10-QPeriod: Q3 FY2017

IDEXX LABORATORIES INC /DE Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 31, 2017For Securities:IDXX

Summary

IDEXX Laboratories, Inc. (IDXX) reported strong financial performance for the nine months ended September 30, 2017, with total revenue increasing by 9.8% to $1.46 billion compared to the same period in 2016. This growth was primarily driven by the Companion Animal Group (CAG) segment, which saw an 11.1% revenue increase, largely due to recurring revenue streams like diagnostics and consumables. The company also benefited from a lower effective tax rate, significantly impacted by the adoption of new accounting standards for share-based compensation. The balance sheet shows a healthy increase in cash and marketable securities, alongside strategic investments in acquisitions and share repurchases. Despite overall positive trends, the Livestock, Poultry and Dairy (LPD) segment experienced a revenue decline of 2.4%, attributed to lower global milk prices impacting producer demand. The company continued its focus on returning value to shareholders through significant share repurchases and maintained a strong liquidity position with substantial cash reserves and available credit facilities. IDEXX is actively preparing for the adoption of new revenue recognition standards, which are not expected to materially impact overall 2018 revenues.

Financial Highlights

52 data points
Beta

Revenue

$491.98M

55.7% Gross Margin

Net Income

$70.51M

14.3% Net Margin

EPS (Diluted)

$0.79

Total Assets

$1.67B

Cash & Equivalents

$169.02M

Free Cash Flow

$94.88M

Financial Statements
Beta
Revenue$491.98M
Cost of Revenue$217.97M
Gross Profit$274.00M
R&D Expenses$27.59M
Operating Income$100.41M
Interest Expense$9.76M
Net Income$70.51M
EPS (Basic)$0.81
EPS (Diluted)$0.79
Shares Outstanding (Basic)87.54M
Shares Outstanding (Diluted)89.26M

Key Highlights

  • 1Total revenue increased by 9.8% to $1.46 billion for the nine months ended September 30, 2017.
  • 2Companion Animal Group (CAG) revenue grew by 11.1% driven by strong recurring revenue, particularly in diagnostics and consumables.
  • 3Effective income tax rate decreased significantly to 22.8% for the nine months ended September 30, 2017, largely due to new accounting for share-based compensation.
  • 4Cash, cash equivalents, and marketable securities increased to $454.1 million.
  • 5The company repurchased $223.1 million of common stock during the nine-month period.
  • 6Livestock, Poultry and Dairy (LPD) segment revenue declined by 2.4% due to market conditions.
  • 7IDEXX Laboratories maintains a strong liquidity position with $162.8 million in available borrowing capacity under its credit facility.

Frequently Asked Questions

The primary driver of IDEXX's revenue growth is its Companion Animal Group (CAG) segment, which experienced an 11.1% increase in revenue for the nine months ended September 30, 2017. This growth is largely fueled by recurring revenue streams such as diagnostic consumables and reference laboratory services, supported by strong volume gains and an expanding instrument installed base.

The adoption of ASU 2016-09, 'Compensation-Stock Compensation,' significantly impacted IDEXX's financial results, particularly its income tax provision. For the nine months ended September 30, 2017, this adoption reduced the effective income tax rate by approximately 8 percent, contributing to higher net income. The company is also preparing to adopt new revenue recognition standards (ASU 2014-09) in early 2018, which is not expected to materially impact overall 2018 revenues but may affect the timing of revenue recognition for certain customer programs.

IDEXX Laboratories maintains a strong liquidity position. As of September 30, 2017, the company held $454.1 million in cash, cash equivalents, and marketable securities. It also has $162.8 million in remaining borrowing availability under its $850 million credit facility. The company's debt-to-Adjusted EBITDA ratio was 2.55 for gross debt and 1.66 for net debt, indicating a healthy leverage position and compliance with financial covenants.

Yes, the Livestock, Poultry and Dairy (LPD) segment experienced a revenue decline of 2.4% for the nine months ended September 30, 2017. This decrease is attributed to lower global milk prices impacting demand for diagnostic testing from dairy producers, particularly in China and Brazil.