10-QPeriod: Q2 FY2017

IDEXX LABORATORIES INC /DE Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 1, 2017For Securities:IDXX

Summary

IDEXX LABORATORIES, INC. reported a strong second quarter for 2017, with total revenue increasing by 9.1% year-over-year to $508.9 million. The company demonstrated solid organic revenue growth of 10.1%, driven primarily by its Companion Animal Group (CAG) segment, which saw a 9.9% increase in revenue. This growth was fueled by strong performance in recurring revenue streams like reference laboratory diagnostic services and consumables. Net income attributable to IDEXX stockholders rose significantly by 27.0% to $85.4 million, or $0.95 per diluted share, compared to $67.2 million, or $0.74 per diluted share, in the prior year period. This robust performance reflects effective cost management and operational efficiencies, alongside the positive impact of adopting new accounting guidance for share-based compensation, which lowered the effective tax rate. The company's financial health remains strong, with ample liquidity and effective management of its capital resources.

Financial Highlights

52 data points
Beta

Revenue

$508.94M

57.5% Gross Margin

Net Income

$85.36M

16.8% Net Margin

EPS (Diluted)

$0.95

Total Assets

$1.64B

Cash & Equivalents

$165.97M

Free Cash Flow

$95.27M

Financial Statements
Beta
Revenue$508.94M
Cost of Revenue$216.22M
Gross Profit$292.71M
R&D Expenses$27.00M
Operating Income$122.56M
Interest Expense$9.15M
Net Income$85.36M
EPS (Basic)$0.97
EPS (Diluted)$0.95
Shares Outstanding (Basic)88.00M
Shares Outstanding (Diluted)89.88M

Key Highlights

  • 1Total revenue for the three months ended June 30, 2017, increased 9.1% to $508.9 million, compared to $466.6 million in the prior year.
  • 2Organic revenue growth was 10.1% for the three months ended June 30, 2017.
  • 3Net income attributable to IDEXX Laboratories, Inc. stockholders increased 27.0% to $85.4 million for the three months ended June 30, 2017, from $67.2 million in the prior year.
  • 4Diluted earnings per share increased to $0.95 for the three months ended June 30, 2017, from $0.74 in the prior year.
  • 5Companion Animal Group (CAG) segment revenue increased 9.9% to $439.9 million, driven by strong performance in recurring revenue categories.
  • 6The effective income tax rate decreased to 25.5% for the three months ended June 30, 2017, from 30.6% in the prior year, primarily due to the adoption of new accounting guidance for share-based compensation.
  • 7The company repurchased approximately 697,000 shares of common stock for $114.3 million during the quarter.

Frequently Asked Questions

The primary driver of IDEXX's revenue growth was its Companion Animal Group (CAG) segment, which experienced a 9.9% increase in revenue. This growth was largely attributed to strong performance in recurring revenue streams such as reference laboratory diagnostic services and IDEXX VetLab consumables, benefiting from increased testing volumes and expanded service offerings.

The adoption of FASB ASU 2016-09 concerning share-based payment accounting had a significant impact, particularly on the income tax provision. It led to a decrease in income tax expense by approximately $7.1 million for the quarter, effectively lowering the company's effective income tax rate by about 6 percentage points, and thus boosting net income.

IDEXX continues to actively repurchase its common stock. During the quarter, the company repurchased approximately 697,000 shares for $114.3 million. The company views share repurchases as a favorable means of returning value to shareholders and also uses them to offset the dilutive effect of its share-based compensation programs.

IDEXX maintains strong liquidity through cash on hand, funds generated from operations, and available borrowing capacity under its credit facility. As of June 30, 2017, the company had $422.9 million in cash, cash equivalents, and marketable securities, and $145 million in remaining borrowing availability under its $850 million credit facility. Management believes these resources are sufficient to fund operations, capital expenditures, and growth initiatives for the next twelve months and beyond.