Idexx Laboratories announces second quarter results

Achieves reported revenue growth of 30% and organic revenue growth of 25%, driven by CAG Diagnostics recurring revenue growth of 30% as reported and 26% organic

Delivers EPS of $2.34, representing 36% growth as reported and 33% on a comparable basis

Increases 2021 revenue guidance to $3,170 million - $3,205 million, reflecting higher expectations for reported growth of 17% - 18.5% and organic growth of 14.5% - 16%, supported by projected CAG Diagnostics recurring revenue growth of 18% - 19.5% as reported and 16% - 17.5% organic

Raises 2021 EPS outlook to $8.20 - $8.36, reflecting an increase of 1% - 1.5% in the organic revenue growth outlook and expectations for higher operating margins of 28.6% - 29.1%

IDEXX Laboratories, Inc. (NASDAQ: IDXX), a global leader in veterinary diagnostics, veterinary practice software and water microbiology testing, today announced second quarter results, as well as an update on U.S. companion animal diagnostics sector trends.

Second Quarter Results

The Company reports revenues of $826 million for the second quarter of 2021, an increase of 30% as reported and 25% organically. Second quarter results were driven by Companion Animal Group ("CAG") Diagnostics recurring revenue growth of 30% reported and 26% organic, reflecting continued high gains in the U.S. and internationally, as well as 86% reported and 78% organic growth in CAG Diagnostics capital instrument revenue. Overall revenue growth was also supported by 32% reported and 27% organic revenue growth in the Water business.

Earnings per diluted share ("EPS") of $2.34 for the second quarter was supported by solid operating margin gains despite comparisons to highly controlled cost levels in the prior year. Overall operating margins expanded 110 basis points on an as reported and comparable basis. EPS results also benefited from a higher than expected $0.07 per share in tax benefits from share-based compensation.

"The IDEXX team delivered another quarter of outstanding performance, reflected in continued high growth in CAG Diagnostics recurring revenues and accelerated gains in instrument placements, as the global animal healthcare sector sustained strong growth momentum globally," said Jay Mazelsky, the Company's President and Chief Executive Officer. "We doubled prior year CAGpremium instrument placements, as our customers look ahead to supporting continued strong global demand for companion animal diagnostics in their practices. We look forward to building on this momentum with the ongoing successful rollout of ProCyte OneTM, our next-generation hematology point-of-care instrument. We continue to drive exceptional performance across our major regions driven by strong commercial execution and adoption of IDEXX innovation. We also continue to build on our capabilities, including expansion of our cloud-based software solutions that support veterinary clinic productivity. We were excited to announce the acquisition of the ezyVet practice management software platform in the quarter and to welcome the talented ezyVet team to IDEXX. Our best-in-class in-clinic platforms and unparalleled global lab services capabilities, integrated with our cloud-based information management solutions, position us to drive accelerated advancement of the global standard of healthcare for companion animals."

Companion Animal Diagnostics Trends Update

Favorable global trends in companion animal healthcare continue to support high growth for CAG diagnostic products and services across regions. U.S. same-store clinical visit growth at veterinary practices was 13% in the second quarter, reflecting year-over-year growth of 11% in non-wellness visits and 14% in wellness visits. These gains include benefits from comparisons to prior year impacts on demand related to the COVID-19 pandemic. Average same-store revenue growth at U.S. veterinary practices was 16% in the second quarter, driven by high growth in healthcare services, including increased utilization of diagnostics. Additional U.S. companion animal practice key metrics are available in the Q2 2021 Earnings Snapshot accessible on the IDEXX website, www.idexx.com/investors.

Second Quarter Performance Highlights

Companion Animal Group

The Companion Animal Group generated 32% reported and 27% organic revenue growth for the quarter, supported by CAG Diagnostics recurring revenue growth of 30% on a reported basis and 26% on an organic basis. High growth across IDEXX's major modalities in the second quarter reflected continued high growth in clinical visits, which benefited in part from lapping of prior year COVID-19 impacts in April and May. Overall CAG revenue growth included 86% reported growth and 78% organic growth in CAG Diagnostics capital instrument revenues, compared to constrained prior year levels.

IDEXX VetLab® consumables generated 31% reported and 26% organicrevenue growth, supported by increased testing utilization across regions, high customer retention levels, ongoing expansion of our global premium instrument installed base, and moderate net price gains.

Reference laboratory diagnostic and consulting services generated 28% reported and 25% organic revenue growth, with high organic growth across regions reflecting strong volume gains across testing categories and benefits from moderate net price gains.

Rapid assay products revenues grew 30% as reported and 28% on an organic basis, with continued worldwide growth in SNAP® 4Dx Plus Test volumes, benefiting from strong overall sector conditions, including high growth in wellness testing, high customer retention levels, and moderate net price gains.

Veterinary software, services and diagnostic imaging systems revenues grew 33% reported and26% on an organic basis, driven by double-digit growth in subscription-based service revenues and strong growth in new veterinary software system placements and recurring software services. Reported growth includes initial benefits from the recent acquisition of ezyVet which closed in June.

Water

Water revenues grew 32% on a reported basis and 27% on an organic basis for the quarter, compared to prior year results, which reflected a 16% organic revenue decline driven by early pandemic-related impacts. Solid revenue growth reflects increased demand for water testing as economies re-open, including continued recovery in non-compliance related testing volumes.

Livestock, Poultry and Dairy ("LPD")

LPD revenues grew 4% reported and declined 2% on an organic basis, as strong results were constrained by the lapping of high prior year demand in key areas such as African Swine Fever testing and relatively lower herd health screening levels due to reduced export levels.

Gross Profit and Operating Profit

Gross profits increased 29% as reported and 25% on a comparable basis. Gross margin of 59.2% decreased 30 basis points compared to prior year period results as reported and 20 basis points on a comparable basis. Gross margin results were impacted by mix impacts from high instrument revenue growth and the lapping of tightly controlled prior year cost levels in key areas including lab operations, which moderated reference lab gross margin gains. These effects were partially offset by a mix benefit from strong CAG Diagnostics recurring revenue growth and moderate net price gains.

Operating margin was 31.4% in the quarter, 110 basis points higher than the prior year period results on both as reported and comparable bases, supported by operating expense leverage on strong revenue growth. Operating expenses increased 24% as reported and 20% on a comparable basis, reflecting comparisons to lower prior year levels impacted by early pandemic-related cost controls, as well as the advancement of investments in our global commercial and innovation capabilities. The Company is planning for constrained gross margin gains and higher levels of operating expense growth over the balance of the year as we continue to lap tightly controlled prior year spending levels, with increases in specific cost areas as pandemic restrictions are eased and advancement of investments aligned with our goals for sustained high revenue growth.