10-KPeriod: FY2016

IDEXX LABORATORIES INC /DE Annual Report, Year Ended Dec 31, 2016

Filed February 17, 2017For Securities:IDXX

Summary

IDEXX Laboratories, Inc. (IDXX) reported strong financial performance for the fiscal year ended December 31, 2016, with revenue growth driven primarily by its Companion Animal Group (CAG) segment. The company experienced a 10.8% increase in total revenue to $1.775 billion, with organic revenue growth of 11.4%. This growth was fueled by robust performance in recurring diagnostic revenue streams, including consumables and reference laboratory services, as well as increased placements of capital instruments like the SediVue Dx analyzer. The company also saw growth in its Water segment, while the Livestock, Poultry and Dairy (LPD) segment experienced a slight revenue decline. IDEXX continued its strategic shift towards a direct-to-customer sales model in the U.S., which management believes strengthens customer loyalty and supports long-term growth. The company also demonstrated a commitment to shareholder returns through active share repurchases. Despite challenges such as foreign currency fluctuations and increased competition, IDEXX's diversified business model and focus on innovation position it for continued success in its core veterinary markets.

Financial Highlights

53 data points
Beta

Revenue

$1.78B

54.9% Gross Margin

Net Income

$222.04M

12.5% Net Margin

EPS (Diluted)

$2.44

Total Assets

$1.53B

Cash & Equivalents

$154.90M

Free Cash Flow

$274.16M

Financial Statements
Beta
Revenue$1.78B
Cost of Revenue$799.99M
Gross Profit$975.44M
R&D Expenses$101.12M
Operating Income$350.24M
Interest Expense$32.05M
Net Income$222.04M
EPS (Basic)$2.47
EPS (Diluted)$2.44
Shares Outstanding (Basic)89.73M
Shares Outstanding (Diluted)90.88M

Key Highlights

  • 1Total revenue increased by 10.8% to $1.775 billion in fiscal year 2016.
  • 2Companion Animal Group (CAG) remained the primary growth driver, with revenue up 12.3% to $1.523 billion, supported by strong recurring diagnostic revenue.
  • 3Organic revenue growth was robust at 11.4%, demonstrating underlying business strength.
  • 4The company successfully implemented its all-direct sales strategy in the U.S., aligning with its goal of enhancing customer loyalty.
  • 5Net income increased by 15.6% to $222.05 million, with diluted EPS growing to $2.44.
  • 6IDEXX continued its share repurchase program, buying back 3.1 million shares for $313.1 million during the year.
  • 7The company maintained a strong liquidity position with $391.8 million in cash, cash equivalents, and marketable securities.

Frequently Asked Questions

IDEXX's revenue growth in 2016 was primarily driven by its Companion Animal Group (CAG) segment. This growth was fueled by strong performance in recurring diagnostic revenue, including IDEXX VetLab consumables and reference laboratory diagnostic and consulting services. The launch of new diagnostic technologies and instruments, such as the SediVue Dx analyzer, also contributed significantly to the increase in capital instrument placements and subsequent consumable sales.

The transition to an all-direct sales strategy in the U.S., completed in early 2015, aligns with IDEXX's goal of strengthening customer relationships and loyalty. While the company incurred some transitional costs, management believes this strategy is crucial for long-term growth by allowing direct engagement with end-users for all companion animal diagnostic products. This also enables better control over customer service and product support.

IDEXX operates globally, with approximately 39% of its revenue generated outside the U.S. To mitigate foreign currency exchange risk, the company employs a hedging program that primarily involves foreign currency exchange contracts to manage risks associated with intercompany inventory purchases and sales. While hedging activities help to minimize volatility, they do not eliminate it, and the company continues to monitor its exposure to fluctuations in exchange rates.

IDEXX returns value to shareholders primarily through its share repurchase program. In 2016, the company repurchased approximately 3.1 million shares for $313.1 million. This program not only enhances shareholder value but also helps to offset the dilutive effect of employee stock-based compensation awards. The company has not historically paid cash dividends but may consider it in the future.