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IDEXX LABORATORIES INC /DE (IDXX)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered modest top-line growth with clear execution: revenue was $0.998B (+4% reported; +5% organic) and EPS was $2.96 (+5% y/y; +7% comparable), supported by 90 bps gross margin expansion to 62.4% .
  • Wall Street estimates were modestly exceeded: EPS beat by ~$0.12 and revenue by ~$1.96M; estimate counts were 9 EPS and 7 revenue inputs (S&P Global) [Values retrieved from S&P Global]*.
  • 2025 guidance was raised at the midpoint: revenue $4.095–$4.210B (5–8% reported), EPS $11.93–$12.43 (+$0.19 increase), and operating margin 31.1–31.6% (still 30–80 bps comparable expansion); FX and a favorable litigation accrual adjustment were key drivers .
  • Execution highlights included strong VetLab consumables (+8.8% reported; +10.5% organic), 9% global premium instrument installed base growth, and early traction in IDEXX Cancer Dx and inVue Dx placements (302 in Q1; >900 by end of April) .
  • Macro headwinds persist (U.S. clinical visits down ~2.6%), but diagnostic utilization and pricing remain resilient; management maintained 6–9% organic growth outlook and addressed tariff planning updates without changing full-year operating objectives .

What Went Well and What Went Wrong

What Went Well

  • VetLab consumables and recurring diagnostics momentum: VetLab consumables grew 8.8% reported and 10.5% organic; CAG diagnostics recurring revenue grew 3.3% reported and 4.5% organic, aided by double-digit international growth .
  • Innovation uptake: launch of IDEXX Cancer Dx for canine lymphoma and transition of inVue Dx from controlled to broad availability; over 1,000 practices ordered Cancer Dx within a month and ~302 inVue Dx placements in Q1, accelerating to >900 by end of April .
  • Margin improvement and cash generation: gross margin expanded 90 bps to 62.4%, operating margin reached 31.7% (+70 bps y/y), and free cash flow was $207.9M in Q1 .

Management quotes:

  • “IDEXX drove solid execution… launched a first-of-its-kind innovation, IDEXX Cancer Dx…” — CEO Jay Mazelsky .
  • “CAG Diagnostics recurring revenues increased 4.5% organically… global net price improvement was 4%.” — CFO Andrew Emerson .

What Went Wrong

  • Rapid assay softness: rapid assay products declined 2.6% reported (1.9% organic) as the Catalyst Pancreatic Lipase Test shifted testing across modalities .
  • U.S. clinic visit headwinds: same-store visits declined ~2.6%, pressuring wellness-driven demand; management expects continued moderation but stable trends .
  • FX and tariffs: FX reduced Q1 EPS by ~$0.04 and operating profit by ~$4M, and updated tariff assumptions (including China retaliation) added planning complexity (though outlook maintained) .

Financial Results

Sequential Trend (Q3 2024 → Q4 2024 → Q1 2025)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$975.5 $954.3 $998.4
Diluted EPS ($)$2.80 $2.62 $2.96
Gross Margin %61.1% 59.8% 62.4%
Operating Margin %31.2% 27.4% 31.7%

Year-over-Year (Q1 2024 → Q1 2025)

MetricQ1 2024Q1 2025
Revenue ($USD Millions)$964.1 $998.4
Diluted EPS ($)$2.81 $2.96
Gross Margin %61.5% 62.4%
Operating Margin %31.0% 31.7%

Versus Estimates (Q1 2025)

MetricConsensusActualSurprise
Revenue ($USD)$996.5M*$998.4M+$1.96M
EPS ($)$2.84*$2.96+$0.12

Footnote: *Values retrieved from S&P Global.

Segment Breakdown (Q1 2025)

SegmentRevenue ($USD Millions)Gross Margin %Op Margin %
CAG$919.8 62.5% 32.1%
Water$45.3 70.8% 45.9%
LPD$28.6 50.2% 0.4%
Other$4.7 45.3% 9.3%

KPIs and Diagnostics Mix (Q1 2025)

KPIValue
CAG Diagnostics recurring revenue growth (reported/organic)3.3% / 4.5%
VetLab consumables growth (reported/organic)8.8% / 10.5%
Rapid assay revenue growth (reported/organic)-2.6% / -1.9%
Reference lab services growth (reported/organic)0.0% / 0.9%
Premium instrument installed base growth+9% y/y
CAG premium instruments placed (Q1)4,163
inVue Dx placements (Q1; ramp through April)302 (Q1) → >900 by end-April
U.S. clinical visit trend (Q1)-2.6% y/y

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)FY 2025$4,055–$4,170 $4,095–$4,210 Raised
Reported Revenue GrowthFY 20254%–7% 5%–8% Raised
Organic Revenue GrowthFY 20256%–9% 6%–9% Maintained
CAG Recurring Reported GrowthFY 20253%–6% 4%–7% Raised
CAG Recurring Organic GrowthFY 20255%–8% 5%–8% Maintained
Operating MarginFY 202531.0%–31.5% 31.1%–31.6% Raised
Comparable Op Margin ExpansionFY 202530–80 bps 30–80 bps Maintained
EPS ($)FY 2025$11.74–$12.24 $11.93–$12.43 Raised (+$0.19)
Net Interest Expense ($)FY 2025~$42 ~$42 Maintained
Effective Tax RateFY 2025~21.5% ~21.5% Maintained
OCF (% of NI)FY 2025100%–110% 95%–105% Lowered
FCF (% of NI)FY 202585%–90% 80%–85% Lowered
Capex ($)FY 2025~$160 ~$160 Maintained

Rationale: Guidance midpoint raised primarily for FX tailwinds and a favorable litigation accrual adjustment; operating metrics maintained despite tariff updates .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3’24; Q-1: Q4’24)Current Period (Q1’25)Trend
AI/Technology initiatives (inVue Dx, Cancer Dx)Q3: ~700 inVue preorders; strong installed base growth . Q4: began shipping inVue; Cancer Dx planned late March .Q1: 302 inVue placements; >900 by end-April; Cancer Dx launched, >1,000 practices ordered; priced for wellness inclusion .Accelerating adoption; expanding menu and consumables flywheel.
Supply chain/tariffsQ3/Q4: no material disruption noted; standard planning.Updated tariff assumptions (U.S. pronouncements; China retaliation) incorporated; focus on continuity and mitigation .Heightened monitoring; operational mitigation in place.
Macro/clinic visitsQ3: sector constraints cited; guidance trimmed . Q4: sector steady but moderated wellness .U.S. visits -2.6%; quality of visits strong; utilization and pricing resilient .Stable moderation; utilization offsets visit pressure.
Product performanceQ3: Rapid assay +6% reported; VetLab +11% . Q4: Rapid assay flat; VetLab +12% .Rapid assay -2.6% as PLP test shifts modality; VetLab +8.8% reported/+10.5% organic .Mix shifting to instrument-based testing; consumables strength persists.
Regional trendsQ3: International double-digit CAG recurring; Water strong U.S./EU . Q4: International solid; Water +8% .International CAG recurring +8.5% organic; Water +7% organic .International outperformance continues.
Regulatory/legalQ3/Q4: litigation accrual $61.5M; total $89M .Matter concluded in April; accrual reduced by ~$9M in Q1; EPS benefit $0.08 .Resolved; minor favorable adjustment.
Software/R&D executionQ3/Q4: Cloud PIMS recurring gains; R&D investment .Cloud software recurring +10% reported/+9% organic; higher R&D spend supporting innovation .Sustainable growth investment.

Management Commentary

  • Strategic focus on innovation-led growth: “IDEXX drove solid execution… launched IDEXX Cancer Dx… earlier detection provides better treatment options… priced to include in screening panels.” — Jay Mazelsky .
  • Diagnostics utilization resilience despite visit declines: “Global net price improvement was 4%… volume gains ~2% days-adjusted… U.S. CAG recurring +3% organically net of days.” — Andrew Emerson .
  • InVue Dx ramp and customer value: “Moved from controlled roll-out to broad availability… over 900 placements through end of April… AI-empowered slide-free cytology system enhances workflows.” — Jay Mazelsky .
  • Tariff posture: “Revised estimates… incorporated China retaliatory tariffs… focused on continuous supply and minimizing impacts.” — Andrew Emerson and Jay Mazelsky .

Q&A Highlights

  • Macro and wellness dynamics: Visits down ~2.6% with stabilization; wellness expected to “snap back” seasonally; practices reengaging clients; underlying utilization/frequency up for those visiting .
  • InVue Dx pacing: Q1 shipments 302; accelerated in April post-gating; still targeting “4,500+” 2025 placements; controlled launch ensured experience quality before scaling .
  • Pricing and guidance buffers: Global net price realization ~4% in Q1; full-year midpoint assumes ~2% decline in U.S. visits similar to 2024; range captures variability; days headwinds in Q1 normalize in H2 .
  • Tariffs/FX sensitivities: Planning includes ~1% FX headwind in Q2; 1% FX change ≈ $11M revenue and $4M operating profit .
  • Cancer Dx adoption and wellness inclusion: >1,000 unique customers ordered in month one; priced and positioned to be included in wellness panels, not just diagnostic workups .

Estimates Context

  • Q1 2025 EPS: Actual $2.96 vs consensus $2.84* → beat of ~$0.12; driven by gross margin gains, opex discipline (ex-ligation accrual) and pricing .
  • Q1 2025 Revenue: Actual $998.4M vs consensus $996.5M* → beat of ~$1.96M; aided by VetLab consumables and international CAG .
  • Estimate inputs: EPS (9 estimates), Revenue (7 estimates)*.

Footnote: *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Diagnostics mix shift supports margins: continued strength in instrument-driven consumables and software recurring revenue underpins gross margin durability and EPS quality .
  • Innovation catalysts: Cancer Dx and inVue Dx are early but material drivers for consumables and utilization; watch inVue placement trajectory versus the 4,500+ target for revenue flywheel acceleration .
  • Guidance improved on FX and litigation resolution: midpoint revenue/EPS raised; comparable margin expansion maintained despite tariff recalibration—signals confidence in operational execution .
  • Macro headwinds manageable: U.S. visit declines persist, but IDEXX continues to outgrow the sector via pricing, utilization, and new business gains; international momentum remains strong .
  • Cash returns: robust FCF and continued share repurchases ($415M in Q1) support per-share EPS growth; monitor leverage stability (~0.7x gross, ~0.6x net) .
  • Near-term trading implications: modest beat and guidance raise with visible AI/diagnostics catalysts could support sentiment; watch sequential inVue placements and tariff headlines as potential volatility drivers .
  • Medium-term thesis: durable recurring revenue, expanding installed base, and integrated software ecosystem should sustain 6–9% organic growth and margin improvement, with oncology and AI-enabled diagnostics enhancing competitive moat .