IDEXX Laboratories Announces Second Quarter Results
WESTBROOK, Maine, Aug. 1, 2017 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in veterinary diagnostics, veterinary practice software and water microbiology testing, reports revenues for the second quarter of 2017 of $509 million, an increase of 9% compared to the prior year period on a reported basis and 10% on an organic basis. Second quarter results were driven by robust global gains in Companion Animal Group ("CAG") Diagnostics recurring revenue, including double-digit organic revenue growth in consumables and reference lab services, and solid growth in both rapid assay and veterinary software, services and diagnostic imaging systems.
Earnings per diluted share ("EPS") was $0.95 for the second quarter, representing 28% growth year over year on a reported basis and 30% on a constant currency basis. These results include an $0.08, or 11%, EPS benefit in the quarter from the adoption of the new accounting guidance related to share-based compensation (ASU 2016-09), on both a reported and constant currency basis.
"Our business continued to thrive in the second quarter as we focused on delivering best-in-class diagnostic and software solutions, while supporting the profession in increasing the companion animal standard of care," said Jonathan Ayers, the Company's Chairman and Chief Executive Officer.
"We are very pleased with the strong momentum we are driving in the U.S. market, reflected in this quarter's accelerated double-digit U.S. organic CAG Diagnostics recurring revenue growth - the highest over the past two years, after implementing our fully direct sales approach. We intend to build on this momentum with increased investment in our U.S. commercial presence, while delivering 2017 profit performance consistent with our long-term goals."
"Consistent with our plan for strong long-term shareholder value creation, we're pleased to be raising our 2017 guidance for revenue and earnings per share, partly as a result of our strong operational performance in the first half of the year and continued positive outlook."
Second Quarter Performance Highlights
Companion Animal Group
CAG generated 10% reported and 11% organic revenue growth for the second quarter, supported by CAG Diagnostics recurring revenue growth of 12% reported and 13% organic. Veterinary software services and diagnostic imaging systems revenues grew 9% on a reported and organic basis.
-- IDEXX VetLab(® )consumables generated reported revenue growth of 15%
and organic revenue growth of 17% in the second quarter, driven by an
expanding premium instrument base in U.S. and international markets,
increasing test utilization, moderate price gains and continued strong
customer retention. IDEXX VetLab premium diagnostic instrument
placements were 2,680, including 1,191 Catalyst(®) instruments, 861
premium hematology instruments and 628 IDEXX SediVue(®) Dx analyzers.
Placement levels were slightly below strong prior year levels, which
included the benefit of higher levels of LaserCyte(®) to ProCyte Dx(®)
upgrades and second Catalyst placements in North America, as part of
successful customer retention programs. Growth in high economic value
placements continued, as evidenced by the placement of 341 Catalysts in
North America in competitive or greenfield accounts, an increase of 14%
over prior year levels. On a worldwide basis, our Catalyst instrument
installed base increased 21% in the second quarter year over year,
reflecting 11% year over year growth in North America and 37% year over
year gains in international markets.
-- Reference laboratory diagnostic and consulting services grew 12% on a
reported and 13% on an organic basis, reflecting accelerated growth in
the U.S. which offset moderated international gains, impacted by the
later timing of the Easter holiday in Europe. Globally, lab growth
continues to be bolstered by the increasing appreciation for IDEXX
SDMA(®), our novel kidney function test, and the strength of our
expanded direct commercial organizations.
-- Rapid assay products had reported revenue growth of 8% and organic
growth of 9%, supported by strong gains in the U.S., reflecting
continued growth in SNAP 4Dx(®) Plus Test revenues and specialty tests,
as well as solid momentum in first generation product revenues.
Livestock, Poultry and Dairy ("LPD")
Reported revenue increased 2% on a reported basis and 4% on an organic basis for the second quarter, supported by growth in swine testing, herd health screening and pregnancy testing revenues, which offset lower revenues related to successful European disease eradication programs and lower Dairy revenues, reflecting market demand impacts from reductions in milk pricing.
Water
Reported Water revenue growth was 6% and organic revenue growth was 7% in the second quarter, driven by higher sales volumes of Colilert(®) test products and related accessories in Europe and Latin America, supported by our go-direct initiatives.
Gross Profit and Operating Profit
Gross profits increased 12%, and gross margin increased to 57.5% from 55.8% in the prior year period. On a constant currency basis, gross margin was 180 basis points higher than in the prior year period, driven by high consumable growth and mix impact, moderate price gains, volume leverage in reference labs, and operational productivity gains.
Operating margin was 24.1% in the second quarter compared to 22.3% operating margin in the prior year period. On a constant currency basis, operating margin improved 180 basis points, driven by gross margin gains. Operating expenses increased 9% in the second quarter compared to the prior year period, driven by accelerated growth in sales and marketing investments aligned with our U.S. commercial expansion.
2017 Financial Outlook
We are raising our 2017 revenue outlook by $17.5 million at the midpoint of prior guidance to $1,945 million - $1,965 million, reflecting an expectation for organic revenue growth of 10% - 11% and approximately a $13 million revenue benefit from updated assumptions related to foreign exchange rates, as noted below. At these rates compared to rates in effect in 2016, we estimate that the stronger U.S. dollar will adversely impact 2017 reported revenue growth by approximately 0.5%, EPS growth by 1%, and reduce EPS by an estimated $0.03 per share, including the net impact from projected hedge gains of approximately $3 million in 2017 compared to $4 million in 2016.
We are also increasing our 2017 EPS outlook to $3.12 - $3.22 per share, reflecting an incremental increase of $0.14 per share at the midpoint of our earlier guidance range. This higher outlook is supported by a projected $0.04 incremental operating profit flow-through from strong revenue trends and higher expectations for annual operating margin improvement, while covering incremental investments in the U.S. CAG business, enabling information technology, R&D and acquisition integration. We now expect full-year operating margin to improve 100 - 125 basis points on a reported basis and 110 - 135 basis points on a constant currency basis, compared to the prior year period. The raised EPS guidance also reflects a $0.02 benefit due to reduced headwind from updated foreign exchange rate assumptions, and an additional $0.08 per share related to raised projections for 2017 benefits from share-based compensation accounting changes.
The updated outlook represents EPS growth of 28% - 32% on a reported basis and 29% - 33% constant currency EPS growth. This outlook includes the impact of the new accounting guidance related to share-based compensation, which we estimate will result in $0.30 - $0.34 of EPS benefit in 2017 reflecting an estimated $27 million to $30 million reduction in our tax provision. While these impacts may vary significantly by quarter based on the timing of actual settlement activity, an estimated $0.15 of the projected full-year 2017 benefit reflects higher than normal stock option exercising in 2017, a level of activity that is not expected to continue in future periods. For 2018 and future years, we estimate the annual benefit from share-based compensation will be approximately $14 million to $17 million assuming the current share price and no change in U.S. tax policy.
The guidance for 2017 reflects the assumptions that the value of the U.S. dollar relative to other currencies will remain at the following rates: euro at $1.12, British pound at $1.28, Canadian dollar at $0.76, Australian dollar at $0.75, Japanese yen at ¥114, Chinese renminbi at RMB 6.80 and Brazilian real at R$3.40 to the U.S. dollar for the remainder of 2017.
We are providing the following updated guidance for 2017:
Amounts in millions except per share data and percentages
Guidance Range Growth Definition Year Over Year Growth
-------------- ----------------- ---------------------
Revenue $1,945 - $1,965 Reported 10% - 11%
Organic Revenue Growth 10% - 11%
EPS $3.12 - $3.22 Reported 28% - 32%
Constant Currency 29% - 33%
Operating
Cash Flow ~130% of net income
Free Cash
Flow ~95% of net income
Capital
Expenditures ~$90 million
We expect an effective tax rate of 24.0% - 25.0%, after a projected reduction of 700 - 800 basis points related to the new share-based compensation accounting guidance. We are projecting a reduction in weighted average shares outstanding of approximately 1.5%, net of 0.5% related to the new share-based compensation accounting guidance, and interest expense, net of interest income, of approximately $33 million reflecting current and projected borrowings.
For a quick-reference snapshot of our quarterly performance, please visit www.idexx.com/investors.
Conference Call and Webcast Information
IDEXX Laboratories, Inc. will be hosting a conference call today at 8:30 a.m. (Eastern) to discuss its second quarter results and management's outlook. To participate in the conference call, please dial 1-877-777-1968 or 1-612-332-0802 and reference confirmation code 426796. Replay of the conference call will be available through Tuesday, August 8, 2017 by dialing 1-800-475-6701 or 1-320-365-3844 and referencing replay code 426796. Individuals can access a live webcast of the conference call through a link on the IDEXX website, www.idexx.com/investors. An archived edition of the webcast will be available after 1:00 p.m. (Eastern) on that day via the same link and will remain available for one year.
About IDEXX Laboratories, Inc.
IDEXX Laboratories, Inc. is a member of the S&P 500(®) Index and is a leader in pet healthcare innovation, serving practicing veterinarians around the world with a broad range of diagnostic and information technology-based products and services. IDEXX products enhance the ability of veterinarians to provide advanced medical care, improve staff efficiency and build more economically successful practices. IDEXX is also a worldwide leader in providing diagnostic tests and information for livestock and poultry and tests for the quality and safety of water and milk. Headquartered in Maine, IDEXX Laboratories employs more than 7,000 people and offers products to customers in over 175 countries. For more information about IDEXX, visit: www.idexx.com.
Statement Regarding Non-GAAP Financial Measures
The following provides information regarding certain measures used in this earnings release and/or the accompanying earnings conference call that are not required by, or presented in accordance with, generally accepted accounting principles in the United States of America ("GAAP"), otherwise referred to as non-GAAP financial measures. To supplement the Company's consolidated results presented in accordance with GAAP, the Company has disclosed non-GAAP financial measures that exclude or adjust certain items. Management believes these non-GAAP financial measures provide useful supplemental information for its and investors' evaluation of the Company's business performance and liquidity and are useful for period-over-period comparisons of the performance of the Company's business and its liquidity and to the performance and liquidity of our peers. While management believes that these non-GAAP financial measures are useful in evaluating the Company's business, this information should be considered as supplemental in nature and should not be considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. In addition, these non-GAAP financial measures may not be the same as similarly titled measures reported by other companies.
The following section defines terms and conventions used in this earnings release and/or the accompanying earnings conference call, including non-GAAP financial measures, and includes applicable information regarding reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, as appropriate:
Accounting Standards Update 2016-09 (ASU 2016-09): Effective January 1, 2017, we adopted the FASB issued amendments which simplify several aspects of the accounting for share-based payment transactions, including income tax consequences, recognition of share compensation award forfeitures, classification of awards as either equity or liabilities, the calculation of diluted shares outstanding and classification on the statement of cash flows.
Constant currency - Constant currency references are non-GAAP financial measures which exclude the impact of changes in foreign currency exchange rates and are consistent with how management evaluates our performance and comparisons with prior and future periods. We estimated the net impacts of currency on our revenue, gross profit, operating profit, and EPS results by restating results to the average exchange rates or exchange rate assumptions for the comparative period, which includes adjusting for the estimated impacts of foreign currency hedging transactions and certain impacts on our effective tax rates. These estimated currency changes reduced second quarter 2017 revenue growth by 1%, gross profit margin growth by 10 basis points, had an immaterial impact on operating profit margin growth, and reduced EPS growth by 2%; reduced projected full-year 2017 revenue growth by approximately 0.5%, projected operating profit margin growth by 10 basis points, and projected 2017 EPS growth by approximately 1%. Constant currency revenue growth represents the percentage change in revenue during the applicable period, as compared to the prior year period, excluding the impact of changes in foreign currency exchange rates. See the supplementary analysis of results below for revenue percentage change from currency for the three and six months ended June 30, 2017.
Free cash flow - Free cash flow is a non-GAAP financial measure and means, with respect to a measurement period, the cash generated from operations during that period, including tax benefits attributable to share-based compensation, reduced by the Company's investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. See the supplementary analysis of results below for our calculation of free cash flow for the six months ended June 30, 2017 and 2016. Since adoption of ASU 2016-09 in 2017, the tax benefit from share-based compensation is included in cash generated from operations and will no longer be an adjustment in our free cash flow calculation. To estimate projected 2017 free cash flow, we have deducted projected purchases of property and equipment (also referred to as capital expenditures) of $90 million.
Growth and organic growth - All references to growth and organic growth refer to growth compared to the equivalent prior year period unless specifically noted.
Organic revenue growth - Organic revenue growth is a non-GAAP financial measure that excludes the impact of changes in foreign currency exchange rates and revenue from business acquisitions. See the supplementary analysis of results below for a reconciliation of reported revenue growth to organic revenue growth for the three and six months ended June 30, 2017. See the constant currency note above for the impacts of estimated currency changes to the projected 2017 organic revenue growth for the Company. For the calculation of projected 2017 organic revenue growth, the impacts of revenue from acquisitions is immaterial.
Note Regarding Forward-Looking Statements
This earnings release contains statements about the Company's business prospects and estimates of the Company's financial results for future periods that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are included above under "2017 Financial Outlook" and elsewhere and can be identified by the use of words such as "expects," "may," "anticipates," "intends," "would," "will," "plans," "believes," "estimates," "projected", "should," and similar words and expressions. Our forward-looking statements include statements relating to our revenue growth and EPS outlooks; operating and free cash flow forecast; projected impact of foreign currency exchange rates; and projected operating margins and expenses, capital expenditures, gains from foreign currency hedging transactions, tax and EPS benefits from share-based compensation arrangements, effective tax rates, weighted average shares outstanding and interest expense. These statements are based on management's expectation of future events as of the date of this earnings release, and the Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments. Actual results could differ materially from management's expectations. Factors that could cause or contribute to such differences include the following: the Company's ability to successfully execute its strategy, including supporting its all-direct sales strategy in the U.S.; the Company's ability to develop, manufacture, introduce and market new products and enhancements to existing products; the Company's ability to achieve cost improvements in its worldwide network of laboratories and in the manufacture and service of in-clinic instruments;the Company's ability to identify acquisition opportunities, complete acquisitions and integrate acquired businesses; disruptions, shortages or pricing changes that affect the Company's purchases of products and materials from third parties, including from sole source suppliers; the effectiveness of the Company's sales and marketing activities; the Company's ability to manufacture complex biologic products; the impact of distributor purchasing decisions on sales of the Company's products that are sold through distribution; the Company's ability to manage the risks associated with the use of distributors to sell the Company's products; the impact of increased competition from existing and new technologies and technological advances by our competitors; the promotion and sale of our competitors' products by our former U.S. distribution partners; the effect of government regulation on the Company's business, including government decisions about whether and when to approve the Company's products, decisions regarding labeling, manufacturing and marketing products and regulations impacting the use of certain substances currently used in our products or processes; the impact of consolidation and reference laboratory vertical integration among our customers, including veterinary hospital consolidation, and the prevalence of buying consortiums on the markets for the Company's products; the Company's ability to obtain patent and other intellectual property protection for its products, successfully enforce its intellectual property rights and defend itself against third party claims against the Company; changes in testing patterns or practices in veterinary medicine that affect the rate of use of the Company's products and services by veterinarians; a failure or perceived failure to comply with regulations and our policies regarding the privacy and protection of user data; the effect of any strengthening of the rate of exchange for the U.S. dollar; the impact of a weak economy on demand for the Company's products and services or increased customer credit risk; the effects of operations outside the U.S., including from currency fluctuations, different regulatory, political and economic conditions, and different market conditions and local business and cultural factors; the impact of the Company's limited experience and small scale in the human point-of-care market; the effects of interruptions to the Company's operations due to natural or man-made disasters, system failures or disruptions or security breaches; the impact of disruptions, attacks or breaches of information systems, including to our customers' information systems via our products and services that connect to and are part of the "Internet of Things"; the effect of any adverse changes in the financial markets on the value of the Company's investment portfolio; the effect on the Company's stock price if quarterly or annual operating results do not meet expectations of market analysts or investors in future periods; potential exposures related to our worldwide provision for income taxes and the potential loss of tax incentives; and the Company's ability to obtain financing on favorable terms. A further description of these and other factors can be found in the Company's Annual Report on Form 10-K for the year ended December 31, 2016 and the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, in the sections captioned "Risk Factors," as well as the Company's other periodic reports filed or to be filed with the Securities and Exchange Commission.
IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
Amounts in thousands except per share data (Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Revenue: Revenue $508,940 $466,569 $970,961 $884,119
Expenses and Income: Cost of revenue 216,225 206,026 420,055 396,039
--------------- ------- ------- ------- -------
Gross profit 292,715 260,543 550,906 488,080
Sales and marketing 87,693 76,652 174,937 156,481
General and administrative 55,460 54,317 108,374 103,612
Research and development 26,998 25,412 52,788 50,032
Income from operations 122,564 104,162 214,807 177,955
Interest expense, net (7,979) (7,276) (15,485) (14,760)
--------------------- ------ ------ ------- -------
Income before provision for income taxes 114,585 96,886 199,322 163,195
Provision for income taxes 29,178 29,680 44,857 49,964
-------------------------- ------ ------ ------ ------
Net Income: Net income 85,407 67,206 154,465 113,231
Less: Noncontrolling interest in subsidiary's earnings 50 4 89 10
------------------------------------------------------ --- --- --- ---
Net income attributable to stockholders $85,357 $67,202 $154,376 $113,221
Earnings per share: Basic $0.97 $0.75 $1.75 $1.26
------------------------- ----- ----- ----- -----
Earnings per share: Diluted $0.95 $0.74 $1.72 $1.25
--------------------------- ----- ----- ----- -----
Shares outstanding: Basic 88,004 89,824 88,060 89,874
------------------------- ------ ------ ------ ------
Shares outstanding: Diluted 89,878 90,817 89,962 90,858
--------------------------- ------ ------ ------ ------
IDEXX Laboratories, Inc. and Subsidiaries
Selected Operating Information (Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Operating Ratios Gross profit 57.5% 55.8% 56.7% 55.2%
(as a percentage of revenue): Sales, marketing, general and administrative expense 28.1% 28.1% 29.2% 29.4%
Research and development expense 5.3% 5.4% 5.4% 5.7%
-------------------------------- --- --- --- ---
Income from operations(1) 24.1% 22.3% 22.1% 20.1%
------------------------ ---- ---- ---- ----
(1)Amounts presented may not recalculate due to rounding.
IDEXX Laboratories, Inc. and Subsidiaries
Segment Information
Amounts in thousands (Unaudited)
Three Months Ended Three Months Ended
------------------ ------------------
June 30, Percent of June 30, Percent of
2017 Revenue 2016 Revenue
---- ------- ---- -------
Revenue: CAG $439,948 $400,223
Water 29,424 27,829
LPD 33,553 32,856
Other 6,015 5,661
----- ----- -----
Total $508,940 $466,569
----- -------- --------
Gross Profit: CAG $250,086 56.8% $220,003 55.0%
Water 20,652 70.2% 19,380 69.6%
LPD 19,682 58.7% 19,178 58.4%
Other 2,503 41.6% 2,291 40.5%
Unallocated Amounts (208) N/A (309) N/A
------------------- ---- --- ---- ---
Total $292,715 57.5% $260,543 55.8%
----- -------- ---- -------- ----
Income from Operations: CAG $108,731 24.7% $91,019 22.7%
Water 13,653 46.4% 12,743 45.8%
LPD 5,176 15.4% 5,069 15.4%
Other 768 12.8% (920) (16.3%)
Unallocated Amounts (5,764) N/A (3,749) N/A
------------------- ------ --- ------ ---
Total $122,564 24.1% $104,162 22.3%
----- -------- ---- -------- ----
Six Months Ended Six Months Ended
---------------- ----------------
June 30, Percent of June 30, Percent of
2017 Revenue 2016 Revenue
---- ------- ---- -------
Revenue: CAG $843,175 $757,862
Water 54,501 51,381
LPD 62,870 63,712
Other 10,415 11,164
----- ------ ------
Total $970,961 $884,119
----- -------- --------
Gross Profit: CAG $471,156 55.9% $410,795 54.2%
Water 38,127 70.0% 35,486 69.1%
LPD 36,527 58.1% 37,155 58.3%
Other 4,614 44.3% 5,214 46.7%
Unallocated Amounts 482 N/A (570) N/A
------------------- --- --- ---- ---
Total $550,906 56.7% $488,080 55.2%
----- -------- ---- -------- ----
Income from Operations: CAG $188,586 22.4% $152,397 20.1%
Water 23,916 43.9% 22,422 43.6%
LPD 8,978 14.3% 9,639 15.1%
Other 1,161 11.1% (1,757) (15.7%)
Unallocated Amounts (7,834) N/A (4,746) N/A
------------------- ------ --- ------ ---
Total $214,807 22.1% $177,955 20.1%
----- -------- ---- -------- ----
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories and by Domestic and International Markets
Amounts in thousands (Unaudited)
Three Months Ended
------------------
Percentage Percentage Organic
June 30, June 30, Dollar Percentage Change from Change from Revenue
Net Revenue 2017 2016 Change Change Currency 1 Acquisitions 2 Growth(3)
----------- ---- ---- ------ ------ ---------- -------------- --------
CAG $439,948 $400,223 $39,725 9.9% (1.2%) 0.2% 10.9%
United States 295,829 266,607 29,222 11.0% - 0.1% 10.9%
International 144,119 133,616 10,503 7.9% (3.5%) 0.3% 11.0%
Water 29,424 27,829 1,595 5.7% (1.4%) - 7.2%
United States 14,366 14,056 310 2.2% - - 2.2%
International 15,058 13,773 1,285 9.3% (3.0%) - 12.3%
LPD 33,553 32,856 697 2.1% (1.4%) - 3.5%
United States 3,433 3,333 100 3.0% - - 3.0%
International 30,120 29,523 597 2.0% (1.6%) - 3.6%
Other 6,015 5,661 354 6.3% (0.2%) - 6.4%
----- ----- ----- ---
Total Company $508,940 $466,569 $42,371 9.1% (1.2%) 0.1% 10.1%
United States $315,695 $285,758 $29,937 10.5% - 0.1% 10.4%
International $193,245 $180,811 $12,434 6.9% (3.1%) 0.2% 9.7%
------------- -------- -------- ------- --- ----- --- ---
Three Months Ended
------------------
Percentage Percentage Organic
June 30, June 30, Dollar Percentage Change from Change from Revenue
Net CAG Revenue 2017 2016 Change Change Currency 1 Acquisitions 2 Growth(3)
--------------- ---- ---- ------ ------ ---------- -------------- --------
CAG Diagnostics recurring revenue: $380,319 $338,653 $41,666 12.3% (1.2%) 0.2% 13.4%
IDEXX VetLab consumables 132,094 114,560 17,534 15.3% (1.4%) - 16.7%
Rapid assay products 60,266 55,777 4,489 8.0% (0.5%) - 8.5%
Reference laboratory diagnostic and consulting services 171,298 153,134 18,164 11.9% (1.4%) 0.4% 12.9%
CAG Diagnostics services and accessories 16,661 15,182 1,479 9.7% (1.4%) - 11.1%
CAG Diagnostics capital - instruments 27,716 32,165 (4,449) (13.8%) (1.0%) - (12.8%)
Veterinary software, services and diagnostic imaging systems 31,913 29,405 2,508 8.5% (0.4%) 0.1% 8.8%
------------------------------------------------------------ ------ ------ -----
Net CAG revenue $439,948 $400,223 $39,725 9.9% (1.2%) 0.2% 10.9%
--------------- -------- -------- ------- --- ----- --- ----
(1)The percentage change from currency is a non-GAAP financial measure. This measure represents the percentage change in revenue resulting from the difference between the average exchange rates during the three months ended June 30, 2017 and the same period of the prior year applied to foreign currency-denominated revenues for the three months
ended June 30, 2016.
(2)The percentage change from acquisitions is a non-GAAP financial measure. This measure represents the percentage change in revenue during the three months ended June 30, 2017 compared to the three months ended June 30, 2016 attributed to acquisitions subsequent to December 31, 2015.
(3)Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the three months ended June 30, 2017 compared to the three months ended June 30, 2016 net of acquisitions and the effect of changes in foreign currency exchange rates. Amounts presented may not recalculate due to rounding.
IDEXX Laboratories, Inc. and Subsidiaries
Revenues and Revenue Growth Analysis by Product and Service Categories and by Domestic and International Markets
Amounts in thousands (Unaudited)
Six Months Ended
----------------
Percentage Percentage Organic
June 30, June 30, Dollar Percentage Change from Change from Revenue
Net Revenue 2017 2016 Change Change Currency 1 Acquisitions 2 Growth(3)
----------- ---- ---- ------ ------ ---------- -------------- --------
CAG $843,175 $757,862 $85,313 11.3% (1.0%) 0.2% 12.1%
United States 566,317 508,417 57,900 11.4% - 0.1% 11.3%
International 276,858 249,445 27,413 11.0% (3.0%) 0.3% 13.7%
Water 54,501 51,381 3,120 6.1% (1.2%) - 7.2%
United States 27,385 26,379 1,006 3.8% - - 3.8%
International 27,116 25,002 2,114 8.5% (2.5%) - 10.9%
LPD 62,870 63,712 (842) (1.3%) (0.9%) - (0.4%)
United States 6,917 6,502 415 6.4% - - 6.4%
International 55,953 57,210 (1,257) (2.2%) (1.0%) - (1.2%)
Other 10,415 11,164 (749) (6.7%) (0.2%) - (6.5%)
----- ------ ------ ----
Total Company $970,961 $884,119 $86,842 9.8% (1.0%) 0.1% 10.7%
United States $604,308 $544,697 $59,611 10.9% - 0.1% 10.9%
International $366,653 $339,422 $27,231 8.0% (2.5%) 0.3% 10.3%
------------- -------- -------- ------- --- ----- --- ----
Six Months Ended
----------------
Percentage Percentage Organic
June 30, June 30, Dollar Percentage Change from Change from Revenue
Net CAG Revenue 2017 2016 Change Change Currency 1 Acquisitions 2 Growth(3)
--------------- ---- ---- ------ ------ ---------- -------------- --------
CAG Diagnostics recurring revenue: $726,999 $644,494 $82,505 12.8% (1.0%) 0.2% 13.6%
IDEXX VetLab consumables 255,647 222,529 33,118 14.9% (1.1%) - 16.0%
Rapid assay products 108,161 98,863 9,298 9.4% (0.4%) - 9.8%
Reference laboratory diagnostic and consulting services 330,367 293,842 36,525 12.4% (1.2%) 0.4% 13.2%
CAG Diagnostics services and accessories 32,824 29,260 3,564 12.2% (1.2%) - 13.4%
CAG Diagnostics capital - instruments 53,899 54,808 (909) (1.7%) (1.3%) - (0.4%)
Veterinary software, services and diagnostic imaging systems 62,277 58,560 3,717 6.3% (0.1%) - 6.5%
------------------------------------------------------------ ------ ------ -----
Net CAG revenue $843,175 $757,862 $85,313 11.3% (1.0%) 0.2% 12.1%
--------------- -------- -------- ------- ---- ----- --- ----
(1)The percentage change from currency is a non-GAAP financial measure. This measure represents the percentage change in revenue resulting from the difference between the average exchange rates during the six months ended June 30, 2017 and the same period of the prior year applied to foreign currency-denominated revenues for the six months
ended June 30, 2016.
(2)The percentage change from acquisitions is a non-GAAP financial measure. This measure represents the percentage change in revenue during the six months ended June 30, 2017 compared to the six months ended June 30, 2016 attributed to acquisitions subsequent to December 31, 2015.
(3)Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the six months ended June 30, 2017 compared to the six months ended June 30, 2016 net of acquisitions and the effect of changes in foreign currency exchange rates. Amounts presented may not recalculate due to rounding.
IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
Amounts in thousands (Unaudited)
June 30, December 31,
2017 2016
---- ----
Assets: Current Assets:
Cash and cash equivalents $165,975 $154,901
Marketable securities 256,923 236,949
Accounts receivable, net 240,262 204,494
Inventories 169,693 158,034
Other current assets 85,805 91,206
-------------------- ------ ------
Total current assets 918,658 845,584
-------------------- ------- -------
Property and equipment, net 364,779 357,422
Other long-term assets, net 353,700 327,698
--------------------------- ------- -------
Total assets $1,637,137 $1,530,704
------------ ---------- ----------
Liabilities and Stockholders'
Equity (Deficit): Current Liabilities:
Accounts payable $58,606 $60,057
Accrued liabilities 210,181 236,131
Line of credit 704,000 611,000
Deferred revenue 28,706 27,380
---------------- ------ ------
Total current liabilities 1,001,493 934,568
------------------------- --------- -------
Long-term debt 600,891 593,110
Other long-term liabilities, net 120,860 111,239
-------------------------------- ------- -------
Total long-term liabilities 721,751 704,349
--------------------------- ------- -------
Total stockholders' equity (deficit) (86,335) (108,352)
Noncontrolling interest 228 139
----------------------- --- ---
Total stockholders' equity (deficit) (86,107) (108,213)
----------------------------------- ------- --------
Total liabilities and stockholders' equity (deficit) $1,637,137 $1,530,704
--------------------------------------------------- ---------- ----------
IDEXX Laboratories, Inc. and Subsidiaries
Selected Balance Sheet Information (Unaudited)
June 30, March 31, December 31, September 30, June 30,
2017 2017 2016 2016 2016
---- ---- ---- ---- ----
Selected Balance Sheet Information:
Days sales outstanding(1) 41.7 42.4 42.1 42.4 41.5
Inventory turns(2) 2.0 1.9 2.0 1.8 1.7
(1)Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.
(2)Inventory turns represent inventory-related cost of product sales for the twelve months preceding each quarter-end divided by the inventory balance at the end of the quarter.
IDEXX Laboratories, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
Amounts in thousands (Unaudited)
Six Months Ended
----------------
June 30, June 30,
2017 2016
---- ----
Operating: Cash Flows from Operating Activities:
Net income $154,465 $113,231
Non-cash charges 56,357 53,673
Changes in assets and liabilities (69,356) (24,240)
Tax benefit from share-based compensation arrangements - (4,791)
------------------------------------------------------ --- ------
Net cash provided by operating activities 141,466 137,873
----------------------------------------- ------- -------
Investing: Cash Flows from Investing Activities:
Purchases of property and equipment (38,566) (37,868)
Purchase of marketable securities (175,522) (123,809)
Proceeds from the sale and maturities of marketable securities 155,903 108,115
Acquisitions of businesses, net of cash acquired (14,529) -
------------------------------------------------ ------- ---
Net cash used by investing activities (72,714) (53,562)
------------------------------------- ------- -------
Financing: Cash Flows from Financing Activities:
Borrowings on revolving credit facilities, net 93,000 (15,000)
Repurchases of common stock (170,798) (76,536)
Debt issue costs - (57)
Proceeds from the exercise of stock options and employee stock purchase plans 23,170 17,554
Shares withheld for statutory tax withholding on restricted stock (7,459) (3,732)
Payment of acquisition-related contingent consideration - (2,717)
Tax benefit from share-based compensation arrangements - 4,791
------------------------------------------------------ --- -----
Net cash provided (used) by financing activities (62,087) (75,697)
------------------------------------------------ ------- -------
Net effect of changes in exchange rates on cash 4,409 3,531
----------------------------------------------- ----- -----
Net increase in cash and cash equivalents 11,074 12,145
----------------------------------------- ------ ------
Cash and cash equivalents, beginning of period 154,901 128,994
---------------------------------------------- ------- -------
Cash and cash equivalents, end of period $165,975 $141,139
---------------------------------------- -------- --------
IDEXX Laboratories, Inc. and Subsidiaries
Free Cash Flow1
Amounts in thousands except per share data (Unaudited)
Six Months Ended
----------------
June 30, June 30,
2017 2016
---- ----
Free Cash
Flow: Net cash provided by operating activities $141,466 $137,873
Financing cash flows attributable to tax benefits from share-based compensation
arrangements - 4,791
Investing cash flows attributable to purchases of property and equipment (38,566) (37,868)
------------------------------------------------------------------------ ------- -------
Free cash flow $102,900 $104,796
-------------- -------- --------
(1)Free cash flow is a non-GAAP financial measure and is calculated from cash generated from operations, including tax benefits attributable to share-based
compensation arrangements, reduced by the Company's investments in property and equipment. Management believes free cash flow is a useful measure because it
indicates the cash the operations of the business are generating after appropriate reinvestment for recurring investments in property and equipment that are
required to operate the business. Management also believes this is a common financial measure useful to further evaluate the results of operations. Upon adopting
ASU 2016-09 in 2017, the tax benefit from share-based compensation is included in cash generated from operations and is no longer an adjustment in our free cash
flow calculation.
IDEXX Laboratories, Inc. and Subsidiaries
Common Stock Repurchases
Amounts in thousands except per share data (Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
Shares repurchased in
the open market 696 269 1,086 977
Shares acquired through
employee surrender for
statutory tax
withholding 1 2 53 54
Total shares repurchased 697 271 1,139 1,031
=== === ===== =====
Cost of shares
repurchased in the open
market $114,163 $23,260 $164,907 $72,975
Cost of shares for
employee surrenders 156 203 7,459 3,732
--- --- ----- -----
Total cost of shares $114,319 $23,463 $172,366 $76,707
======== ======= ======== =======
Average cost per share -
open market repurchases $163.96 $86.45 $151.81 $74.68
Average cost per share -
employee surrenders $168.25 $88.18 $141.56 $68.82
Average cost per share -
total $163.97 $86.46 $151.34 $74.38
Shares remaining under repurchase authorization as of June 30, 2017 totaled 5,649,249.
Contact: Kerry Bennett, Investor Relations, 1-207-556-8155
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SOURCE IDEXX Laboratories, Inc.
