IDEXX LABORATORIES INC /DE

Previous wording

Any forward-looking statements represent our estimates only as of the day this Quarterly Report on Form 10-Q was filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. From time to time, oral or written forward-looking statements may also be included in other materials released to the public, and they are subject to the risk and uncertainties described or cross-referenced in this section. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or expectations change.

Current wording

Any forward-looking statements represent our estimates only as of the day this Quarterly Report on Form 10-Q was filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. From time to time, oral or written forward-looking statements may also be included in other materials released to the public, and they are subject to the risks and uncertainties described or cross-referenced in this section. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or expectations change.

Previous 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.

Current wording

Description of Operating Segments. We operate primarily through three operating 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”). Other information 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. Foreign currency transaction gains and losses for all operating segments are also reported within Other.

Previous wording

Recently, the U.S. government announced changes to its trade policy, including increasing tariffs on imports, in some cases significantly, and potentially renegotiating or terminating its existing trade agreements. For example, on April 2, 2025, the U.S. government announced a new universal baseline tariff of 10%, plus an additional country-specific tariff for select trading partners, on all U.S. imports. Although imposition of the country-specific tariffs was temporarily paused for most countries (not including China) on April 9, 2025, these actions, retaliatory tariffs imposed by other countries on U.S. exports and continuing uncertainty regarding tariff and trade policies have led to volatility and uncertainty in global markets. Continuing tariff and trade policy uncertainty may lead to sustained volatility and uncertainty in U.S. and global financial and economic conditions, increased inflation, diminished expectations for economic growth, and actual or perceived economic weakness, which could result in reduced demand for our products and services.

Current wording

The U.S. government previously announced changes to its trade policy, including increasing tariffs on imports, in some cases significantly, and potentially renegotiating or terminating its existing trade agreements. Imposition of certain country-specific tariffs are uncertain and subject to negotiations, and these actions, as well as retaliatory tariffs imposed by other countries on U.S. exports and continuing uncertainty regarding tariff and trade policies have led to volatility and uncertainty in global markets. Continuing tariff and trade policy uncertainty may lead to sustained volatility and uncertainty in U.S. and global financial and economic conditions, increased inflation, diminished expectations for economic growth, and actual or perceived economic weakness, which could result in reduced demand for our products and services.

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 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.”

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 and six months ended June 30, 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

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.

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 and six months ended June 30, 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

Segment Income from Operations. We report segment income from operations in our discussion of the results of the operations of our segments below. Segment income from operations is a non-GAAP financial measure that adjusts for the impact of foreign currency transaction gains and losses and should be considered in addition to, and not as a replacement for, income from operations. We exclude foreign currency transaction gains and losses for each reportable segment (CAG, Water, and LPD) from segment income from operations and report the full amount of foreign currency transaction gains and losses in our Other operating segment. We believe that reporting segment income from operations provides supplemental analysis to help investors further evaluate each reportable segment’s business performance by excluding foreign currency transaction gains and losses, which are centrally managed by our corporate treasury function and which we do not consider relevant for assessing the results of each reportable segment’s operations. In addition, we believe that reporting segment income from operations provides information to investors regarding key metrics that are used by management, including our CODM, in evaluating the performance of each reportable segment.

Current wording

Segment Income from Operations. We report segment income from operations in our discussion of the results of the operations of our segments below. Segment income from operations is a non-GAAP financial measure that adjusts for the impact of foreign currency transaction gains and losses and should be considered in addition to, and not as a replacement for, income from operations. We exclude foreign currency transaction gains and losses for each reportable segment (CAG, Water, and LPD) from segment income from operations and report the full amount of foreign currency transaction gains and losses in Other. We believe that reporting segment income from operations provides supplemental analysis to help investors further evaluate each reportable segment’s business performance by excluding foreign currency transaction gains and losses, which are centrally managed by our corporate treasury function and which we do not consider relevant for assessing the results of each reportable segment’s operations. In addition, we believe that reporting segment income from operations provides information to investors regarding key metrics that are used by management, including our CODM, in evaluating the performance of each reportable segment.

Previous 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%.

Current wording

CAG Diagnostics Recurring Revenue. The increasein CAG Diagnostics recurring revenue was primarily due to higher volumes in IDEXX VetLab consumables and reference laboratory testing, constrained by macroeconomic and sector headwinds, and higher realized prices. The change in foreign currency exchange rates increased revenue growth by 1.2%.

Previous wording

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%.

Current wording

The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes, primarily in the U.S. and, to a lesser extent, Europe, and from global price realization. The change in foreign currency exchange rates increased revenue growth by 1.1%.

Previous wording

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%.

Current wording

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. The change in foreign currency exchange rates increased revenue growth by 1.7%.

Previous 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%.

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 installed base and higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales. The change in foreign currency exchange rates increased revenue growth by 0.1%.

Previous wording

Segment 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. Research and development expense decreased primarily due to lower personnel-related costs. The change in foreign currency exchange rates decreased operating expense growth by approximately 2%.

Current wording

Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs. General and administrative expense increased primarily due to personnel-related costs and higher bad debt expense. Research and development expense increased primarily due to higher facilities costs. The change in foreign currency exchange rates increased operating expense growth by approximately 2%.

Previous 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.

Current wording

Operating Expenses. Sales and marketing expense increased due to higher personnel-related costs. General and administrative expense decreased primarily due to lower foreign currency transaction losses compared to the prior year. Research and development expense decreased due to lower activities that were not attributable to our three reportable segments.

Previous 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.

Current wording

Interest Expense and Income. Interest expense was $11.3 million for the three months ended June 30, 2025, as compared to $8.1 million for the same period during the prior year. The increase in interest expense was primarily due to higher average debt levels and, to a lesser extent, higher interest rates. Interest income was $0.6 million for the three months ended June 30, 2025, compared to $3.4 million for the same period during the prior year, primarily due to a decrease in money market investments.

Previous 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.

Current wording

Provision for Income Taxes. Our effective income tax rate was 18.9% for the three months ended June 30, 2025, compared to 21.5% for the three months ended June 30, 2024. The decrease in our effective tax rate was primarily due to an increase in tax benefits related to share-based compensation and the resolution of international tax audits.

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, 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%.

Current wording

Total Company Revenue. The increase in revenue reflected growth in CAG Diagnostics recurring revenue, including benefits from higher realized prices and higher volumes, which were supported by new business gains, our expanded menu of available tests, and high customer retention rates, partially offset by constraints from macroeconomic and sector headwinds. Instrument revenue gains were primarily due to the placements of our recently launched IDEXX inVue Dx Analyzer. 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 volumes. The increase in Other revenue was primarily due to higher volumes of our OPTI Medical consumables and instruments. Acquisitions increased revenue growth by 0.1%.

Previous 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.

Current wording

Gross Profit. Gross profit increased due to higher revenue and a 90 basis point increase in the gross profit margin. The increase in the gross profit margin reflected proportionately higher IDEXX VetLab consumable volume growth, favorable instrument placement mix, and the benefit from net price realization, offsetting inflationary cost impacts. These increases in the gross profit margin were reduced by the business mix impact from high instrument revenue. The change in foreign currency exchange rates on the gross profit margin was not significant.

Previous 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%.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and commercial costs. General and administrative expense decreased primarily due to a $61.5 million expense in the prior year related to a litigation matter, partially offset by a related reduction in accrued expense of approximately $9 million in the first quarter of the current period and by higher personnel-related and information technology costs. Research and development expense increased primarily due to higher personnel-related costs, as well as higher project costs. The change in foreign currency exchange rates was not significant to operating expense growth.

Previous wording

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%.

Current wording

The decrease inrapid assay revenue resulted primarily from a shift of customers’ 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 0.1%.

Previous 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%.

Current wording

CAG Diagnostics Capital – Instrument Revenue. The increase in instrument revenue was primarily due to placements of our recently launched IDEXX inVue Dx Analyzer, partially offset by lower placements of other premium instruments. The change in foreign currency exchange rates decreased revenue growth by 0.4%.

Previous 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%.

Current wording

Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs. General and administrative expense decreased primarily due to a $61.5 million expense in the prior year related to a litigation matter, partially offset by a related reduction in accrued expense of approximately $9 million in the first quarter of the current period and by higher personnel-related and information technology costs. Research and development expense increased primarily due to higher personnel-related costs, as well as higher project costs. The change in foreign currency exchange rates was not significant to operating expense growth.

Previous 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%.

Current wording

Revenue. The increase in revenue was due to higher realized prices and higher volumes. The increase in volumes was due to higher testing volumes, primarily in Europe and Asia Pacific. The change in foreign currency exchange rates decreased revenue growth by 0.6%.

Previous 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.

Current wording

Gross Profit. Gross profit increased due to higher revenueas well as a 50 basis point increase in the gross profit margin. The increase in the gross profit margin was due to higher realized prices, partially offset by higher product costs. Thechange in foreign currency exchange rates decreased the gross profit margin by approximately 10 basis points, includingthe impact of higher hedge gains during the current period compared to the prior period.

Previous wording

Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, as well as higher travel and meeting costs. General and administrative expense decreased primarily due to lower personnel-related costs and lower bad debt expense. Research and development expense increased primarily due to higher personnel-related costs. The change in foreign currency exchange rates decreased in operating expense growth by approximately 2%.

Current wording

Segment Operating Expenses. Sales and marketing expense increased primarily due to higher travel and meeting costs and higher personnel-related costs. General and administrative expense decreased primarily due to lower bad debt expense and lower personnel-related costs. Research and development expense increased primarily due to higher personnel-related costs. The change in foreign currency exchange rates decreased operating expense growth by less than 1%.

Previous wording

Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes in the Americas, partially offset by lower volumes in Europe, in part due to the timing of distributor orders. Thechange in foreign currency exchange rates decreased revenue growth by 2.8%.

Current wording

Revenue. The increase in revenue was primarily due to higher realized prices and an increase in test volumes in the Americas and Asia Pacific, partially offset by lower volumes in Europe. Thechange in foreign currency exchange rates decreased revenue growth by 0.2%.

Previous 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.

Current wording

Gross Profit. The decrease in gross profit was primarily due to a 410 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 and related costs, partially offset by higher realized prices. Thechange in foreign currency exchange rates decreased the gross profit margin by approximately 50 basis points, including the impact of lower hedge gains during the current period compared to the prior period.

Previous 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.

Current wording

Gross Profit. Gross profit increased due to higher revenues and a 260 basis point increase in the gross profit margin. The increase in the gross profit margin was largely due to lower product costs. The change in foreign currency exchange rates did not have a significant impact on the gross profit margin.

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. 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.

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 $138.5 million as of June 30, 2025, compared to $332.0 million as of December 31, 2024. The change in working capital is primarily due to lower cash balances and higher borrowings outstanding on the Credit Facility in the current year. As of June 30, 2025, we had $164.6 million of cash and cash equivalents, compared to $288.3 million as of December 31, 2024. As of June 30, 2025, we had a remaining borrowing availability of $669.1 million under our $1.25 billion Credit Facility, with $579.0 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

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.

Current wording

As of June 30, 2025, of the $164.6 million of cash and cash equivalents held, $157.1 million was held as bank deposits and $7.5 million was held in a U.S. government money market fund. 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 June 30, 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

Operating Activities. Cash provided by operating activities during the three months ended March 31, 2025, was $238.0 million, which was a net increase in operating cash flow of $39.4 million, compared to the same period during the prior year. Cash was provided from net income of $242.7 million, adjusted for net non-cash items of $56.0 million, partially offset by a net decrease by changes in operating assets and liabilities of $60.7 million. The following table presents cash flow impacts from changes in operating assets and liabilities, excluding the effects of foreign exchange rate fluctuations:

Current wording

Operating Activities. Cash provided by operating activities during the six months ended June 30, 2025, was $423.7 million, which was a net decrease in operating cash flows of $23.2 million, compared to the same period during the prior year. Cash was provided from net income of $536.7 million, adjusted for net non-cash items of $111.6 million, partially offset by a net decrease from changes in operating assets and liabilities of $224.5 million. The following table presents cash flow impacts from changes in operating assets and liabilities, excluding the effects of foreign exchange rate fluctuations:

Previous wording

Cash used by changes in operating assets and liabilities during the three months ended March 31, 2025, decreased $20.7 million, compared to the same period during the prior year. The $11.1 million decrease in cash used for other assets and liabilities was primarily due to lower annual employee incentive program payments in the current period, compared to the same period in the prior year, and higher current period operating expenses that were prepaid in previous periods. The decrease in cash used by accounts receivable was primarily due to a decrease in the comparative growth in outstanding accounts receivable balances largely due to improved collection efficiency compared to the prior-year period, and to lower comparative changes in revenue between sequential quarterly periods. Cash provided by inventories increased due to higher increases in accrued payables during the current period compared to the same period in the prior year.

Current wording

Cash used by changes in operating assets and liabilities during the six months ended June 30, 2025, increased $157.4 million, compared to the same period during the prior year. During the current period, we paid approximately $80 million, which was accrued in prior years, to conclude a litigation matter and the payment is included within the cash flow impacts from changes in other assets and liabilities. Higher tax payments in the current period and an increase in contract assets arising from customer commitment arrangements, partially offset by lower annual employee incentive program payments in the current period, also contributed to the increase in cash used for other assets and liabilities, compared to the same period in the prior year.

Previous 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.

Current wording

Investing Activities. Cash used by investing activities was $63.2 million during the six months ended June 30, 2025, compared to $139.9 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

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.

Current wording

Financing Activities. Cash used by financing activities was $496.0 million during the six months ended June 30, 2025, compared to $354.3 million used for the same period during the prior year. The increase in cash used was primarily due to $739.0 million of repurchases of our common stock during the current year, compared to $370.3 million of repurchases during the prior year, as well as a payment upon the maturity of our 2025 Series C Notes equivalent to $103.4 million. This increase in cash used by financing activities was partially offset by $329.0 million in net borrowings under our Credit Facility during the current year, compared to no activity under our Credit Facility during the prior-year period. We also remitted approximately $8.4 million of excise tax related to the repurchase of our common stock on April 15, 2025, which is included in the repurchases of common stock on our cash flow statement.

Previous 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.

Current wording

As of June 30, 2025, we had $579.0 million in outstanding borrowings under the Credit Facility, of which $250.0 million is outstanding borrowings under our term loan that matures on October 20, 2025. We anticipate paying off our term loan when due in October 2025, with available cash on hand, borrowings under our line of credit, or a combination thereof. 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 as described below.

Previous 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.

Current wording

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 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.

Previous wording

Should we elect to prepay any of our senior notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company, the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the senior notes. The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, each of 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 ERISA, the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default. The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, 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.

Current wording

Should we elect to prepay any of our senior notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company, the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the senior notes. The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, each of 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 ERISA, the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default. The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, 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 as described below.