10-QPeriod: Q2 FY2018

IDEXX LABORATORIES INC /DE Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 1, 2018For Securities:IDXX

Summary

IDEXX Laboratories Inc. reported solid financial results for the quarter ending June 30, 2018, with total revenue increasing by 14.1% year-over-year to $580.8 million. This growth was primarily driven by a robust performance in the Companion Animal Group (CAG) segment, which saw a 15.4% revenue increase, largely fueled by strong recurring revenue and instrument placements. The company also experienced growth in its Water and Livestock, Poultry, and Dairy (LPD) segments. Profitability improved, with income from operations rising by 18.8% to $145.6 million. The company's effective tax rate decreased significantly due to the 2017 Tax Act, contributing to improved net income. IDEXX also continued its share repurchase program, demonstrating a commitment to returning value to shareholders. The adoption of the new revenue recognition standard (ASC 606) had a notable impact on revenue timing, generally accelerating recognition.

Financial Highlights

53 data points
Beta

Revenue

$580.75M

57.2% Gross Margin

Net Income

$108.69M

18.7% Net Margin

EPS (Diluted)

$1.23

Total Assets

$1.52B

Cash & Equivalents

$174.56M

Free Cash Flow

$91.18M

Financial Statements
Beta
Revenue$580.75M
Cost of Revenue$248.31M
Gross Profit$332.44M
R&D Expenses$29.51M
Operating Income$145.59M
Interest Expense$8.46M
Net Income$108.69M
EPS (Basic)$1.25
EPS (Diluted)$1.23
Shares Outstanding (Basic)87.00M
Shares Outstanding (Diluted)88.60M

Key Highlights

  • 1Total revenue increased by 14.1% to $580.8 million for the three months ended June 30, 2018.
  • 2Companion Animal Group (CAG) segment revenue grew by 15.4% to $507.5 million, driven by strong recurring revenue and instrument placements.
  • 3Income from operations increased by 18.8% to $145.6 million, indicating improved profitability.
  • 4The effective tax rate decreased to 20.9% from 25.5% year-over-year, largely due to the 2017 Tax Act.
  • 5Net income attributable to IDEXX stockholders rose to $108.7 million from $85.4 million in the prior year's comparable period.
  • 6The company repurchased $200.7 million of common stock during the first six months of 2018.
  • 7The adoption of the new revenue recognition standard (ASC 606) impacted revenue timing, generally accelerating recognition, with a positive impact of approximately $14.9 million on Q2 2018 revenue.

Frequently Asked Questions

The primary driver of revenue growth was the Companion Animal Group (CAG) segment, which experienced a 15.4% increase in revenue. This growth was fueled by strong volume gains in CAG Diagnostics recurring revenue, including IDEXX VetLab consumables and reference laboratory diagnostic services, as well as increased placements of diagnostic instruments.

The adoption of ASC 606, effective January 1, 2018, generally accelerated the timing of revenue recognition. This resulted in increases in reported revenue and other assets, and a decrease in retained earnings. For the three months ended June 30, 2018, the new standard contributed approximately $14.9 million to total revenue.

IDEXX maintained a solid liquidity position. As of June 30, 2018, the company had $174.6 million in cash, cash equivalents, and short-duration marketable securities. The company also had $412.0 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.

The 2017 Tax Act led to a significant reduction in IDEXX's effective tax rate. For the three months ended June 30, 2018, the effective tax rate was 20.9% compared to 25.5% in the prior year period. This tax rate reduction contributed to improved net income.