IDEXX(IDXX) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Results IDEXX reported $964 million revenue and $2.81 diluted EPS for Q1 2024, with strong CAG and Water segment growth, despite a slight full-year guidance reduction due to FX impacts First Quarter Highlights IDEXX achieved $964 million revenue and $2.81 diluted EPS in Q1 2024, driven by strong CAG and Water segment performance, while updating full-year guidance due to FX Q1 2024 Key Financial Metrics | Metric | Value | Growth (Reported) | Growth (Organic/Comparable) | | :--- | :--- | :--- | :--- | | Revenue | $964 million | 7% | 7% | | CAG Revenue | - | 7% | 7% | | CAG Diagnostics Recurring Revenue | - | 7% | 7% | | EPS (Diluted) | $2.81 | 10% | 9% | - Growth was supported by strong execution, including an 11% annual increase in the global premium instrument installed base and high customer retention[3] - Operating margin contracted by 10 basis points, which includes a significant negative impact of ~180 basis points from lapping a customer contract resolution payment in Q1 2023[4] Performance by Business Segment CAG led growth with 7% organic increase, outperforming U.S. clinical visits, while Water segment also grew 11% organically, and LPD declined 3% due to Asia Pacific screening reductions Companion Animal Group (CAG) - CAG revenue grew 7% as reported and organic, with U.S. CAG Diagnostics recurring revenue growing 6.5%, which was ~900 basis points above U.S. same-store clinical visit growth[7] CAG Revenue Growth by Category (Q1 2024) | Category | Reported Growth | Organic Growth | | :--- | :--- | :--- | | IDEXX VetLab consumables | 9% | 9% | | Reference laboratory services | 7% | 6% | | Rapid assay products | 5% | 5% | | Veterinary software, services & imaging | 12% | 8% | Water - Water segment revenue grew 11% as reported and organic, reflecting solid gains across regions and benefits from year-end order shipment timing[11] Livestock, Poultry and Dairy (LPD) - LPD revenue declined 3% as reported and organic. Gains in the U.S. and Europe were more than offset by lower revenues in the Asia Pacific region, partly due to reduced herd health screening[12] Profitability Analysis Gross margin improved to 61.5% due to favorable mix and lower costs, but operating margin slightly contracted to 31.0% due to a prior-year contract payment and increased R&D - Gross profit increased by 9%, with gross margin expanding by 120 basis points to 61.5%, supported by business mix and lower costs[13] - Operating margin was 31.0%, a 10 basis point decrease, including a ~180 basis point negative impact from lapping a customer contract resolution payment in Q1 2023[14] - Operating expense growth of 12% was driven by higher R&D spending on innovation and new platform development, as well as the impact of the prior-year customer contract payment[14] 2024 Full-Year Financial Outlook IDEXX lowered its 2024 revenue outlook to $3,895-$3,965 million and EPS to $10.82-$11.20, primarily due to adverse foreign exchange impacts and moderating U.S. clinical visit trends 2024 Full-Year Outlook Comparison (in millions for Revenue, in dollars for EPS) | Metric | Updated Outlook | Prior Outlook | | :--- | :--- | :--- | | Revenue | $3,895 - $3,965 M | $3,930 - $4,040 M | | Reported Revenue Growth | 6.5% - 8.5% | 7.5% - 10.5% | | Organic Revenue Growth | 7% - 9% | 7% - 10% | | Operating Margin | 30.2% - 30.7% | 30.2% - 30.7% | | EPS | $10.82 - $11.20 | $10.84 - $11.33 | | Reported EPS Growth | 8% - 11% | 8% - 13% | - The updated outlook includes a $35 million negative revenue impact from the strengthening U.S. dollar and a 1% reduction to the high end of the organic revenue growth range to reflect moderating U.S. clinical visit trends[16] - The EPS outlook reduction was mitigated by sustained expectations for operating margin improvement and favorable adjustments to projected net interest expense (now ~$21 million vs. ~$27 million prior)[18][19] Foreign Currency Impact Foreign currency changes are expected to negatively impact full-year 2024 results, reducing total revenue growth by ~100 basis points and EPS by ~$0.09 Estimated Foreign Currency Exchange Rate Impacts on 2024 Outlook (in bps for growth rates, in dollars for EPS) | Metric | Estimated Impact | | :--- | :--- | | Revenue growth rate | (~100bps) | | CAG Diagnostics recurring revenue growth rate | (100bps) | | Operating margin growth | ~ 0 bps | | EPS | ($0.09) | | EPS growth rate | (~1%) | Financial Statements and Supplementary Data Consolidated Financial Statements Unaudited Q1 2024 statements show 7.1% revenue growth to $964.1 million, 10.1% net income increase to $235.6 million, and total assets growing to $3.35 billion Statement of Operations Condensed Consolidated Statement of Operations (in thousands) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $964,095 | $900,195 | | Gross Profit | $593,070 | $542,971 | | Income from Operations | $298,958 | $280,399 | | Net Income | $235,579 | $214,054 | | Diluted EPS | $2.81 | $2.55 | Balance Sheet Condensed Consolidated Balance Sheet (in thousands) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $397,433 | $453,932 | | Total current assets | $1,501,973 | $1,495,254 | | Total assets | $3,353,515 | $3,259,925 | | Total current liabilities | $956,902 | $951,547 | | Total liabilities | $1,784,609 | $1,775,395 | | Total stockholders' equity | $1,568,906 | $1,484,530 | Statement of Cash Flows Condensed Consolidated Statement of Cash Flows (in thousands) | Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $198,585 | $183,912 | | Net cash used by investing activities | ($106,944) | ($39,511) | | Net cash used by financing activities | ($144,074) | ($146,081) | | Net decrease in cash | ($56,499) | ($1,179) | - Free cash flow for the quarter was $168.3 million, an increase from $144.4 million in the prior year period[48] Segment and Revenue Analysis CAG remains the largest segment at $889.3 million revenue, with Water and CAG showing strong organic growth, while international markets slightly outpaced U.S. growth Q1 2024 Revenue and Gross Profit by Segment (in thousands) | Segment | Revenue | Gross Profit | Gross Margin % | | :--- | :--- | :--- | :--- | | CAG | $889,285 | $546,236 | 61.4% | | Water | $43,071 | $30,497 | 70.8% | | LPD | $28,205 | $15,234 | 54.0% | | Total | $964,095 | $593,070 | 61.5% | Q1 2024 Organic Revenue Growth by Segment and Geography | Segment/Geography | Organic Revenue Growth | | :--- | :--- | | CAG | 7.2% | | Water | 10.6% | | LPD | (3.3)% | | Total Company | 6.8% | | United States | 6.5% | | International | 7.5% | - Within CAG, recurring revenue from veterinary software, services, and diagnostic imaging systems grew 11.2% organically, driven by high demand for cloud-based software[42] Non-GAAP Financial Measures and Reconciliations The company uses non-GAAP measures like 'organic revenue growth' and 'comparable EPS growth' to provide clearer business performance insights, with reconciliations to GAAP equivalents - Organic revenue growth is a non-GAAP measure that excludes the impact of changes in foreign currency exchange rates and certain acquisitions/divestitures to facilitate easier period-over-period comparisons[29] - Comparable EPS growth is a non-GAAP measure that excludes currency impacts, tax benefits from share-based compensation, and other non-recurring items to better reflect fundamental business performance[34] Q1 2024 EPS Reconciliation (Diluted, in dollars) | Item | Per Share Amount | | :--- | :--- | | Reported EPS | $2.81 | | Less: Share-based compensation tax benefit | $0.10 | | Less: Change from currency | $0.00 | | Comparable EPS | $2.71 | Shareholder Activities IDEXX repurchased 321,000 shares of common stock for $177.3 million during Q1 2024, primarily through open market transactions Q1 2024 Common Stock Repurchases (in thousands) | Category | Shares (thousands) | Cost (thousands) | | :--- | :--- | :--- | | Open market repurchases | 303 | $167,102 | | Employee surrenders for tax | 18 | $10,189 | | Total | 321 | $177,291 | Corporate Information and Disclosures Conference Call and Annual Meeting The company announced its Q1 2024 earnings conference call for May 1, 2024, and a virtual 2024 Annual Meeting of Shareholders on May 6, 2024 - A conference call to discuss Q1 2024 results was scheduled for May 1, 2024, at 8:30 a.m. (EDT)[22] - The 2024 Annual Meeting of Shareholders will be held virtually on Monday, May 6, 2024, at 4:30 p.m. (EDT)[23] Forward-Looking Statements and Non-GAAP Measures This section cautions that forward-looking statements are subject to risks and explains the use of non-GAAP financial measures as supplemental information, not substitutes for GAAP results - The report contains forward-looking statements, including the 2024 financial outlook, which are not guarantees of future performance and are subject to known and unknown risks[26] - The company uses non-GAAP financial measures to supplement GAAP results, believing they provide useful information for evaluating business performance and comparing it to peers[27]