IDEXX LABORATORIES INC DE

Previous wording

Below is a table showing active installed base units of our premium diagnostic instruments as of the years ended December 31, 2023, 2022, and 2021:

Current wording

Below is a table showing the installed base units of our premium diagnostic instruments as of the years ended December 31, 2024, 2023, and 2022:

Previous wording

Our long-term success in the continuing growth of our CAG recurring diagnostic products and services is dependent upon: growing volumes at existing customers by increasing their utilization of existing and new test offerings, acquiring new customers, maintaining high customer loyalty and retention, and realizing annual price increases based on our differentiated products and the growing value of our diagnostic offering. We continuously seek opportunities to enhance the care that veterinary professionals give to their patients and clients through supporting the implementation of real-time care testing workflows, which is performing tests and sharing test results with the client at the time of the patient visit. Our latest generation of chemistry, hematology, and urinalysis instruments demonstrates this commitment by offering enhanced ease of use, faster time to results, broader test menu and connectivity to various information technology platforms that enhance the value of the diagnostic information generated by the instruments. In addition, we provide marketing tools and customer support that help drive efficiencies in veterinary practice processes and allow practices to increase the number of clients they see on a daily basis.

Current wording

Our long-term success in the continuing growth of our CAG recurring diagnostic products and services is dependent upon: growing volumes at existing customers by increasing their utilization of existing and new test offerings, acquiring new customers, maintaining high customer loyalty and retention, and realizing price increases based on our differentiated products and the growing value of our diagnostic offering. We continuously seek opportunities to enhance the care that veterinary professionals give to their patients and clients through supporting the implementation of real-time care testing workflows, which is performing tests and sharing test results with the client at the time of the patient visit. Our latest generation of chemistry, hematology, cytology, and urinalysis instruments demonstrates this commitment by offering enhanced ease of use, faster time to results, broader test menu, and connectivity to various information technology platforms that enhance the value of the diagnostic information generated by the instruments. In addition, we provide marketing tools and customer support that help drive efficiencies in veterinary practice processes and allow practices to increase the number of clients they see on a daily basis.

Previous wording

Our in-clinic diagnostic solutions, consisting of our IDEXX VetLab consumable products and SNAP rapid assay test kits, provide real-time reference lab quality diagnostic results for a variety of companion animal diseases and health conditions. Our outside reference laboratories provide veterinarians with the benefits of a more comprehensive list of diagnostic tests and access to consultations with board-certified veterinary specialists and pathologists, combined with the benefit of same-day or next-day turnaround times.

Current wording

Our in-clinic diagnostic solutions, consisting of our IDEXX VetLab consumable products and SNAP rapid assay test kits, provide real-time reference lab quality diagnostic results for a variety of companion animal diseases and health conditions. Our outside reference laboratories provide veterinarians with the benefits of a more comprehensive list of diagnostic tests and access to consultations with board-certified veterinary specialists and pathologists, combined with the benefit of same-day or next-day turnaround times for most tests.

Previous wording

Our in-clinic diagnostic solutions also include SNAP rapid assay tests that address important medical needs for particular diseases prevalent in the companion animal population. We seek to differentiate these tests from those of other in-clinic test providers and reference laboratory diagnostic service providers based on critically important sensitivity and specificity, as demonstrated by peer-reviewed third-party research, as well as overall superior performance and ease of use by providing our customers with combination tests that test a single sample for up to six diseases at once, including the ability to utilize our SNAP Pro Analyzer. We further augment our product development and customer service efforts with sales and marketing programs that enhance medical awareness and understanding regarding certain diseases and the importance of diagnostic testing.

Current wording

Our in-clinic diagnostic solutions also include SNAP rapid assay tests that address important medical needs for particular diseases prevalent in the companion animal population. We seek to differentiate these tests from those of other in-clinic test providers and reference laboratory diagnostic service providers based on critically important sensitivity and specificity, as demonstrated by peer-reviewed third-party research, as well as overall superior performance and ease of use by providing our customers with combination tests that test a single sample for upto six diseases at once, including the ability to utilize our SNAP Pro Analyzer. We further augment our product development and customer service efforts with sales and marketing programs that enhance medical awareness and understanding regarding certain diseases and the importance of diagnostic testing.

Previous wording

Veterinary Software, Services and Diagnostic Imaging Systems. Our portfolio of practice management offerings is designed to serve the full range of customers primarily within the North American, Australian, New Zealand, and European regions. Cornerstone, ezyVet, Animana, IDEXX Neo, and DVMAX practice management systems provide integrated information solutions, backed by customer support and education. These practice management systems support the veterinarian’s ability to practice better medicine and achieve the practice’s business objectives, including a quality client experience, staff efficiency and practice effectiveness and profitability. We market Cornerstone, ezyVet, IDEXX Neo, and DVMAX practice management systems to customers primarily in North America, Australia, and New Zealand. We market our Animana offering to customers primarily throughout Europe.

Current wording

Veterinary Software, Services and Diagnostic Imaging Systems. Our portfolio of practice management offerings is designed to serve the full range of customers primarily within the North American, Australian, New Zealand, and European regions. Cornerstone, ezyVet, IDEXX Neo, and Animana practice management systems provide integrated information solutions, backed by customer support and education. These practice management systems support the veterinarian’s ability to practice better medicine and achieve the practice’s business objectives, including a quality client experience, staff efficiency, and practice effectiveness and profitability. We market Cornerstone, ezyVet, and IDEXX Neo practice management systems to customers primarily in North America, Australia, and New Zealand. We market our Animana offering to customers primarily throughout Europe.

Previous wording

Recurring Revenue. Animana, ezyVet, and IDEXX Neo practice management systems are subscription-based SaaS offerings designed to provide flexible pricing and a durable, recurring revenue stream, while utilizing cloud technology instead of a client server platform. While we continue to support our licensed-based Cornerstone and DVMAX software, we are growing our installed base of subscription-based practice management offerings for new customers of IDEXX practice management systems. Our Cornerstone and DVMAX customer base continues to be an important driver of growth through diagnostic integrations and add-on subscription services, such as Pet Health Network Pro, Petly Plans, and credit card processing, and we continue to make investments to enhance the customer experience of all of our license-based software offerings. We also offer rVetLink, a comprehensive referral management solution for specialty care hospitals that streamlines the referral process between primary care and specialty care veterinarians. rVetLink’s cloud technology integrates with major specialty hospital management systems, including Cornerstone Software and DVMAX Software. Our large practice management systems installed base provides access to veterinary channel transaction activity, enabling a syndicated data offering.

Current wording

Recurring Revenue. Animana, ezyVet, and IDEXX Neo practice management systems are subscription-based SaaS offerings designed to provide flexible pricing and a durable, recurring revenue stream, while utilizing cloud technology instead of a client server platform. We also offer add-on subscription services such as Pet Health Network Pro, Vello, Petly Plans, and credit card processing. Our Cornerstone customer base continues to be an important driver of growth through diagnostic integrations and add-on subscription services. We continue to make investments to enhance the customer experience of all of our license-based software offerings. Our large practice management systems installed base provides access to veterinary channel transaction activity, enabling a syndicated data offering.

Previous wording

With our SmartFlow and Vet Radar cloud technology, we are able to improve overall patient management through coordination and tracking of every step in a patient workflow. Pet Health Network Pro online client communication and education service complements the entire IDEXX product offering by educating pet owners and building loyalty through engaging the pet owner before, during and after the visit, thereby building client loyalty and driving more patient visits.

Current wording

With our SmartFlow and Vet Radar cloud technology, we are able to improve overall patient management through coordination and tracking of every step in a patient workflow. Our Pet Health Network Pro and Vello software provide online client communication and engagement functionality integrated into practice management system workflow.

Previous wording

Placements of imaging systems are important to the growth of revenue streams that are recurring in nature, including extended maintenance agreements and IDEXX Web PACS, which is our cloud-based SaaS offering for viewing, accessing, storing, and sharing multi-modality diagnostic images. We derive relatively higher margins from our subscription-based products. IDEXX Web PACS is integrated with Cornerstone, ezyVet, IDEXX Neo, DVMAX, and IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device.

Current wording

Placements of imaging systems are important to the growth of revenue streams that are recurring in nature, including extended maintenance agreements and IDEXX Web PACS, which is our cloud-based SaaS offering for viewing, accessing, storing, and sharing multi-modality diagnostic images. We derive relatively higher margins from our subscription-based products. IDEXX Web PACS is integrated with Cornerstone, ezyVet, IDEXX Neo, and IDEXX VetConnect PLUS to provide centralized access to diagnostic imaging results alongside patient diagnostic results from any internet connected device.

Previous wording

Systems and hardware. We differentiate our practice management systems through enhanced functionality, ease of use, and embedded integration with in-clinic IDEXX VetLab instruments and outside reference laboratory test results. Software, hardware, and integrated services that run key functions of veterinary clinics, including managing patient electronic health records, scheduling, client communication, billing, and inventory management. We also provide installation and advisory services associated with our systems and hardware placements.

Current wording

Systems and Hardware. We differentiate our practice management systems through enhanced functionality, ease of use, and embedded integration with in-clinic IDEXX VetLab instruments and outside reference laboratory test results. We offer software, hardware, and integrated services that run key functions of veterinary clinics, including managing patient electronic health records, scheduling, client communication, billing, and inventory management. We also provide installation and advisory services associated with our systems and hardware placements.

Previous wording

Beginning in 2020, with the onset of the COVID-19 pandemic, we provided human testing solutions for the detection of SARS-CoV-2, the virus that causes COVID-19. During the first quarter of 2023, we discontinued actively marketing our COVID-19 testing products and services.

Current wording

Previously, we also provided human testing solutions for the detection of SARS-CoV-2, the virus that causes COVID-19. During the first quarter of 2023, we discontinued actively marketing our COVID-19 testing products and services.

Previous wording

Our customer commitment arrangements that include free or discounted instruments and systems, such as our IDEXX 360 program, provide customers with free or discounted instruments or systems upon entering into multi-year arrangements to purchase annual minimum amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices, to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are billed for products and services over the term of the arrangement. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases and expected price adjustments related to these multi-year arrangements. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced contract assets and cumulative recognized revenue related to these programs by approximately $5.5 million at December 31, 2023.

Current wording

Our customer commitment arrangements that include free or discounted instruments and systems, such as our IDEXX 360 program, provide customers with free or discounted instruments or systems upon entering into multi-year arrangements to purchase annual minimum amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices, to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are billed for products and services over the term of the arrangement. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases and expected price adjustments related to these multi-year arrangements. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced contract assets and cumulative recognized revenue related to these programs by approximately $7.5 million as of December 31, 2024.

Previous wording

Our customer commitment arrangements that include up-front consideration paid to customers provide customers with incentives in the form of IDEXX Points or, from time to time, cash, upon entering into multi-year arrangements to purchase annual minimum amounts of future products or services. If a customer breaches their agreement, they are required to refund all or a portion of the up-front consideration, or make other repayments, remedial actions, or both. Up-front incentives to customers are not made in exchange for distinct goods or services and are capitalized as consideration paid to customers (previously referred to as “customer acquisition costs”) within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer arrangement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices, to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases and expected price adjustments related to these multi-year arrangements. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced cumulative recognized revenue related to these programs by approximately $1.3 million at December 31, 2023.

Current wording

Our customer commitment arrangements that include up-front consideration paid to customers provide customers with incentives in the form of IDEXX Points or, from time to time, cash, upon entering into multi-year arrangements to purchase annual minimum amounts of future products and services. If a customer breaches their agreement, they are required to refund all or a portion of the up-front consideration, or make other repayments, remedial actions, or both. Up-front incentives to customers are not made in exchange for distinct goods or services and are capitalized as consideration paid to customers within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer arrangement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices, to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer purchases and expected price adjustments related to these multi-year arrangements. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced cumulative recognized revenue related to these programs by approximately $1.1 million as of December 31, 2024.

Previous wording

Our rebate arrangements provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the arrangement. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the program. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products and services, partly offsetting rebates as they are earned. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer rebates related to these multi-year arrangements. Differences between estimated and actual customer rebates may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced deferred revenue and cumulative recognized revenue related to these programs by approximately $0.1 million at December 31, 2023.

Current wording

Our rebate arrangements provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the arrangement. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the arrangement. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products and services. We estimate, based on historical experience, and apply judgment to predict the amounts of future customer rebates related to these multi-year arrangements. Differences between estimated and actual customer rebates may impact the timing and amount of revenue recognition during the term of the customer arrangement, and a 10% change in these estimates would have increased or reduced deferred revenue and cumulative recognized revenue related to these programs by approximately $0.3 million as of December 31, 2024.

Previous wording

For those jurisdictions where tax carryforwards are likely to expire unused or the projected operating results indicate that realization is not more likely than not, a valuation allowance is recorded to offset the deferred tax asset within that jurisdiction. In assessing the need for a valuation allowance, we consider future taxable income and ongoing prudent and feasible tax planning strategies. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged against income in the period such determination was made.

Current wording

For those jurisdictions where tax carryforwards are likely to expire unused or the projected operating results indicate that realization is not more-likely-than-not, a valuation allowance is recorded to offset the deferred tax asset within that jurisdiction. In assessing the need for a valuation allowance, we consider future taxable income and ongoing prudent and feasible tax planning strategies. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made.

Previous wording

We record a liability for uncertain tax positions that do not meet the more likely than not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more likely than not be sustained. For positions that we believe that it is more likely than not that we will prevail, we record a benefit considering the amounts and probabilities that could be realized upon ultimate settlement. If our judgment as to the likely resolution of the uncertainty changes, if the uncertainty is ultimately settled or if the statute of limitation related to the uncertainty expires, the effects of the change would be recognized in the period in which the change, resolution or expiration occurs. Our net liability for uncertain tax positions was $25.0 million as of December 31, 2023, and $25.8 million as of December 31, 2022, which includes estimated interest expense and penalties. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 14. Income Taxes” in the accompanying Notes to consolidated financial statements for more information.

Current wording

We record a liability for uncertain tax positions that do not meet the more-likely-than-not standard as prescribed by the authoritative guidance for income tax accounting. We record tax benefits for only those positions that we believe will more-likely-than-not be sustained. For positions that we believe that it is more-likely-than-not that we will prevail, we record a benefit considering the amounts and probabilities that could be realized upon ultimate settlement. If our judgment as to the likely resolution of the uncertainty changes, if the uncertainty is ultimately settled, or if the statute of limitations related to the uncertainty expires, the effects of the change would be recognized in the period in which the change, resolution, or expiration occurs. Our net liability for uncertain tax positions was $18.1 million as of December 31, 2024, and $22.3 million as of December 31, 2023. We also accrue for estimated interest expense and penalties on our uncertain tax positions. Refer to “Part II, Item 8. Financial Statements and Supplementary Data, Note 14. Income Taxes” in the accompanying Notes to consolidated financial statements for more information.

Previous wording

CAG Trends. Global trends in companion animal healthcare, including growth in demand for clinical services, continue to support solid growth for companion animal diagnostic products and services across regions. In the U.S., average diagnostics revenue per practice grew approximately 8% on a same-store basis during 2023, faster than approximately 6% growth in overall clinic revenues. U.S. same-store clinical visits at veterinary practices declined approximately 0.5% in 2023, impacted by ongoing veterinary practice productivity and capacity constraints. Our products and services include solutions that help improve staff productivity and create additional capacity at veterinary clinics. For example, during January 2024, we announced the launch of our new slide-free cellular analyzer, IDEXX inVue Dx, that detects the most common cytologic changes found in ear and blood samples, targeted for late 2024 release.

Current wording

CAG Trends. Global trends in companion animal healthcare, including growth in demand for clinical services, continue to support solid growth for companion animal diagnostic products and services across regions. In the U.S., average diagnostics revenue per practice grew approximately 4% on a same-store basis during 2024, faster than approximately 3% growth in overall practice revenues. U.S. same-store clinical visits at veterinary practices declined approximately 2% in 2024, impacted by ongoing veterinary practice capacity challenges from the influx of higher volumes during the pandemic, as well as macroeconomic headwinds. Our initial 2025 financial outlook anticipates a decline in U.S. same-store clinical growth levels reflecting these near-term sector and macroeconomic dynamics. Our products and services include solutions that help improve staff productivity and create additional capacity at veterinary clinics. For example, during 2024, we upgraded our IDEXX VetLab Station software and also launched our new slide-free cellular analyzer, IDEXX inVue Dx.

Previous wording

Supply Chain and Logistics Challenges. We believe that building and maintaining a well-managed and disciplined infrastructure have helped minimize impacts of supply chain constraints, including product and component availability issues, logistics challenges, including extended shipping periods and delays, and inflationary pressures. Our proactive approach to managing our operational processes, including forward planning with a focus on working closely with our suppliers and logistics partners, enables us to maintain continued high levels of product and service availability and customer service. We believe we are well-positioned to enable sustained high growth in our businesses and to effectively manage the impacts of potentially relatively higher costs in certain areas to support these growth plans. However, there can be no assurance as to the duration or severity of the supply chain and logistics challenges or the effectiveness of our mitigating activities.

Current wording

Supply Chain and Logistics Challenges. We believe that building and maintaining a well-managed and disciplined infrastructure has helped minimize impacts of supply chain constraints, including product and component availability issues, logistics challenges, including extended shipping periods and delays, and inflationary pressures. Our proactive approach to managing our operational processes, including forward planning with a focus on working closely with our suppliers and logistics partners, enables us to maintain continued high levels of product and service availability and customer service. We believe we are well-positioned to enable sustained high growth in our businesses and to effectively manage the impacts of potentially relatively higher costs in certain areas to support these growth plans. However, there can be no assurance as to the duration or severity of the supply chain and logistics challenges or the effectiveness of our mitigating activities.

Previous wording

Effects of Economic Conditions. Demand for our products and services is vulnerable to changes in the economic environment, including slow economic growth, high unemployment, and credit availability. Negative or cautious consumer sentiment can lead to reduced or delayed consumer spending, resulting in a decreased number of patient visits to veterinary clinics. Unfavorable economic conditions can impact sales of instruments, diagnostic imaging, and practice management systems, which are larger capital purchases for veterinarians. Additionally, economic turmoil, fears of a global economic downturn or recession, and inflationary pressure can cause our customers to remain sensitive to the pricing of our products and services. In the U.S., we monitor patient visits and clinic revenue data provided by a subset of our CAG customers. Although this data is a limited sample, and may be susceptible to short-term impacts, we believe that this data provides a fair and meaningful long-term representation of the trend in patient visit activity in the U.S., providing us insight regarding demand for our products and services.

Current wording

Effects of Economic Conditions. Demand for our products and services is vulnerable to changes in the economic environment, including slow economic growth, inflationary pressure, high unemployment, and credit availability. Negative or cautious consumer sentiment can lead to reduced or delayed consumer spending, resulting in a decreased number of patient visits to veterinary clinics or lower use of diagnostics. Unfavorable economic conditions can impact sales of instruments, diagnostic imaging, and practice management systems, which are larger capital purchases for veterinarians. In the U.S., we monitor patient visits and clinic revenue data provided by a subset of our CAG customers. Although this data is a limited sample, and may be susceptible to short-term impacts, we believe that this data provides a fair and meaningful long-term representation of the trend in patient visit activity in the U.S., providing us insight regarding demand for our products and services.

Previous wording

Effect of Geopolitical Conflicts. The overall financial performance of our business may be impacted by geopolitical instability and macroeconomic conditions, including the effects of conflicts between Russia and Ukraine, tensions across the Taiwan Strait, the Israel-Hamas conflict, as well as other conflicts in the Middle East, and resulting uncertainty in the markets, volatility in exchange rates, and inflationary trends. In June 2022 we decided to liquidate our sole Russian subsidiary and suspend our direct Russian operations, which consisted of marketing and selling diagnostic products for veterinary clinics in Russia. A limited number of our products, which are important for human or animal healthcare, continue to be sold in Russia pursuant to ongoing third-party distribution agreements. Suspending our direct Russian operations and liquidating our Russian subsidiary did not have a material impact on our financial statements.

Current wording

Effect of Geopolitical Conflicts. The overall financial performance of our business may be impacted by geopolitical instability and macroeconomic conditions. International conflicts and tensions may result in uncertainty in the markets, volatility in exchange rates, tariffs, and inflationary trends.

Previous wording

Currency Impact. For the year ended December 31, 2023, approximately 21% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 21% for the year ended December 31, 2022, and 23% for the year ended December 31, 2021. Strengthening of the rate of exchange for the U.S. dollar relative to other currencies has a negative impact on our revenues derived in currencies other than the U.S. dollar and on profits of products manufactured or purchased in U.S. dollars and sold internationally, and a weakening of the U.S. dollar has the opposite effect. Similarly, to the extent that the U.S. dollar is stronger in current or future periods relative to the exchange rates in effect in the corresponding prior periods, our growth rate will be negatively affected. The impact of foreign currency denominated operating expenses and foreign currency denominated supply contracts partly offsets this exposure. Additionally, our designated hedges of intercompany inventory purchases and sales help delay the impact of certain exchange rate fluctuations on non-U.S. denominated revenues. Refer to “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in this Annual Report on Form 10-K for additional information regarding currency impact. Our future income tax expense could also be affected by changes in the mix of earnings, including as a result of changes in the rate of exchange for the U.S. dollar relative to currencies in countries with differing statutory tax rates. Refer to “Part I, Item 1A. Risk Factors” included in this Annual Report on Form 10-K for additional information regarding tax impacts.

Current wording

Currency Impact. For the year ended December 31, 2024, approximately 22% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies, compared to 21% for both the years ended December 31, 2023, and December 31, 2022. Strengthening of the rate of exchange for the U.S. dollar relative to other currencies has a negative impact on our revenues derived in currencies other than the U.S. dollar and on profits of products manufactured or purchased in U.S. dollars and sold internationally, and a weakening of the U.S. dollar has the opposite effect. Similarly, to the extent that the U.S. dollar is stronger in current or future periods relative to the exchange rates in effect in the corresponding prior periods, our growth rate will be negatively affected. The impact of foreign currency denominated operating expenses and foreign currency denominated supply contracts partly offsets this exposure. Additionally, our designated hedges of intercompany inventory purchases and sales help delay the impact of certain exchange rate fluctuations on non-U.S. denominated revenues. Refer to “Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk” included in this Annual Report on Form 10-K for additional information regarding currency impact. Our future income tax expense could also be affected by changes in the mix of earnings, including as a result of changes in the rate of exchange for the U.S. dollar relative to currencies in countries with differing statutory tax rates. Refer to “Part I, Item 1A. Risk Factors” included in this Annual Report on Form 10-K for additional information regarding tax impacts.

Previous wording

Effects of Patent Expiration. Although we have several patents and licenses of patents and technologies from third parties that expired during 2023, and several that are expected to expire in 2024 and beyond, the expiration of these patents or licenses, individually or in the aggregate, is not expected to have a material effect on our financial position or future operations due to a range of factors as described in “Part I, Item 1. Business, Patents and Licenses.”

Current wording

Effects of Patent Expiration. Although certain patents and licenses of patents and technologies from third parties periodically expire, the expiration of these patents or licenses, individually or in the aggregate, is not expected to have a material effect on our financial position or future operations due to a range of factors as described in “Part I, Item 1. Intellectual Property, Including Patents and License.”

Previous wording

Non-GAAP Financial Measures. The following revenue analysis and discussion focuses on organic revenue growth, and references in this analysis and discussion to “revenue,” “revenues” or “revenue growth” are references to “organic revenue growth.” Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the current year, compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Organic revenue growth should be considered in addition to, and not as a replacement for, or as a superior measure to, revenues reported in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers.

Current wording

Non-GAAP Financial Measures. The following revenue analysis and discussion focuses on organic revenue growth, and references in this analysis and discussion to “revenue,” “revenues” or “revenue growth” are references to “organic revenue growth.” Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the current year, compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates, certain business acquisitions, and divestitures. Organic revenue growth should be considered in addition to, and not as a replacement for, or as a superior measure to, revenue growth reported in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies. Management believes that reporting organic revenue growth provides useful information to investors by facilitating easier comparisons of our revenue performance with prior and future periods and to the performance of our peers.

Previous wording

Total Company Revenue. The increase in organic revenue reflects benefits from higher realized prices and continued demand for companion animal diagnostics globally, supported by increases in CAG Diagnostics recurring revenues. Increases in our veterinary software and diagnostic imaging services recurring revenue also contributed to higher revenue supported by demand for subscription-based software. Higher revenue in our Water business was primarily due to the benefit of price increases and higher testing volumes in certain international regions, as well as the benefit of an acquisition in the third quarter of 2022. The decline in our LPD business was primarily due to lower herd health screening volume, partially offset by higher realized prices and volume growth in North America, Europe, and South America. The decrease in Other revenue was primarily due to lower sales of OPTI COVID-19 PCR testing products and services, following the discontinuation of active marketing of such products and services in the first quarter of 2023.The impact of currency movements decreased total revenue growth by 0.2%, while the impact of acquisitions increased total revenue growth by 0.1%.

Current wording

Total Company Revenue. The increase in organic revenue reflects growth in CAG Diagnostics recurring revenue, including benefits from higher realized prices and, to a lesser extent, increased volumes, supported by new business gains and sustained high customer retention rates, offsetting constraints from macroeconomic and sector headwinds. Increases in our recurring veterinary software, services, and diagnostic imaging revenue, supported by higher volumes and price gains, also contributed to increased revenue. Higher revenue in our Water business was primarily due to the benefit of realized price increases and higher testing volumes in the U.S. and Europe. The increase in LPD revenue was primarily due to higher realized prices and volume growth in the U.S. and Europe, partially offset by lower testing levels in Asia Pacific. The decrease in Other revenue was primarily due to lower volumes of our OPTI Medical instruments and consumables. The impact of a business acquisition increased total revenue growth by 0.4%, while the change in foreign currency exchange rates decreased total revenue growth by 0.3%.

Previous wording

The following table presents our total Company results of operations:

Current wording

The following table presents our consolidated Company results of operations:

Previous wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, including investments in our global commercial capability. General and administrative expense increased primarily due to higher personnel-related costs, partially offset by a $16 million customer contract resolution gain recognized during the first quarter of 2023. Research and development expense decreased primarily due to the comparison to the prior year acquisition of rights to use certain technology for $84 million, partially offset by higher personnel-related and project costs. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related, meeting, and travel costs. General and administrative expense increased primarily due to a $61.5 million expense related to an ongoing litigation matter, the comparison to the prior year benefit of a $16 million customer contract resolution gain, higher information technology and outside services, and acquisition-related costs. Research and development expense increased primarily due to higher project costs. The change in foreign currency exchange rates was not significant to operating expense growth.

Previous wording

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher realized prices and increased volumes across modalities, primarily in the U.S. International growth was constrained by macroeconomic conditions. The impact of foreign currency movements decreased CAG Diagnostics recurring revenue growth by 0.2%.

Current wording

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher realized prices and, to a lesser extent, increased volumes, supported by new business gains and sustained high customer retention rates, offsetting constraints from macroeconomic and sector headwinds. The change in foreign currency exchange rates decreased CAG Diagnostics recurring revenue growth by 0.2%.

Previous wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and higher sales volumes, supported by the expansion of our installed base of instruments and our expanded menu of available tests. The impact of currency movements decreased revenue growth by 0.3%.

Current wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and, to a lesser extent, higher sales volumes, supported by the expansion of our installed base of instruments and our expanded menu of available tests. The change in foreign currency exchange rates decreased revenue growth by 0.3%.

Previous wording

The increase in reference laboratory diagnostic and consulting services revenue was primarily due to higher realized price and higher testing volumes in our U.S. labs. Growth in other regions was primarily due to higher price realization, partially offset by lower international volumes. The impact of currency movements decreased revenue growth by 0.1%.

Current wording

The increase in reference laboratory diagnostic and consulting services revenue was due to higher global price realization and higher testing volumes, primarily in the U.S. and, to a lesser extent, Europe and Asia. Thechange in foreign currency exchange rates decreased revenue growth by 0.1%.

Previous wording

CAG Diagnostics services and accessories revenue growth was primarily a result of the 11% increase in our active installed base of instruments. The impact of currency movements decreased revenue growth by 0.3%.

Current wording

The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 9% increase in our installed base of premium instruments. The change in foreign currency exchange rates decreased revenue growth by 0.4%.

Previous wording

CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to instrument sales mix, program pricing effects and the regional mix of instrument placements, partially offset by higher premium instrument placements. The impact of currency movements decreased revenue growth by 0.1%.

Current wording

CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to program effects on pricing, partially offset by higher ProCyte One and SediVue Dx placements. Thechange in foreign currency exchange rates decreased revenue growth by 0.8%.

Previous wording

Veterinary Software, Services, and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to an expansion of our active installed base, resulting in higher subscription and support revenue, and higher realized prices. The decrease in our systems and hardware revenue imaging systems revenue was primarily due to marketing program price effects, partially offset by higher instrument placements. The impact of currency movements decreased revenue growth by 0.2%.

Current wording

Veterinary Software, Services, and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher subscription and support services volume from our expanded SaaS installed base and higher realized prices. The impact of a business acquisition increased recurring revenue growth by 6.0%. The decrease in our systems and hardware revenue was primarily due to lower digital imaging system sales and lower hardware sales associated with the transition to cloud-based software placements, partially offset by higher realized prices. The impact of a business acquisition increased systems and hardware revenue growth by 0.3%. Thechange in foreign currency exchange rates decreased systems and hardware revenue growth by 0.1%.

Previous wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, including investments in our global commercial capability. General and administrative expense increased primarily due to higher personnel-related costs, partially offset by a $16 million customer contract resolution gain recognized during the first quarter of 2023. Research and development expense decreased primarily due to the comparison to the prior year acquisition of rights to use certain technology for $84 million, partially offset by higher personnel-related and project costs. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related, meeting, and travel costs. General and administrative expense increased primarily due to a $61.5 million expense related to an ongoing litigation matter, the comparison to the prior year benefit of a $16 million customer contract resolution gain, higher information technology and outside services, and acquisition-related costs. Research and development expense increased primarily due to higher project costs. The change in foreign currency exchange rates was not significant to operating expense growth.

Previous wording

Gross Profit. Gross profit for Water increased due to higher sales volumes, partially offset by a 150 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 160 basis points, including theimpact of lower hedge gains in the current year compared to the prior year. Excluding the impact of foreign currency movements, the increase in the gross profit margin was primarily due to higher realized prices, partially offset by higher product costs.

Current wording

Gross Profit. Gross profit for Water increased due to higher revenue, and a 120 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to higher realized prices and lower freight costs, partially offset by higher product costs. The change in foreign currency exchange rates on the gross profit margin was not significant.

Previous wording

Gross Profit. The decrease in LPD gross profit was primarily due to lower sales volumes and a 570 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 460 basis points, including the impact of lower hedge gains in the current year compared to the prior year. The remaining decrease in the gross profit margin is primarily due to higher product costs and unfavorable sales mix, partially offset by higher realized prices.

Current wording

Gross Profit. The decrease in LPD gross profit was primarily due to a 250 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to higher product and distribution costs and unfavorable business mix, partially offset by higher realized prices. The change in foreign currency exchange rates decreased the gross profit margin by approximately 30 basis points, including the impact of higher hedge gains in the current year compared to the prior year.

Previous wording

Revenue. The decrease in Other revenue was primarily due to lower sales of OPTI COVID-19 PCR testing products and services in the U.S., following our discontinuation of active marketing of such products and services in the first quarter of 2023, partially offset by higher realized prices for our OPTI Medical instruments and consumables.

Current wording

Revenue. The decrease in Other revenue was primarily due to lower sales of our OPTI Medical instruments and consumables, partially offset by higher realized prices.

Previous wording

Gross Profit. Gross profit decreased due to lower sales volume and a 1,680 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to higher product costs and unfavorable sales mix impacts from lower OPTI COVID-19 PCR testing volumes, partially offset by higher realized prices. The overall change in foreign currency exchange rates had an immaterial impact on gross profit.

Current wording

Gross Profit. Gross profit increased due to a 1,160 basis point increase in the gross profit margin, which offset the impact of lower revenues. The increase in the gross profit margin was primarily due to lower product costs and higher realized prices. The overall change in foreign currency exchange rates had an immaterial impact on the gross profit margin.

Previous wording

Operating Expenses. General and administrative expense decreased primarily due to lower foreign exchange losses on settlements of foreign currency denominated transactions compared to the prior year. Foreign exchange losses on settlements for all operating segments are reported within our Other segment. Research and development expense decreased primarily due to lower product development costs related to human medical diagnostic products.

Current wording

Operating Expenses. Sales and marketing expense decreased due to lower personnel-related costs. General and administrative expense increased primarily due to higher foreign currency transaction losses compared to the prior year. Foreign exchange losses on settlements for all operating segments are reported within our Other segment. Research and development expense decreased primarily due to lower development activities that were not related to our three primary business segments.

Previous wording

Our effective income tax rate was 20.4% for the year ended December 31, 2023, and 21.0% for the year ended December 31, 2022. The decrease in our effective tax rate was primarily due to the release of valuation allowances against deferred tax assets in certain international and state jurisdictions. Our projected effective tax rate for 2024 is approximately 22%. This projected increase in the effective tax rate over the full year 2023 effective tax rate, is primarily due to the non-recurring reductions in our December 31, 2023, effective tax rate associated with the release of valuation allowances.

Current wording

Provision for Income Taxes. Our effective income tax rate was 20.0% for the year ended December 31, 2024, and 20.4% for the year ended December 31, 2023. Our effective tax rate for the year ended December 31, 2024, was lower than the prior year primarily due to increased benefits related to share-based compensation. Our projected effective tax rate for 2025 is approximately 21.5%. This increase in the projected 2025 effective tax rate is primarily due to estimated reductions in tax benefits, compared to 2024, from share-based compensation and from the release of tax reserves related to uncertain tax positions.

Previous wording

We fund the capital needs of our business through cash on hand, funds generated from operations, proceeds from long-term senior note financings, and amounts available under our Credit Facility. We generate cash primarily through the payments made by customers for our companion animal veterinary, livestock, poultry, dairy, and water products and services, consulting services, and other various systems and services. Our cash disbursements are primarily related to compensation and benefits for our employees, inventory and supplies, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. At December 31, 2023, we had $453.9 million of cash and cash equivalents, compared to $112.5 million on December 31, 2022. Working capital totaled $543.7 million at December 31, 2023, compared to negative $134.3 million at December 31, 2022. The change in working capital is primarily due to higher cash and lower outstanding borrowings on our Credit Facility. As of December 31, 2023, we had a remaining borrowing availability of $998.5 million under our $1.25 billion Credit Facility with $250.0 million outstanding borrowing under the Credit Facility. The general availability of funds under our Credit Facility is reduced by $1.5 million for outstanding letters of credit. We believe that, if necessary, we could obtain additional borrowings to fund our growth objectives. We further believe that current cash and cash equivalents, funds generated from operations, and committed borrowing availability will be sufficient to fund our operations, capital purchase requirements, and anticipated growth needs for the next twelve months. We believe that these resources, coupled with our ability, as needed, to obtain additional financing, will also be sufficient to fund our business as currently conducted for the foreseeable future. We may enter into new financing arrangements or refinance or retire existing debt in the future depending on market conditions. Should we require more capital in the U.S. than is generated by our operations, for example to fund significant discretionary activities, we could elect to raise capital in the U.S. through the incurrence of debt or equity issuances, which we may not be able to complete on favorable terms or at all. In addition, these alternatives could result in increased interest expense or other dilution of our earnings.

Current wording

We fund the capital needs of our business through cash on hand, funds generated from operations, proceeds from long-term senior note financings, and amounts available under our Credit Facility. We generate cash primarily through the payments made by customers for our companion animal, livestock, poultry, dairy, and water products and services, consulting services, and other various systems and services. Our cash disbursements are primarily related to compensation and benefits for our employees, inventory and supplies, repurchase of our common stock, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. As of December 31, 2024, we had $288.3 million of cash and cash equivalents, compared to $453.9 million as of December 31, 2023. Working capital totaled $332.0 million as of December 31, 2024, compared to $543.7 million as of December 31, 2023. The change in working capital is primarily due to lower cash and higher current amount payable of our Senior Notes. As of December 31, 2024, we had a remaining borrowing availability of $998.1 million under our $1.25 billion Credit Facility, with $250.0 million in outstanding borrowings under the Credit Facility. The general availability of funds under our Credit Facility is reduced by $1.9 million for outstanding letters of credit. We believe that, if necessary, we could obtain additional borrowings to fund our growth objectives. We further believe that current cash and cash equivalents, funds generated from operations, and committed borrowing availability will be sufficient to fund our operations, capital purchase requirements, and anticipated growth needs for the next twelve months. We believe that these resources, coupled with our ability, as needed, to obtain additional financing, will also be sufficient to fund our business as currently conducted for the foreseeable future. We may enter into new financing arrangements or refinance or retire existing debt in the future depending on market conditions. Should we require more capital in the U.S. than is generated by our operations, for example to fund significant discretionary activities, we could elect to raise capital in the U.S. through the incurrence of debt or equity issuances, which we may not be able to complete on favorable terms or at all. In addition, these alternatives could result in increased interest expense or other dilution of our earnings.

Previous wording

Of the $453.9 million of cash and cash equivalents held as of December 31, 2023, $163.1 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks, and $290.8 million was held in a U.S. government money market fund. As of December 31, 2022, more than 99% of the cash and cash equivalents held was as bank deposits. Cash and cash equivalents at December 31, 2023, included approximately USD $1.7 million in cash denominated in non-U.S. currencies held in countries with currency control restrictions, which limit our ability to transfer funds outside of the countries in which they are held. The currency control restricted cash is generally available for use within the country where it is held.

Current wording

Of the $288.3 million of cash and cash equivalents held as of December 31, 2024, $148.7 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks, and $139.6 million was held in a U.S. government money market fund. Of the $453.9 million of cash and cash equivalents held as of December 31, 2023, $163.1 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks, and $290.8 million was held in a U.S. government money market fund. Cash and cash equivalents as of December 31, 2024, included approximately USD $1.0 million in cash denominated in non-U.S. currencies held in a country with currency control restrictions, which limit our ability to transfer funds outside of the country in which they are held without incurring costs. The currency control restricted cash is generally available for use within the country where it is held.