IDEXX LABORATORIES INC DE

Previous wording

This Quarterly Report on Form 10-Q contains statements which, to the extent they are not statements of historical fact, constitute “forward-looking statements.” Such forward-looking statements about our business and expectations within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), include statements relating to, among other things, our expectations regarding revenue recognition timing and amounts; business trends, earnings and other measures of financial performance; projected impact of foreign currency exchange rates and hedging activities; realizability of assets; future cash flow and uses of cash; future repurchases of common stock; future levels of indebtedness and capital spending; the working capital and liquidity outlook; critical accounting estimates; deductibility of goodwill; inflation; an ongoing litigation matter; and timing of delivery of pre-ordered IDEXX inVue Dx Cellular Analyzers in the U.S. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” “project,” and similar words and expressions. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including, among other things, the adverse impact, and the duration, of macroeconomic events, conditions, and uncertainties, such as geopolitical instability (including wars, terrorist attacks, and armed conflicts), general economic uncertainty, inflationary pressures, severe weather and other natural conditions, and supply chain challenges on our business, results of operations, liquidity, financial condition, and stock price, as well as the other matters described under the headings “Business,” “Risk Factors,” “Legal Proceedings,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosure About Market Risk” in our 2023 Annual Report and in the corresponding sections of this Quarterly Report on Form 10-Q, and the Quarterly Reports on Form 10-Q for the quarters ended June 30, 2024, and March 31, 2024, as well as those described from time to time in our other periodic reports filed with the SEC.

Current wording

This Quarterly Report on Form 10-Q contains statements which, to the extent they are not statements of historical fact, constitute “forward-looking statements.” Such forward-looking statements about our business and expectations within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), include statements relating to, among other things, our expectations regarding revenue recognition timing and amounts; business trends, earnings, and other measures of financial performance; projected impact of foreign currency exchange rates and hedging activities; realizability of assets; future cash flow and uses of cash; future repurchases of common stock; future levels of indebtedness and capital spending; the working capital and liquidity outlook; critical accounting estimates; deductibility of goodwill; inflation; and projected impacts of tariff and trade policy changes and uncertainty. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” “project,” and similar words and expressions. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including, among other things, the adverse impact, and the duration, of macroeconomic events, conditions, and uncertainties, such as geopolitical instability (including wars, terrorist attacks, and armed conflicts), general economic uncertainty, changes in U.S. and other countries’ tariff and trade policies, inflationary pressures, severe weather and other natural conditions, and supply chain challenges on our business, results of operations, liquidity, financial condition, and stock price, as well as the other matters described under the headings “Business,” “Risk Factors,” “Legal Proceedings,” “Management's Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosure About Market Risk” in our 2024 Annual Report and in the corresponding sections of this Quarterly Report on Form 10-Q, as well as those described from time to time in our other periodic reports filed with the SEC.

Previous wording

We develop, manufacture, and distribute products and provide services primarily for the companion animal veterinary, livestock, poultry and dairy, and water testing sectors. We also design, manufacture, and distribute point-of-care for the human medical diagnostics sector. Our primary products and services are:

Current wording

We develop, manufacture, and distribute products and provide services primarily for the companion animal veterinary, livestock, poultry and dairy, and water testing sectors. We also provide human medical point-of-care diagnostics. Our primary products and services are:

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•Point-of-care veterinary diagnostic products, comprising instruments, consumables, and rapid assay test kits;

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•Point-of-care veterinary diagnostic products, comprised of instruments, consumables, and rapid assay test kits;

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•Health monitoring, biological materials testing, and laboratory diagnostic instruments, and services used by the biomedical research community;

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•Health monitoring, biological materials testing, laboratory diagnostic instruments, and services used by the biomedical research community;

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•Diagnostic, health-monitoring products for livestock, poultry, and dairy;

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•Diagnostic and health-monitoring products for livestock, poultry, and dairy;

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•Point-of-care electrolytes and blood gas analyzers.

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•Point-of-care electrolytes and blood gas analyzers for the human medical diagnostics sector.

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Description of Business Segments. We operate primarily through three business segments: diagnostic and information management-based products and services for the companion animal veterinary industry, which we refer to as the Companion Animal Group (“CAG”); water quality products (“Water”); and diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk and improve producer efficiency, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our Other operating segment combines and presents our human medical diagnostic products business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.

Current wording

Description of Business Segments. We operate primarily through three business segments: diagnostic and information management-based products and services for the companion animal veterinary industry, which we refer to as the Companion Animal Group (“CAG”); water quality products (“Water”); and diagnostic tests, services, and related instrumentation that are used to manage the health status of livestock and poultry, to improve producer efficiency, and to ensure the quality and safety of milk, which we refer to as Livestock, Poultry and Dairy (“LPD”). Our Other operating segment combines and presents our human medical diagnostic products business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments.

Previous wording

Other Items. Refer to “Part I, Item 1. Business - Patents and Licenses” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Annual Report for additional information regarding trends in companion animal healthcare, distributor purchasing and inventories, economic conditions, and patent expiration.

Current wording

Other Items. Refer to “Part I, Item 1. Business - Patents and Licenses” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report for additional information regarding trends in companion animal healthcare, distributor purchasing and inventories, economic conditions, geopolitical conflict effects and patent expiration.

Previous wording

The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024, are consistent with those discussed in our 2023 Annual Report in the section under the heading “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Assumptions.”

Current wording

The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements for the three months ended March 31, 2025, are consistent with those discussed in our 2024 Annual Report in the section under the heading “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Assumptions.”

Previous wording

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 three and nine months ended September 30, 2024, as 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.

Current wording

Organic Revenue Growth. 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 three months ended March 31, 2025, 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

We also exclude from organic revenue growth the effect of certain business acquisitions and divestitures because the nature, size, and number of these transactions can vary dramatically from period to period, and because they either require or generate cash as an inherent consequence of the transaction, and therefore can also obscure underlying business and operating trends. We consider acquisitions to be a business when all three elements of inputs, processes, and outputs are present, consistent with ASU 2017-01, “Business Combinations: (Topic 805) Clarifying the Definition of a Business.” In a business combination, if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, we do not consider these assets to be a business. A typical acquisition that we do not consider a business is a customer list asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. We believe the efforts required to convert and retain these acquired customers are similar in nature to our existing customer base and therefore are included in organic revenue growth. The percentage change in revenue resulting from acquisitions represents revenues during the current year period, limited to the initial 12 months from the date of the acquisition, that are directly attributable to business acquisitions.

Current wording

We also exclude from organic revenue growth the effect of certain business acquisitions and divestitures because the nature, size, and number of these transactions can vary dramatically from period to period, and because they either require or generate cash as an inherent consequence of the transaction, and therefore can also obscure underlying business and operating trends. We consider acquisitions to be a business when all three elements of inputs, processes, and outputs are present, consistent with ASU 2017-01, “Business Combinations: (Topic 805) Clarifying the Definition of a Business.” In a business combination, if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, we do not consider these assets to be a business. A typical acquisition that we do not consider a business is a customer list asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. We believe the efforts required to convert and retain these acquired customers are similar in nature to our existing customer base and therefore are included in organic revenue growth. The percentage change in revenue resulting from business acquisitions represents revenues during the current-year period, limited to the initial twelve months from the date of the acquisition, that are directly attributable to business acquisitions.

Previous wording

We also use Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio in this Quarterly Report on Form 10-Q, all of which are non-GAAP financial measures that should be considered in addition to, and not as a replacement for, financial measures presented according to U.S. GAAP. Management believes that reporting these non-GAAP financial measures provides supplemental analysis to help investors further evaluate our business performance and available borrowing capacity under our Credit Facility.

Current wording

Other Non-GAAP Financial Measures. We also use Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio, all of which are non-GAAP financial measures that should be considered in addition to, and not as a replacement for, financial measures presented according to U.S. GAAP. Management believes that reporting these non-GAAP financial measures provides supplemental analysis to help investors further evaluate our business performance and available borrowing capacity under our Credit Facility.

Previous 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. Higher volumes and price gains in recurring veterinary software, services, and diagnostic imaging also contributed to increased revenue, supported by demand for subscription-based software. Higher revenue in our Water business was primarily due to the benefit of price increases and increased volume in the U.S. and Europe. The decrease in LPD revenue was primarily due to lower testing levels in Asia Pacific, partially offset by higher realized prices and volume growth in the U.S. and Europe. The decrease in Other revenue was primarily due tolower volumes of our OPTI Medical instruments and consumables. Acquisitions increased revenue growth by 0.3%. The change in foreign currency exchange rates decreased revenue growth by 0.2%.

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, higher volumes. Increased testing volumes were supported by new business gains, high customer retention rates, and our expanded menu of available tests, partially offset by constraints from macroeconomic and sector headwinds. The comparative impact on CAG Diagnostics recurring revenue from fewer equivalent business days in the quarter decreased overall revenue growth. Higher volumes and price gains in recurring veterinary software, services, and diagnostic imaging, also contributed to revenue growth. Higher revenue in our Water business was primarily due to the benefit of realized price increases and increased volumes. The increase in LPD revenue was primarily due to higher realized pricesand higher volume. The increase in Other revenue was primarily due tohigher volumes of our OPTI Medical consumables and instruments. The change in foreign currency exchange rates decreased revenue growth by 1.2%. Acquisitions increased revenue growth by 0.1%.

Previous wording

Operating Expenses. Sales and marketing expense increased primarily due to higher travel, meeting, and personnel-related costs. General and administrative expense increased primarily due to higher information technology, outside services, and acquisition-related costs. Research and development expense increased primarily due to higher project costs. The change in foreign currency exchange rates decreased operating expense growth by approximately 1.0%.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs. General and administrative expense increased primarily due to higher personnel-related and information technology costs, offset by a reduction in accrued expense of approximately $9 million related to a litigation matter. Research and development expense increased primarily due to higher project costs, as well as higher personnel-related costs. The change in foreign currency exchange rates decreased operating expense growth by approximately 1%.

Previous 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 impact in foreign currency exchange rates 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 also due to higher volumes in IDEXX VetLab consumables, offsetting lower volumes in Rapid Assay and constraints from macroeconomic and sector headwinds. The comparative impact of equivalent business days in the quarter decreased overall revenue growth. The change in foreign currency exchange rates decreased CAG Diagnostics recurring revenue growth by 1.2%.

Previous wording

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

Current wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and volume increases, supported by 9% growth in our active installed base of instruments, compared to March 31, 2024, growth in testing by new and existing customers, our expanded menu of available tests, as well as high customer retention rates. The change in foreign currency exchange rates decreased revenue growth by 1.7%.

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The increase inrapid assay revenue resulted primarily from higher price realization, partially offset by lower volumes. Thechange in foreign currency exchange rates decreased revenue growth by 0.2%.

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The decrease inrapid assay revenue resulted primarily from lower volumes as a result of customers shifting pancreatic lipase testing to our Catalyst instrument platform, as well as lower clinical visits in the U.S., partially offset by higher price realization. Thechange in foreign currency exchange rates decreased revenue growth by 0.7%.

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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, Asia Pacific and Europe. Thechange in foreign currency exchange rates decreased revenue growth by 0.1%.

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The increase in reference laboratory diagnostic and consulting services revenue was due to higher global price realization and, to a lesser extent, higher testing volumes. Thechange in foreign currency exchange rates decreased revenue growth by 0.8%.

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The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 10% growth in our active installed base of premium instruments. Thechange in foreign currency exchange rates decreased revenue growth by 0.4%.

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The increase in CAG Diagnostics services and accessories revenue was primarily a result of growth in our active installed base of premium instruments. Thechange in foreign currency exchange rates decreased revenue growth by 1.5%.

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CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to program effects on pricing, largely offset by higher premium instrument placements. The change in foreign currency exchange rates decreased revenue growth by 0.4%.

Current wording

CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to lower ProCyte One and Catalyst placements, partially offset by higher placements of SediVue Dx and our recently-launched IDEXX inVue Dx Analyzer. The change in foreign currency exchange rates decreased revenue growth by 1.5%.

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Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in revenue was primarily due to higher realized prices and higher recurring revenue from subscription and support revenue from an expanded SaaS installed base. The decrease in our systems and hardware revenue was due to lower hardware sales associated with new software placements, which are primarily cloud-based, and lower accessories sales. Thechange in foreign currency exchange rates was not significant to revenue growth. Acquisitions increased revenue growth by 4.4%.

Current wording

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in revenue was primarily due to higher subscription and support services volume from our expanded installed base and higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales. Thechange in foreign currency exchange rates was not significant to revenue growth. Acquisitions increased revenue growth by 1.8%.

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Gross Profit. Gross profit increased due to higher revenue and a 110 basis point increase in the gross profit margin. The increase in the gross profit margin reflected favorable business mix, lower instrument costs, recurring software and services gross margin gains, and the benefit from net price realization, offsetting inflationary cost impacts. The change in foreign currency exchange rates on the gross profit margin was not significant.

Current wording

Gross Profit. Gross profit increased due to higher revenue and a 110 basis point increase in the gross profit margin. The increase in the gross profit margin increased primarily due to favorable business mix, benefiting from IDEXX VetLab consumable growth and instrument placement mix, as well as net price realization, offsetting inflationary cost impacts. The change in foreign currency exchange rates on the gross profit margin was not significant.

Previous 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 $16.0 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.

Current wording

Segment 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 higher personnel-related and information technology costs, offset by a reduction in accrued expense of approximately $9 million related to a litigation matter. Research and development expense increased primarily due to higher project costs, as well as higher personnel-related costs. The change in foreign currency exchange rates decreased operating expense growth by less than 1%.

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Revenue. The increase in revenue was due to higher realized pricesand higher volumes. The increase in volumes in the U.S. and Europe was primarily from our Colilert test products and related accessories used in coliform and E. coli testing. The change in foreign currency exchange rates decreased revenue growth by 0.4%.

Current wording

Revenue. The increase in revenue was due to higher realized pricesand higher volumes. The increase in volumes was primarily from our Colilert test products and related accessories used in coliform and E. coli testing. The change in foreign currency exchange rates decreased revenue growth by 2.1%.

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Gross Profit. Gross profit increased due to higher revenue, partially offset by a 60 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to higher product costs, partially offset by higher realized prices. Theoverall change in foreign currency exchange rates decreased the gross profit margin by approximately 10 basis points, includingthe impact of lower hedge gains during the current period compared to the prior period.

Current wording

Gross Profit. Gross profit increased due to higher revenue. Theoverall change in foreign currency exchange rates increased the gross profit margin by approximately 40 basis points, includingthe impact of higher hedge gains during the current period compared to the prior period. Excluding the impact of foreign currency exchange rates, the decrease in the gross profit margin was due to higher product costs, partially offset by higher realized prices.

Previous wording

Gross Profit. The decrease in gross profit was primarily due to a 270 basis point decrease in the gross profit margin and lower revenue. The decrease in the gross profit margin was primarily due to higher product and distribution costs, partially offset by higher realized prices. The overall change in foreign currency exchange rates decreased the gross profit margin by approximately 70 basis points, including the impact of lower hedge gains during the current period compared to the prior period.

Current wording

Gross Profit. The decrease in gross profit was primarily due to a 380 basis point decrease in the gross profit margin, partially offset by higher revenue. The decrease in the gross profit margin was primarily due to higher product costs, partially offset by higher realized prices. Thechange in foreign currency exchange rates increased the gross profit margin by approximately 100 basis points, including the impact of higher hedge gains during the current period compared to the prior period.

Previous wording

Gross Profit. Gross profit increased primarily due to a 620 basis point increase in the gross profit margin. The increase in the gross profit margin was largely due to higher realized prices. The change in foreign currency exchange rates did not have a significant impact on the gross profit margin.

Current wording

Gross Profit. Gross profit increased due to higher revenues and a 1,410 basis point increase in the gross profit margin. The increase in the gross profit margin was largely due to lower product costs and higher consumable volumes. The change in foreign currency exchange rates did not have a significant impact on the gross profit margin.

Previous wording

Operating Expenses. Sales and marketing expense decreased due to lower personnel-related costs. General and administrative expense decreased primarily due to foreign exchange gains on settlements of foreign currency denominated transactions compared to losses in the prior period. Foreign exchange gains and losses on settlements for all operating segments are reported within Other. Research and development expense decreased due to lower activities that were not attributable to our three primary business segments.

Current wording

Segment Operating Expenses. Sales and marketing expense decreased due to lower travel costs. General and administrative expense decreased primarily due to lower foreign currency transaction losses compared to the prior year. Foreign exchange gains and losses on settlements for all operating segments are reported within our Other segment. Research and development expense decreased due to lower personnel-related costs.

Previous wording

Interest Expense and Income. Interest expense was $7.7 million for the three months ended September 30, 2024, as compared to $8.6 million for the same period during the prior year. The decrease in interest expense was primarily due to lower average debt levels and lower interest rates. Interest income was $2.7 million for the three months ended September 30, 2024, compared to $1.3 million for the same period during the prior year. This increase in interest income is primarily due to the increase in money market investments, as compared to the same period during the prior year.

Current wording

Interest Expense and Income. Interest expense was $7.7 million for the three months ended March 31, 2025, compared to $7.9 million for the same period during the prior year. Interest income was $1.2 million for the three months ended March 31, 2025, compared to $4.4 million for the same period during the prior year. The decrease in interest income is primarily due to a decrease in money market investments, compared to the same period during the prior year.

Previous wording

Provision for Income Taxes. Our effective income tax rate was 22.1% for the three months ended September 30, 2024, compared to 20.8% for the three months ended September 30, 2023. The increase in our effective tax rate was primarily due to lower tax benefits related to share-based compensation, partially offset by the tax impact of differences in geographical income mix.

Current wording

Provision for Income Taxes. Our effective income tax rate was 21.7% for the three months ended March 31, 2025, compared to 20.3% for the three months ended March 31, 2024. The increase in our effective tax rate was primarily due to lower tax benefits related to share-based compensation.

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, repurchases of our common stock, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. As of September 30, 2024, we had $308.6 million of cash and cash equivalents, compared to $453.9 million as of December 31, 2023. Working capital totaled $424.5 million as of September 30, 2024, compared to $543.7 million as of December 31, 2023. As of September 30, 2024, we had a remaining borrowing availability of $998.2 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 $1.8 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 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, repurchases of our common stock, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. Working capital totaled $181.4 million as of March 31, 2025, compared to $332.0 million as of December 31, 2024. The change in working capital is primarily due to higher cash balances and lower borrowings outstanding on the Credit Facility in the prior year. As of March 31, 2025, we had $164.0 million of cash and cash equivalents, compared to $288.3 million as of December 31, 2024. As of March 31, 2025, we had a remaining borrowing availability of $928.6 million under our $1.25 billion Credit Facility, with $319.5 million in outstanding borrowings under the Credit Facility. As of December 31, 2024, we had $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 $308.6 million of cash and cash equivalents held as of September 30, 2024, approximately $136.1 million washeld as bank deposits at a diversified group of institutions, primarily systemically important banks, and $172.5 million was held in a U.S. government money market fund. As of December 31, 2023, of the $453.9 million of cash and cash equivalents held, $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 September 30, 2024, included approximately $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.

Current wording

The cash and cash equivalents of $164.0 million held as of March 31, 2025, were held as bank deposits. As of December 31, 2024, of the $288.3 million of cash and cash equivalents held, $148.7 million was held as bank deposits and $139.6 million was held in a U.S. government money market fund. Our bank deposits are held at a diversified group of institutions, primarily systemically important banks. Cash and cash equivalents as of March 31, 2025, included approximately $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.

Previous wording

(2) Inventory turns are calculated as the ratio of four times our inventory-related cost of revenue for the quarter, divided by the average inventory balances at the beginning and end of each quarter.

Current wording

(2) Inventory turns are calculated as the ratio of our inventory-related cost of revenue for the quarter multiplied by four, divided by the average inventory balances at the beginning and end of each quarter.

Previous wording

We have historically experienced proportionally lower net cash flows from operating activities during the first quarter and proportionally higher cash flows from operating activities for the remainder of the year driven primarily by payments related to annual employee incentive programs in the first quarter following the year for which the bonuses were earned.

Current wording

We have historically experienced proportionately lower net cash flows from operating activities during the first quarter and proportionately higher cash flows from operating activities for the remainder of the year driven primarily by payments related to annual employee incentive programs in the first quarter following the year for which the bonuses were earned.

Previous wording

Investing Activities. Cash used by investing activities was $167.2 million during the nine months ended September 30, 2024, compared to $94.8 million for the same period during the prior year. The increase in cash used by investing activities was primarily due to the acquisition of a software business during the current year.

Current wording

Investing Activities. Cash used by investing activities was $29.6 million during the three months ended March 31, 2025, compared to $106.9 million for the same period during the prior year. The decrease in cash used by investing activities was primarily due to the acquisition of a software business during the prior-year period.

Previous wording

Our total capital expenditure outlook for 2024 is estimated to be approximately $160 million, which includes capital investments to support growth in manufacturing and operations facilities and in customer-facing software development.

Current wording

Our total capital expenditure plan for 2025 is estimated to be approximately $160.0 million, which includes capital investments in manufacturing and operations facilities to support growth and efficiencies, as well as investments in customer-facing software development.

Previous wording

Financing Activities. Cash used by financing activities was $645.3 million during the nine months ended September 30, 2024, compared to $340.2 million of cash used for the same period during the prior year. The increase in cash used was primarily due to $591.0 million of repurchases of our common stock during the current year, compared to $35.1 million of repurchases during the prior year, and due to the July 2024 repayment of our $75.0 million 2024 Series B Notes. This increase in cash used by financing was partially offset by no net borrowings or repayments under our Credit Facility during the current year, compared to repayments of $329.0 million under our Credit Facility during the prior year.

Current wording

Financing Activities. Cash used by financing activities was $330.3 million during the three months ended March 31, 2025, compared to $144.1 million used for the same period during the prior year. The increase in cash used was primarily due to $400.9 million of repurchases of our common stock during the current year, compared to $154.8 million of repurchases during the prior year. This increase in cash used by financing was partially offset by $69.5 million net borrowings under our Credit Facility during the current year, compared to no activity under our Credit Facility during the prior-year period.

Previous wording

We believe that the repurchase of our common stock is a favorable means of returning value to our stockholders, and we also repurchase our stock to offset the dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary depending upon the level of other investing and deployment activities, as well as share price and prevailing interest rates. Refer to Note 12 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information about our share repurchases.

Current wording

We believe that the repurchase of our common stock is a favorable means of returning value to our stockholders, and we also repurchase our stock to offset the dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary depending upon the level of other investing and deployment activities, as well as share price and prevailing interest rates, and are subject to market conditions. Refer to Note 12 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information about our share repurchases.

Previous wording

As of September 30, 2024, we had $250.0 million in outstanding borrowings under the Credit Facility. The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under the Credit Facility, which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency-related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974 (“ERISA”), the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default. The Credit Facility contains affirmative, negative, and financial covenants customary for financings of this type. The negative covenants include restrictions on liens, indebtedness of subsidiaries of the Company, fundamental changes, investments, transactions with affiliates, and certain restrictive agreements. The financial covenant is a consolidated leverage ratio test.

Current wording

As of March 31, 2025, we had $319.5 million in outstanding borrowings under the Credit Facility. The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under the Credit Facility, which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency-related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974 (“ERISA”), the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default. The Credit Facility contains affirmative, negative, and financial covenants customary for financings of this type. The negative covenants include restrictions on liens, indebtedness of subsidiaries of the Company, fundamental changes, investments, transactions with affiliates, certain restrictive agreements, and violations of laws and regulations. The sole financial covenant is a consolidated leverage ratio test.

Previous wording

We anticipate paying off the aggregate principal amounts of our €88.9 million 2025 Series C Notes, which will become due and payable on June 18, 2025, with available cash on hand at time of payment.

Current wording

The aggregate principal amounts of our 2025 Series C Notes will become due and payable on June 18, 2025, and the aggregate principal amounts of our 2025 Series B Notes will become due and payable on December 11, 2025. We anticipate paying off our 2025 Series C Notes for €88.9 million when due in June 2025, and our 2025 Series B Notes for $75.0 million when due in December 2025, with available cash on hand, borrowings under our Credit Facility, or proceeds from the issuance of new notes, or a combination thereof.