IDEXX(IDXX) - 2025 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and related notes for the interim period Item 1. Financial Statements (Unaudited) This section presents IDEXX Laboratories' unaudited condensed consolidated financial statements and detailed explanatory notes Condensed Consolidated Balance Sheets The Condensed Consolidated Balance Sheets present the company's financial position as of June 30, 2025, compared to December 31, 2024 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $3,330,794 | $3,293,443 | | Total Liabilities | $1,871,967 | $1,698,130 | | Total Stockholders' Equity | $1,458,827 | $1,595,313 | - Total assets increased by $37.35 million, while total liabilities increased by $173.837 million, and total stockholders' equity decreased by $136.486 million from December 31, 2024, to June 30, 2025[10] Condensed Consolidated Statements of Income The Condensed Consolidated Statements of Income present the company's financial performance for the three and six months ended June 30, 2025, and 2024 | Metric (in thousands, except EPS) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Revenue | $1,109,457 | $1,003,578 | $2,107,884 | $1,967,673 | | Gross Profit | $694,732 | $619,159 | $1,318,111 | $1,212,229 | | Income from Operations | $373,046 | $263,801 | $689,580 | $562,759 | | Net Income | $293,989 | $203,298 | $536,666 | $438,877 | | Diluted EPS | $3.63 | $2.44 | $6.59 | $5.24 | - For the three months ended June 30, 2025, total revenue increased by 10.6% YoY, net income increased by 44.6% YoY, and diluted EPS increased by 48.8% YoY. For the six months ended June 30, 2025, total revenue increased by 7.1% YoY, net income increased by 22.3% YoY, and diluted EPS increased by 25.8% YoY[12] Condensed Consolidated Statements of Comprehensive Income The Condensed Consolidated Statements of Comprehensive Income detail net income and other comprehensive income components for the three and six months ended June 30, 2025, and 2024 | Metric (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $293,989 | $203,298 | $536,666 | $438,877 | | Other Comprehensive Income (Loss), net of tax | $13,141 | $(4,784) | $16,695 | $(13,975) | | Comprehensive Income | $307,130 | $198,514 | $553,361 | $424,902 | - Other comprehensive income significantly improved, moving from a loss of $4.784 million in Q2 2024 to a gain of $13.141 million in Q2 2025, primarily driven by foreign currency translation adjustments[14] Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in stockholders' equity for the six months ended June 30, 2025, and 2024, reflecting net income and share repurchases | Metric (in thousands) | Balance December 31, 2024 | Balance June 30, 2025 | | :-------------------- | :------------------------ | :-------------------- | | Total Stockholders' Equity | $1,595,313 | $1,458,827 | | Net Income | N/A | $536,666 | | Repurchases of Common Stock, net | N/A | $(743,758) | - Total stockholders' equity decreased from $1,595.313 million at December 31, 2024, to $1,458.827 million at June 30, 2025, primarily due to significant common stock repurchases totaling $743.758 million, partially offset by net income[17] Condensed Consolidated Statements of Cash Flows The Condensed Consolidated Statements of Cash Flows detail cash generated from or used in operating, investing, and financing activities for the six months ended June 30, 2025, and 2024 | Metric (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by Operating Activities | $423,705 | $446,897 | | Net Cash Used by Investing Activities | $(63,238) | $(139,851) | | Net Cash Used by Financing Activities | $(495,952) | $(354,312) | | Net Decrease in Cash and Cash Equivalents | $(123,672) | $(52,342) | | Cash and Cash Equivalents at End of Period | $164,594 | $401,590 | - Net cash provided by operating activities decreased by $23.192 million YoY. Net cash used by financing activities significantly increased by $141.640 million, primarily due to higher common stock repurchases and senior note payments. This led to a larger net decrease in cash and cash equivalents of $123.672 million in the current period[20] Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, revenue, debt, and segment reporting NOTE 1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION This note clarifies that the unaudited condensed consolidated financial statements adhere to U.S. GAAP and include consolidated subsidiaries - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X, Rule 10-01[22] - The company consolidates all wholly-owned and majority-owned subsidiaries, eliminating intercompany transactions[23] NOTE 2. ACCOUNTING POLICIES This note details significant accounting policies, including consistency with the 2024 Annual Report and updates on new accounting pronouncements - Adopted ASU 2023-07, "Segment Reporting," as of December 31, 2024, which did not materially impact consolidated financial statements[27] - Evaluating ASU 2024-03, "Disaggregation of Income Statement Expenses," effective for fiscal years beginning after December 15, 2026, to determine its impact[28] - Evaluating ASU 2023-09, "Income Taxes," effective for annual periods beginning after December 15, 2024, for its impact on consolidated financial statements[29] NOTE 3. REVENUE This note provides disaggregated revenue information by product, service, and geographic area, detailing accounting for multi-performance obligation contracts Revenue by Major Product and Service Categories (in thousands) | Category | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | CAG Diagnostics recurring revenue | $877,995 | $808,454 | $1,684,262 | $1,588,598 | | CAG Diagnostics capital - instruments | $58,600 | $35,292 | $90,594 | $69,384 | | Veterinary software, services and diagnostic imaging systems | $85,848 | $78,552 | $167,423 | $153,601 | | Water segment revenue | $51,001 | $46,726 | $96,322 | $89,797 | | LPD segment revenue | $31,762 | $30,306 | $60,358 | $58,511 | | Other segment revenue | $4,251 | $4,248 | $8,925 | $7,782 | | Total revenue | $1,109,457 | $1,003,578 | $2,107,884 | $1,967,673 | Revenue by Principal Geographic Area (in thousands) | Geographic Area | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | United States | $717,869 | $660,146 | $1,372,730 | $1,291,155 | | Europe, Middle East and Africa | $233,271 | $200,689 | $437,818 | $400,520 | | Asia Pacific Region | $89,298 | $80,435 | $171,031 | $156,739 | | Canada | $46,691 | $40,992 | $83,991 | $77,703 | | Latin America & Caribbean | $22,328 | $21,316 | $42,314 | $41,556 | | Total revenue | $1,109,457 | $1,003,578 | $2,107,884 | $1,967,673 | - Contract assets, net, were $274.8 million as of June 30, 2025, up from $246.3 million on December 31, 2024, reflecting new placements under commitment arrangements[36] - Capitalized consideration paid to customers was $217.7 million as of June 30, 2025, up from $196.6 million on December 31, 2024[38] - Future revenues related to multi-year customer commitment arrangements are estimated at approximately $4.7 billion[42] NOTE 4. ACQUISITIONS, ASSET PURCHASES AND INVESTMENTS This note details the company's acquisition strategy and a Q1 2024 software and data platform acquisition for $81.1 million - In Q1 2024, IDEXX acquired a U.S.-based software and data platform business for approximately $81.1 million, including a contingent payment of $4.4 million[51] - The acquisition resulted in $45.8 million in goodwill, representing synergies with the software business, and is expected to be tax deductible[51] NOTE 5. SHARE-BASED COMPENSATION This note details share-based compensation, including fair value of awards, unrecognized expense, and option valuation assumptions Share-Based Compensation Expenses (in thousands) | Period | 2025 | 2024 | | :----- | :--- | :--- | | 3 Months Ended June 30 | $14,900 | $15,700 | | 6 Months Ended June 30 | $29,500 | $30,100 | - Total unrecognized compensation expense for unvested share-based awards was $94.7 million as of June 30, 2025, to be recognized over approximately 1.7 years[52] Weighted Average Valuation Assumptions for Option Awards | Assumption | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------ | :--------------------------- | :--------------------------- | | Expected stock price volatility | 33% | 32% | | Expected term, in years | 7.3 | 7.0 | | Risk-free interest rate | 4.5% | 4.3% | | Weighted average fair value of options granted | $206.58 | $239.64 | NOTE 6. CREDIT LOSSES This note discusses the company's exposure to credit losses and allowances for uncollectible receivables Allowance for Credit Losses (in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Accounts Receivable | $12,200 | $12,600 | | Contract Assets and Lease Receivables | $7,600 | $6,800 | - As of June 30, 2025, approximately 88% of accounts receivable had not yet reached the invoice due date, indicating strong payment performance[58] NOTE 7. INVENTORIES This note provides a breakdown of inventory components, valued at the lower of cost (FIFO) or net realizable value Inventory Components (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :---------------- | :------------ | :---------------- | | Raw materials | $104,061 | $104,195 | | Work-in-process | $35,111 | $31,907 | | Finished goods | $253,412 | $245,775 | | Total Inventories | $392,584 | $381,877 | - Total inventories increased by $10.707 million from December 31, 2024, to June 30, 2025, primarily driven by an increase in finished goods and work-in-process[60] NOTE 8. LEASE COMMITMENTS This note details the maturities of operating lease liabilities and supplemental cash flow information related to leases Maturities of Operating Lease Liabilities (in thousands) | Year | Amount (in thousands) | | :-------------------- | :----- | | 2025 (remainder of year) | $14,493 | | 2026 | $32,735 | | 2027 | $27,271 | | 2028 | $21,004 | | 2029 | $16,903 | | Thereafter | $42,678 | | Total lease payments | $155,084 | Supplemental Cash Flow Information for Leases (in thousands) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------------- | :--------------------------- | :--------------------------- | | Cash paid for operating lease liabilities | $16,125 | $13,700 | | Right-of-use assets obtained, net of early terminations | $22,602 | $17,137 | NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS This note provides a breakdown of other current and long-term assets, including contract assets and equity investments Other Current Assets (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Contract assets, net | $67,908 | $60,751 | | Consideration paid to customers | $66,690 | $61,653 | | Prepaid expenses | $46,221 | $58,626 | | Taxes receivable | $34,995 | $26,990 | | Other assets | $28,802 | $48,159 | | Total other current assets | $244,616 | $256,179 | Other Long-Term Assets (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Contract assets, net | $206,881 | $185,506 | | Consideration paid to customers | $151,026 | $134,896 | | Deferred income taxes | $125,021 | $125,630 | | Equity investments | $31,004 | $31,004 | | Investments in long-term product supply arrangements | $27,298 | $26,714 | | Other assets | $39,535 | $43,768 | | Total other long-term assets | $580,765 | $547,518 | NOTE 10. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES This note details components of accounts payable, accrued liabilities, and other long-term liabilities, including supplier financing Accrued Liabilities (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Accrued employee compensation and related expenses | $140,920 | $174,583 | | Accrued expenses | $90,045 | $165,550 | | Accrued customer incentives and refund obligations | $84,970 | $78,195 | | Accrued taxes | $75,214 | $62,252 | | Current lease liabilities | $25,828 | $21,539 | | Total accrued liabilities | $416,977 | $502,119 | Other Long-Term Liabilities (in thousands) | Component | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Accrued taxes | $14,112 | $20,898 | | Other accrued long-term expenses | $42,676 | $23,443 | | Total other long-term liabilities | $56,788 | $44,341 | NOTE 11. DEBT This note details the company's Credit Facility and Senior Notes, including outstanding borrowings, interest rates, and covenants - As of June 30, 2025, IDEXX had $579.0 million in outstanding borrowings under its $1.25 billion Credit Facility, with $669.1 million remaining borrowing availability[68] - The weighted average effective interest rate on total outstanding borrowings under the Credit Facility was 5.3% at June 30, 2025[68] Outstanding Unsecured Senior Notes (Principal Amount in thousands) | Issue Date | Due Date | Series | Principal Amount (in thousands) | Coupon Rate | | :--------- | :--------- | :-------------------- | :--------------- | :---------- | | 12/11/2013 | 12/11/2025 | 2025 Series B Notes | $75,000 | 4.04% | | 9/4/2014 | 9/4/2026 | 2026 Senior Notes | $75,000 | 3.72% | | 2/12/2015 | 2/12/2027 | 2027 Series B Notes | $75,000 | 3.72% | | 3/14/2019 | 3/14/2029 | 2029 Series C Notes | $100,000 | 4.19% | | 4/2/2020 | 4/2/2030 | MetLife 2030 Series D Notes | $125,000 | 2.50% | | 4/14/2020 | 4/14/2030 | Prudential 2030 Series D Notes | $75,000 | 2.50% | - On June 18, 2025, the company repaid its 2025 Series C Notes for €88.9 million (US**$103.4 million**) at maturity[71] NOTE 12. REPURCHASES OF COMMON STOCK This note summarizes the company's common stock repurchase activities, including open market repurchases and employee share surrenders Common Stock Repurchases (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total shares repurchased | 715 | 415 | 1,660 | 736 | | Total cost of shares | $328,500 | $208,248 | $743,839 | $385,539 | | Average cost per share - total | $459.10 | $501.44 | $448.07 | $523.26 | - The company repurchased significantly more shares in the first six months of 2025 (1.66 million shares for $743.8 million) compared to the same period in 2024 (0.736 million shares for $385.5 million)[74] NOTE 13. INCOME TAXES This note discusses the company's effective income tax rates and influencing factors like share-based compensation and tax audit resolutions Effective Income Tax Rates | Period | 2025 | 2024 | | :-------------------- | :--- | :--- | | 3 Months Ended June 30 | 18.9% | 21.5% | | 6 Months Ended June 30 | 20.2% | 20.9% | - The decrease in the effective tax rate for both the three and six months ended June 30, 2025, was primarily due to increased tax benefits from share-based compensation and the resolution of international tax audits[75] - Cash paid for income taxes, net of refunds, was $137.4 million for the six months ended June 30, 2025, up from $90.9 million in the prior year[76] NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME This note details changes in Accumulated Other Comprehensive Income (AOCI), net of tax, including hedging and defined benefit plans Changes in AOCI (in thousands) for Six Months Ended June 30, 2025 | Component | Balance Dec 31, 2024 (in thousands) | Other comprehensive (loss) income before reclassifications (in thousands) | Reclassified from AOCI (in thousands) | Balance June 30, 2025 (in thousands) | | :------------------------------------ | :------------------- | :------------------------------------------------------- | :--------------------- | :-------------------- | | Foreign Currency Exchange Contracts | $12,785 | $(19,609) | $(1,817) | $(8,641) | | Interest Rate Swap | $542 | $234 | $(504) | $272 | | Euro Denominated Notes | $6,451 | $(8,958) | — | $(2,507) | | Cross Currency Swaps | $7,409 | $(14,047) | — | $(6,638) | | Defined Benefit Plans, Net of Tax | $(3,908) | — | $247 | $(3,661) | | Cumulative Translation Adjustment | $(116,924) | $61,149 | — | $(55,775) | | Total | $(93,645) | $18,769 | $(2,074) | $(76,950) | - AOCI improved from a loss of $93.645 million at December 31, 2024, to a loss of $76.950 million at June 30, 2025, primarily due to positive foreign currency translation adjustments[77] NOTE 15. EARNINGS PER SHARE This note reconciles weighted average shares outstanding for basic and diluted EPS, including anti-dilutive awards and options Weighted Average Shares Outstanding (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Shares outstanding for basic EPS | 80,413 | 82,630 | 80,864 | 82,863 | | Dilutive effect of share-based payment awards | 581 | 763 | 601 | 821 | | Shares outstanding for diluted EPS | 80,994 | 83,393 | 81,465 | 83,684 | Anti-Dilutive Awards and Options (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Weighted average number of shares underlying anti-dilutive awards | 35 | 70 | 1 | 53 | | Weighted average number of shares underlying anti-dilutive options | 587 | 474 | 563 | 440 | NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES This note outlines the company's commitments, contingencies, and guarantees, including legal proceedings and indemnification - On April 17, 2025, the company paid an $80 million judgment to conclude a litigation matter that was accrued in prior years[84] - The company accrues for loss contingencies when probable and estimable, and as of June 30, 2025, accruals for actual and threatened litigation were not material[83] - The fair value of potential indemnification obligations under agreements with third parties is believed to be minimal, with no liabilities recognized as of June 30, 2025[86] NOTE 17. SEGMENT REPORTING This note provides financial information for the company's three reportable segments: CAG, Water, and LPD, plus 'Other' activities - IDEXX operates through three reportable segments: Companion Animal Group (CAG), Water quality products (Water), and Livestock, Poultry and Dairy (LPD)[88] Segment Revenues (in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | CAG | $1,022,443 | $922,298 | $1,942,279 | $1,811,583 | | Water | $51,001 | $46,726 | $96,322 | $89,797 | | LPD | $31,762 | $30,306 | $60,358 | $58,511 | | Other | $4,251 | $4,248 | $8,925 | $7,782 | | Total Consolidated Revenue | $1,109,457 | $1,003,578 | $2,107,884 | $1,967,673 | Segment Gross Profit (in thousands) | Segment | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | CAG | $642,102 | $569,071 | $1,216,925 | $1,115,307 | | Water | $35,511 | $32,074 | $67,584 | $62,571 | | LPD | $14,929 | $15,558 | $29,294 | $30,792 | | Total Segment Gross Profit | $692,542 | $616,703 | $1,313,803 | $1,208,670 | NOTE 18. FAIR VALUE MEASUREMENTS This note describes the company's fair value measurements for financial assets and liabilities, categorized by a three-level hierarchy - 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, Level 3: unobservable inputs)[96][102] Assets and Liabilities Measured at Fair Value (in thousands) | Category | Level | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :---- | :------------ | :---------------- | | Money market funds | 1 | $7,508 | $139,626 | | Foreign currency exchange contracts | 2 | $698 | $16,921 | | Interest rate swap | 2 | $356 | $710 | | Cross currency swaps (Liabilities) | 2 | $15,019 | $33 | | Foreign currency exchange contracts (Liabilities) | 2 | $12,355 | — | | Contingent consideration (Liabilities) | 3 | $1,500 | $2,300 | - The estimated fair value of long-term debt was $511.9 million as of June 30, 2025, compared to its carrying value of $525.0 million[101] NOTE 19. HEDGING INSTRUMENTS This note provides transparency on the company's use of derivative and non-derivative instruments for hedging foreign currency and interest rate risk - IDEXX uses foreign currency exchange contracts and an interest rate swap as cash flow hedges to reduce exposure to variability in cash flows[113] - The company targets hedging approximately 75% to 85% of estimated exposure from intercompany product purchases and sales in major foreign currencies[116] - Euro-denominated notes and cross currency swap contracts are designated as net investment hedges to offset foreign currency translation gains and losses on net investments in foreign subsidiaries[118][119] Fair Values of Hedging Instruments (in thousands) | Instrument | Classification | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :-------------------- | :------------ | :---------------- | | Foreign currency exchange contracts (Assets) | Other current assets | $698 | $16,921 | | Interest rate swap contract (Assets) | Other current assets | $356 | $710 | | Foreign currency exchange contracts (Liabilities) | Accrued liabilities | $9,663 | — | | Cross currency swaps (Liabilities) | Other long-term liabilities | $15,019 | $33 | | Foreign currency denominated debt (Liabilities) | Short-term debt | — | $92,803 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition, operations, and cash flows, including business overview, accounting estimates, and segment performance Business Overview IDEXX develops and distributes products and services for companion animal, livestock, poultry, dairy, and water testing sectors - IDEXX operates through three primary segments: Companion Animal Group (CAG), Water quality products (Water), and Livestock, Poultry and Dairy (LPD)[128] - Key products and services include point-of-care veterinary diagnostics, reference laboratory services, practice management software, and water microbiology testing[129] Currency Impact, Tariff and Trade Policies, U.S. Tax Law Changes, and Other Items This section discusses external factors impacting the company, including foreign currency, tariff policies, and the new U.S. tax law - Approximately 35% of overall revenues for the year ended December 31, 2024, were from international sales, making the company susceptible to foreign currency exchange rate fluctuations[132] - Changes in U.S. and other countries' tariff and trade policies could adversely affect business, financial condition, and operating results by increasing costs or decreasing profit margins[133][134] - The company is evaluating the impact of the recently signed U.S. tax law, the "One Big Beautiful Bill Act" (OBBBA), on its financial statements and results of operations[135] Critical Accounting Estimates and Assumptions Financial statements require management estimates and judgments affecting reported amounts, consistent with the 2024 Annual Report - Financial statements require estimates and judgments affecting reported assets, liabilities, revenues, and expenses, consistent with the 2024 Annual Report[137] Recent Accounting Pronouncements This section refers to Note 2 for information on recent accounting standards and their impact on financial statements - Refer to Note 2 for details on recent accounting standards and their impact on financial statements[138] Non-GAAP Financial Measures This section defines and reconciles non-GAAP financial measures like organic revenue growth, segment income, and Adjusted EBITDA for investor analysis - Organic revenue growth is a non-GAAP measure that excludes the effects of foreign currency exchange rates and certain business acquisitions/divestitures to show underlying business trends[139][140][141] - Segment income from operations is a non-GAAP measure that adjusts for foreign currency transaction gains and losses, which are centrally managed[142] - Other non-GAAP measures include Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio, used to evaluate business performance[143] Results of Operations This section analyzes the company's financial performance for the three and six months ended June 30, 2025, by total company and operating segments Three Months Ended June 30, 2025, Compared to Three Months Ended June 30, 2024 For Q2 2025, total revenue grew 10.6% (9.3% organic), driven by CAG Diagnostics, with improved gross profit margin and lower operating expenses Total Company Revenue Growth (3 Months Ended June 30) | Segment | 2025 Revenue (in thousands) | Reported Revenue Growth | Organic Revenue Growth | | :-------------------- | :-------------------------- | :---------------------- | :--------------------- | | CAG | $1,022,443 | 10.9% | 9.7% | | Water | $51,001 | 9.1% | 8.4% | | LPD | $31,762 | 4.8% | 2.6% | | Other | $4,251 | 0.1% | 0.1% | | Total Company | $1,109,457 | 10.6% | 9.3% | - Total Company revenue increased by 10.6% (9.3% organic) to $1,109.457 million, driven by CAG Diagnostics recurring revenue and IDEXX inVue Dx Analyzer placements[145][147] - Gross profit increased by 12.2% to $694.732 million, with a 90 basis point increase in gross profit margin to 62.6%, reflecting higher consumable volume, productivity, and net price realization[148] - Income from operations increased by 41.4% to $373.046 million, primarily due to a $61.5 million decrease in general and administrative expense related to a prior-year litigation matter[148][149] Total Company (Three Months) Total Company revenue grew 10.6% (9.3% organic) to $1,109.457 million, with gross profit up 12.2% and operating income up 41.4% Total Company Results of Operations (3 Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change Amount (in thousands) | Percentage Change | | :-------------------- | :----------- | :----------- | :------------ | :---------------- | | Revenues | $1,109,457 | $1,003,578 | $105,879 | 10.6% | | Cost of revenue | $414,725 | $384,419 | $30,306 | 7.9% | | Gross profit | $694,732 | $619,159 | $75,573 | 12.2% | | Income from operations | $373,046 | $263,801 | $109,245 | 41.4% | - Gross profit margin increased by 90 basis points to 62.6%, driven by higher IDEXX VetLab consumable volume, productivity improvements, and net price realization[148] - General and administrative expense decreased by $58.562 million, primarily due to a $61.5 million litigation expense in the prior year[149] Companion Animal Group (Three Months) CAG revenue increased 10.9% (9.7% organic) to $1,022.443 million, driven by VetLab consumables and inVue Dx Analyzer placements CAG Revenue by Category (3 Months Ended June 30, in thousands) | Category | 2025 Revenue (in thousands) | Reported Growth | Organic Growth | | :------------------------------------ | :----------- | :-------------- | :------------- | | CAG Diagnostics recurring revenue | $877,995 | 8.6% | 7.4% | | IDEXX VetLab consumables | $375,112 | 15.3% | 13.6% | | Rapid assay products | $100,240 | (3.0%) | (3.3%) | | Reference laboratory diagnostic and consulting services | $367,694 | 5.9% | 4.8% | | CAG Diagnostics capital - instruments | $58,600 | 66.0% | 62.5% | | Veterinary software, services and diagnostic imaging systems | $85,848 | 9.3% | 9.2% | - IDEXX VetLab consumables revenue increased by 15.3% (13.6% organic) due to higher test volumes and price realization, supported by 10% growth in the active installed base of premium instruments[153] - CAG Diagnostics capital - instrument revenue surged by 66.0% (62.5% organic), primarily driven by placements of the new IDEXX inVue Dx Analyzer[157] - Segment gross profit margin increased by 110 basis points to 62.8%, and segment income from operations grew by 44.3% to $348.477 million[159] Water (Three Months) Water segment revenue increased 9.1% (8.4% organic) to $51.001 million, with gross profit margin up 100 basis points and operating income up 20.2% - Water segment revenue increased by 9.1% (8.4% organic) to $51.001 million, due to higher realized prices and increased testing volumes, especially in Europe and Asia Pacific[161] - Gross profit margin for the Water segment increased by 100 basis points to 69.6%, mainly due to higher realized prices and lower product costs[162] - Segment income from operations for Water grew by 20.2% to $24.642 million[161] Livestock, Poultry and Dairy (Three Months) LPD segment revenue increased 4.8% (2.6% organic) to $31.762 million, but gross profit decreased 4.0% due to margin decline, resulting in an operating loss - LPD segment revenue increased by 4.8% (2.6% organic) to $31.762 million, primarily from higher realized prices and increased test volumes in Asia Pacific and North America[165] - Gross profit decreased by 4.0% to $14.929 million, with a 430 basis point decrease in gross profit margin to 47.0%, mainly due to higher product and related costs[166] - The LPD segment reported an income from operations loss of $0.505 million, a 133.7% decrease from the prior year's profit[165] Other (Three Months) Other segment revenue remained flat at $4.251 million, gross profit decreased 10.8%, but operating income increased 74.2% due to lower foreign currency losses - Other segment revenue was $4.251 million, a slight increase of 0.1%, with higher sales volumes of OPTI Medical consumables and instruments offset by lower royalty revenue[169] - Gross profit decreased by 10.8% to $2.190 million, with a 630 basis point decrease in gross profit margin to 51.5%, largely due to higher product and freight costs[170] - Other income from operations increased by 74.2% to $0.432 million, primarily due to lower foreign currency transaction losses[169][171] Non-Operating Items (Three Months) Interest expense increased to $11.3 million, interest income decreased to $0.6 million, and the effective income tax rate decreased to 18.9% - Interest expense increased to $11.3 million (from $8.1 million in 2024) due to higher average debt levels and interest rates[172] - Interest income decreased to $0.6 million (from $3.4 million in 2024) due to a decrease in money market investments[172] - The effective income tax rate decreased to 18.9% (from 21.5% in 2024), primarily due to increased tax benefits from share-based compensation and international tax audit resolutions[173] Six Months Ended June 30, 2025, Compared to Six Months Ended June 30, 2024 For H1 2025, total revenue grew 7.1% (7.1% organic), driven by CAG Diagnostics, with improved gross profit margin and lower operating expenses Total Company Revenue Growth (6 Months Ended June 30) | Segment | 2025 Revenue (in thousands) | Reported Revenue Growth | Organic Revenue Growth | | :-------------------- | :-------------------------- | :---------------------- | :--------------------- | | CAG | $1,942,279 | 7.2% | 7.1% | | Water | $96,322 | 7.3% | 7.9% | | LPD | $60,358 | 3.2% | 3.4% | | Other | $8,925 | 14.7% | 14.7% | | Total Company | $2,107,884 | 7.1% | 7.1% | - Total Company revenue increased by 7.1% (7.1% organic) to $2,107.884 million, primarily from CAG Diagnostics recurring revenue and IDEXX inVue Dx Analyzer placements[174][175] - Gross profit increased by 8.7% to $1,318.111 million, with a 90 basis point increase in gross profit margin to 62.5%, reflecting higher consumable volume, favorable instrument mix, and net price realization[176] - Income from operations increased by 22.5% to $689.580 million, mainly due to a $61.5 million litigation expense in the prior year, partially offset by a $9 million reduction in accrued expense in the current period[176][177] Total Company (Six Months) Total Company revenue grew 7.1% (7.1% organic) to $2,107.884 million, with gross profit up 8.7% and operating income up 22.5% Total Company Results of Operations (6 Months Ended June 30, in thousands) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change Amount (in thousands) | Percentage Change | | :-------------------- | :----------- | :----------- | :------------ | :---------------- | | Revenues | $2,107,884 | $1,967,673 | $140,211 | 7.1% | | Cost of revenue | $789,773 | $755,444 | $34,329 | 4.5% | | Gross profit | $1,318,111 | $1,212,229 | $105,882 | 8.7% | | Income from operations | $689,580 | $562,759 | $126,821 | 22.5% | - Gross profit margin increased by 90 basis points to 62.5%, driven by higher IDEXX VetLab consumable volume, favorable instrument placement mix, and net price realization[176] - General and administrative expense decreased by $59.025 million, primarily due to a $61.5 million litigation expense in the prior year, partially offset by a $9 million reduction in accrued expense in the current period[177] Companion Animal Group (Six Months) CAG revenue increased 7.2% (7.1% organic) to $1,942.279 million, driven by VetLab consumables and inVue Dx Analyzer placements CAG Revenue by Category (6 Months Ended June 30, in thousands) | Category | 2025 Revenue (in thousands) | Reported Growth | Organic Growth | | :------------------------------------ | :----------- | :-------------- | :------------- | | CAG Diagnostics recurring revenue | $1,684,262 | 6.0% | 6.0% | | IDEXX VetLab consumables | $719,891 | 12.1% | 12.1% | | Rapid assay products | $184,274 | (2.8%) | (2.7%) | | Reference laboratory diagnostic and consulting services | $712,100 | 2.9% | 2.9% | | CAG Diagnostics capital - instruments | $90,594 | 30.6% | 30.1% | | Veterinary software, services and diagnostic imaging systems | $167,423 | 9.0% | 8.3% | - IDEXX VetLab consumables revenue increased by 12.1% (12.1% organic) due to higher volume and price realization, supported by 10% growth in the active installed base of premium instruments[182] - CAG Diagnostics capital - instrument revenue increased by 30.6% (30.1% organic), primarily due to placements of the new IDEXX inVue Dx Analyzer[186] - Segment gross profit margin increased by 110 basis points to 62.7%, and segment income from operations grew by 23.5% to $643.632 million[188] Water (Six Months) Water segment revenue increased 7.3% (7.9% organic) to $96.322 million, with gross profit margin up 50 basis points and operating income up 13.8% - Water segment revenue increased by 7.3% (7.9% organic) to $96.322 million, due to higher realized prices and increased testing volumes, especially in Europe and Asia Pacific[190] - Gross profit margin for the Water segment increased by 50 basis points to 70.2%, mainly due to higher realized prices, partially offset by higher product costs[191] - Segment income from operations for Water grew by 13.8% to $45.459 million[190] Livestock, Poultry and Dairy (Six Months) LPD segment revenue increased 3.2% (3.4% organic) to $60.358 million, but gross profit decreased 4.9% due to margin decline, resulting in an operating loss - LPD segment revenue increased by 3.2% (3.4% organic) to $60.358 million, primarily from higher realized prices and increased test volumes in the Americas and Asia Pacific[194] - Gross profit decreased by 4.9% to $29.294 million, with a 410 basis point decrease in gross profit margin to 48.5%, mainly due to higher product and related costs[195] - The LPD segment reported an income from operations loss of $0.380 million, a 116.1% decrease from the prior year's profit[194] Other (Six Months) Other segment revenue increased 14.7% to $8.925 million, gross profit increased 21.0% with improved margin, and operating income shifted from loss to profit - Other segment revenue increased by 14.7% to $8.925 million, primarily due to higher sales volumes of OPTI Medical consumables and instruments[198] - Gross profit increased by 21.0% to $4.308 million, with a 260 basis point increase in gross profit margin to 48.3%, largely due to lower product costs[199] - Other income from operations improved significantly from a loss of $0.786 million in 2024 to a profit of $0.869 million in 2025, primarily due to lower foreign currency transaction losses[198][200] Non-Operating Items (Six Months) Interest expense increased to $19.0 million, interest income decreased to $1.8 million, and the effective income tax rate decreased to 20.2% - Interest expense increased to $19.0 million (from $16.0 million in 2024) due to higher average debt levels and interest rates[201] - Interest income decreased to $1.8 million (from $7.8 million in 2024) due to a decrease in money market investments[201] - The effective income tax rate decreased to 20.2% (from 20.9% in 2024), primarily driven by the resolution of international tax audits[202] Liquidity and Capital Resources The company funds operations via cash, operating cash flows, and Credit Facility; working capital decreased to $138.5 million due to lower cash and higher borrowings - Working capital decreased to $138.5 million as of June 30, 2025, from $332.0 million at December 31, 2024, due to lower cash balances and higher Credit Facility borrowings[203] - Cash and cash equivalents were $164.6 million at June 30, 2025, with $669.1 million remaining borrowing availability under the $1.25 billion Credit Facility[203] Cash and Cash Equivalents (in thousands) | Location | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------- | :------------ | :---------------- | | U.S. | $18,555 | $145,118 | | Foreign | $146,039 | $143,148 | | Total | $164,594 | $288,266 | - Net cash provided by operating activities for the six months ended June 30, 2025, was $423.7 million, a decrease of $23.2 million YoY, primarily due to an $80 million litigation payment and higher tax payments[208] - Cash used by financing activities increased to $496.0 million, mainly due to $739.0 million in common stock repurchases and a $103.4 million senior note payment, partially offset by $329.0 million in net Credit Facility borrowings[213] - The company anticipates paying off its $250.0 million term loan (due October 2025) and $75.0 million 2025 Series B Notes (due December 2025) using available cash, Credit Facility borrowings, or new note issuances[215][216] Consolidated Leverage Ratio Calculation (Twelve Months Ended June 30, 2025, in thousands) | Metric | Amount (in thousands) | | :------------------------------------ | :------------- | | Adjusted EBITDA | $1,459,233 | | Total debt | $1,103,806 | | Gross debt | $1,105,787 | | Gross debt to Adjusted EBITDA ratio | 0.76 | | Net debt | $941,193 | | Net debt to Adjusted EBITDA ratio | 0.64 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses market risks, including foreign currency exchange rates, interest rate risk, and inflation, and their impact on revenues and profits - Approximately 22% of consolidated revenue for the three and six months ended June 30, 2025, was derived from products manufactured in the U.S. and sold internationally in local currencies[224] Estimated Foreign Currency Exchange Impact (in thousands, except per share amounts) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue increase (decrease) | $12,454 | $(7,109) | $201 | $(6,862) | | Operating profit increase (decrease) - compared to prior period | $3,022 | $(2,613) | $(1,066) | $(2,816) | | Diluted EPS increase (decrease) - compared to prior period | $0.03 | $(0.02) | $(0.01) | $(0.02) | - A 1% strengthening of the U.S. dollar is projected to reduce revenue by approximately $8 million and operating income by approximately $3 million for the remainder of 2025, net of hedge positions[226] - The company uses an interest rate swap to fix the variable interest rate on $250.0 million of Credit Facility borrowings at 3.9% through October 20, 2025, to manage interest rate risk[227] - Inflationary pressures are expected to continue to result in higher costs for labor, commodities, energy, and transportation, which may not be fully offset by productivity initiatives and price increases[227] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[228] - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[229] PART II—OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, equity sales, other disclosures, and exhibits Item 1. Legal Proceedings The company is subject to ordinary legal actions, which management believes will not materially affect financial results, though outcomes are uncertain - Management believes current legal proceedings are not expected to have a material effect on results of operations, financial condition, or cash flows[232] - The results of legal actions are uncertain, and actual losses could exceed accruals[232] Item 1A. Risk Factors No material changes to risk factors previously disclosed in the 2024 Annual Report, which could materially affect the business - No material changes to risk factors previously disclosed in the 2024 Annual Report[233] - Additional unknown or immaterial risks could also adversely affect the business[233] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details common stock repurchases during Q2 2025 under the company's ongoing share repurchase program Common Stock Repurchases (3 Months Ended June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :-------------------- | :----------------------------- | :--------------------------- | | April 1 to April 30, 2025 | 383,300 | $412.72 | | May 1 to May 31, 2025 | 194,263 | $500.94 | | June 1 to June 30, 2025 | 136,073 | $529.27 | | Total | 713,636 | N/A | - As of December 31, 2024, the Board of Directors approved the repurchase of up to 78 million shares, with 4,487,220 shares remaining available under the program as of June 30, 2025[237] Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025[236] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and interactive data files - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2)[238] - Corporate governance documents such as the Amended and Restated Certificate of Incorporation and By-Laws are incorporated by reference[238] - Interactive data files (iXBRL) for the financial statements are included as Exhibit 101 and 104[238]