| --- | --- | --- | --- | --- | --- | --- | |-------------------------------------------------------------------------------------------|-------|-------|-------|-------|-------|-------| | | | | | | | | | IDEXX Laboratories, Inc. Raymond James 43rd Annual Institutional Investors Conference | | | | | | | | | | | | | | | | Jay Mazelsky President and Chief Executive Officer March 7, 2022 | | | | | | | | | | | | | | | Safe Harbor Disclaimer The following information contains forward-looking statements within the ...

[Glossary of Terms and Selected Abbreviations](index=2&type=section&id=GLOSSARY%20OF%20TERMS%20AND%20SELECTED%20ABBREVIATIONS) PART I [ITEM 1. Business](index=6&type=section&id=ITEM%201.%20BUSINESS) IDEXX is a global leader in diagnostics and software for veterinary, livestock, poultry, dairy, and water testing industries [Company Overview](index=6&type=section&id=COMPANY%20OVERVIEW) - IDEXX was incorporated in Delaware in 1983 and develops, manufactures, and distributes products and services primarily for the companion animal veterinary, livestock and poultry, dairy, and water testing industries, also providing human medical point-of-care and laboratory diagnostics[17](index=17&type=chunk) [Description of Business by Segment](index=6&type=section&id=DESCRIPTION%20OF%20BUSINESS%20BY%20SEGMENT) [Companion Animal Group ("CAG")](index=6&type=section&id=Companion%20Animal%20Group%20(%22CAG%22)) [CAG Diagnostics](index=6&type=section&id=CAG%20Diagnostics) - CAG Diagnostics provides in-clinic diagnostic solutions (IDEXX VetLab suite of analyzers, consumables, SNAP rapid assay test kits) and outside reference laboratory services, integrated via VetConnect PLUS cloud-based technology for comprehensive patient data access and analysis[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) - Key in-clinic diagnostic offerings include Catalyst One Chemistry analyzer, ProCyte One and ProCyte Dx hematology analyzers, Coag Dx analyzer, SNAP rapid assay tests (e g, 4Dx Plus for vector-borne diseases, Heartworm RT, Feline Triple), and SediVue Dx and IDEXX VetLab UA for urinalysis[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) [Outside Reference Laboratory Diagnostic and Consulting Services](index=7&type=section&id=Outside%20Reference%20Laboratory%20Diagnostic%20and%20Consulting%20Services) - IDEXX offers commercial reference laboratory diagnostic and consulting services to veterinarians globally through a network of approximately 80 laboratories, providing a large selection of specialized tests and advisory services (radiology, cardiology, internal medicine, ultrasound)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [Veterinary Software and Services & Diagnostic Imaging Systems](index=8&type=section&id=Veterinary%20Software%20and%20Services%20%26%20Diagnostic%20Imaging%20Systems) - The company provides a portfolio of veterinary software and services, including practice management systems (ezyVet, Animana, IDEXX Neo, Cornerstone, DVMAX), workflow optimization (SmartFlow, VetRadar), client communication (Pet Health Network Pro), and diagnostic imaging systems (IDEXX ImageVue DR50/DR30) with PACS software (IDEXX-PACS, IDEXX Web PACS)[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) [Water quality products ("Water")](index=9&type=section&id=Water%20quality%20products%20(%22Water%22)) - Water segment offers innovative testing solutions for rapid and accurate detection of microbiological parameters in water, including Colilert, Colilert-18, Colisure (total coliforms and E coli), Enterolert (enterococci), Pseudalert (Pseudomonas aeruginosa), Filta-Max/Filta-Maxxpress (Cryptosporidium and Giardia), and Legiolert (Legionella pneumophila)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk)[43](index=43&type=chunk) [Livestock, Poultry and Dairy ("LPD")](index=9&type=section&id=Livestock%2C%20Poultry%20and%20Dairy%20(%22LPD%22)) - LPD provides diagnostic tests, services, and instrumentation for livestock and poultry health management (e g, BVDV, PRRS, ASFV tests, Rapid Visual Pregnancy Test for cattle) and dairy product quality/safety (e g, SNAP Beta-Lactam ST, SNAPduo Beta-Tetra ST for antibiotic residues in milk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) [Other](index=10&type=section&id=Other) - The 'Other' segment includes OPTI Medical, which sells human medical point-of-care analyzers (electrolytes, blood gases) and related consumables, as well as human COVID-19 testing products (OPTI SARS-CoV-2 RT-PCR test kit) and laboratory services[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) [Marketing and Distribution](index=10&type=section&id=MARKETING%20AND%20DISTRIBUTION) - IDEXX markets, sells, and services its products worldwide through direct sales forces and independent distributors, with sales offices in Africa, Asia Pacific, Canada, Europe, Middle East, and Latin America[53](index=53&type=chunk)[54](index=54&type=chunk) [Research and Development](index=10&type=section&id=RESEARCH%20AND%20DEVELOPMENT) Research and Development Expenses | Year | R&D Expenses (Millions) | % of Consolidated Revenue | | :--- | :---------------------- | :------------------------ | | 2021 | $161.0 | 5.0% | | 2020 | $141.2 | 5.2% | | 2019 | $133.2 | 5.5% | [Patents and Licenses](index=11&type=section&id=PATENTS%20AND%20LICENSES) - IDEXX actively seeks patent protection and licenses third-party technologies, considering these rights important for invention protection, competitive advantage, and reputation The expiration of certain patents and licenses (e g, BVDV, Anaplasma, Ehrlichia, Catalyst consumables/instruments, canine pancreatic lipase, SDMA) is not expected to materially affect financial position or future operations due to other mitigating factors like brand strength, product breadth, and continuous innovation[56](index=56&type=chunk)[57](index=57&type=chunk) [Production and Supply](index=11&type=section&id=PRODUCTION%20AND%20SUPPLY) - The company relies on third-party manufacturers and sole/single-source suppliers for many instruments (e g, Catalyst Dx/One consumables, VetTest slides, ProCyte Dx/One analyzers, SediVue Dx) and components, actively seeking alternative suppliers to mitigate risks[59](index=59&type=chunk)[60](index=60&type=chunk)[61](index=61&type=chunk)[62](index=62&type=chunk) [Competition](index=12&type=section&id=COMPETITION) - IDEXX faces intense competition across its segments from large human and animal health companies, as well as smaller specialized businesses Key competitive factors include ease of use, diagnostic accuracy, product quality, breadth of offerings, integrated technology, customer service, and pricing[64](index=64&type=chunk)[65](index=65&type=chunk) - Major competitors in companion animal diagnostics include **Antech Diagnostics (Mars)**, **Zoetis Inc (Abaxis)**, **Heska Corporation**, and **Samsung Electronics Co, Ltd** In water, livestock, poultry, and dairy testing, competitors range from focused smaller companies to multibillion-dollar firms[65](index=65&type=chunk) [Government Regulation](index=13&type=section&id=GOVERNMENT%20REGULATION) - Many IDEXX products are subject to comprehensive U S and foreign regulations, including those from **USDA** (veterinary biologics), **FDA** (veterinary medical devices, human medical devices, COVID-19 tests), and **EPA** (water testing methods)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[70](index=70&type=chunk)[71](index=71&type=chunk)[72](index=72&type=chunk) - Compliance with regulations like the EU's RoHS, REACH, and Biocidal Products Regulation, as well as similar state-level rules (e g, California's Proposition 65, Maine's PFAS restrictions), creates risks and may require product redesign or reformulation[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Human Capital](index=15&type=section&id=HUMAN%20CAPITAL) - IDEXX focuses on attracting, motivating, developing, and retaining talented employees by fostering an inclusive culture, offering competitive compensation and benefits, and providing growth opportunities[77](index=77&type=chunk)[81](index=81&type=chunk) Employee Demographics (as of Dec 31, 2021) | Category | Percentage | | :-------------------------------- | :--------- | | Total Employees | ~10,350 | | U.S. Underrepresented Minorities | 22.5% | | Black/African American | 8.6% | | Asian | 6.4% | | Hispanic/Latinx | 5.4% | | Other | 2.1% | | Global Women | 58% | | Global Senior Leadership Team (Women) | 34.5% | | Global Senior Executive Team (Women) | 23.8% | - Voluntary employee turnover rate was approximately **12% in 2021**, with managerial and professional staff turnover at **6%** The company's most recent global employee survey indicated an **82% engagement level**[85](index=85&type=chunk)[86](index=86&type=chunk) [Available Information](index=16&type=section&id=AVAILABLE%20INFORMATION) - IDEXX makes its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments available free of charge on its website (www idexx com) and through the SEC's website (www sec gov)[88](index=88&type=chunk)[89](index=89&type=chunk) [ITEM 1A. Risk Factors](index=17&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces risks from the COVID-19 pandemic, competition, supplier dependency, regulations, and general operational challenges [Risk Related to the COVID-19 Pandemic](index=17&type=section&id=RISK%20RELATED%20TO%20THE%20COVID-19%20PANDEMIC) - The COVID-19 pandemic's duration and impact remain uncertain, potentially disrupting supply chains, operations, and labor, and decreasing companion animal clinical visits, which could materially affect business, results of operations, liquidity, financial condition, and stock price **CAG products and services represented 90% of 2021 consolidated revenues**, making this segment particularly vulnerable[92](index=92&type=chunk)[93](index=93&type=chunk)[94](index=94&type=chunk) [Risks Related to Our Business and Industry](index=18&type=section&id=RISKS%20RELATED%20TO%20OUR%20BUSINESS%20AND%20INDUSTRY) - The **highly competitive companion animal healthcare industry** requires successful execution of strategies like developing innovative products, maintaining premium pricing, expanding sales/marketing, and attracting talent to sustain growth and profitability[95](index=95&type=chunk)[96](index=96&type=chunk) - **Dependence on sole or single-source third-party suppliers** for critical components and raw materials (e g, Catalyst Dx/One consumables, ProCyte analyzers) poses a risk of supply chain disruptions, increased costs, and potential loss of customers if suppliers fail to meet demands[97](index=97&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The company's success relies heavily on **continuous product and service innovation**, requiring substantial R&D investment and effective protection of proprietary rights through patents, trade secrets, and trademarks Failure to innovate or protect IP could adversely affect business[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - **Consolidation in the veterinary customer base**, including increased corporate hospital ownership and buying consortiums, could negatively impact profitability by leveraging buying power for favorable pricing or shifting purchases to competitors' reference laboratories[117](index=117&type=chunk) [General Risks](index=23&type=section&id=GENERAL%20RISKS) - **Dependence on key leadership and talent**, especially in competitive labor markets, is crucial for success Failure to attract, develop, or retain skilled employees, or ineffective succession planning, could disrupt operations and delay strategic objectives[122](index=122&type=chunk)[123](index=123&type=chunk) - Increasing reliance on information technology systems makes the company **vulnerable to disruptions or significant security breaches** (e g, cyberattacks, ransomware), which could lead to operational delays, data loss, financial losses, and reputational damage[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - Factors beyond control, such as natural disasters, public health issues (including COVID-19 variants), civil unrest, geopolitical conditions, and workforce disruptions, could severely impact operations, supply chain, and logistics, potentially causing facility damage or temporary closures[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - **International operations (38% of 2021 revenue)** expose the company to risks like foreign currency fluctuations, differing regulatory requirements, intellectual property protection challenges, and geopolitical instability, which could negatively affect operating results[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) - Evolving global data privacy laws (e g, CCPA, CPRA, GDPR, PIPL, LGPD, POPIA) create compliance challenges, potentially requiring changes to business practices, incurring substantial costs, and risking reputational damage or legal actions for non-compliance[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk)[137](index=137&type=chunk) - Changes in tax rates, new U S or international tax legislation (e g, global minimum tax rate proposals), or adverse audit outcomes could materially impact income tax liability, effective tax rate, and results of operations[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk)[141](index=141&type=chunk)[142](index=142&type=chunk) - A weak worldwide economy could reduce demand for products and services, particularly in the companion animal veterinary industry (due to reduced pet owner spending or vet recommendations), and increase customer credit risk[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - **Strengthening of the U S dollar negatively impacts revenues and profits** from international sales, as approximately 23% of 2021 consolidated revenue was derived from U S dollar-sourced products sold in local currencies Hedging activities aim to mitigate, but not eliminate, this volatility[146](index=146&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk) [ITEM 1B. Unresolved Staff Comments](index=30&type=section&id=ITEM%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments applicable to this report [ITEM 2. Properties](index=31&type=section&id=ITEM%202.%20Properties) IDEXX operates global facilities, with its headquarters in Maine and key sites for manufacturing, distribution, and R&D worldwide - Worldwide headquarters and principal executive offices are located in Westbrook, Maine, encompassing manufacturing, R&D, marketing, sales, and general/administrative functions[157](index=157&type=chunk) Primary Facility Locations | Location | Functions | Own/Lease | | :------------------------ | :-------------------------------------------- | :-------- | | Westbrook, Maine | Worldwide Headquarters, principal executive offices | Own | | Hoofddorp, Netherlands | Distribution center, warehousing, International administrative offices | Lease | | Memphis, Tennessee | Distribution Center and Reference Lab | Lease | | Kornwestheim, Germany | Reference Lab | Own | | Wetherby, United Kingdom | Reference Lab | Lease | | Newmarket, United Kingdom | Water manufacturing | Lease | | Bern, Switzerland | LPD manufacturing | Lease | | Montpellier, France | LPD manufacturing | Lease | | Roswell, Georgia | OPTI Medical manufacturing | Lease | - IDEXX has **over 50 reference laboratories in the U S** and **over 25 internationally**, with the majority being leased[158](index=158&type=chunk) [ITEM 3. Legal Proceedings](index=31&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in ordinary course legal actions not expected to materially affect its financial condition - The company is involved in legal actions in the ordinary course of business, but management, based on legal counsel, does not expect these matters to have a material effect on results of operations, financial condition, or cash flows[159](index=159&type=chunk) [ITEM 4. Mine Safety Disclosures](index=31&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to IDEXX Laboratories, Inc PART II [ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=32&type=section&id=ITEM%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) IDEXX common stock trades on NASDAQ, with active share repurchases but no history of paying cash dividends [Market Information](index=32&type=section&id=Market%20Information) - IDEXX's common stock is quoted on the NASDAQ Global Select Market under the symbol **IDXX**[163](index=163&type=chunk) [Holders of Common Stock](index=32&type=section&id=Holders%20of%20Common%20Stock) - As of February 11, 2022, there were **390 holders of record** of the company's common stock[164](index=164&type=chunk) [Purchases of Equity Securities by the Issuer](index=32&type=section&id=Purchases%20of%20Equity%20Securities%20by%20the%20Issuer) Common Stock Repurchases (Q4 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :-------------------------------- | :--------------------- | :--------------------------- | | October 1, 2021 to October 31, 2021 | 101,855 | $632.26 | | November 1, 2021 to November 30, 2021 | 129,176 | $629.38 | | December 1, 2021 to December 31, 2021 | 159,662 | $619.88 | | **Total (Q4 2021)** | **390,693** | | - For the year ended December 31, 2021, IDEXX repurchased approximately **1.3 million shares** of common stock through its repurchase program and received **0.03 million shares** from employees for tax withholding[167](index=167&type=chunk) - As of December 31, 2021, **4,992,231 shares remained available for repurchase** under the Board-approved program, which has no specified expiration date[165](index=165&type=chunk) [Dividends](index=33&type=section&id=Dividends) - IDEXX has **never declared or paid any cash dividends** on its common stock and has no intention to do so at this time[169](index=169&type=chunk) [Stock Performance](index=33&type=section&id=Stock%20Performance) Total Stockholder Returns (Indexed to $100 on 12/31/2016) | Index | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | 12/31/2021 | | :-------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | :--------- | | IDEXX Laboratories, Inc. | $100.00 | $133.35 | $158.63 | $222.67 | $426.26 | $561.49 | | NASDAQ Index | $100.00 | $129.64 | $125.96 | $172.18 | $249.51 | $304.85 | | S&P 500 Index | $100.00 | $121.83 | $116.49 | $153.17 | $181.35 | $233.41 | | S&P 500 Health Care Index | $100.00 | $122.08 | $129.97 | $157.04 | $178.15 | $224.71 | [ITEM 6. [Reserved]](index=33&type=section&id=ITEM%206.%20%5BReserved%5D) This item is reserved and contains no information [ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=ITEM%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial results, highlighting strong 2021 performance driven by CAG recovery amid ongoing operational challenges [Description of Business Segments](index=34&type=section&id=Description%20of%20Business%20Segments) [Companion Animal Group](index=34&type=section&id=Companion%20Animal%20Group) [CAG Diagnostics](index=34&type=section&id=CAG%20Diagnostics) - CAG's strategy is to provide veterinarians with high-quality diagnostic information, software, and services to support advanced medical care and efficient practice management, building mutually successful relationships[176](index=176&type=chunk) - Diagnostic capabilities generate both **recurring** (consumables, rapid assay kits, reference lab services, maintenance agreements) and **non-recurring** (instrument placements) revenues Recurring revenues have significantly higher gross margins[178](index=178&type=chunk) Active Installed Base Units of Diagnostic Instruments (in thousands) | Instrument | December 31, 2021 | December 31, 2020 | December 31, 2019 | | :---------------- | :---------------- | :---------------- | :---------------- | | Catalyst | 56.5 | 49.6 | 43.9 | | Premium Hematology| 38.2 | 34.6 | 31.5 | | SediVue | 13.2 | 10.7 | 8.9 | - Long-term success in CAG recurring diagnostics depends on increasing utilization at existing customers, acquiring new customers, maintaining high loyalty, and realizing modest annual price increases[184](index=184&type=chunk) - **Recurring diagnostic revenue**, which is highly durable and profitable, accounted for approximately **79% of consolidated revenue** for the year ended December 31, 2021[187](index=187&type=chunk) [Veterinary Software, Services and Diagnostic Imaging Systems](index=37&type=section&id=Veterinary%20Software%2C%20Services%20and%20Diagnostic%20Imaging%20Systems) - The software portfolio includes practice management systems (Cornerstone, ezyVet, Animana, IDEXX Neo, DVMAX), with a growing focus on subscription-based SaaS offerings (Animana, ezyVet, IDEXX Neo) for higher profitability[195](index=195&type=chunk)[196](index=196&type=chunk) - Diagnostic imaging systems (IDEXX ImageVue DR50/DR30) provide high-quality digital radiography, integrated with IDEXX imaging software and cloud-based Web PACS for enhanced diagnostic features and streamlined integration[198](index=198&type=chunk) [Water](index=37&type=section&id=Water) - The Water business strategy focuses on developing, manufacturing, marketing, and selling innovative products for microbial contamination testing in water, with future growth dependent on increasing international sales and broadening the product line, often driven by regulatory approvals[199](index=199&type=chunk) [Livestock, Poultry and Dairy](index=38&type=section&id=Livestock%2C%20Poultry%20and%20Dairy) - LPD's strategy is to offer differentiated tests and services for livestock and poultry disease management, herd health, and milk/food safety, noting that performance can fluctuate due to episodic disease outbreaks and changes in government funding[200](index=200&type=chunk)[201](index=201&type=chunk) - Dairy testing business aims to increase penetration in dairy processors with antibiotic residue and contaminant testing products, leveraging the SNAP test platform[202](index=202&type=chunk) [Other](index=38&type=section&id=Other) - OPTI Medical's strategy is to develop, manufacture, and sell human point-of-care electrolyte and blood gas analyzers and related consumables, with a focus on small to mid-sized hospitals Growth is dependent on new customer acquisition, retention, and increased utilization[203](index=203&type=chunk) - The OPTI Medical business also includes human COVID-19 testing products (OPTI SARS-CoV-2 RT-PCR test kit) and laboratory services, which were a primary driver of growth in 2020 but are anticipated to decline in 2022[204](index=204&type=chunk) [Critical Accounting Estimates and Assumptions](index=39&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES%20AND%20ASSUMPTIONS) Financial statements rely on key management estimates for revenue recognition, goodwill valuation, and income tax provisions [Revenue Recognition](index=39&type=section&id=Revenue%20Recognition) - Revenue recognition involves significant judgment in identifying distinct performance obligations, estimating variable consideration (e g, volume rebates, price adjustments), and allocating transaction prices based on standalone selling prices, especially for multi-year customer agreements[210](index=210&type=chunk)[211](index=211&type=chunk) - For up-front loyalty programs, incentives are capitalized as customer acquisition costs and recognized as a reduction to revenue over the agreement term For volume commitment programs, instrument revenue is recognized at installation, and future consideration is recorded as a contract asset[212](index=212&type=chunk)[213](index=213&type=chunk) - Instrument rebate programs treat the customer's right to earn rebates as a separate performance obligation, deferred and recognized upon future product/service purchases[215](index=215&type=chunk) - A **10% change in estimates** for future customer purchases in up-front loyalty programs would impact deferred revenue and cumulative revenue by approximately **$1.3 million** at December 31, 2021 For volume commitment programs, it would impact contract assets and cumulative revenue by approximately **$4.0 million**[212](index=212&type=chunk)[214](index=214&type=chunk) [Valuation of Goodwill and Other Intangible Assets](index=40&type=section&id=Valuation%20of%20Goodwill%20and%20Other%20Intangible%20Assets) - Goodwill and other intangible assets are initially valued at fair value, requiring significant assumptions about future cash flows, growth rates, discount rates, and useful lives Goodwill is assessed for impairment annually using a discounted forecasted cash flow approach[217](index=217&type=chunk)[218](index=218&type=chunk)[222](index=222&type=chunk) - In Q4 2021, all reporting units showed an excess of estimated fair value over carrying amount, with a minimum of approximately **65%** and a weighted average of **1,375%** in total The Veterinary Software and Services reporting unit had a relatively lower excess of **210% ($385 million)**[223](index=223&type=chunk)[224](index=224&type=chunk) - **No goodwill impairments were identified in 2021, 2020, or 2019** Impairment tests for other intangible assets are performed when circumstances indicate carrying value may not be recoverable[226](index=226&type=chunk)[228](index=228&type=chunk) [Income Taxes](index=42&type=section&id=Income%20Taxes) - The provision for income taxes uses the asset and liability approach, requiring assessment of current and projected earnings to determine the realizability of deferred tax assets and the need for valuation allowances[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - A liability for uncertain tax positions is recorded for positions not meeting the 'more likely than not' standard The net liability for uncertain tax positions was **$25.5 million** at December 31, 2021, and **$26.0 million** at December 31, 2020[234](index=234&type=chunk) [Recent Accounting Pronouncements](index=43&type=section&id=RECENT%20ACCOUNTING%20PRONOUNCEMENTS) IDEXX adopted several new accounting standards with minimal material impact and is evaluating others for future implementation - Adopted ASU 2016-02 (Leases) in 2019, ASU 2018-13 (Fair Value Measurement) and ASU 2016-13 (Credit Losses) in 2020, and ASU 2019-12 (Income Taxes) and ASU 2021-05 (Leases) in 2021 Most adoptions did not have a material impact, except for ASU 2016-13 which resulted in a **$1.8 million non-cash cumulative effect adjustment** to retained earnings[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk)[399](index=399&type=chunk) - The company is evaluating ASU 2021-08 (Business Combinations) for future impact and does not expect ASU 2020-04 (Reference Rate Reform) to impact consolidated financial statements due to Credit Facility provisions for benchmark replacement rates[400](index=400&type=chunk)[401](index=401&type=chunk) [Results of Operations and Trends](index=43&type=section&id=RESULTS%20OF%20OPERATIONS%20AND%20TRENDS) Strong 2021 results were driven by CAG recovery, while LPD revenues declined and supply chain challenges persisted [Effects of Certain Factors on Results of Operations](index=43&type=section&id=Effects%20of%20Certain%20Factors%20on%20Results%20of%20Operations) - Companion animal sector showed strong recovery in 2021, with U S same-store clinical visit growth of **12% (Q1)**, **13% (Q2)**, and **2% (Q3, Q4)**, supporting demand for CAG diagnostic products and services[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) - Water testing volumes continued to recover in 2021 for both compliance and non-compliance testing, following disruptions in 2020 due to business lockdowns and closures[241](index=241&type=chunk) - **LPD revenues contracted by 7% in 2021**, primarily due to lower demand for African Swine Fever testing in China, influenced by relaxed disease management programs, lower pork prices, and changing government requirements[242](index=242&type=chunk) - Human COVID-19 testing products and services, a primary growth driver for the 'Other' segment in 2020, are anticipated to decline in 2022[243](index=243&type=chunk)[244](index=244&type=chunk) - The company proactively manages supply chain and logistics challenges, including product/component availability, shipping delays, and inflationary pressures, to maintain high product and service availability[246](index=246&type=chunk) - Strengthening of the U S dollar negatively impacts revenues and profits from international sales, with approximately **23% of 2021 consolidated revenue** derived from U S dollar-sourced products sold internationally in local currencies[249](index=249&type=chunk)[310](index=310&type=chunk) [Twelve Months Ended December 31, 2021, Compared to Twelve Months Ended December 31, 2020](index=46&type=section&id=Twelve%20Months%20Ended%20December%2031%2C%202021%2C%20Compared%20to%20Twelve%20Months%20Ended%20December%2031%2C%202020) [Total Company](index=46&type=section&id=Total%20Company) Total Company Revenue by Segment (2021 vs 2020) | Segment | 2021 Net Revenue ($K) | 2020 Net Revenue ($K) | Dollar Change ($K) | Reported Growth (%) | Organic Growth (%) | | :------------ | :-------------------- | :-------------------- | :----------------- | :------------------ | :----------------- | | CAG | 2,889,960 | 2,385,765 | 504,195 | 21.1% | 18.7% | | Water | 146,505 | 128,625 | 17,880 | 13.9% | 11.7% | | LPD | 135,887 | 145,845 | (9,958) | (6.8%) | (9.2%) | | Other | 43,008 | 46,420 | (3,412) | (7.4%) | (8.2%) | | **Total Company** | **3,215,360** | **2,706,655** | **508,705** | **18.8%** | **16.4%** | Total Company Results of Operations (2021 vs 2020) | Metric | 2021 ($K) | % of Revenue | 2020 ($K) | % of Revenue | Change ($K) | Change (%) | | :---------------------- | :---------- | :----------- | :---------- | :----------- | :---------- | :--------- | | Revenues | 3,215,360 | | 2,706,655 | | 508,705 | 18.8% | | Cost of revenue | 1,325,928 | | 1,135,615 | | 190,313 | 16.8% | | Gross profit | 1,889,432 | 58.8% | 1,571,040 | 58.0% | 318,392 | 20.3% | | Sales and marketing | 486,735 | 15.1% | 434,435 | 16.1% | 52,300 | 12.0% | | General and administrative | 309,660 | 9.6% | 300,832 | 11.1% | 8,828 | 2.9% | | Research and development | 161,009 | 5.0% | 141,249 | 5.2% | 19,760 | 14.0% | | Total operating expenses | 957,404 | 29.8% | 876,516 | 32.4% | 80,888 | 9.2% | | Income from operations | 932,028 | 29.0% | 694,524 | 25.7% | 237,504 | 34.2% | - Gross profit increased due to higher sales volumes and an **80 basis point increase in gross profit margin**, driven by volume leverage in CAG Diagnostics recurring revenue, price increases, and strong growth in veterinary software/services This was partially offset by product mix (higher CAG instrument revenue) and increased freight/distribution costs[262](index=262&type=chunk) - Operating expenses increased due to higher personnel-related costs and investments in global commercial capability, following cost containment efforts in 2020[263](index=263&type=chunk) [Companion Animal Group](index=48&type=section&id=Companion%20Animal%20Group) CAG Revenue by Product/Service Category (2021 vs 2020) | Category | 2021 Net Revenue ($K) | 2020 Net Revenue ($K) | Dollar Change ($K) | Reported Growth (%) | Organic Growth (%) | | :---------------------------------------- | :-------------------- | :-------------------- | :----------------- | :------------------ | :----------------- | | CAG Diagnostics recurring revenue | 2,534,562 | 2,113,839 | 420,723 | 19.9% | 18.1% | | IDEXX VetLab consumables | 1,006,781 | 824,376 | 182,405 | 22.1% | 20.0% | | Rapid assay products | 296,852 | 253,018 | 43,834 | 17.3% | 16.6% | | Reference laboratory diagnostic and consulting services | 1,123,656 | 946,268 | 177,388 | 18.7% | 16.8% | | CAG Diagnostics services and accessories | 107,273 | 90,177 | 17,096 | 19.0% | 17.1% | | CAG Diagnostics capital - instruments | 149,140 | 108,950 | 40,190 | 36.9% | 35.7% | | Veterinary software, services and diagnostic imaging systems | 206,258 | 162,976 | 43,282 | 26.6% | 15.4% | | **Net CAG revenue** | **2,889,960** | **2,385,765** | **504,195** | **21.1%** | **18.7%** | - CAG Diagnostics recurring revenue increased by **19.9% (18.1% organic)** due to strong demand, higher testing volumes (clinical visits and utilization per visit), and higher realized prices IDEXX VetLab consumables grew **22.1% (20.0% organic)**, rapid assay products grew **17.3% (16.6% organic)**, and reference laboratory services grew **18.7% (16.8% organic)**[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk) - CAG Diagnostics capital (instruments) revenue increased **36.9% (35.7% organic)** due to strong premium instrument placements globally, recovering from constrained placements in 2020[269](index=269&type=chunk) - Veterinary software, services, and diagnostic imaging systems revenue increased **26.6% (15.4% organic, with acquisitions contributing 10.5%)**, driven by growth in active installed base, software system placements, and diagnostic imaging system placements[270](index=270&type=chunk) - CAG gross profit margin increased by **120 basis points to 58.3%**, primarily due to volume leverage and price increases in recurring revenue, and higher software/imaging system revenues, partially offset by product mix and increased costs[272](index=272&type=chunk) [Water](index=50&type=section&id=Water) Water Segment Results of Operations (2021 vs 2020) | Metric | 2021 ($K) | % of Revenue | 2020 ($K) | % of Revenue | Change ($K) | Change (%) | | :---------------------- | :-------- | :----------- | :-------- | :----------- | :---------- | :--------- | | Revenues | 146,505 | | 128,625 | | 17,880 | 13.9% | | Cost of revenue | 45,561 | | 38,245 | | 7,316 | 19.1% | | Gross profit | 100,944 | 68.9% | 90,380 | 70.3% | 10,564 | 11.7% | | Sales and marketing | 17,814 | 12.2% | 15,046 | 11.7% | 2,768 | 18.4% | | General and administrative | 13,442 | 9.2% | 12,595 | 9.8% | 847 | 6.7% | | Research and development | 4,244 | 2.9% | 3,872 | 3.0% | 372 | 9.6% | | Total operating expenses | 35,500 | 24.2% | 31,513 | 24.5% | 3,987 | 12.7% | | Income from operations | 65,444 | 44.7% | 58,867 | 45.8% | 6,577 | 11.2% | - Water revenue increased **13.9% (11.7% organic)** due to recovery in overall testing volumes, including non-compliance testing, and price increases in Colilert test products Foreign currency movements contributed **2.2%** to revenue growth[274](index=274&type=chunk) - Gross profit margin for Water decreased by **140 basis points to 68.9%**, reflecting a 50 basis point reduction from foreign currency movements (hedge losses vs prior year gains) and higher product, distribution, and freight costs[275](index=275&type=chunk) [Livestock, Poultry and Dairy](index=51&type=section&id=Livestock%2C%20Poultry%20and%20Dairy) LPD Segment Results of Operations (2021 vs 2020) | Metric | 2021 ($K) | % of Revenue | 2020 ($K) | % of Revenue | Change ($K) | Change (%) | | :---------------------- | :-------- | :----------- | :-------- | :----------- | :---------- | :--------- | | Revenues | 135,887 | | 145,845 | | (9,958) | (6.8%) | | Cost of revenue | 54,323 | | 56,643 | | (2,320) | (4.1%) | | Gross profit | 81,564 | 60.0% | 89,202 | 61.2% | (7,638) | (8.6%) | | Sales and marketing | 21,681 | 16.0% | 20,655 | 14.2% | 1,026 | 5.0% | | General and administrative | 17,606 | 13.0% | 17,061 | 11.7% | 545 | 3.2% | | Research and development | 13,641 | 10.0% | 11,478 | 7.9% | 2,163 | 18.8% | | Total operating expenses | 52,928 | 39.0% | 49,194 | 33.7% | 3,734 | 7.6% | | Income from operations | 28,636 | 21.1% | 40,008 | 27.4% | (11,372) | (28.4%) | - LPD revenues decreased **6.8% (9.2% organic)** primarily due to lower demand for diagnostic testing in China, specifically African Swine Fever testing, offset by higher volumes and prices in Europe and the Americas Foreign currency movements increased revenue by **2.3%**[277](index=277&type=chunk) - LPD gross profit decreased due to lower sales volumes and a **120 basis point decrease in gross profit margin**, driven by higher distribution/freight costs and lower realized prices[278](index=278&type=chunk) [Other](index=52&type=section&id=Other) Other Segment Results of Operations (2021 vs 2020) | Metric | 2021 ($K) | % of Revenue | 2020 ($K) | % of Revenue | Change ($K) | Change (%) | | :---------------------- | :-------- | :----------- | :-------- | :----------- | :---------- | :--------- | | Revenues | 43,008 | | 46,420 | | (3,412) | (7.4%) | | Cost of revenue | 19,888 | | 18,148 | | 1,740 | 9.6% | | Gross profit | 23,120 | 53.8% | 28,272 | 60.9% | (5,152) | (18.2%) | | Sales and marketing | 2,546 | 5.9% | 1,942 | 4.2% | 604 | 31.1% | | General and administrative | 4,142 | 9.6% | 1,712 | 3.7% | 2,430 | 141.9% | | Research and development | 2,506 | 5.8% | 3,856 | 8.3% | (1,350) | (35.0%) | | Total operating expenses | 9,194 | 21.4% | 7,510 | 16.2% | 1,684 | 22.4% | | Income from operations | 13,926 | 32.4% | 20,762 | 44.7% | (6,836) | (32.9%) | - Other revenue decreased **7.4% (8.2% organic)** due to lower OPTI COVID-19 PCR testing products/services and reduced royalty revenue from former pharmaceutical products, partially offset by higher OPTI Medical consumables sales[281](index=281&type=chunk) - Gross profit margin for Other decreased by **780 basis points to 53.8%**, primarily due to higher product costs from write-downs of excess COVID-19 testing inventory and lower mix benefits from royalty revenue[282](index=282&type=chunk) [Non-Operating Items](index=52&type=section&id=Non-Operating%20Items) Interest Expense and Effective Income Tax Rate | Metric | 2021 ($K) | 2020 ($K) | Change ($K) | Change (%) | | :---------------------- | :-------- | :-------- | :---------- | :--------- | | Interest expense | 29,808 | 33,125 | (3,317) | (10.0%) | | Effective income tax rate | 17.5% | 12.1% | 5.4 pp | | - The increase in the effective tax rate in 2021 was primarily due to the prior year's one-time positive impact from Swiss tax reform transitional benefits and higher tax benefits related to share-based compensation in 2020 The projected effective tax rate for 2022 is approximately **22%**[285](index=285&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains strong liquidity through cash flow and debt, funding operations, acquisitions, and significant share repurchases [Sources and Uses of Cash](index=54&type=section&id=Sources%20and%20Uses%20of%20Cash) Cash and Cash Equivalents (Year-End) | Category | December 31, 2021 ($K) | December 31, 2020 ($K) | | :------- | :--------------------- | :--------------------- | | U.S. | 2,632 | 248,374 | | Foreign | 141,822 | 135,554 | | **Total**| **144,454** | **383,928** | Net Cash Provided (Used) by Activities (2021 vs 2020) | Activity | 2021 ($K) | 2020 ($K) | Dollar Change ($K) | | :-------------------------------- | :---------- | :---------- | :----------------- | | Net cash provided by operating activities | 755,546 | 648,063 | 107,483 | | Net cash used by investing activities | (292,967) | (109,376) | (183,591) | | Net cash used by financing activities | (697,414) | (248,416) | (448,998) | | Net effect of changes in exchange rates on cash | (4,639) | 3,331 | (7,970) | | **Net change in cash and cash equivalents** | **(239,474)** | **293,602** | **(533,076)** | - The increase in operating cash flow was primarily due to **higher net income**, partially offset by changes in other assets and liabilities (e g, higher payroll/income tax payments, incentive payments, and investments in customer commitment programs)[290](index=290&type=chunk)[291](index=291&type=chunk) - Cash used in investing activities increased significantly due to **business acquisitions completed in 2021**, including a cloud-based veterinary software business[293](index=293&type=chunk) - Cash used in financing activities increased primarily due to **higher common stock repurchases** (resumed in Q1 2021 after suspension in 2020) and the repayment of **$50 million 2021 Series A Notes**[295](index=295&type=chunk)[296](index=296&type=chunk) - The **$1.0 billion unsecured revolving Credit Facility** was amended and extended to December 2026, with **$925.1 million remaining borrowing availability** at December 31, 2021[286](index=286&type=chunk)[297](index=297&type=chunk) [Off-Balance Sheet Arrangements](index=56&type=section&id=Off-Balance%20Sheet%20Arrangements) - IDEXX has no off-balance sheet arrangements or variable interest entities, except for letters of credit and third-party guarantees[302](index=302&type=chunk) [Financial Covenant](index=56&type=section&id=Financial%20Covenant) - The consolidated leverage ratio (debt to Adjusted EBITDA) covenant requires the ratio not to exceed **3.5-to-1** At December 31, 2021, the ratio was **0.86**, indicating compliance[303](index=303&type=chunk) Consolidated Leverage Ratio Calculation (Dec 31, 2021) | Metric | Amount ($K) | | :---------------------------------------- | :---------- | | Net income attributable to stockholders | 744,845 | | Interest expense | 29,808 | | Provision for income taxes | 157,810 | | Depreciation and amortization | 104,596 | | Acquisition-related expense | 4,127 | | Share-based compensation expense | 37,755 | | Extraordinary and other non-recurring non-cash charges | 5,148 | | **Adjusted EBITDA** | **1,084,089** | | Line of credit | 73,500 | | Current and long-term portion of long-term debt | 850,201 | | Total debt | 923,701 | | Acquisition-related consideration payable | 10,708 | | Financing leases | 14 | | Deferred financing costs | 510 | | **Gross debt** | **934,933** | | **Gross debt to Adjusted EBITDA ratio** | **0.86** | | Cash and cash equivalents | (144,454) | | **Net debt** | **790,479** | | **Net debt to Adjusted EBITDA ratio** | **0.73** | [Commitments, Contingencies and Guarantees](index=57&type=section&id=Commitments%2C%20Contingencies%20and%20Guarantees) - IDEXX has minimum purchase obligations of approximately **$377.1 million due in 2022** and **$44.3 million beyond 2022**[306](index=306&type=chunk) - An accrual of **$27.5 million** was established in Q3 2020 for an ongoing litigation matter involving an alleged breach of contract for underpayment of royalty payments[539](index=539&type=chunk) - The remaining obligation for the deemed repatriation tax from the Tax Cut and Jobs Act of 2017 is **$27.0 million**, with final installment due in 2025[308](index=308&type=chunk) [ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) IDEXX manages market risks from foreign currency, interest rates, and inflation through hedging and operational strategies [Interest Rate Risk and Effects of Inflation](index=59&type=section&id=Interest%20Rate%20Risk%20and%20Effects%20of%20Inflation) Estimated Foreign Currency Exchange Impact on Financials (2021 vs Prior Years) | Metric | 2021 ($K) | 2020 ($K) | 2019 ($K) | | :------------------------------------------------------------------ | :-------- | :-------- | :-------- | | Revenue increase (decrease) | 46,001 | 1,301 | (38,624) | | Operating profit increase (decrease), excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions | 28,557 | 887 | (18,989) | | Hedge gains (losses) - current period | (7,121) | 829 | 10,628 | | Exchange gains (losses) on settlements of foreign currency denominated transactions - current period | (2,111) | 699 | (1,116) | | Operating profit increase (decrease) - current period | 19,325 | 2,415 | (9,477) | | Operating profit increase (decrease) - as compared to prior period | 17,797 | (7,097) | (5,343) | | Diluted earnings per share increase (decrease) - as compared to prior period | 0.16 | (0.06) | (0.05) | - A **1% strengthening of the U S dollar** is projected to reduce 2022 revenue by approximately **$12 million** and operating income by approximately **$7 million**, with hedge contracts providing incremental offsetting gains of about **$3 million**[312](index=312&type=chunk) - The company's Credit Facility bears interest at variable rates (e g, LIBOR-based), exposing it to interest rate risk Inflationary cost increases have been offset by net realized annual price increases and productivity gains in recent years[319](index=319&type=chunk)[320](index=320&type=chunk) [ITEM 8. Financial Statements and Supplementary Data](index=60&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) This item refers to the consolidated financial statements and related notes, which are presented as a separate section of the report starting on page F-1 [ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=60&type=section&id=ITEM%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) This item is not applicable, indicating no changes in or disagreements with accountants on accounting and financial disclosure [ITEM 9A. Controls and Procedures](index=60&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded that IDEXX's disclosure controls and internal control over financial reporting were effective as of year-end 2021 [Disclosure Controls and Procedures](index=60&type=section&id=Disclosure%20Controls%20and%20Procedures) - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were **effective at the reasonable assurance level** as of December 31, 2021[323](index=323&type=chunk) [Report of Management on Internal Control Over Financial Reporting](index=60&type=section&id=Report%20of%20Management%20on%20Internal%20Control%20Over%20Financial%20Reporting) - Management concluded that IDEXX's internal control over financial reporting was **effective as of December 31, 2021**, based on the COSO framework[328](index=328&type=chunk) - The effectiveness of internal control over financial reporting was audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm[329](index=329&type=chunk) [Changes in Internal Control Over Financial Reporting](index=62&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There were **no changes in internal control over financial reporting** during the three months ended December 31, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[330](index=330&type=chunk) [Certifications](index=62&type=section&id=Certifications) - Certifications from the Principal Executive Officer and Principal Financial Officer regarding disclosure controls and procedures and internal control over financial reporting are attached as Exhibits 31 1 and 31 2[331](index=331&type=chunk) [ITEM 9B. Other Information](index=62&type=section&id=ITEM%209B.%20Other%20Information) This item is not applicable and contains no other information [ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=62&type=section&id=ITEM%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable, indicating no foreign jurisdictions prevent inspections PART III [ITEM 10. Directors, Executive Officers and Corporate Governance](index=63&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement [ITEM 11. Executive Compensation](index=63&type=section&id=ITEM%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2022 Proxy Statement [ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=63&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information concerning security ownership and equity compensation plans is incorporated by reference from the 2022 Proxy Statement [ITEM 13. Certain Relationships and Related Transactions, and Director Independence](index=63&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2022 Proxy Statement [ITEM 14. Principal Accountant Fees and Services](index=63&type=section&id=ITEM%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2022 Proxy Statement PART IV [ITEM 15. Exhibits, Financial Statement Schedules](index=64&type=section&id=ITEM%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This item lists the financial statements, schedules, and exhibits filed as part of this Form 10-K - The financial statements and consolidated financial statement schedule are filed as a separate section commencing on page F-1[342](index=342&type=chunk) - The exhibits listed in the accompanying Exhibit Index are filed as part of this Annual Report on Form 10-K[344](index=344&type=chunk) [ITEM 16. Form 10-K Summary](index=64&type=section&id=ITEM%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided [Financial Statements and Supplemental Data](index=65&type=section&id=FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTAL%20DATA) [Report of Independent Registered Public Accounting Firm](index=66&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PwC issued unqualified opinions on the financial statements and internal controls, identifying revenue recognition as a critical audit matter [Opinions on the Financial Statements and Internal Control over Financial Reporting](index=66&type=section&id=Opinions%20on%20the%20Financial%20Statements%20and%20Internal%20Control%20over%20Financial%20Reporting) - PricewaterhouseCoopers LLP issued **unqualified opinions** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of December 31, 2021[350](index=350&type=chunk)[351](index=351&type=chunk) [Basis for Opinions](index=66&type=section&id=Basis%20for%20Opinions) - The audits were conducted in accordance with PCAOB standards, assessing risks of material misstatement and evaluating accounting principles and estimates[353](index=353&type=chunk)[354](index=354&type=chunk) [Definition and Limitations of Internal Control over Financial Reporting](index=66&type=section&id=Definition%20and%20Limitations%20of%20Internal%20Control%20over%20Financial%20Reporting) - Internal control over financial reporting is defined as a process providing reasonable assurance regarding financial reporting reliability, acknowledging its inherent limitations in preventing or detecting misstatements[355](index=355&type=chunk)[356](index=356&type=chunk) [Critical Audit Matters](index=67&type=section&id=Critical%20Audit%20Matters) - **Revenue recognition relating to customer commitment programs** was identified as a critical audit matter due to significant management judgment in estimating variable consideration and the complexity in assessing audit evidence[358](index=358&type=chunk)[359](index=359&type=chunk) [Consolidated Balance Sheets as of December 31, 2021 and 2020](index=68&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20December%2031%2C%202021%20and%202020) Total assets grew to $2.44 billion in 2021, driven by increases in goodwill and intangible assets Consolidated Balance Sheet Highlights (in thousands) | Metric | December 31, 2021 | December 31, 2020 | | :-------------------------- | :---------------- | :---------------- | | Cash and cash equivalents | $144,454 | $383,928 | | Accounts receivable, net | $368,348 | $331,429 | | Inventories | $269,030 | $209,873 | | Total current assets | $955,655 | $1,062,738 | | Property and equipment, net | $587,667 | $555,167 | | Goodwill | $359,345 | $243,347 | | Intangible assets, net | $99,035 | $52,543 | | Total assets | $2,437,203 | $2,294,561 | | Accounts payable | $116,140 | $74,558 | | Accrued liabilities | $458,909 | $415,648 | | Line of credit | $73,500 | — | | Current portion of long-term debt | $74,996 | $49,988 | | Total current liabilities | $763,579 | $582,761 | | Long-term debt, net | $775,205 | $858,492 | | Total liabilities | $1,747,211 | $1,661,766 | | Total stockholders' equity | $689,992 | $632,795 | [Consolidated Statements of Income for the Years Ended December 31, 2021, 2020 and 2019](index=69&type=section&id=Consolidated%20Statements%20of%20Income%20for%20the%20Years%20Ended%20December%2031%2C%202021%2C%202020%20and%202019) Revenue grew to $3.22 billion in 2021, driving net income to $744.8 million and diluted EPS to $8.60 Consolidated Statements of Income Highlights (in thousands, except per share amounts) | Metric | 2021 | 2020 | 2019 | | :---------------------------------------- | :---------- | :---------- | :---------- | | Product revenue | $1,875,308 | $1,586,809 | $1,423,144 | | Service revenue | $1,340,052 | $1,119,846 | $983,764 | | **Total revenue** | **$3,215,360**| **$2,706,655**| **$2,406,908**| | Cost of product revenue | $656,823 | $557,795 | $506,202 | | Cost of service revenue | $669,105 | $577,820 | $535,157 | | **Total cost of revenue** | **$1,325,928**| **$1,135,615**| **$1,041,359**| | **Gross profit** | **$1,889,432**| **$1,571,040**| **$1,365,549**| | Sales and marketing | $486,735 | $434,435 | $418,193 | | General and administrative | $309,660 | $300,832 | $261,317 | | Research and development | $161,009 | $141,249 | $133,193 | | **Income from operations** | **$932,028** | **$694,524** | **$552,846** | | Interest expense | $(29,808) | $(33,125) | $(31,055) | | Income before provision for income taxes | $902,654 | $661,985 | $522,218 | | Provision for income taxes | $157,810 | $79,854 | $94,426 | | **Net income** | **$744,844** | **$582,131** | **$427,792** | | Net income attributable to IDEXX Laboratories, Inc. stockholders | $744,845 | $581,776 | $427,720 | | Basic EPS | $8.74 | $6.82 | $4.97 | | Diluted EPS | $8.60 | $6.71 | $4.89 | [Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2021, 2020 and 2019](index=70&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20for%20the%20Years%20Ended%20December%2031%2C%202021%2C%202020%20and%202019) Total comprehensive income reached $745.0 million in 2021, reflecting net income and other comprehensive income adjustments Consolidated Statements of Comprehensive Income Highlights (in thousands) | Metric | 2021 | 2020 | 2019 | | :---------------------------------------- | :-------- | :-------- | :-------- | | Net income | $744,844 | $582,131 | $427,792 | | Other comprehensive income (loss), net of tax: | | | | | Foreign currency translation adjustments | (26,731) | 15,151 | (1,590) | | Unrealized gain (loss) on Euro-denominated notes, net of tax | 6,404 | (7,378) | 1,790 | | Unrealized gain (loss) on investments, net of tax | 146 | (382) | 267 | | Unrealized gain (loss) on derivative instruments | 20,312 | (14,824) | (4,858) | | **Other comprehensive gain (loss), net of tax** | **131** | **(7,433)** | **(4,391)** | | **Comprehensive income** | **744,975** | **574,698** | **423,401** | [Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 2021, 2020 and 2019](index=71&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)%20for%20the%20Years%20Ended%20December%2031%2C%202021%2C%202020%20and%202019) Total stockholders' equity increased to $690.0 million in 2021, driven by net income despite significant share repurchases Consolidated Statements of Stockholders' Equity Highlights (in thousands) | Metric | December 31, 2021 | December 31, 2020 | December 31, 2019 | | :---------------------------------------- | :---------------- | :---------------- | :---------------- | | Common Stock ($0.10 Par Value) | $10,688 | $10,646 | $10,571 | | Additional Paid-in Capital | $1,377,320 | $1,294,849 | $1,213,517 | | Retained Earnings | $2,920,440 | $2,175,595 | $1,595,648 | | Accumulated Other Comprehensive Loss | $(53,484) | $(53,615) | $(46,182) | | Treasury Stock, at cost | $(3,570,691) | $(2,799,890) | $(2,600,543) | | **Total Stockholders' Equity** | **$689,992** | **$632,795** | **$177,825** | - Net income attributable to IDEXX Laboratories, Inc stockholders was **$744.8 million in 2021**, **$581.8 million in 2020**, and **$427.7 million in 2019**[372](index=372&type=chunk) - Repurchases of common stock, net, amounted to **$(770.8) million in 2021**, **$(199.3) million in 2020**, and **$(311.6) million in 2019**[372](index=372&type=chunk) [Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019](index=72&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Years%20Ended%20December%2031%2C%202021%2C%202020%20and%202019) Operating cash flow increased to $755.5 million in 2021, while investing and financing activities resulted in significant cash outflows Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | 2021 | 2020 | 2019 | | :-------------------------------------- | :---------- | :---------- | :---------- | | Net cash provided by operating activities | $755,546 | $648,063 | $459,158 | | Net cash used by investing activities | $(292,967) | $(109,376) | $(205,528) | | Net cash used by financing activities | $(697,414) | $(248,416) | $(286,409) | | Net effect of changes in exchange rates on cash | $(4,639) | $3,331 | $(689) | | Net (decrease) increase in cash and cash equivalents | $(239,474) | $293,602 | $(33,468) | | Cash and cash equivalents at end of period | $144,454 | $383,928 | $90,326 | - The increase in cash provided by operating activities in 2021 was primarily due to **higher net income**, partially offset by changes in other assets and liabilities[290](index=290&type=chunk) - Cash used by investing activities increased significantly i

Financial Data and Key Metrics Changes - IDEXX reported a revenue increase of 11% as reported and 10.5% organically in Q4 2021, supported by 13% organic growth in CAG Diagnostics recurring revenues [7][10] - Full year 2021 saw an overall organic revenue growth of 16%, driven by 18% gains in CAG Diagnostics recurring revenues [10][15] - EPS for Q4 was $1.89, up 12% on a comparable basis, while full year EPS reached $8.60, up 29% on a comparable basis [9][34] Business Line Data and Key Metrics Changes - CAG Diagnostics recurring revenue growth was 13% in Q4, with strong contributions from IDEXX VetLab instrument revenues and veterinary software and diagnostic imaging revenues [14][26] - Water revenues increased 13% organically in Q4, while livestock, poultry, and dairy revenues decreased 90% organically in Q4 compared to the previous year [28][29] - Rapid assay revenue grew 10% organically in Q4, reflecting solid gains in the U.S. and high growth in international regions [24] Market Data and Key Metrics Changes - U.S. same-store clinical visit growth was 2.2% in Q4, with a two-year increase of 5.5% [16] - Global reference lab revenues increased 12% organically in Q4, with double-digit gains in the U.S. and high single-digit growth internationally [19] - IDEXX achieved record premium instrument placements in Q4, with a 29% increase year-on-year [22] Company Strategy and Development Direction - IDEXX aims for 10% to 12% overall organic revenue growth and 12% to 14% organic growth in CAG Diagnostics recurring revenues for 2022 [11][39] - The company is focusing on expanding its global commercial capabilities and investing in innovation to capture long-term market opportunities [49][50] - IDEXX plans to continue its investment in R&D and enhance its global sales and marketing capabilities [32][70] Management's Comments on Operating Environment and Future Outlook - Management noted strong underlying demand for veterinary services despite some near-term impacts from the Omicron variant [76][78] - The company is confident in sustaining strong growth trends in companion animal diagnostics, driven by increased demand for healthcare services [51][88] - IDEXX anticipates challenges in the livestock, poultry, and dairy segment but remains focused on core business growth [29][41] Other Important Information - Free cash flow for 2021 was $636 million, reflecting a strong balance sheet with leverage ratios of 0.9 times gross and 0.7 times net of cash [37] - The company established a new five-year $1 billion revolving credit facility to improve borrowing rates [37] - IDEXX plans to allocate capital to share repurchases, projecting a 1% to 1.5% reduction in diluted shares outstanding for 2022 [38] Q&A Session Summary Question: Impact of Omicron on veterinary visits - Management acknowledged some impact on testing volumes due to Omicron but emphasized strong underlying demand and forward bookings at veterinary practices [76][77] Question: Inflationary environment and margin impacts - Management noted higher input costs and freight impacts but remains focused on maintaining high business continuity and reliability [84][86] Question: New product initiatives and oncology opportunities - Management discussed the significant market opportunity in pet cancer diagnostics and the importance of partnerships to support veterinarians [92][94] Question: CAG recurring revenue guidance - Management provided insights on the expected growth in CAG recurring revenues, emphasizing the importance of clinical visit growth and diagnostic utilization [97][99] Question: Staffing capacity issues in veterinary practices - Management highlighted the ongoing demand for wellness visits and the impact of new pet adoptions on veterinary practice capacity [104][105]

[FORM 10-Q Filing Information](index=1&type=section&id=FORM%2010-Q) This section provides key administrative details of the Form 10-Q filing, including company identification and stock information [Filing Details](index=1&type=section&id=Filing%20Details) This document is a Quarterly Report on Form 10-Q for IDEXX Laboratories, Inc., filed for the quarterly period ended September 30, 2021 - The report is a Quarterly Report on Form 10-Q for the period ended September 30, 2021[2](index=2&type=chunk) - IDEXX Laboratories, Inc. is incorporated in Delaware and its common stock trades on the NASDAQ Global Select Market under the symbol IDXX[3](index=3&type=chunk)[4](index=4&type=chunk) Filing Metrics | Metric | Value | | :--- | :--- | | Shares Outstanding (as of Oct 27, 2021) | 84,793,608 | | Filer Status | Large Accelerated Filer | [Glossary of Terms and Selected Abbreviations](index=2&type=section&id=GLOSSARY%20OF%20TERMS%20AND%20SELECTED%20ABBREVIATIONS) This section defines key financial and business terms and abbreviations used throughout the report for enhanced clarity [Key Definitions](index=2&type=section&id=Key%20Definitions) This section provides definitions for key terms and abbreviations used throughout the 10-Q report to aid reader comprehension - The glossary defines terms and abbreviations used in the report for clarity[7](index=7&type=chunk) - Key business segments defined include Companion Animal Group (CAG), Livestock, Poultry and Dairy (LPD), and Water[7](index=7&type=chunk) - Financial terms like 'Organic revenue growth' (non-GAAP) and 'Reported revenue growth' (GAAP) are explicitly defined[7](index=7&type=chunk) [PART I—FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements of IDEXX Laboratories, Inc. and its subsidiaries, along with detailed notes - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X[23](index=23&type=chunk) - Management's opinion is that all necessary adjustments for a fair statement of financial position and results of operations have been included, and all such adjustments are of a recurring nature[25](index=25&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $145,203 | $383,928 | | Accounts receivable, net | $376,760 | $331,429 | | Inventories | $258,484 | $209,873 | | Total current assets | $938,037 | $1,062,738 | | Property and equipment, net | $573,385 | $555,167 | | Goodwill | $355,240 | $243,347 | | Intangible assets, net | $94,976 | $52,543 | | Total long-term assets | $1,447,707 | $1,231,823 | | **TOTAL ASSETS** | **$2,385,744** | **$2,294,561** | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :------------------------------------ | :----------- | :----------- | | Accounts payable | $86,684 | $74,558 | | Accrued liabilities | $431,047 | $415,648 | | Current portion of long-term debt | $74,990 | $49,988 | | Total current liabilities | $633,849 | $582,761 | | Long-term debt, net of current portion | $778,025 | $858,492 | | Total liabilities | $1,630,284 | $1,661,766 | | Total stockholders' equity | $755,460 | $632,795 | | **TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY** | **$2,385,744** | **$2,294,561** | - Total assets increased by **$91.183 million (3.97%)** from December 31, 2020, to September 30, 2021[11](index=11&type=chunk) - Cash and cash equivalents decreased significantly by **$238.725 million (-62.18%)** from December 31, 2020, to September 30, 2021[11](index=11&type=chunk) [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the company's financial performance, including revenues, expenses, and net income over specific periods Condensed Consolidated Statements of Income (in thousands, except per share amounts) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenue | $810,421 | $721,789 | $2,414,270 | $1,985,717 | | Gross profit | $472,921 | $422,606 | $1,433,011 | $1,161,538 | | Income from operations | $225,962 | $171,856 | $732,837 | $509,429 | | Net income attributable to IDEXX Laboratories, Inc. stockholders | $175,235 | $146,219 | $582,074 | $406,986 | | Basic EPS | $2.06 | $1.71 | $6.82 | $4.77 | | Diluted EPS | $2.03 | $1.69 | $6.71 | $4.70 | - Total revenue increased by **12.3%** for the three months ended September 30, 2021, and by **21.6%** for the nine months ended September 30, 2021, compared to the prior year periods[13](index=13&type=chunk) - Net income attributable to stockholders increased by **19.8%** for the three months and **43.0%** for the nine months ended September 30, 2021, year-over-year[13](index=13&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the company's comprehensive income, including net income and other comprehensive income items Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $175,178 | $146,321 | $582,073 | $407,173 | | Other comprehensive income (loss), net of tax | $(3,666) | $(4,893) | $1,558 | $(15,743) | | Comprehensive income attributable to IDEXX Laboratories, Inc. | $171,569 | $141,326 | $583,632 | $391,243 | - Other comprehensive income (loss) improved from a loss of **$4.893 million** in Q3 2020 to a loss of **$3.666 million** in Q3 2021, and from a loss of **$15.743 million** in 9M 2020 to a gain of **$1.558 million** in 9M 2021[16](index=16&type=chunk) - Foreign currency translation adjustments contributed to a loss of **$12.967 million** in Q3 2021, compared to a gain of **$7.329 million** in Q3 2020[16](index=16&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in the company's equity accounts, including net income, stock repurchases, and other comprehensive income Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Dec 31, 2020 | Sep 30, 2021 | | :-------------------- | :----------- | :----------- | | Total Stockholders' Equity | $632,795 | $755,460 | | Net income | $2,175,595 (Retained Earnings) | $2,757,669 (Retained Earnings) | | Repurchases of common stock, net | $(2,799,890) (Treasury Stock) | $(3,326,021) (Treasury Stock) | | Accumulated other comprehensive loss | $(53,615) | $(52,057) | - Total stockholders' equity increased by **$122.665 million (19.38%)** from December 31, 2020, to September 30, 2021[19](index=19&type=chunk) - Retained earnings increased by **$582.074 million** during the nine months ended September 30, 2021, reflecting net income[13](index=13&type=chunk)[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $545,582 | $429,129 | | Net cash used by investing activities | $(248,927) | $(93,686) | | Net cash used by financing activities | $(531,594) | $(248,814) | | Net (decrease) increase in cash and cash equivalents | $(238,725) | $85,261 | | Cash and cash equivalents at end of period | $145,203 | $175,587 | - Net cash provided by operating activities increased by **$116.453 million (27.14%)** for the nine months ended September 30, 2021, compared to the prior year[22](index=22&type=chunk)[205](index=205&type=chunk) - Net cash used by investing activities significantly increased by **$155.241 million (165.71%)** due to business acquisitions in 2021[22](index=22&type=chunk)[207](index=207&type=chunk) - Net cash used by financing activities increased by **$282.780 million (113.65%)** primarily due to increased common stock repurchases[22](index=22&type=chunk)[209](index=209&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements [NOTE 1. Basis of Presentation and Principles of Consolidation](index=10&type=section&id=NOTE%201.%20BASIS%20OF%20PRESENTATION%20AND%20PRINCIPLES%20OF%20CONSOLIDATION) This note outlines that the unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC Regulation S-X - Financial statements are prepared under U.S. GAAP for interim reporting and SEC Regulation S-X[23](index=23&type=chunk) - Consolidation includes all wholly-owned and majority-owned subsidiaries, with intercompany transactions eliminated[24](index=24&type=chunk) - The preparation of financial statements involves estimates, judgments, and assumptions that affect reported amounts[26](index=26&type=chunk) [NOTE 2. Accounting Policies](index=10&type=section&id=NOTE%202.%20ACCOUNTING%20POLICIES) This note details the significant accounting policies, consistent with the 2020 Annual Report, and updates on newly adopted accounting pronouncements - Significant accounting policies remain consistent with the 2020 Annual Report[27](index=27&type=chunk) - Adopted ASU 2019-12 (Income Taxes) and ASU 2021-05 (Leases) in 2021, with no material impact[28](index=28&type=chunk)[29](index=29&type=chunk) - Does not expect ASU 2020-04 (Reference Rate Reform) to have a material impact[30](index=30&type=chunk) [NOTE 3. Revenue Recognition](index=11&type=section&id=NOTE%203.%20REVENUE%20RECOGNITION) This note describes the company's revenue recognition policies, applying a five-step model, and disaggregates revenue by categories and geographic areas - Revenue is recognized when control of promised products or services is transferred to the customer, following a five-step model[31](index=31&type=chunk) - Major revenue categories include diagnostic products, reference laboratory services, instruments/software, lease revenue, extended warranties, post-contract support, and SaaS subscriptions[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[39](index=39&type=chunk) - Significant customer programs (e.g., Up-Front Customer Loyalty, Volume Commitment, Instrument Rebate, Reagent Rental) involve multiple performance obligations and specific revenue recognition treatments[41](index=41&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk)[48](index=48&type=chunk)[50](index=50&type=chunk) Disaggregated Revenue by Segment (in thousands) | Segment (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | CAG segment revenue | $732,495 | $638,017 | $2,170,857 | $1,756,113 | | Water segment revenue | $38,143 | $33,272 | $109,374 | $95,537 | | LPD segment revenue | $29,126 | $36,971 | $101,920 | $103,369 | | Other segment revenue | $10,657 | $13,529 | $32,119 | $30,698 | | **Total revenue** | **$810,421** | **$721,789** | **$2,414,270** | **$1,985,717** | Revenue by Principal Geographic Area (in thousands) | Geographic Area (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | United States | $514,343 | $454,836 | $1,502,219 | $1,257,617 | | Europe, Middle East, Africa | $167,956 | $147,193 | $510,759 | $400,928 | | Asia Pacific Region | $78,239 | $77,401 | $246,645 | $212,663 | | Canada | $32,813 | $28,710 | $105,608 | $78,314 | | Latin America | $17,070 | $13,649 | $49,039 | $36,195 | | **Total revenue** | **$810,421** | **$721,789** | **$2,414,270** | **$1,985,717** | [NOTE 4. Acquisitions](index=16&type=section&id=NOTE%204.%20ACQUISITIONS) This note details business acquisitions made during the nine months ended September 30, 2021, expanding geographic reach, customer base, or product lines - Acquired a teleradiology business for approximately **$5.4 million** in Q3 2021, expanding current capabilities[64](index=64&type=chunk) - Acquired ezyVet and VetRadar cloud-based veterinary software businesses for approximately **$157.2 million** in Q2 2021, expanding cloud-based software offerings[66](index=66&type=chunk) - Acquired a Swiss reference laboratory for approximately **$5.5 million** in Q1 2021, expanding international reference laboratory presence[66](index=66&type=chunk) - Goodwill from the ezyVet/VetRadar acquisition was approximately **$109.4 million**, allocated across IDEXX VetLab, Reference Laboratory, Rapid Assay, and Veterinary Software Services[66](index=66&type=chunk) [NOTE 5. Share-Based Compensation](index=17&type=section&id=NOTE%205.%20SHARE-BASED%20COMPENSATION) This note outlines the company's share-based compensation, including options, restricted stock units, and employee stock purchase rights - Total unrecognized compensation expense for unvested share-based awards was **$72.6 million** as of September 30, 2021, with a weighted average recognition period of approximately **1.6 years**[67](index=67&type=chunk) Share-Based Compensation Expense (in thousands) | Period | 2021 | 2020 | | :----- | :--- | :--- | | 3 Months Ended Sep 30 | $9,500 | $7,900 | | 9 Months Ended Sep 30 | $28,000 | $23,000 | Weighted Average Fair Value of Options Granted | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | | Share price at grant | $527.49 | $290.15 | | Expected stock price volatility | 30% | 27% | | Weighted average fair value of options granted | $169.13 | $84.60 | [NOTE 6. Credit Losses](index=18&type=section&id=NOTE%206.%20CREDIT%20LOSSES) This note details the company's exposure to credit losses and its maintenance of allowances, based on customer analysis and historical experience - Allowances for credit losses are maintained based on specific customer situations, aging analysis, and historical experience, adjusted for current economic conditions[70](index=70&type=chunk) Allowance for Credit Losses (in thousands) | Metric (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :-------------------- | :----------- | :----------- | | Accounts receivable | $6,500 | $6,800 | | Contract assets and lease receivables | $4,300 | $3,700 | - At September 30, 2021, approximately **91%** of accounts receivable had not yet reached the invoice due date, and substantially all of the **9%** past due was less than 60 days past due[73](index=73&type=chunk) [NOTE 7. Inventories](index=19&type=section&id=NOTE%207.%20INVENTORIES) This note provides a breakdown of inventories, valued at the lower of cost or net realizable value, which increased by $48.611 million - Inventories are valued at the lower of cost (FIFO) or net realizable value[75](index=75&type=chunk) Inventories (in thousands) | Component (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Raw materials | $59,609 | $45,986 | | Work-in-process | $24,617 | $20,374 | | Finished goods | $174,258 | $143,513 | | **Total Inventories** | **$258,484** | **$209,873** | [NOTE 8. Leases](index=19&type=section&id=NOTE%208.%20LEASES) This note details the maturities of operating lease liabilities and supplemental cash flow information for leases Maturities of Operating Lease Liabilities (in thousands) | Year (in thousands) | September 30, 2021 | | :------------------ | :----------------- | | 2021 (remainder) | $4,586 | | 2022 | $24,124 | | 2023 | $20,195 | | 2024 | $15,581 | | 2025 | $12,049 | | Thereafter | $48,987 | | Total lease payments | $125,522 | | Less imputed interest | $(15,364) | | **Total** | **$110,158** | Supplemental Cash Flow Information for Leases (in thousands) | Metric (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | | Cash paid for operating leases | $17,232 | $14,619 | | Right-of-use assets obtained | $33,052 | $17,064 | - Additions for right-of-use assets in 2021 include **$7.9 million** from the ezyVet acquisition[77](index=77&type=chunk) [NOTE 9. Other Current and Long-Term Assets](index=20&type=section&id=NOTE%209.%20OTHER%20CURRENT%20AND%20LONG-TERM%20ASSETS) This note provides a detailed breakdown of other current and long-term assets, which saw increases primarily driven by customer acquisition costs and contract assets Other Current Assets (in thousands) | Component (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Customer acquisition costs | $48,164 | $43,751 | | Prepaid expenses | $37,462 | $34,556 | | Contract assets, net | $31,446 | $23,837 | | Deferred sales commissions | $6,302 | $5,738 | | **Total Other current assets** | **$157,590** | **$137,508** | Other Long-Term Assets (in thousands) | Component (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Customer acquisition costs | $108,947 | $104,369 | | Contract assets, net | $114,668 | $91,681 | | Deferred income taxes | $24,861 | $31,549 | | Deferred sales commissions | $12,695 | $11,719 | | **Total Other long-term assets** | **$317,144** | **$289,595** | [NOTE 10. Accrued Liabilities](index=20&type=section&id=NOTE%2010.%20ACCRUED%20LIABILITIES) This note provides a breakdown of accrued liabilities, which increased by $15.399 million, with employee compensation remaining the largest component Accrued Liabilities (in thousands) | Component (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Accrued employee compensation and related expenses | $161,579 | $167,649 | | Accrued expenses | $124,465 | $112,526 | | Accrued customer incentives and refund obligations | $81,029 | $75,064 | | Accrued taxes | $43,536 | $42,676 | | Current lease liabilities | $20,438 | $17,733 | | **Total Accrued liabilities** | **$431,047** | **$415,648** | Other Long-Term Liabilities (in thousands) | Component (in thousands) | Sep 30, 2021 | Dec 31, 2020 | | :----------------------- | :----------- | :----------- | | Accrued taxes | $58,727 | $60,313 | | Other accrued long-term expenses | $14,266 | $25,291 | | **Total Other long-term liabilities** | **$72,993** | **$85,604** | [NOTE 11. Debt](index=21&type=section&id=NOTE%2011.%20DEBT) This note details the company's outstanding unsecured senior notes, including the payoff of 2021 Series A Notes and the upcoming maturity of 2022 Series A Notes - Paid off **$50.0 million** 2021 Series A Notes on July 21, 2021, using cash from operations[81](index=81&type=chunk) - The **$75.0 million** 2022 Series A Notes will become due and payable on February 12, 2022[81](index=81&type=chunk) Outstanding Senior Notes (Principal Amount in thousands) | Series | Due Date | Principal Amount | Coupon Rate | | :----- | :------- | :--------------- | :---------- | | 2023 Series A Notes | 12/11/2023 | $75,000 | 3.94% | | 2025 Series B Notes | 12/11/2025 | $75,000 | 4.04% | | 2026 Senior Notes | 9/4/2026 | $75,000 | 3.72% | | 2024 Series B Notes | 7/21/2024 | $75,000 | 3.76% | | 2025 Series C Notes (Euro) | 6/18/2025 | €88,857 | 1.785% | | 2022 Series A Notes | 2/12/2022 | $75,000 | 3.25% | | 2027 Series B Notes | 2/12/2027 | $75,000 | 3.72% | | 2029 Series C Notes | 03/14/2029 | $100,000 | 4.19% | | MetLife 2030 Series D Notes | 04/02/2030 | $125,000 | 2.50% | | Prudential 2030 Series D Notes | 04/14/2030 | $75,000 | 2.50% | [NOTE 12. Repurchases of Common Stock](index=21&type=section&id=NOTE%2012.%20REPURCHASES%20OF%20COMMON%20STOCK) This note summarizes common stock repurchases, including open market repurchases and shares acquired through employee surrenders for tax withholding - Common stock repurchases occur primarily in the open market, and also through employee surrenders for tax withholding[82](index=82&type=chunk) Common Stock Repurchases (in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Shares repurchased in open market | 274 | — | 892 | 721 | | Shares acquired through employee surrender | 1 | 1 | 29 | 31 | | **Total shares repurchased** | **275** | **1** | **921** | **752** | | Cost of shares repurchased in open market | $183,315 | $— | $510,937 | $179,623 | | Cost of shares for employee surrenders | $515 | $360 | $15,501 | $9,029 | | **Total cost of shares** | **$183,830** | **$360** | **$526,438** | **$188,652** | | Average cost per share - total | $668.38 | $393.12 | $571.36 | $250.96 | - The average cost per share for total repurchases increased from **$250.96** in 9M 2020 to **$571.36** in 9M 2021[83](index=83&type=chunk) [NOTE 13. Income Taxes](index=22&type=section&id=NOTE%2013.%20INCOME%20TAXES) This note discusses the company's effective income tax rate, which increased primarily due to lower tax benefits from share-based compensation Effective Income Tax Rate | Period | 2021 | 2020 | | :----- | :--- | :--- | | 3 Months Ended Sep 30 | 20.0% | 10.8% | | 9 Months Ended Sep 30 | 18.1% | 16.0% | - The increase in the effective tax rate was primarily driven by a decrease in tax benefits from share-based compensation and the resolution of uncertain tax positions[84](index=84&type=chunk) - The effective tax rate for both periods in 2021 differed from the U.S. statutory tax rate of **21%** primarily due to tax benefits from share-based compensation[85](index=85&type=chunk) [NOTE 14. Accumulated Other Comprehensive Income](index=22&type=section&id=NOTE%2014.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20INCOME) This note details the changes in Accumulated Other Comprehensive Income (AOCI), net of tax, including foreign currency translation adjustments and hedging activities Changes in AOCI (in thousands) | Component (in thousands) | Dec 31, 2020 Balance | 9 Months Ended Sep 30, 2021 OCI (Loss) | Sep 30, 2021 Balance | | :----------------------- | :------------------- | :------------------------- | :------------------ | | Unrealized Gain (Loss) on Investments, Net of Tax | $(272) | $153 | $(119) | | Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax (Foreign Currency Exchange Contracts) | $(9,934) | $7,300 | $2,888 | | Unrealized (Loss) Gain on Net Investment Hedges, Net of Tax (Euro Denominated Notes) | $(5,982) | $4,235 | $(1,747) | | Unrealized (Loss) Gain on Net Investment Hedges, Net of Tax (Cross Currency Swaps) | $(2,159) | $4,561 | $2,402 | | Cumulative Translation Adjustment | $(35,268) | $(20,213) | $(55,481) | | **Total AOCI** | **$(53,615)** | **$(3,964) (before reclassifications)** | **$(52,057)** | - Foreign currency translation adjustments resulted in a loss of **$20.213 million** for the nine months ended September 30, 2021[86](index=86&type=chunk) - Gains on derivative instruments classified as cash flow hedges reclassified from AOCI to net income were **$2.036 million** for the nine months ended September 30, 2021[87](index=87&type=chunk) [NOTE 15. Earnings Per Share](index=23&type=section&id=NOTE%2015.%20EARNINGS%20PER%20SHARE) This note details the computation of basic and diluted earnings per share (EPS), including the dilutive effect of share-based payment awards - Basic EPS is computed using net income attributable to stockholders and weighted average common shares outstanding[88](index=88&type=chunk) - Diluted EPS includes the dilutive effect of share-based payment awards using the treasury stock method[88](index=88&type=chunk) Weighted Average Shares Outstanding (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Shares outstanding for basic EPS | 85,123 | 85,314 | 85,325 | 85,293 | | Dilutive effect of share-based payment awards | 1,388 | 1,376 | 1,387 | 1,342 | | **Shares outstanding for diluted EPS** | **86,511** | **86,690** | **86,712** | **86,635** | [NOTE 16. Commitments, Contingencies and Guarantees](index=24&type=section&id=NOTE%2016.%20COMMITMENTS%2C%20CONTINGENCIES%20AND%20GUARANTEES) This note addresses the company's commitments, contingencies, and guarantees, primarily focusing on an ongoing litigation matter - The company is subject to claims and litigation in the ordinary course of business[92](index=92&type=chunk) - An accrual of **$27.5 million** was established in Q3 2020 for an alleged breach of contract litigation, with a plaintiff claim of approximately **$50 million**[93](index=93&type=chunk) - No material changes to contingencies and guarantees have occurred since the 2020 Annual Report[95](index=95&type=chunk) [NOTE 17. Segment Reporting](index=25&type=section&id=NOTE%2017.%20SEGMENT%20REPORTING) This note defines the company's operating segments: Companion Animal Group (CAG), Water, and Livestock, Poultry and Dairy (LPD), with 'Other' encompassing human medical diagnostics - Operating segments are CAG (veterinary market), Water (water quality products), and LPD (livestock, poultry, and dairy health)[97](index=97&type=chunk) - The 'Other' segment includes OPTI Medical (human medical diagnostics) and out-licensing arrangements[97](index=97&type=chunk) Segment Performance (Income from Operations in thousands) | Segment (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | CAG | $201,947 | $139,434 | $649,892 | $426,062 | | Water | $17,599 | $15,243 | $49,599 | $43,383 | | LPD | $3,600 | $10,505 | $24,276 | $28,417 | | Other | $2,816 | $6,674 | $9,070 | $11,567 | | **Consolidated Total Income from Operations** | **$225,962** | **$171,856** | **$732,837** | **$509,429** | [NOTE 18. Fair Value Measurements](index=26&type=section&id=NOTE%2018.%20FAIR%20VALUE%20MEASUREMENTS) This note describes the fair value measurements of financial assets and liabilities, categorized into a three-level hierarchy based on input observability - Fair value measurements are classified into a three-level hierarchy (Level 1: quoted prices in active markets; Level 2: observable inputs other than Level 1 prices; Level 3: unobservable inputs)[101](index=101&type=chunk)[102](index=102&type=chunk) - Cross currency swaps and foreign currency exchange contracts are measured at fair value on a recurring basis using Level 2 inputs[103](index=103&type=chunk)[104](index=104&type=chunk) Fair Value of Long-Term Debt (in millions) | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----- | :----------- | :----------- | | Estimated Fair Value | $928.2 | $1,000.0 | | Carrying Value | $853.6 | $909.1 | - Contingent consideration related to acquisitions is classified within Level 3 of the fair value hierarchy due to significant unobservable inputs[112](index=112&type=chunk) [NOTE 19. Hedging Instruments](index=28&type=section&id=NOTE%2019.%20HEDGING%20INSTRUMENTS) This note explains the company's use of derivative and non-derivative instruments to manage foreign currency exchange risk - The primary risk managed through hedging instruments is foreign currency exchange risk[115](index=115&type=chunk) - Foreign currency exchange contracts are designated as cash flow hedges for forecasted intercompany inventory purchases and sales, targeting approximately **85%** of exposure[121](index=121&type=chunk)[123](index=123&type=chunk) - Euro-denominated notes and cross currency swaps are designated as net investment hedges to offset foreign currency translation gains and losses on net investments in foreign operations[125](index=125&type=chunk)[126](index=126&type=chunk) - Estimated net gains of **$2.0 million** (net of tax) from cash flow hedges are expected to be reclassified into earnings within the next **12 months**[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, including a business overview, market trends, and non-GAAP measures - The discussion includes forward-looking statements about business expectations, financial performance, and potential risks[128](index=128&type=chunk) - The analysis is based on unaudited condensed consolidated financial statements and requires management estimates and judgments[141](index=141&type=chunk) - Non-GAAP financial measures like organic revenue growth and Adjusted EBITDA are used to provide supplemental analysis for investors[143](index=143&type=chunk)[146](index=146&type=chunk) [Business Overview](index=32&type=section&id=Business%20Overview) IDEXX Laboratories, Inc. develops, manufactures, and distributes products and services primarily for the companion animal veterinary, livestock, poultry and dairy, and water testing markets - IDEXX primarily serves companion animal veterinary, livestock, poultry and dairy, and water testing markets, with a presence in human medical diagnostics[132](index=132&type=chunk) - Key operating segments are CAG (veterinary diagnostics and IT), Water (water microbiology testing), and LPD (livestock/poultry health, milk quality)[132](index=132&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) - The 'Other' segment includes OPTI Medical (point-of-care and laboratory diagnostics for human medical market) and out-licensing arrangements[133](index=133&type=chunk)[134](index=134&type=chunk) [Effects of Certain Factors and Trends on Results of Operations](index=33&type=section&id=Effects%20of%20Certain%20Factors%20and%20Trends%20on%20Results%20of%20Operations) This section discusses market trends impacting operations, including positive global trends in companion animal healthcare and anticipated reduced LPD revenues - Positive global trends in companion animal healthcare continue to drive strong growth for CAG diagnostic products and services[135](index=135&type=chunk) - LPD revenues are expected to decline year-over-year due to lower swine testing in China, influenced by changing disease management, low pork prices, and government requirements[136](index=136&type=chunk) - The company is actively managing supply chain and logistics challenges (product/component availability, shipping delays, inflationary pressures) through proactive planning and supplier/logistics partner collaboration[137](index=137&type=chunk) [Critical Accounting Estimates and Assumptions](index=34&type=section&id=Critical%20Accounting%20Estimates%20and%20Assumptions) This section highlights that the preparation of financial statements requires significant estimates and judgments affecting reported asset, liability, revenue, and expense amounts - Financial statements rely on estimates and judgments impacting reported financial figures[141](index=141&type=chunk) - Estimates are based on historical experience and reasonable assumptions, consistent with the 2020 Annual Report[141](index=141&type=chunk) [Recent Accounting Pronouncements](index=34&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 2 of the financial statements for information on the impact of recent accounting standards and amendments on the consolidated financial statements - Refer to Note 2 for details on recent accounting pronouncements and their impact[142](index=142&type=chunk) [Non-GAAP Financial Measures](index=34&type=section&id=Non-GAAP%20Financial%20Measures) This section explains the use of non-GAAP financial measures, specifically organic revenue growth, Adjusted EBITDA, gross debt, net debt, and related ratios - Organic revenue growth (non-GAAP) excludes foreign currency exchange rate changes and certain business acquisitions/divestitures to show underlying business trends[143](index=143&type=chunk)[144](index=144&type=chunk)[145](index=145&type=chunk) - Other non-GAAP measures include Adjusted EBITDA, gross debt, net debt, and their ratios, used to evaluate business performance and borrowing capacity[146](index=146&type=chunk) - Non-GAAP measures are considered in addition to, not as a replacement for, U.S. GAAP financial measures[143](index=143&type=chunk)[146](index=146&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's financial performance for the three and nine months ended September 30, 2021, compared to the corresponding periods in 2020 [Three Months Ended September 30, 2021, Compared to Three Months Ended September 30, 2020](index=35&type=section&id=Three%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20to%20Three%20Months%20Ended%20September%2030%2C%202020) For the three months ended September 30, 2021, total company revenue increased by 12.3% (10.2% organic), driven by strong CAG Diagnostics recurring revenue and instrument placements Total Company Revenue Growth (3 Months Ended Sep 30) | Metric | 2021 Revenue (k) | Reported Growth | Organic Growth | | :----- | :--------------- | :-------------- | :------------- | | CAG | $732,495 | 14.8% | 12.7% | | Water | $38,143 | 14.6% | 12.7% | | LPD | $29,126 | (21.2%) | (22.5%) | | Other | $10,657 | (21.2%) | (21.1%) | | **Total Company** | **$810,421** | **12.3%** | **10.2%** | - Total Company organic revenue growth was **10.2%**, driven by strong volume gains in CAG Diagnostics recurring revenue and instrument placements[147](index=147&type=chunk)[148](index=148&type=chunk) - LPD revenues decreased primarily due to lower swine testing in China, and Other revenues declined due to lower demand for human OPTI COVID-19 PCR testing[148](index=148&type=chunk) Total Company Operating Results (3 Months Ended Sep 30, in thousands) | Metric (in thousands) | 2021 | 2020 | Change Amount | Change % | | :-------------------- | :--- | :--- | :------------ | :------- | | Revenues | $810,421 | $721,789 | $88,632 | 12.3% | | Gross profit | $472,921 | $422,606 | $50,315 | 11.9% | | Gross profit margin | 58.4% | 58.5% | (0.1%) | - | | Income from operations | $225,962 | $171,856 | $54,106 | 31.5% | - General and administrative expense decreased by **21.8%** due to a prior-year litigation accrual and charitable donation, partially offset by higher personnel and acquisition costs[150](index=150&type=chunk) [Nine Months Ended September 30, 2021, Compared to Nine Months Ended September 30, 2020](index=42&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202021%2C%20Compared%20to%20Nine%20Months%20Ended%20September%2030%2C%202020) For the nine months ended September 30, 2021, total company revenue increased by 21.6% (18.5% organic), driven by strong CAG performance and recovery in Water Total Company Revenue Growth (9 Months Ended Sep 30) | Metric | 2021 Revenue (k) | Reported Growth | Organic Growth | | :----- | :--------------- | :-------------- | :------------- | | CAG | $2,170,857 | 23.6% | 20.6% | | Water | $109,374 | 14.5% | 11.4% | | LPD | $101,920 | (1.4%) | (5.4%) | | Other | $32,119 | 4.6% | 2.7% | | **Total Company** | **$2,414,270** | **21.6%** | **18.5%** | - Total Company organic revenue growth was **18.5%**, driven by strong CAG Diagnostics recurring revenue, increased clinical visits, and diagnostic utilization[173](index=173&type=chunk)[174](index=174&type=chunk) - LPD business declined due to lower swine testing demand in China, while Water revenue increased due to recovery in testing volumes[174](index=174&type=chunk) Total Company Operating Results (9 Months Ended Sep 30, in thousands) | Metric (in thousands) | 2021 | 2020 | Change Amount | Change % | | :-------------------- | :--- | :--- | :------------ | :------- | | Revenues | $2,414,270 | $1,985,717 | $428,553 | 21.6% | | Gross profit | $1,433,011 | $1,161,538 | $271,473 | 23.4% | | Gross profit margin | 59.4% | 58.5% | 0.9% | - | | Income from operations | $732,837 | $509,429 | $223,408 | 43.9% | - Gross profit margin increased by **90 basis points** due to volume leverage in CAG Diagnostics recurring revenue, price increases, and strong growth in veterinary software and services[175](index=175&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company funds its operations through cash on hand, operating cash flows, senior note financings, and its $1 billion unsecured revolving credit facility - Liquidity is supported by cash on hand, operating cash flows, senior note financings, and a **$1 billion** unsecured revolving credit facility[200](index=200&type=chunk) Cash and Cash Equivalents (in millions) | Metric (in millions) | Sep 30, 2021 | Dec 31, 2020 | | :------------------- | :----------- | :----------- | | U.S. | $6.1 | $248.4 | | Foreign | $139.1 | $135.5 | | **Total** | **$145.2** | **$383.9** | - As of September 30, 2021, **$998.6 million** was available under the Credit Facility, with no outstanding borrowings[200](index=200&type=chunk) Cash Flow Summary (9 Months Ended Sep 30, in thousands) | Activity (in thousands) | 2021 | 2020 | Dollar Change | | :---------------------- | :--- | :--- | :------------ | | Operating Activities | $545,582 | $429,129 | $116,453 | | Investing Activities | $(248,927) | $(93,686) | $(155,241) | | Financing Activities | $(531,594) | $(248,814) | $(282,780) | - The consolidated leverage ratio (debt to Adjusted EBITDA) was **0.81** at September 30, 2021, well within the **3.5-to-1** covenant limit[218](index=218&type=chunk) [Other Commitments, Contingencies and Guarantees](index=52&type=section&id=Other%20Commitments%2C%20Contingencies%20and%20Guarantees) This section refers to Note 16 for details on significant commitments, contingencies, and guarantees as of September 30, 2021 - Refer to Note 16 for details on commitments, contingencies, and guarantees[219](index=219&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily foreign currency exchange risk, and its potential impact on revenue and operating income - The primary market risk is foreign currency exchange risk, as approximately **22%** of consolidated revenue is derived from products manufactured in the U.S. and sold internationally in local currencies[221](index=221&type=chunk) - A strengthening U.S. dollar negatively impacts revenues and profits from international sales, while a weakening dollar has the opposite effect[221](index=221&type=chunk) - A projected **1%** strengthening of the U.S. dollar for the remainder of 2021 would reduce revenue by approximately **$3 million** and operating income by **$1.5 million**, with hedging contracts providing an incremental offset of **$0.5 million**[222](index=222&type=chunk) Estimated Foreign Currency Exchange Impact (as compared to prior period, in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :----- | :-------------------------- | :-------------------------- | | Revenue impact | $6,760 | $51,474 | | Operating profit impact | $2,114 | $19,930 | | Diluted EPS impact | $0.02 | $0.18 | [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2021[226](index=226&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2021[227](index=227&type=chunk) [PART II — OTHER INFORMATION](index=55&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, equity security sales, and a list of exhibits [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) This section states that the company is subject to legal actions in the ordinary course of business, with management believing current matters will not materially affect financial results - The company is subject to pending and threatened legal actions arising from ordinary business operations[229](index=229&type=chunk) - Management believes current legal matters are not expected to have a material effect on financial results, but outcomes are inherently unpredictable[229](index=229&type=chunk) - Further details on litigation are provided in Note 16 to the financial statements[92](index=92&type=chunk)[93](index=93&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) This section highlights potential risks that could negatively affect future operating results, specifically focusing on changes in tax rates and new tax legislation - Future operating results could be negatively affected by changes in tax rates, new U.S. or international tax legislation, or additional tax liabilities[231](index=231&type=chunk) - Proposed corporate tax reforms, including a global minimum tax rate, could materially and adversely impact income tax liability and effective tax rate[232](index=232&type=chunk) - The non-renewal of a tax ruling from the Netherlands creates uncertainty regarding future tax rates and could lead to increased operating costs or tax liabilities[233](index=233&type=chunk)[234](index=234&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=57&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section provides a summary of common stock repurchases during the three months ended September 30, 2021, and the remaining shares available under the repurchase program Common Stock Repurchases (3 Months Ended Sep 30, 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :----- | :--------------------- | :--------------------------- | | July 1 to July 31, 2021 | 19,967 | $648.57 | | August 1 to August 31, 2021 | 112,900 | $676.08 | | September 1 to September 30, 2021 | 142,168 | $665.06 | | **Total** | **275,035** | **$668.38** | - As of September 30, 2021, **5,382,823 shares** remained available for repurchase under the company's share repurchase program, which has no specified expiration date[237](index=237&type=chunk)[239](index=239&type=chunk) - Shares acquired through employee surrender for statutory tax withholding are included in total shares purchased but do not reduce the number of shares available under the repurchase program[238](index=238&type=chunk)[239](index=239&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including amendments to supply agreements, certifications, and financial information in Inline XBRL format - Exhibits include Amendment No. 7 to U.S. Supply Agreement and Amendment No. 5 to European Supply Agreement[241](index=241&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are included as Exhibits 31.1, 31.2, 32.1, and 32.2[241](index=241&type=chunk) - Financial and related information is provided in Inline XBRL format as Exhibit 101[241](index=241&type=chunk) [Signatures](index=59&type=section&id=SIGNATURES) This section contains the required signatures for the Quarterly Report on Form 10-Q, confirming its due authorization and filing - The report is duly signed on behalf of IDEXX Laboratories, Inc. by Brian P. McKeon, Executive Vice President, Chief Financial Officer and Treasurer, on November 2, 2021[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)

Financial Data and Key Metrics Changes - Revenue increased by 12% as reported and 10% organically compared to the prior year [3][4] - Earnings per share (EPS) reached $2.03, reflecting a 12% increase on a comparable basis [4][15] - Operating profit increased by 32% as reported, with a 12% increase on a comparable basis [13][14] - Free cash flow was $354 million for Q3 and $458 million for the first nine months of 2021 [15][16] Business Line Data and Key Metrics Changes - Companion Animal Group (CAG) Diagnostic recurring revenues grew by 11.5% organically, with 10% growth in the U.S. and 14% internationally [6][21] - Water revenue increased by 13% organically, recovering from a 4% decline in the previous year [12] - Livestock, Poultry, and Dairy (LPD) revenue decreased by 23% organically, impacted by prior high demand for African Swine Fever testing [12][13] Market Data and Key Metrics Changes - U.S. clinical visit growth was 2% in Q3, compared to 7% in the same quarter of the previous year [7][22] - The average annual growth rate for U.S. same-store clinical visits was 4.4%, above pre-pandemic levels [7][22] - Global reference lab revenues increased by 10% organically, driven by high same-store volume growth [8] Company Strategy and Development Direction - The company is focused on expanding pet healthcare services and enhancing diagnostic utilization [8][21] - Continued investment in commercial capabilities and infrastructure to support high growth [25][34] - The company is advancing plans for 2022, aiming to sustain strong revenue growth and manage inflationary impacts [20][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining strong growth momentum, supported by high levels of execution and sector trends [21][24] - The company anticipates continued lower LPD revenues and a reduction in human COVID testing revenues year-on-year [18][20] - Management highlighted the importance of maintaining high service levels and addressing inflationary pressures [62][63] Other Important Information - The company achieved a record of 4,307 premium CAG instrument placements, reflecting a 36% increase year-on-year [9][24] - The integration of the ezyVet acquisition contributed to a 33% year-on-year growth in veterinary software services and diagnostic imaging revenues [29] - The company maintained a strong balance sheet with a debt to EBITDA leverage ratio of 0.8 times gross [16] Q&A Session Summary Question: Insights on strong instrument placement trends and competitive dynamics - Management noted record placements across premium instruments, driven by practices investing in technology to support productivity [37][38] Question: Trends in clinical visit growth and revenue per visit - Management highlighted that CAG Diagnostic recurring growth trends held up well on a 2-year basis, with a focus on sustained strong growth [40][41] Question: Capacity and labor shortages in veterinary practices - Management indicated that veterinary practices are busy, with some hiring more staff and improving workflow to increase capacity [46][47] Question: Operating margins and investment strategies for 2022 - Management provided guidance for operating margins at 28.8% to 29%, emphasizing the importance of reinvesting in growth [48][49] Question: Impact of in-person access on business operations - Management stated that while in-person access is improving, virtual engagements have been effective, though in-person interactions are still valuable [60][61] Question: Inflationary pressures and their impact on margins - Management acknowledged some inflationary impacts, particularly in freight and distribution, but expressed confidence in managing these challenges [63]

Start Time: 08:30 January 1, 0000 9:30 AM ET IDEXX Laboratories, Inc. (NASDAQ:IDXX) Q2 2021 Earnings Conference Call July 30, 2021, 08:30 AM ET Company Participants Jay Mazelsky - President and CEO Brian McKeon - EVP, CFO and Treasurer Conference Call Participants Michael Ryskin - Bank of America Erin Wright - Credit Suisse Jon Block - Stifel Nathan Rich - Goldman Sachs Operator Good morning and welcome to the IDEXX Laboratories Second Quarter 2021 Earnings Conference Call. As a reminder, today’s conference ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________. COMMISSION FILE NUMBER: 000-19271 IDEXX LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________. COMMISSION FILE NUMBER: 000-19271 IDEXX LABORATORIES, INC. (Exact name of registrant as specified in its charter) Delaware ...

IDEXX Laboratories, Inc. (NASDAQ:IDXX) Q1 2021 Earnings Conference Call May 4, 2021 8:30 AM ET Company Participants Brian McKeon - Chief Financial Officer Jay Mazelsky - President and Chief Executive Officer Conference Call Participants Michael Ryskin - Bank of America Erin Wright - Credit Suisse Jon Block - Stifel Nathan Rich - Goldman Sachs Balaji Prasad - Barclays Operator Good morning and welcome to the IDEXX Laboratories' First Quarter 2021 Earnings Conference Call. As a reminder, today’s conference is ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________. COMMISSION FILE NUMBER: 0-19271 IDEXX LABORATORIES, INC. (Exact name of registrant as specified in its charter) (State or other ju ...