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IDEXX Laboratories Announces First Quarter Results

-- Achieves 11% organic growth for total Company and CAG Diagnostics recurring revenues-- Premium instrument placements increase 18%, supported by 25% growth in Catalyst®-- Delivers EPS of $0.51, up 14% on a constant currency basis-- 2016 organic revenue growth guidance range increased to 9% - 10% on positive trends-- 2016 revenue guidance range increased by $40 million based on favorable changes in foreign exchange rates and higher organic growth-- 2016 EPS guidance range increased to $2.18 - $2.25 on favorable growth outlook and favorable changes in foreign exchange rates

IDXX, -1.39% today reported revenues for the first quarter of 2016 of $418 million, an increase of 9% compared to the prior year period. Organic revenue growth for the quarter was 11%, supported by strong growth in the Companion Animal Group ("CAG") and Water segments.

Earnings per diluted share ("EPS") for the quarter was $0.51, an increase of 4% compared to the prior year period, while absorbing a negative $0.05 per share impact related to net changes in foreign exchange, resulting in constant currency EPS growth of 14%. The federal research and development tax credit, which benefited the current but not the prior year period, had a 2% favorable impact to EPS growth.

"We were very pleased with the Company's performance in the first quarter. The benefits of our go-direct commercial strategy and innovation pipeline drove strong gains in our recurring revenues. We also achieved continued outstanding results in placing new instruments globally, supported by the expansion of Catalyst One [®] . We achieved 714 Catalyst placements in international markets and 443 in North America, with 58% of North America placements to new and competitive accounts. Our powerful worldwide commercial model and new products such as IDEXX SDMA™ and Catalyst One have put us in a very favorable position for continued strong growth. Given our strong start and positive trends, we are raising our 2016 guidance range for organic revenue growth to 9% - 10%," said Jonathan Ayers, the Company's Chairman and Chief Executive Officer.

"We are pleased to announce that in mid-April, as planned, we started shipping SediVue Dx™, our novel urine sediment analyzer for use in-clinic. SediVue provides improved accuracy and streamlined workflow benefits to veterinary clinics compared to the traditional challenging manual process involving microscopic interpretation. In concert with chemistry and hematology, urinalysis forms the essential third pillar of the minimum diagnostic database to support the assessment of a pet's health," continued Ayers.

First Quarter Financial Performance Highlights

First quarter revenue increased 9% to $418 million and organic revenue growth was 11%.

  • Companion Animal Group organic revenue growth was 11% for the first quarter, driven by 11% organic growth in CAG Diagnostics recurring revenues, 16% organic revenue growth in CAG Diagnostics instruments, and 14% organic revenue growth in customer information management and diagnostic imaging systems. CAG Diagnostics recurring revenue gains reflected 15% organic growth in reference laboratory diagnostic and consulting services, driven by high teen organic revenue growth in the US, and 12% organic revenue growth in IDEXX VetLab [®] consumables. Rapid assay organic revenue growth declined 1% primarily due to the quarterly timing of promotional programs. CAG Diagnostics recurring revenue growth was supported by an extra day in the quarter due to leap year and favorable comparative weather conditions.
  • Water's organic revenue growth was 11% in the first quarter, driven by worldwide increases in core coliform and E.coli products, as well as benefits from the launch of our new Quanti-Tray [®] Sealer PLUS product, the extra leap year day, and favorable comparative weather conditions.
  • Livestock, Poultry and Dairy ("LPD") organic revenue increased 4% for the first quarter reflecting solid growth in new products worldwide, strong growth in China porcine and poultry products, and higher livestock services revenue in Australia, partially offset by lower Europe bovine revenue.

Gross profit increased 6% compared to the prior year period. Gross margin decreased from 56.4% to 54.5%, reflecting the unfavorable impact of foreign exchange rates (including the lapping of prior year hedge gains), higher manufacturing costs, and mix impacts from strong instrument sales, partially offset by benefits from moderate price gains.

Operating margin was 17.7% in the first quarter, down from prior year period operating margin of 19.0%, reflecting gross margin changes. Operating expenses increased 8%, slightly below the rate of revenue growth.

Outlook for 2016

The Company is increasing its 2016 revenue guidance range by $40 million and its 2016 EPS guidance range by $0.08 per share to reflect its strong first quarter operating results, positive revenue growth trends, and projected benefits from a moderated strengthening of the US dollar relative to foreign currencies, partially offset by an anticipated increase in the effective tax rate.

At the revised current foreign exchange rates assumptions below, compared to assumptions used in our prior guidance for 2016 provided during our fourth quarter earnings call on January 29, 2016, the moderating of the US dollar strength has the effect of increasing projected revenue by approximately $27 million and EPS by $0.05 per share, net of hedge benefits. We estimate that with these revised foreign exchange assumptions, the effect of the stronger US dollar compared to rates in effect in 2015 will adversely impact 2016 reported revenue growth by approximately 1%, EPS by an estimated $0.21 per share, and Adjusted EPS growth by 10%.

The Company provides the following updated guidance for 2016:

Amounts in millions except per share data and percentages

Guidance Range

Growth Definition

Year-over-Year Growth


$1,730 - $1,750

Organic Revenue Growth

9% to 10%


8% to 9%


$2.18 - $2.25


3% to 7%

Constant Currency Adjusted


13% to 17%6% to 10%

Free Cash Flow 95% - 100% of net income

Capital Expenditures $90 million

The guidance above assumes that the value of the US dollar relative to other currencies will reflect the euro at $1.12, the British pound at $1.40, the Canadian dollar at $0.75, the Australian dollar at $0.75 and the Japanese yen at ¥113 to the US dollar for the remainder of 2016.

We continue to expect that operating margins for the full year will be 18.0% to 18.5%. Adjusted for foreign currency impacts (including comparisons to 2015 hedge gains) and the 2015 software impairment charge, we continue to target operating margin improvement of approximately 50 basis points from 2015 levels.

We expect an effective tax rate of approximately 30.5% to 31.0%, up slightly from previous guidance due to a higher mix of profit in the US versus lower tax rate jurisdictions. We are projecting a reduction in weighted average shares outstanding of approximately 3.5%, and interest expense, net of interest income, of approximately $31 million reflecting current and projected borrowings.

Conference Call and Webcast Information

IDEXX Laboratories, Inc. will be hosting a conference call today at 8:30 a.m. (Eastern) to discuss its first quarter results and management's outlook. To participate in the conference call, dial 800-230-1092 or 612-288-0340 and reference confirmation code 390906. An audio replay will be available through Friday, May 6, 2016 by dialing 800-475-6701 or 320-365-3844 and referencing replay code 390906.

The call will also be available via live or archived webcast on the IDEXX Laboratories' website at and will be available for one year.

Annual Meeting

IDEXX Laboratories, Inc. today announced that it will host a simultaneous webcast of its Annual Meeting of Stockholders, to be held on Wednesday, May 4, 2016, at 10:00 a.m. (Eastern) at the Portland Marriott Hotel, 200 Sable Oaks Drive, South Portland, Maine.

Chairman and Chief Executive Officer Jonathan Ayers will chair the meeting. Investors may listen to live audio of the Annual Meeting via a link on the Company's website, An archived edition of the meeting will be available after 1:00 p.m. (Eastern) on that day via the same link and will be available for 14 days.

About IDEXX Laboratories, Inc.

IDEXX Laboratories, Inc. 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 7,000 people and offers products to customers in over 175 countries.

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 are useful for period-over-period comparisons of the performance of the Company's business and to the performance 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:

Adjusted EPS and Adjusted EPS growth - Adjusted EPS and Adjusted EPS growth are non-GAAP financial measures. Management believes that reporting Adjusted EPS provides useful information to investors by facilitating easier comparisons of our EPS performance with...