Business Description
IDEXX Laboratories, Inc. is a company engaged in the development, manufacturing, and distribution of products and services for various sectors, including companion animal veterinary, livestock, poultry and dairy, water testing, and human medical diagnostics . The company operates through three main business segments: Companion Animal Group (CAG), Water, and Livestock, Poultry and Dairy (LPD) . IDEXX's business model is heavily reliant on a recurring revenue structure, supported by strong customer loyalty and high retention rates .
- Companion Animal Group (CAG) - Provides diagnostic and information management-based products and services for the companion animal veterinary industry, including in-clinic diagnostic solutions, reference laboratory services, and veterinary software.
- Water - Develops products used to detect microbiological parameters in water.
- Livestock, Poultry and Dairy (LPD) - Offers diagnostic tests and services to manage livestock and poultry health and ensure milk quality and safety.
- OPTI Medical - Focuses on human medical diagnostics.
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Q2 2024 Summary
What went well
- IDEXX continues to deliver solid financial performance with sustained high customer retention rates and new business gains, supporting strong growth in recurring revenues despite some macro headwinds.
- Investments in innovation and technology are driving growth through same-store sales and higher diagnostics utilization, leading to strong gross margins and operating expense leverage.
- Management remains optimistic about long-term growth, citing strong secular tailwinds like pet humanization, longer pet lifespans, and increased spending on pet healthcare, which are expected to drive future growth despite near-term visit declines.
What went wrong
- Deceleration in U.S. CAG Diagnostics recurring premium growth to 250 basis points, the lowest in recent memory, indicating ongoing growth deceleration over the past 10 quarters.
- Future growth may rely more on innovation and creating growth in new markets rather than market share gains, potentially leading to higher R&D expenses and uncertainty in achieving historical growth rates.
- The company incurred a $62 million expense accrual related to an ongoing litigation matter over royalty payments, indicating potential legal and financial risks impacting future profitability.
Q&A Summary
-
Legal Charge Impact
Q: What was the $62M legal charge about?
A: The company recognized a $62 million expense accrual due to an ongoing litigation matter related to royalty payments over time. They do not comment further on ongoing litigation but have included disclosures in their filings. -
Visit Trends and Growth Outlook
Q: Can you explain the headwinds in visit trends?
A: The company is facing headwinds in clinical visits due to staffing challenges and macroeconomic impacts on consumers. Despite this, they continue to see positive long-term drivers like pet humanization, increased pet ownership, and aging pets requiring more care. -
Impact of Pain Medications
Q: Are pain meds affecting diagnostics usage?
A: The introduction of pain medications like Librela has impacted non-wellness diagnostic metrics. Some pets receive pain treatments without additional diagnostics, affecting visit numbers. However, diagnostic utilization in wellness visits is up 100 basis points year-over-year. -
Returning to Long-Term Growth Targets
Q: How will you regain 10%+ growth?
A: They remain confident in returning to 10%+ long-term growth through innovation and expansion. New products and services, along with positive sector trends, are expected to drive future growth. -
Cost Control and Margin Management
Q: How are you managing costs amid slower growth?
A: The company has effectively managed expenses, aligning expense growth with revenue growth. They continue to invest heavily in R&D and areas important for long-term growth. Gross margin improvements are driven by cost management, lab productivity, and favorable business mix. -
Innovation Pipeline and inVue Launch
Q: What's the update on inVue and other innovations?
A: The inVue launch is on track for Q4, primarily as an instrument introduction. Recurring revenue is expected to build over time. Additional innovations will be discussed at the Investor Day. -
Market Share and Future Growth Levers
Q: Do you still have room for market share gains?
A: Most growth has come from same-store sales driven by innovation and increased diagnostics utilization. They focus on developing new platforms and expanding their offerings to open up new market opportunities.
Key Metrics
Revenue by Segment - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
CAG | 827.279 | 866.65 | 837.16 | 821.31 | 3,352.4 | 889.3 | 922.3 | 892.0 | ||||||||||||||||||||||||||||||||||||||||||||||
- CAG Diagnostics Recurring | 726.902 | 762.48 | 733.96 | 712.06 | 2,935.4 | 780.1 | 808.5 | 783.4 | ||||||||||||||||||||||||||||||||||||||||||||||
-- IDEXX VetLab Consumables | 291.114 | 303.74 | 296.04 | 297.41 | 1,188.3 | 316.9 | 325.3 | 329.1 | ||||||||||||||||||||||||||||||||||||||||||||||
-- Rapid Assay Products | 82.032 | 97.34 | 87.56 | 77.57 | 344.5 | 86.3 | 103.3 | 92.8 | ||||||||||||||||||||||||||||||||||||||||||||||
-- Reference Lab Services | 323.180 | 330.11 | 320.29 | 305.02 | 1,278.6 | 344.3 | 347.4 | 328.4 | ||||||||||||||||||||||||||||||||||||||||||||||
-- Services and Accessories | 30.576 | 31.30 | 30.06 | 32.16 | 124.1 | 32.6 | 32.4 | 33.2 | ||||||||||||||||||||||||||||||||||||||||||||||
- CAG Diagnostics Capital | 33.144 | 34.05 | 32.25 | 38.16 | 137.6 | 34.1 | 35.3 | 29.5 | ||||||||||||||||||||||||||||||||||||||||||||||
- Veterinary Software | 67.233 | 70.12 | 70.95 | 71 | 279.3 | 75.0 | 78.6 | 79.0 | ||||||||||||||||||||||||||||||||||||||||||||||
-- Recurring Revenue | - | - | - | - | 214.6 | 59.7 | 63.1 | 64.6 | ||||||||||||||||||||||||||||||||||||||||||||||
-- Systems and Hardware | - | - | - | - | 64.7 | 15.3 | 15.4 | 14.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Water | 38.883 | 43.03 | 44.45 | 41.74 | 168.1 | 43.1 | 46.7 | 50.2 | ||||||||||||||||||||||||||||||||||||||||||||||
LPD | 29.208 | 29.91 | 29.75 | 32.83 | 121.7 | 28.2 | 30.3 | 29.0 | ||||||||||||||||||||||||||||||||||||||||||||||
Other | 4.825 | 4.04 | 4.17 | 5.77 | 18.8 | 3.5 | 4.2 | 4.4 | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 900.195 | 943.63 | 915.53 | 901.64 | 3,661.0 | 964.1 | 1,003.6 | 975.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Revenue by Geography - in Millions of USD | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
Americas | - | - | - | - | 2,625.460 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- United States | 590.413 | 621.607 | 603.05 | 576.36 | 2,391.427 | 631.009 | 660.146 | 638.06 | ||||||||||||||||||||||||||||||||||||||||||||||
- Canada | 35.962 | 41.635 | 35.61 | 36.9 | 150.110 | 36.711 | 40.992 | 36.93 | ||||||||||||||||||||||||||||||||||||||||||||||
- Latin America & Caribbean | 19.452 | 20.816 | 21.35 | 22.3 | 83.923 | 20.240 | 21.316 | 20.98 | ||||||||||||||||||||||||||||||||||||||||||||||
Europe, Middle East, Africa | 176.008 | 178.666 | 177.85 | 183.66 | 716.184 | 199.831 | 200.689 | 198.61 | ||||||||||||||||||||||||||||||||||||||||||||||
- Germany | - | - | - | - | 149.789 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- United Kingdom | - | - | - | - | 121.745 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- France | - | - | - | - | 96.797 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Italy | - | - | - | - | 53.787 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Spain | - | - | - | - | 52.332 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Switzerland | - | - | - | - | 34.830 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Netherlands | - | - | - | - | 30.508 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Other EMEA | - | - | - | - | 176.396 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Asia Pacific | 78.360 | 80.906 | 77.67 | 82.37 | 319.309 | 76.304 | 80.435 | 80.97 | ||||||||||||||||||||||||||||||||||||||||||||||
- Australia | - | - | - | - | 95.465 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Japan | - | - | - | - | 75.569 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- China | - | - | - | - | 44.168 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
- Other Asia Pacific | - | - | - | - | 104.107 | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Total Revenue | 900.195 | 943.630 | 915.53 | 901.6 | 3,660.953 | 964.095 | 1,003.578 | 975.54 | ||||||||||||||||||||||||||||||||||||||||||||||
KPIs - Metric / Quarter | FY 2013 | Q1 2014 | Q2 2014 | Q3 2014 | Q4 2014 | FY 2014 | Q1 2015 | Q2 2015 | Q3 2015 | Q4 2015 | FY 2015 | Q1 2016 | Q2 2016 | Q3 2016 | Q4 2016 | FY 2016 | Q1 2017 | Q2 2017 | Q3 2017 | Q4 2017 | FY 2017 | Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | FY 2018 | Q1 2019 | Q2 2019 | Q3 2019 | Q4 2019 | FY 2019 | Q1 2020 | Q2 2020 | Q3 2020 | Q4 2020 | FY 2020 | Q1 2021 | Q2 2021 | Q3 2021 | Q4 2021 | FY 2021 | Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | FY 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | FY 2023 | Q1 2024 | Q2 2024 | Q3 2024 |
Deferred Revenue - Rebate & Up-front Consideration ($M) | 24.9 | 23.7 | 22.5 | 32.9 | - | 31.9 | 30.4 | 29.8 | ||||||||||||||||||||||||||||||||||||||||||||||
Lease Revenue - Instrument Rental Quarterly ($M) | 4.5 | 5.5 | 5.3 | - | - | 3.8 | 3.3 | 3.5 | ||||||||||||||||||||||||||||||||||||||||||||||
Lease Revenue - Instrument Rental Annual ($M) | - | - | - | 20.7 | - | - | - | - |
Executive Team
Past Guidance
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024 and FY 2024
- Guidance:
- Full Year Guidance:
- Reported Operating Margin: 28.7% to 29.0%, incorporating a reduction of approximately 160 basis points due to a discrete litigation expense accrual .
- Full Year EPS: $10.31 to $10.59 per share, down $0.56 per share at midpoint due to the litigation expense accrual .
- Organic Revenue Growth: Updated to 6.2% to 7.8%, approximately 7% at midpoint .
- Reported Revenues: $3.885 billion to $3.945 billion, a reduction of $15 million at midpoint .
- Foreign Exchange Impact: Estimated to reduce full year revenue growth by approximately 0.5% and EPS by approximately $0.05 per share .
- Q3 2024 Guidance:
- Reported Revenue Growth: 6% to 8%, net of an estimated 1% growth headwind from foreign exchange .
- Organic Revenue Growth: Approximately 6.5% to 8.5%, including 1% to 1.5% growth benefit from equivalent days effects .
- Reported Operating Margins: 29.5% to 30.0%, down moderately on a comparable basis .
- Free Cash Flow Conversion: Maintaining outlook for 90% to 95%, reflecting estimated capital spending of approximately $180 million .
- Full Year Guidance:
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: FY 2024
- Guidance:
- Free Cash Flow Conversion: 90% to 95%, reflecting estimated capital spending of approximately $180 million .
- Revenue Guidance:
- Full year reported revenues: $3.895 billion to $3.965 billion, a reduction of $55 million at midpoint due to the strengthening of the U.S. dollar .
- Full year organic growth: 7% to 9%, supported by 7.5% to 9.5% gains in CAG Diagnostic recurring revenues .
- Operating Margins: 30.2% to 30.7% for the full year 2024, with an expected expansion of 20 to 70 basis points in full year comparable operating margin .
- Earnings Per Share (EPS): $10.82 to $11.20 per share, down $0.08 per share at midpoint due to updated foreign exchange estimates .
- Foreign Exchange Impact: Negative $0.09 per share full year EPS impact, $0.11 per share unfavorable to prior estimates .
- Q2 2024 Guidance:
- Reported revenue growth: 5% to 7.5%, net of an estimated 1.5% growth headwind from foreign exchange .
- Organic revenue growth for Q2: 6% to 8.5% .
- Reported operating margins for Q2: 31.0% to 31.4% .
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Organic Revenue Growth: 7% to 10% overall, supported by 7.5% to 10.5% organic gains in CAG Diagnostic recurring revenues .
- Reported Revenue Growth: 7.5% to 10.5% on a reported basis, with revenues projected between $3.930 billion to $4.04 billion .
- Operating Margin: 30.2% to 30.7%, reflecting an improvement of 20 to 70 basis points on a comparable basis, net of a negative 40 basis point impact from the lapping of a Q1 2023 customer contract resolution payment .
- Earnings Per Share (EPS): $10.84 to $11.33 per share, reflecting an increase of 8% to 13% as reported .
- Effective Tax Rate: Expected to increase by 1.5% to approximately 22% in 2024 .
- Free Cash Flow: Anticipated net income to free cash flow conversion ratio of 90% to 95%, with estimated capital spending of $180 million or approximately 4.5% of revenues .
- Interest Expense: Expected to be lower compared to 2023, with similar leverage ratios anticipated for 2024 .
- Share Count: Projected reduction in diluted shares outstanding by 0.5% to 1% for the full year 2024 .
- Foreign Exchange Impact: Limited impact expected on 2024 revenue growth and operating margin, with an estimated increase in full year EPS by $0.02 per share due to current hedge positions .
- Q1 2024 Guidance:
- Organic Revenue Growth: 6% to 8%, factoring in a 1% negative growth impact from severe weather in the U.S. in January .
- Operating Margins: Planned to be 29.4% to 29.8% in Q1 .
The documents do not contain information about the Q3 2024 earnings call for IDEXX Laboratories (IDXX), so I cannot provide guidance metrics or the period for that specific earnings call.
Competitors
Competitors mentioned in the company's latest 10K filing.
- Mars, Incorporated brands Antech Diagnostics and Heska; and Zoetis Inc. (including its wholly-owned subsidiary Abaxis, Inc.) - Major competitors in most geographic locations in North America for companion animal veterinary diagnostic products and services .
- Zoetis Inc.; Mars, Incorporated brands including Heska, Antech Diagnostics, Scil, and Asia Veterinary Diagnostics; Fujifilm Holdings Corporation; Samsung Electronics, Arkray, Inc.; Mindray; and BioNote, Inc. - Competitors in certain international geographies for companion animal veterinary diagnostic products and services .
- Covetrus, Inc. - Largest competitor in North America and the U.K. for veterinary software, services, and diagnostic imaging systems .
- Sound-Eklin, Antech Diagnostics, FUJIFILM, and Heska - Competitors in the diagnostic imaging systems sector .
- Radiometer A/S, Siemens Medical Solutions Diagnostics, Instrumentation Laboratory Company, Abbott Diagnostics, a division of Abbott Laboratories, and Roche Diagnostics Corporation - Competitors in human point-of-care medical diagnostic products .
Latest news
Recent developments and announcements about IDXX.
Corporate Leadership
CFO Change
Brian P. McKeon, the Chief Financial Officer (CFO) of IDEXX Laboratories, Inc., has announced his retirement effective June 1, 2025. He will step down from his role as CFO on March 1, 2025, and will serve as Executive Vice President and Special Advisor until his retirement to ensure a smooth transition. Andrew Emerson, currently the Senior Vice President of Corporate and Companion Animal Group Finance, will succeed him as CFO effective March 1, 2025 .
Leadership Change
Brian McKeon is retiring as CFO of IDEXX effective June 1, 2025. Andrew Emerson will step up as the new CFO on March 1, 2025. McKeon will serve as EVP and Special Advisor until his retirement to ensure a smooth transition. Emerson, with nearly 20 years of financial experience, has been with IDEXX since 2015 and has led the finance organization for the Companion Animal Group .
Board Change
Jonathan W. Ayers resigned from the Board of Directors of IDEXX Laboratories, Inc. on November 8, 2024. He also stepped down from the finance committee. His resignation was not due to any disagreement with the company .