10-QPeriod: Q1 FY2018

IDEXX LABORATORIES INC /DE Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 4, 2018For Securities:IDXX

Summary

IDEXX Laboratories, Inc. reported solid financial results for the first quarter of 2018, demonstrating robust revenue growth across its key segments. Total revenue increased by 16.4% year-over-year to $537.7 million, driven by a 16.8% increase in the Companion Animal Group (CAG) segment, which benefited from strong performance in recurring diagnostics revenue and instrument placements. The Water and Livestock, Poultry, and Dairy (LPD) segments also showed healthy growth. Net income attributable to IDEXX stockholders rose significantly to $89.5 million, or $1.01 per diluted share, up from $69.0 million, or $0.77 per diluted share, in the prior year's quarter. This strong profitability was supported by an improved gross profit margin and effective management of operating expenses. The company also benefited from a lower effective tax rate primarily due to the 2017 Tax Act. Despite a decrease in cash and cash equivalents due to foreign currency repatriation and debt repayment, the company maintained a strong liquidity position with significant availability under its credit facility.

Financial Highlights

51 data points
Beta

Revenue

$537.66M

56.4% Gross Margin

Net Income

$89.45M

16.6% Net Margin

EPS (Diluted)

$1.01

Total Assets

$1.47B

Cash & Equivalents

$159.23M

Free Cash Flow

$11.17M

Financial Statements
Beta
Revenue$537.66M
Cost of Revenue$234.56M
Gross Profit$303.10M
R&D Expenses$29.02M
Operating Income$113.04M
Interest Expense$9.27M
Net Income$89.45M
EPS (Basic)$1.02
EPS (Diluted)$1.01
Shares Outstanding (Basic)87.33M
Shares Outstanding (Diluted)88.94M

Key Highlights

  • 1Total revenue grew 16.4% to $537.7 million compared to the prior year's first quarter.
  • 2Net income attributable to IDEXX stockholders increased by 29.6% to $89.5 million.
  • 3Diluted earnings per share rose to $1.01 from $0.77 in the same period last year.
  • 4Companion Animal Group (CAG) revenue increased by 16.8% driven by recurring diagnostics and instrument placements.
  • 5Gross profit margin improved by 50 basis points to 56.4%.
  • 6Effective tax rate decreased to 14.3% from 18.5% in the prior year, largely due to the 2017 Tax Act.
  • 7The company adopted the New Revenue Standard (ASC 606) effective January 1, 2018, with a modified retrospective approach, impacting revenue recognition timing.
  • 8Cash used in financing activities was $325.0 million, primarily due to debt repayments from repatriated foreign cash.

Frequently Asked Questions

The primary driver of revenue growth was the strong performance in the Companion Animal Group (CAG) segment, which saw a 16.8% increase in revenue. This growth was fueled by significant gains in CAG Diagnostics recurring revenue, particularly in reference laboratory diagnostic services and IDEXX VetLab consumables, as well as increased placements of diagnostic instruments. The Water and Livestock, Poultry, and Dairy (LPD) segments also contributed to the overall revenue increase.

IDEXX adopted the New Revenue Standard (ASC 606) effective January 1, 2018, using a modified retrospective approach. This change impacted the timing of revenue recognition, leading to an acceleration of revenue for certain programs like up-front customer loyalty and volume commitment programs, and an increase in deferred revenue for instrument rebate programs. This resulted in a net increase in total revenue of approximately $12 million and a net increase in net income of approximately $4.5 million for the first quarter of 2018. The adoption also led to changes in the presentation of certain balance sheet items, such as increased deferred revenue and adjusted other assets.

At March 31, 2018, IDEXX had $159.2 million in cash, cash equivalents, and short-duration marketable securities. The company generated $34.9 million in net cash from operating activities. Notably, the company repatriated foreign cash, using $247.5 million to reduce its revolving credit facility balance. Despite a decrease in total cash and equivalents from the previous quarter, the company has $441.5 million in remaining borrowing availability under its $850 million credit facility, indicating a strong liquidity position to fund operations and growth initiatives.

The 2017 Tax Act significantly reduced IDEXX's effective income tax rate to 14.3% for the first quarter of 2018, compared to 18.5% in the prior year. This decrease was primarily due to the reduction in the U.S. statutory tax rate. The company also liquidated marketable securities held outside the U.S. during the quarter as a result of the tax act, repatriating these funds and using them to reduce debt.