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 Announces Fourth Quarter and Full Year Results By: IDEXX Laboratories, Inc. via Business Wire February 05, 2024 at 06:30 AM EST Achieves fourth quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 11% reported and 10% organic Solid growth supported by continued benefits from IDEXX execution drivers, including 11% year-over-year expansion of IDEXX's global premium instrument installed base Delivers fourth quarter EPS of $2.32, an increase of 13% as reported and 17% on a comparable basis Provides initial outlook for 2024 revenue of $3,930 million - $4,040 million, reflecting growth of 7.5% - 10.5% reported and 7% - 10% organic, supported by CAG Diagnostics recurring revenue growth of 7.5% - 10.5% as reported and on an organic basis Estimates 2024 EPS of $10.84 - $11.33, an increase of 8% - 13% as reported and on a comparable basis, including a ~2% negative EPS growth impact from 2023 customer contract resolution IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced fourth quarter and full year results. Fourth Quarter and Full Year Results The Company reports revenues of $902 million for the fourth quarter of 2023, an increase of 9% compared to the prior year period on a reported basis and 8% on an organic basis driven by Companion Animal Group ("CAG") growth of 10% reported and 9% organic. CAG Diagnostics recurring revenue gains of 11% reported and 10% organic in the quarter were supported by continued benefits from IDEXX execution drivers including high quality placements of CAG Diagnostics capital instruments across regions, high customer retention, new business gains, and net price realization. CAG revenue gains also reflect double-digit veterinary software, services and diagnostic imaging systems recurring revenue growth as reported and organically, supported by strong software solution placement growth and a continued shift to cloud-based products. Earnings per diluted share (“EPS”) were $2.32 for the fourth quarter, an increase of 13% as reported and 17% on a comparable basis. Results reflect operating margin contraction of 10 basis points as reported and expansion of 60 basis points on a comparable basis. Fourth quarter EPS included $0.04 per share negative impact from currency changes and $0.02 per share in tax benefits from share-based compensation. Fourth quarter EPS also benefit by $0.10 per share from the release of tax valuation allowances in certain jurisdictions which lowered the full year effective tax rate by approximately 100 basis points. Revenue for the full year of $3,661 million increased 9% as reported and organically, driven by 10% reported and 10.5% organic growth in CAG Diagnostics recurring revenue. “Outstanding execution by IDEXX's commercial and operations teams supported delivery of strong organic revenue growth and financial results for the Company in 2023. We're excited about our sustained business momentum, supported by partnerships with our customers, that will be further enabled by key innovations we are advancing across our instrument platforms, test menu and software offerings. This includes the launch of our new revolutionary slide-free cellular analyzer, IDEXX inVue Dx™ targeted for late 2024," said Jay Mazelsky, President and Chief Executive Officer. "Our performance and progress demonstrate that customers of all types appreciate the purpose-built solutions that we provide and utilize these tools and services to deliver increased standards of care while realizing critical efficiency gains." For the full year 2023, EPS of $10.06 increased 25% on a reported basis and 29% on a comparable basis, including a ~12% EPS growth benefit related to $80 million of discrete in-license of technology in 2022 and a $16 million customer contract resolution in 2023. EPS results reflect operating margin expansion of 330 basis points as reported and 390 basis points on a comparable basis, including a ~280 basis point benefit from the discrete in-license of technology and customer contract resolution. EPS results include a $0.24 negative impact from currency changes and $0.16 in tax benefits from share-based compensation. The Company's 2024 revenue guidance range reflects full year growth of 7.5% - 10.5% as reported and 7% - 10% on an organic basis, supported by 7.5% - 10.5% reported and organic CAG Diagnostics recurring revenue growth. The guidance range for global CAG Diagnostics recurring revenue growth reflects goals for sustained benefits from execution drivers, supporting continued solid volume gains, and an estimated 5% full year benefit from net price improvement. 2024 EPS guidance of $10.84 - $11.33 reflects expectations for solid organic revenue gains and a targeted 20 - 70 basis points of reported operating margin improvement net of a ~40 basis point negative impact from lapping the 2023 customer contract resolution. Fourth Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated 10% reported revenue growth for the fourth quarter. CAG Diagnostics organic recurring revenue growth of 10% reflects solid gains across IDEXX's major modalities globally, supported by growth in clinical service demand and expanded utilization of diagnostic products and services. Additional U.S. companion animal practice key metrics are available in the Q4 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 14% reported and 13% organic revenue growth reflecting double-digit gains across U.S. and International regions, supported by global premium instrument installed base growth, high customer retention levels and net price gains. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, reflecting high single-digit growth in the U.S. and sustained solid organic revenue growth in International regions. Rapid assay products generated 9% revenue growth as reported and organically, reflecting continued solid volume gains in the U.S. and benefits from net price increases. Veterinary software, services and diagnostic imaging systems revenue growth increased 6% as reported and organically compared to strong prior year performance levels, supported by double-digit growth in recurring revenues and strong interest in cloud-based veterinary software solutions. Water Water achieved revenue growth of 6% on a reported basis and 5% on an organic basis, reflecting benefits from net price improvement and solid gains in the U.S. and Europe, moderated by lower revenues in China and year-end order timing. Livestock, Poultry and Dairy (“LPD”) LPD revenue declined 2% on a reported basis and 4% on an organic basis as solid core product growth in the U.S. and Europe was offset by declines in herd health screening and China revenues. Gross Profit and Operating Profit Gross profits increased 9%. Gross margins of 58.4% contracted 20 basis points compared to prior year on a reported basis and expanded 50 basis points on a comparable basis. Gross margin results reflect benefits from net price improvement which offset inflationary cost impacts, favorable business mix benefits from strong consumable growth, and higher software service gross margins. Operating margin was 27.2% in the quarter, 10 basis points lower than the prior year period results on a reported basis and 60 basis points higher on a comparable basis. Operating expenses grew 9% as reported and 7% on a comparable basis. Operating expense growth reflects increased investments in commercial resources and R&D project spend. 2024 Growth and Financial Performance Outlook The following table provides the Company's initial estimates for annual key financial metrics in 2024: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2024 Revenue $3,930 - $4,040 Reported growth 7.5% - 10.5% Organic growth 7% - 10% CAG Diagnostics Recurring Revenue Growth Reported growth 7.5% - 10.5% Organic growth 7.5% - 10.5% Operating Margin 30.2% - 30.7% Reported operating margin expansion 20 - 70 bps Comparable operating margin expansion 20 - 70 bps Negative impact of 2023 customer contract resolution payment ~ 40 bps EPS $10.84 - $11.33 Reported growth 8% - 13% Comparable growth 8% - 13% Negative impact of 2023 customer contract resolution payment ~ 2% Other Key Metrics Net interest expense ~ $27 Share-based compensation tax benefit ~ $8 Share-based compensation tax rate benefit ~ 1 % Effective tax rate ~ 22 % Share-based compensation EPS impact ~ $0.10 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 110% - 115% of net income Free Cash Flow 90% - 95% of net income Capital Expenditures ~ $180 million The following table outlines estimates of foreign currency exchange rate impacts, net of foreign currency hedging transactions, and foreign currency exchange rate assumptions reflected in the above financial performance outlook for 2024. Estimated Foreign Currency Exchange Rate Impacts 2024 Revenue growth rate impact ~ 0% CAG Diagnostics recurring revenue growth rate impact ~ 0% Operating margin growth impact ~ 0 bps EPS impact ~ $0.02 EPS growth impact ~ 0% Go-forward Foreign Currency Exchange Rate Assumptions In U.S. dollars euro $1.08 British pound $1.25 Canadian dollar $0.74 Australian dollar $0.66 Relative to the U.S. dollar Japanese yen ¥147 Chinese renminbi ¥7.23 Brazilian real R$4.95 Conference Call and Webcast Information IDEXX Laboratories, Inc. will host a conference call today at 8:30 a.m. (Eastern) to discuss its 2023 fourth quarter and full year financial results and management’s outlook. To participate in the conference call, dial 1-800-776-0420 or 1-773-377-9037 and reference access code 764284. Individuals can access a live webcast of the conference call on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (Eastern) 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 and the statements to be made in the accompanying earnings conference call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including forward-looking statements about the Company’s business prospects and estimates of the Company’s financial results for future periods. Forward-looking statements are included under "2024 Growth and Financial Performance Outlook" and elsewhere in this earnings release 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 and business performance; revenue growth and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates and interest rates; projected operating margins and expenses and capital expenditures; projected tax, tax rate and EPS benefits from share-based compensation arrangements; projected effective tax rates, reduction of average shares outstanding and net interest expense; and expectations for net price improvement. These statements are intended to provide management's expectation of future events as of the date of this earnings release; are based on management's estimates, projections, beliefs and assumptions as of the date of this earnings release; and are not guarantees of future performance. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things, the matters described under the headings "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the 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 fourth quarter 2023 results as follows: decreased gross profit growth by 0.2%, decreased gross margin growth by 70 basis points, increased operating expense growth by 1.3%, decreased operating profit margin growth by 70 basis points, and decreased EPS growth by 1.9%. Estimated currency changes impacted full year 2023 results as follows: decreased gross profit growth by 1.3%, decreased gross margin growth by 60 basis points, was immaterial to operating expense growth, decreased operating profit margin growth by 60 basis points, and decreased EPS growth by 3.0%. 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 year ended December 31, 2023 and refer to the 2024 Growth and Financial Performance Outlook section of this press release for estimated foreign currency exchange rate impacts on 2024 projections and estimates. Growth and organic revenue growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted. Organic revenue growth is a non-GAAP financial measure that represents the percentage change in revenue, as compared to the same period for the prior year, net of the impact of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers. Organic revenue growth should be considered in addition to, and not as a replacement of or a superior measure to, revenue growth reported in accordance with GAAP. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three and twelve months ended December 31, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. 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 expected to increase projected full year 2024 revenue growth by 50 basis points. 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 Twelve Months Ended Year-over-Year December 31, December 31, Change December 31, December 31, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 526,167 $ 484,927 9 % $ 2,189,970 $ 2,004,338 9 % Gross margin 58.4 % 58.5 % (20) bps 59.8 % 59.5 % 30 bps Less: comparability adjustments Change from currency (1,062 ) — (25,887 ) — Comparable gross profit growth $ 527,229 $ 484,927 9 % $ 2,215,857 $ 2,004,338 11 % Comparable gross margin and gross margin gain (or growth) 59.1 % 58.5 % 50 bps 60.5 % 59.5 % 90 bps Operating expenses (as reported) $ 280,865 $ 258,400 9 % $ 1,092,842 $ 1,105,573 (1 )% Less: comparability adjustments Change from currency 3,440 — (507 ) — Comparable operating expense growth 277,425 258,400 7 % 1,093,349 1,105,573 (1 )% Income from operations (as reported) $ 245,302 $ 226,527 8 % $ 1,097,128 $ 898,765 22 % Operating margin 27.2 % 27.3 % (10) bps 30.0 % 26.7 % 330 bps Less: comparability adjustments Change from currency (4,501 ) — (25,380 ) — Comparable operating profit growth $ 249,803 $ 226,527 10 % $ 1,122,508 $ 898,765 25 % Comparable operating margin and operating margin gain (or growth) 28.0 % 27.3 % 60 bps 30.6 % 26.7 % 390 bps Amounts presented may not recalculate due to rounding. Projected 2024 comparable operating margin expansion outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the projected full year 2024 reported operating margin adjusted for estimated positive year-over-year foreign currency exchange rate change impact of approximately 0 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 2024 operating margin expansion) to comparable gross profit growth, comparable gross margin gain, comparable operating expense growth, comparable operating profit growth and comparable operating margin gain for the Company. Comparable EPS growth - Comparable EPS growth is a non-GAAP financial measure that represents the percentage change in earnings per share (diluted) ("EPS") for a measurement period, as compared to the prior base period, net of the impact of changes in foreign currency exchange rates from the prior base period and excluding the tax benefits of share-based compensation activity under ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and non-recurring or unusual items (if any). Management believes comparable EPS growth is a more useful way to measure the Company’s business performance than EPS growth because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding a key metric used by management. Comparable EPS growth should be considered in addition to, and not as a replacement of or a superior measure to, EPS growth reported in accordance with GAAP. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. The reconciliation of this non-GAAP financial measure is as follows: Three Months Ended Year-over-Year Twelve Months Ended Year-over-Year December 31, December 31, Growth December 31, December 31, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.32 $ 2.05 13 % $ 10.06 $ 8.03 25 % Less: comparability adjustments Share-based compensation activity 0.02 0.05 0.16 0.15 Change from currency (0.04 ) — (0.24 ) — Comparable EPS growth 2.34 2.00 17 % 10.14 7.88 29 % Amounts presented may not recalculate due to rounding. Projected 2024 comparable EPS growth outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the following adjustments: (i) full year 2023 reported EPS adjusted for positive share-based compensation activity of $0.16 for full year 2023; and (ii) projected full year 2024 reported EPS adjusted for estimated positive share-based compensation activity of $0.10 and estimated positive year-over-year foreign currency exchange rate change impact of $0.02. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2024 reported EPS growth) to comparable EPS growth for the Company. Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Free cash flow should be considered in addition to, and not as a replacement of or a superior measure to, net cash provided by operating activities. See the supplementary analysis of results below for our calculation of free cash flow for the years ended December 31, 2023 and 2022. To estimate projected 2024 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of ~ $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 the free cash flow conversion for the twelve months ended December 31, 2023, we have deducted purchases of property and equipment of approximately $134 million from net cash provided from operating activities of approximately $907 million, divided by net income of approximately $845 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. After-Tax Return on Invested Capital, Excluding Cash and Investments (“ROIC”) - After-Tax Return on Invested Capital, Excluding Cash and Investments, is a non-GAAP financial measure. After-tax return on invested capital, excluding cash and investments, represents our after-tax income from operations, divided by our average invested capital, excluding cash and investments, using beginning and ending balance sheet values. Management believes that reporting ROIC provides useful information to investors for evaluating the efficiency and effectiveness of our use of capital. ROIC, after-tax income from operations and average invested capital, excluding cash and investments, are not measures of financial performance under GAAP and should be considered in addition to, and not as replacements of or superior measures to, return on assets, net income, total assets or other financial measures reported in accordance with GAAP. See the supplementary table below for reconciliation of this non-GAAP financial measure. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Revenue: Revenue $ 901,601 $ 828,568 $ 3,660,953 $ 3,367,324 Expenses and Income: Cost of revenue 375,434 343,641 1,470,983 1,362,986 Gross profit 526,167 484,927 2,189,970 2,004,338 Sales and marketing 142,032 131,935 566,066 524,505 General and administrative 87,021 83,047 335,825 326,248 Research and development 51,812 43,418 190,951 254,820 Income from operations 245,302 226,527 1,097,128 898,765 Interest expense, net (5,634 ) (13,312 ) (35,952 ) (38,793 ) Income before provision for income taxes 239,668 213,215 1,061,176 859,972 Provision for income taxes 45,147 41,008 216,134 180,883 Net Income: Net income attributable to stockholders $ 194,521 $ 172,207 $ 845,042 $ 679,089 Earnings per share: Basic $ 2.34 $ 2.08 $ 10.17 $ 8.12 Earnings per share: Diluted $ 2.32 $ 2.05 $ 10.06 $ 8.03 Shares outstanding: Basic 83,088 82,934 83,066 83,623 Shares outstanding: Diluted 83,933 83,815 83,978 84,600 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Operating Ratios Gross profit 58.4% 58.5% 59.8% 59.5% (as a percentage of revenue): Sales, marketing, general and administrative expense 25.4% 25.9% 24.6% 25.3% Research and development expense 5.7% 5.2% 5.2% 7.6% Income from operations 1 27.2% 27.3% 30.0% 26.7% 1 Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended Three Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 821,265 $ 748,532 Water 41,787 39,314 LPD 32,793 33,396 Other 5,756 7,326 Total $ 901,601 $ 828,568 Gross Profit: CAG $ 478,669 58.3 % $ 434,890 58.1 % Water 27,380 65.5 % 27,357 69.6 % LPD 18,465 56.3 % 18,996 56.9 % Other 1,653 28.7 % 3,684 50.3 % Total $ 526,167 58.4 % $ 484,927 58.5 % Income from Operations: CAG $ 222,123 27.0 % $ 199,844 26.7 % Water 17,221 41.2 % 18,021 45.8 % LPD 4,311 13.1 % 5,362 16.1 % Other 1,647 28.6 % 3,300 45.0 % Total $ 245,302 27.2 % $ 226,527 27.3 % Twelve Months Ended Twelve Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 3,352,356 $ 3,058,793 Water 168,149 155,720 LPD 121,659 122,607 Other 18,789 30,204 Total $ 3,660,953 $ 3,367,324 Gross Profit: CAG $ 2,002,426 59.7 % $ 1,806,577 59.1 % Water 116,001 69.0 % 109,859 70.5 % LPD 65,440 53.8 % 73,001 59.5 % Other 6,103 32.5 % 14,901 49.3 % Total $ 2,189,970 59.8 % $ 2,004,338 59.5 % Income from Operations: CAG $ 1,012,740 30.2 % $ 800,949 26.2 % Water 74,340 44.2 % 72,519 46.6 % LPD 9,975 8.2 % 19,809 16.2 % Other 73 0.4 % 5,488 18.2 % Total $ 1,097,128 30.0 % $ 898,765 26.7 % 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 Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % United States 549,755 510,072 39,683 7.8 % — — 7.8 % International 271,510 238,460 33,050 13.9 % 2.9 % — 10.9 % Water $ 41,787 $ 39,314 $ 2,473 6.3 % 1.2 % — 5.1 % United States 19,906 18,571 1,335 7.2 % — — 7.2 % International 21,881 20,743 1,138 5.5 % 2.3 % — 3.2 % LPD $ 32,793 $ 33,396 $ (603 ) (1.8 %) 2.0 % — (3.8 %) United States 4,956 4,579 377 8.2 % — — 8.2 % International 27,837 28,817 (980 ) (3.4 %) 2.3 % — (5.7 %) Other $ 5,756 $ 7,326 $ (1,570 ) (21.4 %) — — (21.4 %) Total Company $ 901,601 $ 828,568 $ 73,033 8.8 % 1.0 % — 7.8 % United States 576,361 536,936 39,425 7.3 % — — 7.3 % International 325,240 291,632 33,608 11.5 % 2.8 % — 8.7 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % IDEXX VetLab consumables 297,370 261,164 36,206 13.9 % 1.4 % — 12.5 % Rapid assay products 77,560 71,125 6,435 9.0 % 0.5 % — 8.5 % Reference laboratory diagnostic and consulting services 305,037 283,318 21,719 7.7 % 0.8 % — 6.9 % CAG Diagnostics services and accessories 32,122 27,141 4,981 18.3 % 1.3 % — 17.1 % CAG Diagnostics capital – instruments 38,151 38,926 (775 ) (2.0 %) 0.9 % — (2.8 %) Veterinary software, services and diagnostic imaging systems: 71,025 66,858 4,167 6.2 % 0.1 % — 6.1 % Recurring revenue 54,558 48,647 5,911 12.1 % 0.2 % — 12.0 % Systems and hardware 16,467 18,211 (1,744 ) (9.6 %) — — (9.5 %) Net CAG revenue $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % United States $ 470,900 $ 432,467 $ 38,433 8.9 % — — 8.9 % International $ 241,189 $ 210,281 $ 30,908 14.7 % 3.1 % — 11.6 % 1 See 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) Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % United States 2,282,507 2,073,222 209,285 10.1 % — — 10.1 % International 1,069,849 985,571 84,278 8.6 % (0.6 %) — 9.1 % Water $ 168,149 $ 155,720 $ 12,429 8.0 % (0.3 %) 1.1 % 7.2 % United States 83,838 76,875 6,963 9.1 % — 0.5 % 8.5 % International 84,311 78,845 5,466 6.9 % (0.6 %) 1.6 % 5.9 % LPD $ 121,659 $ 122,607 $ (948 ) (0.8 %) — — (0.8 %) United States 18,961 16,633 2,328 14.0 % — — 14.0 % International 102,698 105,974 (3,276 ) (3.1 %) 0.1 % — (3.1 %) Other $ 18,789 $ 30,204 $ (11,415 ) (37.8 %) — — (37.8 %) Total Company $ 3,660,953 $ 3,367,324 $ 293,629 8.7 % (0.2 %) 0.1 % 8.8 % United States 2,391,427 2,182,959 208,468 9.5 % — — 9.5 % International 1,269,526 1,184,365 85,161 7.2 % (0.5 %) 0.1 % 7.6 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % IDEXX VetLab consumables 1,188,261 1,057,236 131,025 12.4 % (0.3 %) — 12.7 % Rapid assay products 344,494 313,667 30,827 9.8 % (0.2 %) — 10.0 % Reference laboratory diagnostic and consulting services 1,278,617 1,178,113 100,504 8.5 % (0.1 %) — 8.6 % CAG Diagnostics services and accessories 124,053 111,264 12,789 11.5 % (0.3 %) — 11.8 % CAG Diagnostics capital – instruments 137,603 147,326 (9,723 ) (6.6 %) (0.1 %) — (6.5 %) Veterinary software, services and diagnostic imaging systems 279,328 251,187 28,141 11.2 % (0.2 %) — 11.4 % Recurring revenue 214,597 180,973 33,624 18.6 % (0.2 %) — 18.8 % Systems and hardware 64,731 70,214 (5,483 ) (7.8 %) (0.2 %) — (7.6 %) Net CAG revenue $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % United States $ 1,976,737 $ 1,784,406 $ 192,331 10.8 % — — 10.8 % International $ 958,688 $ 875,874 $ 82,814 9.5 % (0.6 %) — 10.0 % 1 See 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) December 31, December 31, 2023 2022 Assets: Current Assets: Cash and cash equivalents $ 453,932 $ 112,546 Accounts receivable, net 457,445 400,619 Inventories 380,282 367,823 Other current assets 203,595 220,489 Total current assets 1,495,254 1,101,477 Property and equipment, net 702,177 649,474 Other long-term assets, net 1,062,494 995,814 Total assets $ 3,259,925 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 110,643 $ 110,221 Accrued liabilities 478,712 433,662 Credit facility 250,000 579,000 Current portion of long-term debt 74,997 74,982 Deferred revenue 37,195 37,938 Total current liabilities 951,547 1,235,803 Long-term debt, net of current portion 622,883 694,387 Other long-term liabilities, net 200,965 207,838 Total long-term liabilities 823,848 902,225 Total stockholders' equity 1,484,530 608,737 Total liabilities and stockholders' equity $ 3,259,925 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Selected Balance Sheet Information: Days sales outstanding 1 46.1 45.6 43.9 42.9 43.4 Inventory turns 2 1.3 1.3 1.3 1.3 1.3 1 Days 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. 2 Inventory 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) Twelve Months Ended December 31, December 31, 2023 2022 Operating: Cash Flows from Operating Activities: Net income $ 845,042 $ 679,089 Non-cash charges 133,897 137,425 Changes in assets and liabilities (72,429 ) (273,530 ) Net cash provided by operating activities 906,510 542,984 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (133,631 ) (148,838 ) Acquisitions of businesses, intangible assets and equity investment, net of cash acquired — (46,512 ) Proceeds from net investment hedges 8,377 — Net cash used by investing activities (125,254 ) (195,350 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings on credit facilities, net (329,000 ) 505,500 Payments of senior debt (75,000 ) (75,000 ) Debt issuance costs — (435 ) Payment of acquisition-related contingent considerations and holdbacks (3,135 ) (6,431 ) Repurchases of common stock (71,920 ) (819,711 ) Proceeds from exercises of stock options and employee stock purchase plans 47,034 35,747 Shares withheld for statutory tax withholding payments on restricted stock (9,975 ) (10,606 ) Net cash used by financing activities (441,996 ) (370,936 ) Net effect of changes in exchange rates on cash 2,126 (8,606 ) Net change in cash and cash equivalents 341,386 (31,908 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 453,932 $ 112,546 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands (Unaudited) Twelve Months Ended December 31, December 31, 2023 2022 Free Cash Flow: Net cash provided by operating activities $ 906,510 $ 542,984 Investing cash flows attributable to purchases of property and equipment (133,631 ) (148,838 ) Free cash flow 1 $ 772,879 $ 394,146 1 See Statements Regarding Non-GAAP Financial Measures, above. IDEXX Laboratories, Inc. and Subsidiaries After-Tax Return on Invested Capital, Excluding Cash and Investments ("ROIC") Amounts in thousands (Unaudited) Numerator For the Year Ended December 31, 2023 Income from operations (as reported) $ 1,097,128 After-tax income from operations 1 $ 873,672 Denominator As of December 31, 2023 As of December 31, 2022 Total shareholders’ equity $ 1,484,530 $ 608,737 Credit facility 250,000 579,000 Long-term debt, current portion 74,997 74,982 Long-term debt, net of current portion 622,883 694,387 Deferred income tax assets (107,364 ) (55,215 ) Deferred income tax liabilities 7,235 8,150 Total invested capital $ 2,332,281 $ 1,910,041 Less cash and cash equivalents 453,932 112,546 Total invested capital, excluding cash and investments $ 1,878,349 $ 1,797,495 Average invested capital, excluding cash and investments 2 $ 1,837,922 After-tax return on invested capital, excluding cash and investments 47.5 % 1 After-tax income from operations represents income from operations reduced by our reported effective tax rate. 2 Average invested capital, excluding cash and investments, represents the average of the amount of total invested capital, excluding cash and investments. IDEXX Laboratories, Inc. and Subsidiaries Common Stock Repurchases Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Shares repurchased in the open market 90 199 155 1,963 Shares acquired through employee surrender for statutory tax withholding — — 20 21 Total shares repurchased 90 199 175 1,984 Cost of shares repurchased in the open market $ 37,569 $ 68,281 $ 72,639 $ 810,942 Cost of shares for employee surrenders 67 54 9,974 10,606 Total cost of shares $ 37,636 $ 68,335 $ 82,613 $ 821,548 Average cost per share – open market repurchases $ 419.72 $ 342.35 $ 468.84 $ 413.12 Average cost per share – employee surrenders $ 482.60 $ 439.17 $ 503.28 $ 501.89 Average cost per share – total $ 419.82 $ 342.41 $ 472.74 $ 414.06 View source version on businesswire.com: https://www.businesswire.com/news/home/20240204928472/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 Announces Fourth Quarter and Full Year Results By: IDEXX Laboratories, Inc. via Business Wire February 05, 2024 at 06:30 AM EST Achieves fourth quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 11% reported and 10% organic Solid growth supported by continued benefits from IDEXX execution drivers, including 11% year-over-year expansion of IDEXX's global premium instrument installed base Delivers fourth quarter EPS of $2.32, an increase of 13% as reported and 17% on a comparable basis Provides initial outlook for 2024 revenue of $3,930 million - $4,040 million, reflecting growth of 7.5% - 10.5% reported and 7% - 10% organic, supported by CAG Diagnostics recurring revenue growth of 7.5% - 10.5% as reported and on an organic basis Estimates 2024 EPS of $10.84 - $11.33, an increase of 8% - 13% as reported and on a comparable basis, including a ~2% negative EPS growth impact from 2023 customer contract resolution IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced fourth quarter and full year results. Fourth Quarter and Full Year Results The Company reports revenues of $902 million for the fourth quarter of 2023, an increase of 9% compared to the prior year period on a reported basis and 8% on an organic basis driven by Companion Animal Group ("CAG") growth of 10% reported and 9% organic. CAG Diagnostics recurring revenue gains of 11% reported and 10% organic in the quarter were supported by continued benefits from IDEXX execution drivers including high quality placements of CAG Diagnostics capital instruments across regions, high customer retention, new business gains, and net price realization. CAG revenue gains also reflect double-digit veterinary software, services and diagnostic imaging systems recurring revenue growth as reported and organically, supported by strong software solution placement growth and a continued shift to cloud-based products. Earnings per diluted share (“EPS”) were $2.32 for the fourth quarter, an increase of 13% as reported and 17% on a comparable basis. Results reflect operating margin contraction of 10 basis points as reported and expansion of 60 basis points on a comparable basis. Fourth quarter EPS included $0.04 per share negative impact from currency changes and $0.02 per share in tax benefits from share-based compensation. Fourth quarter EPS also benefit by $0.10 per share from the release of tax valuation allowances in certain jurisdictions which lowered the full year effective tax rate by approximately 100 basis points. Revenue for the full year of $3,661 million increased 9% as reported and organically, driven by 10% reported and 10.5% organic growth in CAG Diagnostics recurring revenue. “Outstanding execution by IDEXX's commercial and operations teams supported delivery of strong organic revenue growth and financial results for the Company in 2023. We're excited about our sustained business momentum, supported by partnerships with our customers, that will be further enabled by key innovations we are advancing across our instrument platforms, test menu and software offerings. This includes the launch of our new revolutionary slide-free cellular analyzer, IDEXX inVue Dx™ targeted for late 2024," said Jay Mazelsky, President and Chief Executive Officer. "Our performance and progress demonstrate that customers of all types appreciate the purpose-built solutions that we provide and utilize these tools and services to deliver increased standards of care while realizing critical efficiency gains." For the full year 2023, EPS of $10.06 increased 25% on a reported basis and 29% on a comparable basis, including a ~12% EPS growth benefit related to $80 million of discrete in-license of technology in 2022 and a $16 million customer contract resolution in 2023. EPS results reflect operating margin expansion of 330 basis points as reported and 390 basis points on a comparable basis, including a ~280 basis point benefit from the discrete in-license of technology and customer contract resolution. EPS results include a $0.24 negative impact from currency changes and $0.16 in tax benefits from share-based compensation. The Company's 2024 revenue guidance range reflects full year growth of 7.5% - 10.5% as reported and 7% - 10% on an organic basis, supported by 7.5% - 10.5% reported and organic CAG Diagnostics recurring revenue growth. The guidance range for global CAG Diagnostics recurring revenue growth reflects goals for sustained benefits from execution drivers, supporting continued solid volume gains, and an estimated 5% full year benefit from net price improvement. 2024 EPS guidance of $10.84 - $11.33 reflects expectations for solid organic revenue gains and a targeted 20 - 70 basis points of reported operating margin improvement net of a ~40 basis point negative impact from lapping the 2023 customer contract resolution. Fourth Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated 10% reported revenue growth for the fourth quarter. CAG Diagnostics organic recurring revenue growth of 10% reflects solid gains across IDEXX's major modalities globally, supported by growth in clinical service demand and expanded utilization of diagnostic products and services. Additional U.S. companion animal practice key metrics are available in the Q4 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 14% reported and 13% organic revenue growth reflecting double-digit gains across U.S. and International regions, supported by global premium instrument installed base growth, high customer retention levels and net price gains. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, reflecting high single-digit growth in the U.S. and sustained solid organic revenue growth in International regions. Rapid assay products generated 9% revenue growth as reported and organically, reflecting continued solid volume gains in the U.S. and benefits from net price increases. Veterinary software, services and diagnostic imaging systems revenue growth increased 6% as reported and organically compared to strong prior year performance levels, supported by double-digit growth in recurring revenues and strong interest in cloud-based veterinary software solutions. Water Water achieved revenue growth of 6% on a reported basis and 5% on an organic basis, reflecting benefits from net price improvement and solid gains in the U.S. and Europe, moderated by lower revenues in China and year-end order timing. Livestock, Poultry and Dairy (“LPD”) LPD revenue declined 2% on a reported basis and 4% on an organic basis as solid core product growth in the U.S. and Europe was offset by declines in herd health screening and China revenues. Gross Profit and Operating Profit Gross profits increased 9%. Gross margins of 58.4% contracted 20 basis points compared to prior year on a reported basis and expanded 50 basis points on a comparable basis. Gross margin results reflect benefits from net price improvement which offset inflationary cost impacts, favorable business mix benefits from strong consumable growth, and higher software service gross margins. Operating margin was 27.2% in the quarter, 10 basis points lower than the prior year period results on a reported basis and 60 basis points higher on a comparable basis. Operating expenses grew 9% as reported and 7% on a comparable basis. Operating expense growth reflects increased investments in commercial resources and R&D project spend. 2024 Growth and Financial Performance Outlook The following table provides the Company's initial estimates for annual key financial metrics in 2024: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2024 Revenue $3,930 - $4,040 Reported growth 7.5% - 10.5% Organic growth 7% - 10% CAG Diagnostics Recurring Revenue Growth Reported growth 7.5% - 10.5% Organic growth 7.5% - 10.5% Operating Margin 30.2% - 30.7% Reported operating margin expansion 20 - 70 bps Comparable operating margin expansion 20 - 70 bps Negative impact of 2023 customer contract resolution payment ~ 40 bps EPS $10.84 - $11.33 Reported growth 8% - 13% Comparable growth 8% - 13% Negative impact of 2023 customer contract resolution payment ~ 2% Other Key Metrics Net interest expense ~ $27 Share-based compensation tax benefit ~ $8 Share-based compensation tax rate benefit ~ 1 % Effective tax rate ~ 22 % Share-based compensation EPS impact ~ $0.10 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 110% - 115% of net income Free Cash Flow 90% - 95% of net income Capital Expenditures ~ $180 million The following table outlines estimates of foreign currency exchange rate impacts, net of foreign currency hedging transactions, and foreign currency exchange rate assumptions reflected in the above financial performance outlook for 2024. Estimated Foreign Currency Exchange Rate Impacts 2024 Revenue growth rate impact ~ 0% CAG Diagnostics recurring revenue growth rate impact ~ 0% Operating margin growth impact ~ 0 bps EPS impact ~ $0.02 EPS growth impact ~ 0% Go-forward Foreign Currency Exchange Rate Assumptions In U.S. dollars euro $1.08 British pound $1.25 Canadian dollar $0.74 Australian dollar $0.66 Relative to the U.S. dollar Japanese yen ¥147 Chinese renminbi ¥7.23 Brazilian real R$4.95 Conference Call and Webcast Information IDEXX Laboratories, Inc. will host a conference call today at 8:30 a.m. (Eastern) to discuss its 2023 fourth quarter and full year financial results and management’s outlook. To participate in the conference call, dial 1-800-776-0420 or 1-773-377-9037 and reference access code 764284. Individuals can access a live webcast of the conference call on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (Eastern) 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 and the statements to be made in the accompanying earnings conference call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including forward-looking statements about the Company’s business prospects and estimates of the Company’s financial results for future periods. Forward-looking statements are included under "2024 Growth and Financial Performance Outlook" and elsewhere in this earnings release 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 and business performance; revenue growth and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates and interest rates; projected operating margins and expenses and capital expenditures; projected tax, tax rate and EPS benefits from share-based compensation arrangements; projected effective tax rates, reduction of average shares outstanding and net interest expense; and expectations for net price improvement. These statements are intended to provide management's expectation of future events as of the date of this earnings release; are based on management's estimates, projections, beliefs and assumptions as of the date of this earnings release; and are not guarantees of future performance. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things, the matters described under the headings "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the 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 fourth quarter 2023 results as follows: decreased gross profit growth by 0.2%, decreased gross margin growth by 70 basis points, increased operating expense growth by 1.3%, decreased operating profit margin growth by 70 basis points, and decreased EPS growth by 1.9%. Estimated currency changes impacted full year 2023 results as follows: decreased gross profit growth by 1.3%, decreased gross margin growth by 60 basis points, was immaterial to operating expense growth, decreased operating profit margin growth by 60 basis points, and decreased EPS growth by 3.0%. 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 year ended December 31, 2023 and refer to the 2024 Growth and Financial Performance Outlook section of this press release for estimated foreign currency exchange rate impacts on 2024 projections and estimates. Growth and organic revenue growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted. Organic revenue growth is a non-GAAP financial measure that represents the percentage change in revenue, as compared to the same period for the prior year, net of the impact of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers. Organic revenue growth should be considered in addition to, and not as a replacement of or a superior measure to, revenue growth reported in accordance with GAAP. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three and twelve months ended December 31, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. 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 expected to increase projected full year 2024 revenue growth by 50 basis points. 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 Twelve Months Ended Year-over-Year December 31, December 31, Change December 31, December 31, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 526,167 $ 484,927 9 % $ 2,189,970 $ 2,004,338 9 % Gross margin 58.4 % 58.5 % (20) bps 59.8 % 59.5 % 30 bps Less: comparability adjustments Change from currency (1,062 ) — (25,887 ) — Comparable gross profit growth $ 527,229 $ 484,927 9 % $ 2,215,857 $ 2,004,338 11 % Comparable gross margin and gross margin gain (or growth) 59.1 % 58.5 % 50 bps 60.5 % 59.5 % 90 bps Operating expenses (as reported) $ 280,865 $ 258,400 9 % $ 1,092,842 $ 1,105,573 (1 )% Less: comparability adjustments Change from currency 3,440 — (507 ) — Comparable operating expense growth 277,425 258,400 7 % 1,093,349 1,105,573 (1 )% Income from operations (as reported) $ 245,302 $ 226,527 8 % $ 1,097,128 $ 898,765 22 % Operating margin 27.2 % 27.3 % (10) bps 30.0 % 26.7 % 330 bps Less: comparability adjustments Change from currency (4,501 ) — (25,380 ) — Comparable operating profit growth $ 249,803 $ 226,527 10 % $ 1,122,508 $ 898,765 25 % Comparable operating margin and operating margin gain (or growth) 28.0 % 27.3 % 60 bps 30.6 % 26.7 % 390 bps Amounts presented may not recalculate due to rounding. Projected 2024 comparable operating margin expansion outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the projected full year 2024 reported operating margin adjusted for estimated positive year-over-year foreign currency exchange rate change impact of approximately 0 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 2024 operating margin expansion) to comparable gross profit growth, comparable gross margin gain, comparable operating expense growth, comparable operating profit growth and comparable operating margin gain for the Company. Comparable EPS growth - Comparable EPS growth is a non-GAAP financial measure that represents the percentage change in earnings per share (diluted) ("EPS") for a measurement period, as compared to the prior base period, net of the impact of changes in foreign currency exchange rates from the prior base period and excluding the tax benefits of share-based compensation activity under ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and non-recurring or unusual items (if any). Management believes comparable EPS growth is a more useful way to measure the Company’s business performance than EPS growth because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding a key metric used by management. Comparable EPS growth should be considered in addition to, and not as a replacement of or a superior measure to, EPS growth reported in accordance with GAAP. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. The reconciliation of this non-GAAP financial measure is as follows: Three Months Ended Year-over-Year Twelve Months Ended Year-over-Year December 31, December 31, Growth December 31, December 31, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.32 $ 2.05 13 % $ 10.06 $ 8.03 25 % Less: comparability adjustments Share-based compensation activity 0.02 0.05 0.16 0.15 Change from currency (0.04 ) — (0.24 ) — Comparable EPS growth 2.34 2.00 17 % 10.14 7.88 29 % Amounts presented may not recalculate due to rounding. Projected 2024 comparable EPS growth outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the following adjustments: (i) full year 2023 reported EPS adjusted for positive share-based compensation activity of $0.16 for full year 2023; and (ii) projected full year 2024 reported EPS adjusted for estimated positive share-based compensation activity of $0.10 and estimated positive year-over-year foreign currency exchange rate change impact of $0.02. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2024 reported EPS growth) to comparable EPS growth for the Company. Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Free cash flow should be considered in addition to, and not as a replacement of or a superior measure to, net cash provided by operating activities. See the supplementary analysis of results below for our calculation of free cash flow for the years ended December 31, 2023 and 2022. To estimate projected 2024 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of ~ $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 the free cash flow conversion for the twelve months ended December 31, 2023, we have deducted purchases of property and equipment of approximately $134 million from net cash provided from operating activities of approximately $907 million, divided by net income of approximately $845 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. After-Tax Return on Invested Capital, Excluding Cash and Investments (“ROIC”) - After-Tax Return on Invested Capital, Excluding Cash and Investments, is a non-GAAP financial measure. After-tax return on invested capital, excluding cash and investments, represents our after-tax income from operations, divided by our average invested capital, excluding cash and investments, using beginning and ending balance sheet values. Management believes that reporting ROIC provides useful information to investors for evaluating the efficiency and effectiveness of our use of capital. ROIC, after-tax income from operations and average invested capital, excluding cash and investments, are not measures of financial performance under GAAP and should be considered in addition to, and not as replacements of or superior measures to, return on assets, net income, total assets or other financial measures reported in accordance with GAAP. See the supplementary table below for reconciliation of this non-GAAP financial measure. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Revenue: Revenue $ 901,601 $ 828,568 $ 3,660,953 $ 3,367,324 Expenses and Income: Cost of revenue 375,434 343,641 1,470,983 1,362,986 Gross profit 526,167 484,927 2,189,970 2,004,338 Sales and marketing 142,032 131,935 566,066 524,505 General and administrative 87,021 83,047 335,825 326,248 Research and development 51,812 43,418 190,951 254,820 Income from operations 245,302 226,527 1,097,128 898,765 Interest expense, net (5,634 ) (13,312 ) (35,952 ) (38,793 ) Income before provision for income taxes 239,668 213,215 1,061,176 859,972 Provision for income taxes 45,147 41,008 216,134 180,883 Net Income: Net income attributable to stockholders $ 194,521 $ 172,207 $ 845,042 $ 679,089 Earnings per share: Basic $ 2.34 $ 2.08 $ 10.17 $ 8.12 Earnings per share: Diluted $ 2.32 $ 2.05 $ 10.06 $ 8.03 Shares outstanding: Basic 83,088 82,934 83,066 83,623 Shares outstanding: Diluted 83,933 83,815 83,978 84,600 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Operating Ratios Gross profit 58.4% 58.5% 59.8% 59.5% (as a percentage of revenue): Sales, marketing, general and administrative expense 25.4% 25.9% 24.6% 25.3% Research and development expense 5.7% 5.2% 5.2% 7.6% Income from operations 1 27.2% 27.3% 30.0% 26.7% 1 Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended Three Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 821,265 $ 748,532 Water 41,787 39,314 LPD 32,793 33,396 Other 5,756 7,326 Total $ 901,601 $ 828,568 Gross Profit: CAG $ 478,669 58.3 % $ 434,890 58.1 % Water 27,380 65.5 % 27,357 69.6 % LPD 18,465 56.3 % 18,996 56.9 % Other 1,653 28.7 % 3,684 50.3 % Total $ 526,167 58.4 % $ 484,927 58.5 % Income from Operations: CAG $ 222,123 27.0 % $ 199,844 26.7 % Water 17,221 41.2 % 18,021 45.8 % LPD 4,311 13.1 % 5,362 16.1 % Other 1,647 28.6 % 3,300 45.0 % Total $ 245,302 27.2 % $ 226,527 27.3 % Twelve Months Ended Twelve Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 3,352,356 $ 3,058,793 Water 168,149 155,720 LPD 121,659 122,607 Other 18,789 30,204 Total $ 3,660,953 $ 3,367,324 Gross Profit: CAG $ 2,002,426 59.7 % $ 1,806,577 59.1 % Water 116,001 69.0 % 109,859 70.5 % LPD 65,440 53.8 % 73,001 59.5 % Other 6,103 32.5 % 14,901 49.3 % Total $ 2,189,970 59.8 % $ 2,004,338 59.5 % Income from Operations: CAG $ 1,012,740 30.2 % $ 800,949 26.2 % Water 74,340 44.2 % 72,519 46.6 % LPD 9,975 8.2 % 19,809 16.2 % Other 73 0.4 % 5,488 18.2 % Total $ 1,097,128 30.0 % $ 898,765 26.7 % 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 Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % United States 549,755 510,072 39,683 7.8 % — — 7.8 % International 271,510 238,460 33,050 13.9 % 2.9 % — 10.9 % Water $ 41,787 $ 39,314 $ 2,473 6.3 % 1.2 % — 5.1 % United States 19,906 18,571 1,335 7.2 % — — 7.2 % International 21,881 20,743 1,138 5.5 % 2.3 % — 3.2 % LPD $ 32,793 $ 33,396 $ (603 ) (1.8 %) 2.0 % — (3.8 %) United States 4,956 4,579 377 8.2 % — — 8.2 % International 27,837 28,817 (980 ) (3.4 %) 2.3 % — (5.7 %) Other $ 5,756 $ 7,326 $ (1,570 ) (21.4 %) — — (21.4 %) Total Company $ 901,601 $ 828,568 $ 73,033 8.8 % 1.0 % — 7.8 % United States 576,361 536,936 39,425 7.3 % — — 7.3 % International 325,240 291,632 33,608 11.5 % 2.8 % — 8.7 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % IDEXX VetLab consumables 297,370 261,164 36,206 13.9 % 1.4 % — 12.5 % Rapid assay products 77,560 71,125 6,435 9.0 % 0.5 % — 8.5 % Reference laboratory diagnostic and consulting services 305,037 283,318 21,719 7.7 % 0.8 % — 6.9 % CAG Diagnostics services and accessories 32,122 27,141 4,981 18.3 % 1.3 % — 17.1 % CAG Diagnostics capital – instruments 38,151 38,926 (775 ) (2.0 %) 0.9 % — (2.8 %) Veterinary software, services and diagnostic imaging systems: 71,025 66,858 4,167 6.2 % 0.1 % — 6.1 % Recurring revenue 54,558 48,647 5,911 12.1 % 0.2 % — 12.0 % Systems and hardware 16,467 18,211 (1,744 ) (9.6 %) — — (9.5 %) Net CAG revenue $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % United States $ 470,900 $ 432,467 $ 38,433 8.9 % — — 8.9 % International $ 241,189 $ 210,281 $ 30,908 14.7 % 3.1 % — 11.6 % 1 See 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) Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % United States 2,282,507 2,073,222 209,285 10.1 % — — 10.1 % International 1,069,849 985,571 84,278 8.6 % (0.6 %) — 9.1 % Water $ 168,149 $ 155,720 $ 12,429 8.0 % (0.3 %) 1.1 % 7.2 % United States 83,838 76,875 6,963 9.1 % — 0.5 % 8.5 % International 84,311 78,845 5,466 6.9 % (0.6 %) 1.6 % 5.9 % LPD $ 121,659 $ 122,607 $ (948 ) (0.8 %) — — (0.8 %) United States 18,961 16,633 2,328 14.0 % — — 14.0 % International 102,698 105,974 (3,276 ) (3.1 %) 0.1 % — (3.1 %) Other $ 18,789 $ 30,204 $ (11,415 ) (37.8 %) — — (37.8 %) Total Company $ 3,660,953 $ 3,367,324 $ 293,629 8.7 % (0.2 %) 0.1 % 8.8 % United States 2,391,427 2,182,959 208,468 9.5 % — — 9.5 % International 1,269,526 1,184,365 85,161 7.2 % (0.5 %) 0.1 % 7.6 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % IDEXX VetLab consumables 1,188,261 1,057,236 131,025 12.4 % (0.3 %) — 12.7 % Rapid assay products 344,494 313,667 30,827 9.8 % (0.2 %) — 10.0 % Reference laboratory diagnostic and consulting services 1,278,617 1,178,113 100,504 8.5 % (0.1 %) — 8.6 % CAG Diagnostics services and accessories 124,053 111,264 12,789 11.5 % (0.3 %) — 11.8 % CAG Diagnostics capital – instruments 137,603 147,326 (9,723 ) (6.6 %) (0.1 %) — (6.5 %) Veterinary software, services and diagnostic imaging systems 279,328 251,187 28,141 11.2 % (0.2 %) — 11.4 % Recurring revenue 214,597 180,973 33,624 18.6 % (0.2 %) — 18.8 % Systems and hardware 64,731 70,214 (5,483 ) (7.8 %) (0.2 %) — (7.6 %) Net CAG revenue $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % United States $ 1,976,737 $ 1,784,406 $ 192,331 10.8 % — — 10.8 % International $ 958,688 $ 875,874 $ 82,814 9.5 % (0.6 %) — 10.0 % 1 See 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) December 31, December 31, 2023 2022 Assets: Current Assets: Cash and cash equivalents $ 453,932 $ 112,546 Accounts receivable, net 457,445 400,619 Inventories 380,282 367,823 Other current assets 203,595 220,489 Total current assets 1,495,254 1,101,477 Property and equipment, net 702,177 649,474 Other long-term assets, net 1,062,494 995,814 Total assets $ 3,259,925 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 110,643 $ 110,221 Accrued liabilities 478,712 433,662 Credit facility 250,000 579,000 Current portion of long-term debt 74,997 74,982 Deferred revenue 37,195 37,938 Total current liabilities 951,547 1,235,803 Long-term debt, net of current portion 622,883 694,387 Other long-term liabilities, net 200,965 207,838 Total long-term liabilities 823,848 902,225 Total stockholders' equity 1,484,530 608,737 Total liabilities and stockholders' equity $ 3,259,925 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Selected Balance Sheet Information: Days sales outstanding 1 46.1 45.6 43.9 42.9 43.4 Inventory turns 2 1.3 1.3 1.3 1.3 1.3 1 Days 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. 2 Inventory 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) Twelve Months Ended December 31, December 31, 2023 2022 Operating: Cash Flows from Operating Activities: Net income $ 845,042 $ 679,089 Non-cash charges 133,897 137,425 Changes in assets and liabilities (72,429 ) (273,530 ) Net cash provided by operating activities 906,510 542,984 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (133,631 ) (148,838 ) Acquisitions of businesses, intangible assets and equity investment, net of cash acquired — (46,512 ) Proceeds from net investment hedges 8,377 — Net cash used by investing activities (125,254 ) (195,350 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings on credit facilities, net (329,000 ) 505,500 Payments of senior debt (75,000 ) (75,000 ) Debt issuance costs — (435 ) Payment of acquisition-related contingent considerations and holdbacks (3,135 ) (6,431 ) Repurchases of common stock (71,920 ) (819,711 ) Proceeds from exercises of stock options and employee stock purchase plans 47,034 35,747 Shares withheld for statutory tax withholding payments on restricted stock (9,975 ) (10,606 ) Net cash used by financing activities (441,996 ) (370,936 ) Net effect of changes in exchange rates on cash 2,126 (8,606 ) Net change in cash and cash equivalents 341,386 (31,908 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 453,932 $ 112,546 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands (Unaudited) Twelve Months Ended December 31, December 31, 2023 2022 Free Cash Flow: Net cash provided by operating activities $ 906,510 $ 542,984 Investing cash flows attributable to purchases of property and equipment (133,631 ) (148,838 ) Free cash flow 1 $ 772,879 $ 394,146 1 See Statements Regarding Non-GAAP Financial Measures, above. IDEXX Laboratories, Inc. and Subsidiaries After-Tax Return on Invested Capital, Excluding Cash and Investments ("ROIC") Amounts in thousands (Unaudited) Numerator For the Year Ended December 31, 2023 Income from operations (as reported) $ 1,097,128 After-tax income from operations 1 $ 873,672 Denominator As of December 31, 2023 As of December 31, 2022 Total shareholders’ equity $ 1,484,530 $ 608,737 Credit facility 250,000 579,000 Long-term debt, current portion 74,997 74,982 Long-term debt, net of current portion 622,883 694,387 Deferred income tax assets (107,364 ) (55,215 ) Deferred income tax liabilities 7,235 8,150 Total invested capital $ 2,332,281 $ 1,910,041 Less cash and cash equivalents 453,932 112,546 Total invested capital, excluding cash and investments $ 1,878,349 $ 1,797,495 Average invested capital, excluding cash and investments 2 $ 1,837,922 After-tax return on invested capital, excluding cash and investments 47.5 % 1 After-tax income from operations represents income from operations reduced by our reported effective tax rate. 2 Average invested capital, excluding cash and investments, represents the average of the amount of total invested capital, excluding cash and investments. IDEXX Laboratories, Inc. and Subsidiaries Common Stock Repurchases Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Shares repurchased in the open market 90 199 155 1,963 Shares acquired through employee surrender for statutory tax withholding — — 20 21 Total shares repurchased 90 199 175 1,984 Cost of shares repurchased in the open market $ 37,569 $ 68,281 $ 72,639 $ 810,942 Cost of shares for employee surrenders 67 54 9,974 10,606 Total cost of shares $ 37,636 $ 68,335 $ 82,613 $ 821,548 Average cost per share – open market repurchases $ 419.72 $ 342.35 $ 468.84 $ 413.12 Average cost per share – employee surrenders $ 482.60 $ 439.17 $ 503.28 $ 501.89 Average cost per share – total $ 419.82 $ 342.41 $ 472.74 $ 414.06 View source version on businesswire.com: https://www.businesswire.com/news/home/20240204928472/en/Contacts John Ravis, Investor Relations, 1-207-556-8155
Achieves fourth quarter revenue growth of 9% reported and 8% organic, driven by CAG Diagnostics recurring revenue growth of 11% reported and 10% organic Solid growth supported by continued benefits from IDEXX execution drivers, including 11% year-over-year expansion of IDEXX's global premium instrument installed base Delivers fourth quarter EPS of $2.32, an increase of 13% as reported and 17% on a comparable basis Provides initial outlook for 2024 revenue of $3,930 million - $4,040 million, reflecting growth of 7.5% - 10.5% reported and 7% - 10% organic, supported by CAG Diagnostics recurring revenue growth of 7.5% - 10.5% as reported and on an organic basis Estimates 2024 EPS of $10.84 - $11.33, an increase of 8% - 13% as reported and on a comparable basis, including a ~2% negative EPS growth impact from 2023 customer contract resolution
IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in pet healthcare innovation, today announced fourth quarter and full year results. Fourth Quarter and Full Year Results The Company reports revenues of $902 million for the fourth quarter of 2023, an increase of 9% compared to the prior year period on a reported basis and 8% on an organic basis driven by Companion Animal Group ("CAG") growth of 10% reported and 9% organic. CAG Diagnostics recurring revenue gains of 11% reported and 10% organic in the quarter were supported by continued benefits from IDEXX execution drivers including high quality placements of CAG Diagnostics capital instruments across regions, high customer retention, new business gains, and net price realization. CAG revenue gains also reflect double-digit veterinary software, services and diagnostic imaging systems recurring revenue growth as reported and organically, supported by strong software solution placement growth and a continued shift to cloud-based products. Earnings per diluted share (“EPS”) were $2.32 for the fourth quarter, an increase of 13% as reported and 17% on a comparable basis. Results reflect operating margin contraction of 10 basis points as reported and expansion of 60 basis points on a comparable basis. Fourth quarter EPS included $0.04 per share negative impact from currency changes and $0.02 per share in tax benefits from share-based compensation. Fourth quarter EPS also benefit by $0.10 per share from the release of tax valuation allowances in certain jurisdictions which lowered the full year effective tax rate by approximately 100 basis points. Revenue for the full year of $3,661 million increased 9% as reported and organically, driven by 10% reported and 10.5% organic growth in CAG Diagnostics recurring revenue. “Outstanding execution by IDEXX's commercial and operations teams supported delivery of strong organic revenue growth and financial results for the Company in 2023. We're excited about our sustained business momentum, supported by partnerships with our customers, that will be further enabled by key innovations we are advancing across our instrument platforms, test menu and software offerings. This includes the launch of our new revolutionary slide-free cellular analyzer, IDEXX inVue Dx™ targeted for late 2024," said Jay Mazelsky, President and Chief Executive Officer. "Our performance and progress demonstrate that customers of all types appreciate the purpose-built solutions that we provide and utilize these tools and services to deliver increased standards of care while realizing critical efficiency gains." For the full year 2023, EPS of $10.06 increased 25% on a reported basis and 29% on a comparable basis, including a ~12% EPS growth benefit related to $80 million of discrete in-license of technology in 2022 and a $16 million customer contract resolution in 2023. EPS results reflect operating margin expansion of 330 basis points as reported and 390 basis points on a comparable basis, including a ~280 basis point benefit from the discrete in-license of technology and customer contract resolution. EPS results include a $0.24 negative impact from currency changes and $0.16 in tax benefits from share-based compensation. The Company's 2024 revenue guidance range reflects full year growth of 7.5% - 10.5% as reported and 7% - 10% on an organic basis, supported by 7.5% - 10.5% reported and organic CAG Diagnostics recurring revenue growth. The guidance range for global CAG Diagnostics recurring revenue growth reflects goals for sustained benefits from execution drivers, supporting continued solid volume gains, and an estimated 5% full year benefit from net price improvement. 2024 EPS guidance of $10.84 - $11.33 reflects expectations for solid organic revenue gains and a targeted 20 - 70 basis points of reported operating margin improvement net of a ~40 basis point negative impact from lapping the 2023 customer contract resolution. Fourth Quarter Performance Highlights Companion Animal Group The Companion Animal Group generated 10% reported revenue growth for the fourth quarter. CAG Diagnostics organic recurring revenue growth of 10% reflects solid gains across IDEXX's major modalities globally, supported by growth in clinical service demand and expanded utilization of diagnostic products and services. Additional U.S. companion animal practice key metrics are available in the Q4 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 14% reported and 13% organic revenue growth reflecting double-digit gains across U.S. and International regions, supported by global premium instrument installed base growth, high customer retention levels and net price gains. Reference laboratory diagnostic and consulting services generated 8% reported and 7% organic revenue growth, reflecting high single-digit growth in the U.S. and sustained solid organic revenue growth in International regions. Rapid assay products generated 9% revenue growth as reported and organically, reflecting continued solid volume gains in the U.S. and benefits from net price increases. Veterinary software, services and diagnostic imaging systems revenue growth increased 6% as reported and organically compared to strong prior year performance levels, supported by double-digit growth in recurring revenues and strong interest in cloud-based veterinary software solutions. Water Water achieved revenue growth of 6% on a reported basis and 5% on an organic basis, reflecting benefits from net price improvement and solid gains in the U.S. and Europe, moderated by lower revenues in China and year-end order timing. Livestock, Poultry and Dairy (“LPD”) LPD revenue declined 2% on a reported basis and 4% on an organic basis as solid core product growth in the U.S. and Europe was offset by declines in herd health screening and China revenues. Gross Profit and Operating Profit Gross profits increased 9%. Gross margins of 58.4% contracted 20 basis points compared to prior year on a reported basis and expanded 50 basis points on a comparable basis. Gross margin results reflect benefits from net price improvement which offset inflationary cost impacts, favorable business mix benefits from strong consumable growth, and higher software service gross margins. Operating margin was 27.2% in the quarter, 10 basis points lower than the prior year period results on a reported basis and 60 basis points higher on a comparable basis. Operating expenses grew 9% as reported and 7% on a comparable basis. Operating expense growth reflects increased investments in commercial resources and R&D project spend. 2024 Growth and Financial Performance Outlook The following table provides the Company's initial estimates for annual key financial metrics in 2024: Amounts in millions except per share data and percentages Growth and Financial Performance Outlook 2024 Revenue $3,930 - $4,040 Reported growth 7.5% - 10.5% Organic growth 7% - 10% CAG Diagnostics Recurring Revenue Growth Reported growth 7.5% - 10.5% Organic growth 7.5% - 10.5% Operating Margin 30.2% - 30.7% Reported operating margin expansion 20 - 70 bps Comparable operating margin expansion 20 - 70 bps Negative impact of 2023 customer contract resolution payment ~ 40 bps EPS $10.84 - $11.33 Reported growth 8% - 13% Comparable growth 8% - 13% Negative impact of 2023 customer contract resolution payment ~ 2% Other Key Metrics Net interest expense ~ $27 Share-based compensation tax benefit ~ $8 Share-based compensation tax rate benefit ~ 1 % Effective tax rate ~ 22 % Share-based compensation EPS impact ~ $0.10 Reduction in average shares outstanding 0.5% - 1% Operating Cash Flow 110% - 115% of net income Free Cash Flow 90% - 95% of net income Capital Expenditures ~ $180 million The following table outlines estimates of foreign currency exchange rate impacts, net of foreign currency hedging transactions, and foreign currency exchange rate assumptions reflected in the above financial performance outlook for 2024. Estimated Foreign Currency Exchange Rate Impacts 2024 Revenue growth rate impact ~ 0% CAG Diagnostics recurring revenue growth rate impact ~ 0% Operating margin growth impact ~ 0 bps EPS impact ~ $0.02 EPS growth impact ~ 0% Go-forward Foreign Currency Exchange Rate Assumptions In U.S. dollars euro $1.08 British pound $1.25 Canadian dollar $0.74 Australian dollar $0.66 Relative to the U.S. dollar Japanese yen ¥147 Chinese renminbi ¥7.23 Brazilian real R$4.95 Conference Call and Webcast Information IDEXX Laboratories, Inc. will host a conference call today at 8:30 a.m. (Eastern) to discuss its 2023 fourth quarter and full year financial results and management’s outlook. To participate in the conference call, dial 1-800-776-0420 or 1-773-377-9037 and reference access code 764284. Individuals can access a live webcast of the conference call on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (Eastern) 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 and the statements to be made in the accompanying earnings conference call contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including forward-looking statements about the Company’s business prospects and estimates of the Company’s financial results for future periods. Forward-looking statements are included under "2024 Growth and Financial Performance Outlook" and elsewhere in this earnings release 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 and business performance; revenue growth and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates and interest rates; projected operating margins and expenses and capital expenditures; projected tax, tax rate and EPS benefits from share-based compensation arrangements; projected effective tax rates, reduction of average shares outstanding and net interest expense; and expectations for net price improvement. These statements are intended to provide management's expectation of future events as of the date of this earnings release; are based on management's estimates, projections, beliefs and assumptions as of the date of this earnings release; and are not guarantees of future performance. These forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, among other things, the matters described under the headings "Business," "Risk Factors," "Legal Proceedings," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and in the corresponding sections of the Company's Quarterly Reports on Form 10-Q for the 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 fourth quarter 2023 results as follows: decreased gross profit growth by 0.2%, decreased gross margin growth by 70 basis points, increased operating expense growth by 1.3%, decreased operating profit margin growth by 70 basis points, and decreased EPS growth by 1.9%. Estimated currency changes impacted full year 2023 results as follows: decreased gross profit growth by 1.3%, decreased gross margin growth by 60 basis points, was immaterial to operating expense growth, decreased operating profit margin growth by 60 basis points, and decreased EPS growth by 3.0%. 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 year ended December 31, 2023 and refer to the 2024 Growth and Financial Performance Outlook section of this press release for estimated foreign currency exchange rate impacts on 2024 projections and estimates. Growth and organic revenue growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted. Organic revenue growth is a non-GAAP financial measure that represents the percentage change in revenue, as compared to the same period for the prior year, net of the impact of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers. Organic revenue growth should be considered in addition to, and not as a replacement of or a superior measure to, revenue growth reported in accordance with GAAP. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three and twelve months ended December 31, 2023. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. 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 expected to increase projected full year 2024 revenue growth by 50 basis points. 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 Twelve Months Ended Year-over-Year December 31, December 31, Change December 31, December 31, Change Dollar amounts in thousands 2023 2022 2023 2022 Gross Profit (as reported) $ 526,167 $ 484,927 9 % $ 2,189,970 $ 2,004,338 9 % Gross margin 58.4 % 58.5 % (20) bps 59.8 % 59.5 % 30 bps Less: comparability adjustments Change from currency (1,062 ) — (25,887 ) — Comparable gross profit growth $ 527,229 $ 484,927 9 % $ 2,215,857 $ 2,004,338 11 % Comparable gross margin and gross margin gain (or growth) 59.1 % 58.5 % 50 bps 60.5 % 59.5 % 90 bps Operating expenses (as reported) $ 280,865 $ 258,400 9 % $ 1,092,842 $ 1,105,573 (1 )% Less: comparability adjustments Change from currency 3,440 — (507 ) — Comparable operating expense growth 277,425 258,400 7 % 1,093,349 1,105,573 (1 )% Income from operations (as reported) $ 245,302 $ 226,527 8 % $ 1,097,128 $ 898,765 22 % Operating margin 27.2 % 27.3 % (10) bps 30.0 % 26.7 % 330 bps Less: comparability adjustments Change from currency (4,501 ) — (25,380 ) — Comparable operating profit growth $ 249,803 $ 226,527 10 % $ 1,122,508 $ 898,765 25 % Comparable operating margin and operating margin gain (or growth) 28.0 % 27.3 % 60 bps 30.6 % 26.7 % 390 bps Amounts presented may not recalculate due to rounding. Projected 2024 comparable operating margin expansion outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the projected full year 2024 reported operating margin adjusted for estimated positive year-over-year foreign currency exchange rate change impact of approximately 0 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 2024 operating margin expansion) to comparable gross profit growth, comparable gross margin gain, comparable operating expense growth, comparable operating profit growth and comparable operating margin gain for the Company. Comparable EPS growth - Comparable EPS growth is a non-GAAP financial measure that represents the percentage change in earnings per share (diluted) ("EPS") for a measurement period, as compared to the prior base period, net of the impact of changes in foreign currency exchange rates from the prior base period and excluding the tax benefits of share-based compensation activity under ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, and non-recurring or unusual items (if any). Management believes comparable EPS growth is a more useful way to measure the Company’s business performance than EPS growth because it enables better period-over-period comparisons of the fundamental financial results by excluding items that vary independent of performance and provides greater transparency to investors regarding a key metric used by management. Comparable EPS growth should be considered in addition to, and not as a replacement of or a superior measure to, EPS growth reported in accordance with GAAP. Please refer to the constant currency note above for a summary of foreign currency exchange rate impacts. The reconciliation of this non-GAAP financial measure is as follows: Three Months Ended Year-over-Year Twelve Months Ended Year-over-Year December 31, December 31, Growth December 31, December 31, Growth 2023 2022 2023 2022 Earnings per share (diluted) $ 2.32 $ 2.05 13 % $ 10.06 $ 8.03 25 % Less: comparability adjustments Share-based compensation activity 0.02 0.05 0.16 0.15 Change from currency (0.04 ) — (0.24 ) — Comparable EPS growth 2.34 2.00 17 % 10.14 7.88 29 % Amounts presented may not recalculate due to rounding. Projected 2024 comparable EPS growth outlined in the 2024 Growth and Financial Performance Outlook section of this earnings release reflects the following adjustments: (i) full year 2023 reported EPS adjusted for positive share-based compensation activity of $0.16 for full year 2023; and (ii) projected full year 2024 reported EPS adjusted for estimated positive share-based compensation activity of $0.10 and estimated positive year-over-year foreign currency exchange rate change impact of $0.02. These impacts and those described in the constant currency note above reconcile reported EPS growth (including projected 2024 reported EPS growth) to comparable EPS growth for the Company. Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Free cash flow should be considered in addition to, and not as a replacement of or a superior measure to, net cash provided by operating activities. See the supplementary analysis of results below for our calculation of free cash flow for the years ended December 31, 2023 and 2022. To estimate projected 2024 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of ~ $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 the free cash flow conversion for the twelve months ended December 31, 2023, we have deducted purchases of property and equipment of approximately $134 million from net cash provided from operating activities of approximately $907 million, divided by net income of approximately $845 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2023. After-Tax Return on Invested Capital, Excluding Cash and Investments (“ROIC”) - After-Tax Return on Invested Capital, Excluding Cash and Investments, is a non-GAAP financial measure. After-tax return on invested capital, excluding cash and investments, represents our after-tax income from operations, divided by our average invested capital, excluding cash and investments, using beginning and ending balance sheet values. Management believes that reporting ROIC provides useful information to investors for evaluating the efficiency and effectiveness of our use of capital. ROIC, after-tax income from operations and average invested capital, excluding cash and investments, are not measures of financial performance under GAAP and should be considered in addition to, and not as replacements of or superior measures to, return on assets, net income, total assets or other financial measures reported in accordance with GAAP. See the supplementary table below for reconciliation of this non-GAAP financial measure. IDEXX Laboratories, Inc. and Subsidiaries Condensed Consolidated Statement of Operations Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Revenue: Revenue $ 901,601 $ 828,568 $ 3,660,953 $ 3,367,324 Expenses and Income: Cost of revenue 375,434 343,641 1,470,983 1,362,986 Gross profit 526,167 484,927 2,189,970 2,004,338 Sales and marketing 142,032 131,935 566,066 524,505 General and administrative 87,021 83,047 335,825 326,248 Research and development 51,812 43,418 190,951 254,820 Income from operations 245,302 226,527 1,097,128 898,765 Interest expense, net (5,634 ) (13,312 ) (35,952 ) (38,793 ) Income before provision for income taxes 239,668 213,215 1,061,176 859,972 Provision for income taxes 45,147 41,008 216,134 180,883 Net Income: Net income attributable to stockholders $ 194,521 $ 172,207 $ 845,042 $ 679,089 Earnings per share: Basic $ 2.34 $ 2.08 $ 10.17 $ 8.12 Earnings per share: Diluted $ 2.32 $ 2.05 $ 10.06 $ 8.03 Shares outstanding: Basic 83,088 82,934 83,066 83,623 Shares outstanding: Diluted 83,933 83,815 83,978 84,600 IDEXX Laboratories, Inc. and Subsidiaries Selected Operating Information (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Operating Ratios Gross profit 58.4% 58.5% 59.8% 59.5% (as a percentage of revenue): Sales, marketing, general and administrative expense 25.4% 25.9% 24.6% 25.3% Research and development expense 5.7% 5.2% 5.2% 7.6% Income from operations 1 27.2% 27.3% 30.0% 26.7% 1 Amounts presented may not recalculate due to rounding. IDEXX Laboratories, Inc. and Subsidiaries Segment Information Amounts in thousands (Unaudited) Three Months Ended Three Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 821,265 $ 748,532 Water 41,787 39,314 LPD 32,793 33,396 Other 5,756 7,326 Total $ 901,601 $ 828,568 Gross Profit: CAG $ 478,669 58.3 % $ 434,890 58.1 % Water 27,380 65.5 % 27,357 69.6 % LPD 18,465 56.3 % 18,996 56.9 % Other 1,653 28.7 % 3,684 50.3 % Total $ 526,167 58.4 % $ 484,927 58.5 % Income from Operations: CAG $ 222,123 27.0 % $ 199,844 26.7 % Water 17,221 41.2 % 18,021 45.8 % LPD 4,311 13.1 % 5,362 16.1 % Other 1,647 28.6 % 3,300 45.0 % Total $ 245,302 27.2 % $ 226,527 27.3 % Twelve Months Ended Twelve Months Ended December 31, Percent of December 31, Percent of 2023 Revenue 2022 Revenue Revenue: CAG $ 3,352,356 $ 3,058,793 Water 168,149 155,720 LPD 121,659 122,607 Other 18,789 30,204 Total $ 3,660,953 $ 3,367,324 Gross Profit: CAG $ 2,002,426 59.7 % $ 1,806,577 59.1 % Water 116,001 69.0 % 109,859 70.5 % LPD 65,440 53.8 % 73,001 59.5 % Other 6,103 32.5 % 14,901 49.3 % Total $ 2,189,970 59.8 % $ 2,004,338 59.5 % Income from Operations: CAG $ 1,012,740 30.2 % $ 800,949 26.2 % Water 74,340 44.2 % 72,519 46.6 % LPD 9,975 8.2 % 19,809 16.2 % Other 73 0.4 % 5,488 18.2 % Total $ 1,097,128 30.0 % $ 898,765 26.7 % 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 Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % United States 549,755 510,072 39,683 7.8 % — — 7.8 % International 271,510 238,460 33,050 13.9 % 2.9 % — 10.9 % Water $ 41,787 $ 39,314 $ 2,473 6.3 % 1.2 % — 5.1 % United States 19,906 18,571 1,335 7.2 % — — 7.2 % International 21,881 20,743 1,138 5.5 % 2.3 % — 3.2 % LPD $ 32,793 $ 33,396 $ (603 ) (1.8 %) 2.0 % — (3.8 %) United States 4,956 4,579 377 8.2 % — — 8.2 % International 27,837 28,817 (980 ) (3.4 %) 2.3 % — (5.7 %) Other $ 5,756 $ 7,326 $ (1,570 ) (21.4 %) — — (21.4 %) Total Company $ 901,601 $ 828,568 $ 73,033 8.8 % 1.0 % — 7.8 % United States 576,361 536,936 39,425 7.3 % — — 7.3 % International 325,240 291,632 33,608 11.5 % 2.8 % — 8.7 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % IDEXX VetLab consumables 297,370 261,164 36,206 13.9 % 1.4 % — 12.5 % Rapid assay products 77,560 71,125 6,435 9.0 % 0.5 % — 8.5 % Reference laboratory diagnostic and consulting services 305,037 283,318 21,719 7.7 % 0.8 % — 6.9 % CAG Diagnostics services and accessories 32,122 27,141 4,981 18.3 % 1.3 % — 17.1 % CAG Diagnostics capital – instruments 38,151 38,926 (775 ) (2.0 %) 0.9 % — (2.8 %) Veterinary software, services and diagnostic imaging systems: 71,025 66,858 4,167 6.2 % 0.1 % — 6.1 % Recurring revenue 54,558 48,647 5,911 12.1 % 0.2 % — 12.0 % Systems and hardware 16,467 18,211 (1,744 ) (9.6 %) — — (9.5 %) Net CAG revenue $ 821,265 $ 748,532 $ 72,733 9.7 % 0.9 % — 8.8 % Three Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 712,089 $ 642,748 $ 69,341 10.8 % 1.0 % — 9.8 % United States $ 470,900 $ 432,467 $ 38,433 8.9 % — — 8.9 % International $ 241,189 $ 210,281 $ 30,908 14.7 % 3.1 % — 11.6 % 1 See 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) Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % United States 2,282,507 2,073,222 209,285 10.1 % — — 10.1 % International 1,069,849 985,571 84,278 8.6 % (0.6 %) — 9.1 % Water $ 168,149 $ 155,720 $ 12,429 8.0 % (0.3 %) 1.1 % 7.2 % United States 83,838 76,875 6,963 9.1 % — 0.5 % 8.5 % International 84,311 78,845 5,466 6.9 % (0.6 %) 1.6 % 5.9 % LPD $ 121,659 $ 122,607 $ (948 ) (0.8 %) — — (0.8 %) United States 18,961 16,633 2,328 14.0 % — — 14.0 % International 102,698 105,974 (3,276 ) (3.1 %) 0.1 % — (3.1 %) Other $ 18,789 $ 30,204 $ (11,415 ) (37.8 %) — — (37.8 %) Total Company $ 3,660,953 $ 3,367,324 $ 293,629 8.7 % (0.2 %) 0.1 % 8.8 % United States 2,391,427 2,182,959 208,468 9.5 % — — 9.5 % International 1,269,526 1,184,365 85,161 7.2 % (0.5 %) 0.1 % 7.6 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue Net CAG Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % IDEXX VetLab consumables 1,188,261 1,057,236 131,025 12.4 % (0.3 %) — 12.7 % Rapid assay products 344,494 313,667 30,827 9.8 % (0.2 %) — 10.0 % Reference laboratory diagnostic and consulting services 1,278,617 1,178,113 100,504 8.5 % (0.1 %) — 8.6 % CAG Diagnostics services and accessories 124,053 111,264 12,789 11.5 % (0.3 %) — 11.8 % CAG Diagnostics capital – instruments 137,603 147,326 (9,723 ) (6.6 %) (0.1 %) — (6.5 %) Veterinary software, services and diagnostic imaging systems 279,328 251,187 28,141 11.2 % (0.2 %) — 11.4 % Recurring revenue 214,597 180,973 33,624 18.6 % (0.2 %) — 18.8 % Systems and hardware 64,731 70,214 (5,483 ) (7.8 %) (0.2 %) — (7.6 %) Net CAG revenue $ 3,352,356 $ 3,058,793 $ 293,563 9.6 % (0.2 %) — 9.8 % Twelve Months Ended Reported Percentage Percentage Organic December 31, December 31, Dollar Revenue Change from Change from Revenue 2023 2022 Change Growth 1 Currency Acquisitions Growth 1 CAG Diagnostics recurring revenue: $ 2,935,425 $ 2,660,280 $ 275,145 10.3 % (0.2 %) — 10.5 % United States $ 1,976,737 $ 1,784,406 $ 192,331 10.8 % — — 10.8 % International $ 958,688 $ 875,874 $ 82,814 9.5 % (0.6 %) — 10.0 % 1 See 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) December 31, December 31, 2023 2022 Assets: Current Assets: Cash and cash equivalents $ 453,932 $ 112,546 Accounts receivable, net 457,445 400,619 Inventories 380,282 367,823 Other current assets 203,595 220,489 Total current assets 1,495,254 1,101,477 Property and equipment, net 702,177 649,474 Other long-term assets, net 1,062,494 995,814 Total assets $ 3,259,925 $ 2,746,765 Liabilities and Stockholders' Equity: Current Liabilities: Accounts payable $ 110,643 $ 110,221 Accrued liabilities 478,712 433,662 Credit facility 250,000 579,000 Current portion of long-term debt 74,997 74,982 Deferred revenue 37,195 37,938 Total current liabilities 951,547 1,235,803 Long-term debt, net of current portion 622,883 694,387 Other long-term liabilities, net 200,965 207,838 Total long-term liabilities 823,848 902,225 Total stockholders' equity 1,484,530 608,737 Total liabilities and stockholders' equity $ 3,259,925 $ 2,746,765 IDEXX Laboratories, Inc. and Subsidiaries Selected Balance Sheet Information (Unaudited) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 December 31, 2022 Selected Balance Sheet Information: Days sales outstanding 1 46.1 45.6 43.9 42.9 43.4 Inventory turns 2 1.3 1.3 1.3 1.3 1.3 1 Days 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. 2 Inventory 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) Twelve Months Ended December 31, December 31, 2023 2022 Operating: Cash Flows from Operating Activities: Net income $ 845,042 $ 679,089 Non-cash charges 133,897 137,425 Changes in assets and liabilities (72,429 ) (273,530 ) Net cash provided by operating activities 906,510 542,984 Investing: Cash Flows from Investing Activities: Purchases of property and equipment (133,631 ) (148,838 ) Acquisitions of businesses, intangible assets and equity investment, net of cash acquired — (46,512 ) Proceeds from net investment hedges 8,377 — Net cash used by investing activities (125,254 ) (195,350 ) Financing: Cash Flows from Financing Activities: (Repayments) borrowings on credit facilities, net (329,000 ) 505,500 Payments of senior debt (75,000 ) (75,000 ) Debt issuance costs — (435 ) Payment of acquisition-related contingent considerations and holdbacks (3,135 ) (6,431 ) Repurchases of common stock (71,920 ) (819,711 ) Proceeds from exercises of stock options and employee stock purchase plans 47,034 35,747 Shares withheld for statutory tax withholding payments on restricted stock (9,975 ) (10,606 ) Net cash used by financing activities (441,996 ) (370,936 ) Net effect of changes in exchange rates on cash 2,126 (8,606 ) Net change in cash and cash equivalents 341,386 (31,908 ) Cash and cash equivalents, beginning of period 112,546 144,454 Cash and cash equivalents, end of period $ 453,932 $ 112,546 IDEXX Laboratories, Inc. and Subsidiaries Free Cash Flow Amounts in thousands (Unaudited) Twelve Months Ended December 31, December 31, 2023 2022 Free Cash Flow: Net cash provided by operating activities $ 906,510 $ 542,984 Investing cash flows attributable to purchases of property and equipment (133,631 ) (148,838 ) Free cash flow 1 $ 772,879 $ 394,146 1 See Statements Regarding Non-GAAP Financial Measures, above. IDEXX Laboratories, Inc. and Subsidiaries After-Tax Return on Invested Capital, Excluding Cash and Investments ("ROIC") Amounts in thousands (Unaudited) Numerator For the Year Ended December 31, 2023 Income from operations (as reported) $ 1,097,128 After-tax income from operations 1 $ 873,672 Denominator As of December 31, 2023 As of December 31, 2022 Total shareholders’ equity $ 1,484,530 $ 608,737 Credit facility 250,000 579,000 Long-term debt, current portion 74,997 74,982 Long-term debt, net of current portion 622,883 694,387 Deferred income tax assets (107,364 ) (55,215 ) Deferred income tax liabilities 7,235 8,150 Total invested capital $ 2,332,281 $ 1,910,041 Less cash and cash equivalents 453,932 112,546 Total invested capital, excluding cash and investments $ 1,878,349 $ 1,797,495 Average invested capital, excluding cash and investments 2 $ 1,837,922 After-tax return on invested capital, excluding cash and investments 47.5 % 1 After-tax income from operations represents income from operations reduced by our reported effective tax rate. 2 Average invested capital, excluding cash and investments, represents the average of the amount of total invested capital, excluding cash and investments. IDEXX Laboratories, Inc. and Subsidiaries Common Stock Repurchases Amounts in thousands except per share data (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, December 31, December 31, 2023 2022 2023 2022 Shares repurchased in the open market 90 199 155 1,963 Shares acquired through employee surrender for statutory tax withholding — — 20 21 Total shares repurchased 90 199 175 1,984 Cost of shares repurchased in the open market $ 37,569 $ 68,281 $ 72,639 $ 810,942 Cost of shares for employee surrenders 67 54 9,974 10,606 Total cost of shares $ 37,636 $ 68,335 $ 82,613 $ 821,548 Average cost per share – open market repurchases $ 419.72 $ 342.35 $ 468.84 $ 413.12 Average cost per share – employee surrenders $ 482.60 $ 439.17 $ 503.28 $ 501.89 Average cost per share – total $ 419.82 $ 342.41 $ 472.74 $ 414.06 View source version on businesswire.com: https://www.businesswire.com/news/home/20240204928472/en/