10-QPeriod: Q1 FY2019

IDEXX LABORATORIES INC /DE Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 1, 2019For Securities:IDXX

Summary

IDEXX Laboratories, Inc. reported strong financial performance for the first quarter of 2019, with total revenue increasing by 7.1% year-over-year to $576.1 million. This growth was primarily driven by the Companion Animal Group (CAG) segment, which saw an 8.1% increase in revenue, notably from recurring revenue streams like consumables and reference laboratory services. The company also demonstrated improved profitability, with a 9.4% increase in gross profit and a 17.8% rise in income from operations. Despite a slight decrease in cash and cash equivalents, the company maintained a healthy liquidity position with significant availability under its credit facility. Key financial achievements include an 11.9% organic growth in CAG Diagnostics recurring revenue and a solid gross profit margin of 57.6%. The company successfully navigated the adoption of new accounting standards for leases (ASC 842) with minimal disruption. Management expressed confidence in the company's ability to fund its operations and growth initiatives, supported by ongoing cash generation and available credit lines.

Financial Highlights

51 data points
Beta

Revenue

$576.06M

57.6% Gross Margin

Net Income

$102.71M

17.8% Net Margin

EPS (Diluted)

$1.17

Total Assets

$1.68B

Cash & Equivalents

$116.62M

Free Cash Flow

-$3.83M

Financial Statements
Beta
Revenue$576.06M
Cost of Revenue$244.46M
Gross Profit$331.60M
R&D Expenses$31.51M
Operating Income$133.14M
Interest Expense$8.39M
Net Income$102.71M
EPS (Basic)$1.19
EPS (Diluted)$1.17
Shares Outstanding (Basic)86.20M
Shares Outstanding (Diluted)87.55M

Key Highlights

  • 1Total revenue increased by 7.1% to $576.1 million for the three months ended March 31, 2019, compared to the prior year.
  • 2Income from operations grew by 17.8% to $133.1 million.
  • 3The Companion Animal Group (CAG) segment, the largest contributor, saw revenue increase by 8.1% to $508.9 million.
  • 4Gross profit margin improved to 57.6% from 56.4% in the prior year period.
  • 5Operating expenses increased by 4.4%, outpacing revenue growth, but the company maintained strong operating leverage with a higher operating income percentage.
  • 6The company successfully adopted the new Leases standard (ASC 842) as of January 1, 2019, with minor impacts on the balance sheet.
  • 7Cash and cash equivalents decreased by $7.2 million, ending the quarter at $116.6 million, but the company maintained substantial liquidity with $501.7 million available under its credit facility.

Frequently Asked Questions

The primary driver of revenue growth was the Companion Animal Group (CAG) segment, which experienced an 8.1% increase in revenue. This growth was particularly strong in recurring revenue streams such as IDEXX VetLab consumables, rapid assay products, and reference laboratory diagnostic and consulting services.

IDEXX adopted ASC 842 on January 1, 2019. This adoption resulted in the recognition of operating lease right-of-use assets of $83.7 million and operating lease liabilities of $68.9 million. While it impacted the balance sheet by increasing total assets and liabilities, the company stated it had no material impact on consolidated earnings or cash flows for the three months ended March 31, 2019.

As of March 31, 2019, IDEXX had $116.6 million in cash and cash equivalents. More importantly, the company had significant borrowing availability of $501.7 million under its $850 million Credit Facility. Management believes these resources are sufficient to fund operations, capital requirements, and growth needs for the next twelve months and the foreseeable future.

Currency movements had a negative impact on reported revenue, decreasing it by 2.8%. However, the company utilizes hedging strategies which mitigated some of this impact. For the operating profit, currency impacts were $3.7 million unfavorable when including hedging activity.