 169,043 10.3 % — — 10.2 % International 944,286 892,733 51,553 5.8 % (1.5 %) 0.1 % 7.2 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 Net CAG Revenue CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % IDEXX VetLab consumables 890,891 796,072 94,819 11.9 % (0.8 %) — 12.7 % Rapid assay products 266,934 242,542 24,392 10.1 % (0.4 %) — 10.4 % Reference laboratory diagnostic and consulting services 973,580 894,795 78,785 8.8 % (0.4 %) — 9.2 % CAG Diagnostics services and accessories 91,931 84,123 7,808 9.3 % (0.8 %) — 10.1 % CAG Diagnostics capital – instruments 99,452 108,400 (8,948 ) (8.3 %) (0.4 %) — (7.8 %) Veterinary software, services and diagnostic imaging systems 208,303 184,329 23,974 13.0 % (0.3 %) — 13.3 % Net CAG revenue $ 2,531,091 $ 2,310,261 $ 220,830 9.6 % (0.5 %) — 10.1 % Nine Months Ended September 30, 2023 September 30, 2022 Dollar Change Reported Revenue Growth1 Percentage Change from Currency Percentage Change from Acquisitions Organic Revenue Growth1 CAG Diagnostics recurring revenue: $ 2,223,336 $ 2,017,532 $ 205,804 10.2 % (0.6 %) — 10.8 % United States 1,505,837 1,351,936 153,901 11.4 % — — 11.4 % International 717,499 665,596 51,903 7.8 % (1.7 %) — 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) September 30, 2023 December 31, 2022 Assets: Current Assets: Cash and cash equivalents $ 331,696 $ 112,546 Accounts receivable, net 452,699 400,619 Inventories 393,974 367,823 Other current assets 205,861 220,489 Total current assets 1,384,230 1,101,477 Property and equipment, net 687,101 649,474 Other long-term assets, net 1,015,073 995,814 Total assets $ 3,086,404 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 112,609 $ 110,221 Accrued liabilities 420,312 433,662 Line of credit 250,000 579,000 Current portion of long-term debt 149,990 74,982 Deferred revenue 37,282 37,938 Total current liabilities 970,193 1,235,803 Long-term debt, net of current portion 618,813 694,387 Other long-term liabilities, net 199,991 207,838 Total long-term liabilities 818,804 902,225 Total stockholders' equity 1,297,407 608,737 Total liabilities and stockholders' equity $ 3,086,404 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 September 30, 2022 Selected Balance Sheet Information: Days sales outstanding1 45.6 43.9 42.9 43.4 43.4 Inventory turns2 1.3 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 represent inventory-related cost of product revenue for the twelve months preceding each quarter-end 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) Nine Months Ended September 30, 2023 September 30, 2022 Operating: Cash Flows from Operating Activities: Net income $ 650,521 $ 506,882 Non-cash adjustments to net income 120,390 92,271 Changes in assets and liabilities (114,252 ) (229,597 ) Net cash provided by operating activities 656,659 369,556 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (101,075 ) (99,609 ) Equity investment — (25,000 ) Acquisition of intangible assets — (10,000 ) Acquisition of a business, net of cash acquired — (11,512 ) Proceeds from net investment hedges 6,256 — Net cash used by investing activities (94,819 ) (146,121 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings under credit facility, net (329,000 ) 559,500 Payment of senior debt — (75,000 ) Payments for the acquisition-related contingent consideration and holdbacks (1,879 ) (5,730 ) Repurchases of common stock (35,070 ) (745,691 ) Proceeds from exercises of stock options and employee stock purchase plans 35,704 23,257 Shares withheld for statutory tax withholding payments on restricted stock (9,907 ) (10,552 ) Net cash used by financing activities (340,152 ) (254,216 ) Net effect of changes in exchange rates on cash (2,538 ) (14,497 ) Net increase (decrease) in cash and cash equivalents 219,150 (45,278 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 331,696 $ 99,176 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands except per share data (Unaudited) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Free Cash Flow: Net cash provided by operating activities $ 272,433 $ 189,000 $ 656,659 $ 369,556 Investing cash flows attributable to purchases of property and equipment (34,094 ) (37,685 ) (101,075 ) (99,609 ) Free cash flow1 $ 238,339 $ 151,315 $ 555,584 $ 269,947 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 Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Shares repurchased in the open market 65 453 65 1,764 Shares acquired through employee surrender for statutory tax withholding 1 — 20 21 Total shares repurchased 66 453 85 1,785 Cost of shares repurchased in the open market $ 35,070 $ 166,423 $ 35,070 $ 742,661 Cost of shares for employee surrenders 231 162 9,907 10,552 Total cost of shares $ 35,301 $ 166,585 $ 44,977 $ 753,213 Average cost per share – open market repurchases $ 536.03 $ 367.55 $ 536.03 $ 421.12 Average cost per share – employee surrenders $ 506.74 $ 387.07 $ 503.43 $ 502.26 Average cost per share – total $ 535.83 $ 367.56 $ 528.49 $ 422.07 View source version on businesswire.com: https://www.businesswire.com/news/home/20231031725061/en/