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    IDEXX Laboratories Inc (IDXX)

    CFO Change
    Board Change

    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 .

    1. 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.
    2. Water - Develops products used to detect microbiological parameters in water.
    3. Livestock, Poultry and Dairy (LPD) - Offers diagnostic tests and services to manage livestock and poultry health and ensure milk quality and safety.
    4. OPTI Medical - Focuses on human medical diagnostics.

    Q2 2024 Summary

    Initial Price$541.37April 1, 2024
    Final Price$476.40July 1, 2024
    Price Change$-64.97
    % Change-12.00%

    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

    1. 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.

    2. 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.

    3. 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.

    4. 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.

    5. 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.

    6. 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.

    7. 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

    View all financials →
    Revenue by Segment - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    CAG827.279866.65837.16821.313,352.4889.3922.3892.0
    - CAG Diagnostics Recurring726.902762.48733.96712.062,935.4780.1808.5783.4
    -- IDEXX VetLab Consumables291.114303.74296.04297.411,188.3316.9325.3329.1
    -- Rapid Assay Products82.03297.3487.5677.57344.586.3103.392.8
    -- Reference Lab Services323.180330.11320.29305.021,278.6344.3347.4328.4
    -- Services and Accessories30.57631.3030.0632.16124.132.632.433.2
    - CAG Diagnostics Capital33.14434.0532.2538.16137.634.135.329.5
    - Veterinary Software67.23370.1270.9571279.375.078.679.0
    -- Recurring Revenue----214.659.763.164.6
    -- Systems and Hardware----64.715.315.414.4
    Water38.88343.0344.4541.74168.143.146.750.2
    LPD29.20829.9129.7532.83121.728.230.329.0
    Other4.8254.044.175.7718.83.54.24.4
    Total Revenue900.195943.63915.53901.643,661.0964.11,003.6975.5
    Revenue by Geography - in Millions of USDFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Americas----2,625.460---
    - United States590.413621.607603.05576.362,391.427631.009660.146638.06
    - Canada35.96241.63535.6136.9150.11036.71140.99236.93
    - Latin America & Caribbean19.45220.81621.3522.383.92320.24021.31620.98
    Europe, Middle East, Africa176.008178.666177.85183.66716.184199.831200.689198.61
    - 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 Pacific78.36080.90677.6782.37319.30976.30480.43580.97
    - Australia----95.465---
    - Japan----75.569---
    - China----44.168---
    - Other Asia Pacific----104.107---
    Total Revenue900.195943.630915.53901.63,660.953964.0951,003.578975.54
    KPIs - Metric / QuarterFY 2013Q1 2014Q2 2014Q3 2014Q4 2014FY 2014Q1 2015Q2 2015Q3 2015Q4 2015FY 2015Q1 2016Q2 2016Q3 2016Q4 2016FY 2016Q1 2017Q2 2017Q3 2017Q4 2017FY 2017Q1 2018Q2 2018Q3 2018Q4 2018FY 2018Q1 2019Q2 2019Q3 2019Q4 2019FY 2019Q1 2020Q2 2020Q3 2020Q4 2020FY 2020Q1 2021Q2 2021Q3 2021Q4 2021FY 2021Q1 2022Q2 2022Q3 2022Q4 2022FY 2022Q1 2023Q2 2023Q3 2023Q4 2023FY 2023Q1 2024Q2 2024Q3 2024
    Deferred Revenue - Rebate & Up-front Consideration ($M)24.923.722.532.9-31.930.429.8
    Lease Revenue - Instrument Rental Quarterly ($M)4.55.55.3--3.83.33.5
    Lease Revenue - Instrument Rental Annual ($M)---20.7----

    Executive Team

    NamePositionStart DateShort Bio
    Jonathan J. MazelskyPresident and Chief Executive OfficerOctober 2019Jonathan J. Mazelsky has served as the President and CEO of IDEXX Laboratories, Inc. since October 2019. He was previously the Interim President and CEO from June 2019 to October 2019, and Executive Vice President from August 2012 to June 2019 .
    Brian P. McKeonExecutive Vice President, Chief Financial Officer, and TreasurerJanuary 2014Brian P. McKeon has been serving as the Executive Vice President, CFO, and Treasurer of IDEXX since January 2014. He will transition to Executive Vice President and Special Advisor on March 1, 2025, until his retirement on June 1, 2025 .
    Michael Erickson, PhDExecutive Vice President and General Manager, Point of Care DiagnosticsJanuary 2024Michael Erickson, PhD, has been serving as the Executive Vice President and General Manager of Point of Care Diagnostics and Telemedicine at IDEXX since January 2024. He joined IDEXX in 2011 and has held various leadership roles .
    Tina Hunt, PhDExecutive Vice President, Strategy, Sector Development, and Global OperationsJanuary 2023Dr. Tina Hunt has been serving as the Executive Vice President, Strategy, Sector Development, and Global Operations at IDEXX since January 2023. She joined IDEXX in 2006 and has held various leadership roles .
    Michael P. JohnsonExecutive Vice President and Chief Human Resources OfficerJanuary 2024Michael P. Johnson has been serving as an Executive Vice President and Chief Human Resources Officer at IDEXX since January 2024. He joined IDEXX in March 2022 as a Senior Vice President and Chief Human Resources Officer .
    Michael J. LaneExecutive Vice President and General Manager, Global Reference Laboratories and Information TechnologyJanuary 2020Michael J. Lane has been an Executive Vice President at IDEXX since January 2020. He has been the General Manager of IDEXX's Global Reference Laboratories business since November 2016. Effective January 1, 2025, he will assume oversight responsibility for the Water, Livestock, Poultry and Dairy, and OPTI Medical businesses .
    James F. PolewaczykExecutive Vice President and Chief Commercial OfficerJanuary 2020James F. Polewaczyk has been serving as the Executive Vice President and Chief Commercial Officer of IDEXX since January 2020. He is set to retire effective April 1, 2024 .
    Michael SchreckExecutive Vice President and General Manager, Veterinary Software and Services, Corporate Accounts and Customer ExperienceJanuary 2024Michael Schreck has been serving as the Executive Vice President and General Manager, Veterinary Software and Services, Corporate Accounts and Customer Experience at IDEXX since January 2024. He joined IDEXX in July 2020 .
    Martin Smith, PhDExecutive Vice President and Chief Technology OfficerAugust 2021Martin Smith, PhD, has been serving as the Executive Vice President and Chief Technology Officer at IDEXX Laboratories since August 2021 .
    Sharon E. UnderbergExecutive Vice President, General Counsel, and Corporate SecretaryFebruary 2019Sharon E. Underberg serves as Executive Vice President, General Counsel, and Corporate Secretary at IDEXX Laboratories, Inc. She joined the company in February 2019 .
    George J. FennellSenior Vice President and Chief Revenue OfficerJanuary 2024George J. Fennell has been with IDEXX since June 2011. He became the Senior Vice President in January 2020 and has served as the Chief Revenue Officer since January 2024 .
    Andrew EmersonSenior Vice President, Corporate and CAG Finance; Executive Vice President, Chief Financial Officer and Treasurer (effective March 1, 2025)January 2024Andrew Emerson joined IDEXX Laboratories, Inc. in November 2015. He has served as Senior Vice President, Corporate and CAG Finance since January 2024. He will assume the role of Executive Vice President, CFO, and Treasurer, effective March 1, 2025 .

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateAugust 13, 1999
    End Date/DurationNo specified expiration date
    Total additional amountN/A
    Remaining authorization amount1,696,986 shares as of September 30, 2024
    DetailsThe program is intended to return value to stockholders and offset the dilutive effect of share-based compensation programs. Shares are acquired through open market repurchases and employee share surrenders for tax withholding.

    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 .

    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

      ·
      Nov 21, 2024, 12:55 PM

      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

      ·
      Nov 21, 2024, 12:55 PM

      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

      ·
      Nov 12, 2024, 12:00 AM

      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 .