IDEXX(US:IDXX)2025-05-01 20:11markdown PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the three months ended March 31, 2025, show a 3.6% increase in total revenue to $998.4 million compared to the prior year, with net income rising to $242.7 million and diluted EPS increasing to $2.96 from $2.81, while the balance sheet indicates a decrease in cash and cash equivalents and total assets, an increase in total liabilities, and cash flow from operations increasing to $238.0 million with a significant rise in cash used in financing activities due to increased stock repurchases [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets were $3.21 billion, a slight decrease from $3.29 billion at year-end 2024, primarily due to a reduction in cash and cash equivalents, while total liabilities increased to $1.77 billion from $1.70 billion, driven by higher borrowings under the credit facility, consequently decreasing total stockholders' equity to $1.45 billion from $1.60 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $1,317,613 | $1,399,897 | | Cash and cash equivalents | $163,970 | $288,266 | | **Total Assets** | **$3,213,689** | **$3,293,443** | | **Total Current Liabilities** | $1,136,213 | $1,067,916 | | Credit facility | $319,500 | $250,000 | | **Total Liabilities** | **$1,765,676** | **$1,698,130** | | **Total Stockholders' Equity** | **$1,448,013** | **$1,595,313** | [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) For the three months ended March 31, 2025, total revenue increased by 3.6% year-over-year to $998.4 million, gross profit grew by 5.1% to $623.4 million, indicating margin expansion, and net income rose to $242.7 million from $235.6 million in the prior-year period, resulting in a diluted EPS of $2.96, up from $2.81 Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $998,427 | $964,095 | 3.6% | | Gross Profit | $623,379 | $593,070 | 5.1% | | Income from Operations | $316,534 | $298,958 | 5.9% | | Net Income | $242,677 | $235,579 | 3.0% | | Diluted EPS | $2.96 | $2.81 | 5.3% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the first quarter of 2025, net cash from operating activities increased to $238.0 million from $198.6 million in the prior year, net cash used in investing activities decreased significantly to $29.6 million from $106.9 million primarily due to a business acquisition in the 2024 period, and net cash used in financing activities increased substantially to $330.3 million from $144.1 million, driven by a significant increase in common stock repurchases Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $237,962 | $198,585 | | Net cash used by investing activities | $(29,610) | $(106,944) | | Net cash used by financing activities | $(330,321) | $(144,074) | | **Net decrease in cash** | **$(124,296)** | **$(56,499)** | - The increase in cash used for financing was primarily due to a significant rise in common stock repurchases, which totaled **$400.9 million in Q1 2025** compared to **$154.8 million in Q1 2024**[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures supporting the financial statements, including revenue disaggregation by segment and geography, specifics on customer commitment arrangements and contract assets, information on a 2024 business acquisition, debt structure and covenants, a significant increase in stock repurchases, segment performance breakdowns, and hedging activities - Estimated future revenues from multi-year customer commitment arrangements are approximately **$4.7 billion**[44](index=44&type=chunk) - In Q1 2024, the company acquired a software and data platform business for approximately **$81.1 million**, which included **$45.8 million of goodwill**[52](index=52&type=chunk) - The company paid a legal judgment of approximately **$80 million** on April 17, 2025, which was fully accrued as of March 31, 2025[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reported total company organic revenue growth of 4.7% for Q1 2025, driven by the Companion Animal Group (CAG) segment, which saw 4.4% organic growth, with gross profit margin improving by 90 basis points to 62.4% due to favorable business mix and price realization, while the company significantly increased its stock repurchases, maintaining strong liquidity with $928.6 million available under the credit facility and compliance with all debt covenants at a low leverage ratio [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Total company organic revenue grew 4.7%, led by CAG Diagnostics recurring revenue and the Water business, with gross profit margin expanding to 62.4% from 61.5% due to favorable mix and pricing, and operating income increasing 5.9% to $316.5 million, while the CAG segment's organic revenue grew 4.4% with strong performance in IDEXX VetLab consumables (10.5% organic growth), and the Water segment grew 7.3% organically, with LPD growing 4.2% Q1 2025 Organic Revenue Growth by Segment | Segment | Organic Revenue Growth (%) | | :--- | :--- | | **Total Company** | **4.7%** | | Companion Animal Group (CAG) | 4.4% | | Water | 7.3% | | Livestock, Poultry and Dairy (LPD) | 4.2% | | Other | 32.2% | - Gross profit margin increased by **90 basis points**, primarily due to favorable business mix, benefiting from IDEXX VetLab consumable growth, and net price realization which offset inflationary cost impacts[142](index=142&type=chunk) - Within the CAG segment, IDEXX VetLab consumables revenue showed strong **10.5% organic growth**, supported by a **9% growth** in the active installed base of instruments[146](index=146&type=chunk)[148](index=148&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity position remains solid, with $164.0 million in cash and $928.6 million available under its credit facility as of March 31, 2025, despite working capital decreasing to $181.4 million from $332.0 million at year-end 2024, with strong cash from operations at $238.0 million, and financing activities using $330.3 million, largely for stock repurchases of $400.9 million, while remaining in compliance with its financial covenants, maintaining a gross debt to Adjusted EBITDA ratio of 0.70-to-1, well below the 3.5-to-1 limit - As of March 31, 2025, the company had **$164.0 million in cash and cash equivalents** and **$928.6 million of remaining borrowing availability** under its **$1.25 billion Credit Facility**[169](index=169&type=chunk) - Cash used in financing activities increased significantly year-over-year, primarily due to **$400.9 million in common stock repurchases in Q1 2025** compared to **$154.8 million in Q1 2024**[179](index=179&type=chunk) Financial Covenant Compliance (in thousands, as of March 31, 2025) | Metric | Value | | :--- | :--- | | Trailing 12 Months Adjusted EBITDA | $1,350,001 thousand | | Gross Debt | $943,027 thousand | | **Gross Debt to Adjusted EBITDA Ratio** | **0.70** | | Covenant Limit | 3.50 | [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency exchange rates and interest rates, with a strengthening U.S. dollar negatively impacting Q1 2025 revenues by $12.3 million and operating profit by $4.1 million compared to the prior year, and continued currency headwinds expected to decrease revenues by approximately $26 million and diluted EPS by $0.06 for the remainder of 2025, while interest rate risk on $250 million of debt is managed through an interest rate swap, effectively fixing the rate - A strengthening U.S. dollar negatively impacted Q1 2025 results, **decreasing revenue by $12.3 million** and **operating profit by $4.1 million** compared to the prior-year period[192](index=192&type=chunk) - For the remainder of 2025, the company anticipates that foreign exchange rates will **decrease revenues by approximately $26 million** and **reduce diluted EPS by approximately $0.06 per share**[192](index=192&type=chunk) - Interest rate risk is partially mitigated by an interest rate swap that effectively fixes the rate on **$250.0 million of borrowings** under the Credit Facility at **3.9%** plus the applicable credit spread through October 20, 2025[194](index=194&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of March 31, 2025, with no material changes in the company's internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, the company's disclosure controls and procedures were **effective at the reasonable assurance level**[195](index=195&type=chunk) - **No changes occurred in internal control over financial reporting** during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, these controls[196](index=196&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal actions in the ordinary course of business, and management believes that the resolution of any currently pending matters will not have a material effect on the company's financial condition or results of operations - Management does not expect any currently pending or threatened legal matters to **not have a material effect** on the company's results of operations, financial condition, or cash flows[199](index=199&type=chunk) [Item 1A. Risk Factors](index=45&type=page&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - **No material changes** have occurred from the risk factors previously disclosed in the 2024 Annual Report[200](index=200&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the first quarter of 2025, the company repurchased a total of 944,576 shares of its common stock, with 930,800 shares repurchased as part of the publicly announced program, and as of March 31, 2025, 5,202,746 shares remained authorized for repurchase under the program Share Repurchases for Q1 2025 | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jan 2025 | 177,300 | $428.42 | | Feb 2025 | 338,369 | $460.01 | | Mar 2025 | 428,907 | $428.36 | | **Total** | **944,576** | **N/A** | - As of March 31, 2025, a maximum of **5,202,746 shares** may yet be purchased under the company's share repurchase program[203](index=203&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) During the three months ended March 31, 2025, none of the company's directors or officers adopted, modified, or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement - **No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans** during the first quarter of 2025[204](index=204&type=chunk) [Item 6. Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, and the interactive data files (iXBRL) - Exhibits filed include **CEO and CFO certifications** pursuant to Sarbanes-Oxley Sections 302 and 906, and **iXBRL data files**[205](index=205&type=chunk)