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; 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.

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 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2025, and June 30, 2025, as well as those described from time to time in our other filings with the SEC.

Previous wording

Changes in Tariff and Trade Policies. Although we manufacture many of our companion animal and Water testing products, as well as certain of our LPD testing products, in the United States, we rely on third-party suppliers located in the United States and other regions (such as Europe and Asia Pacific) for certain components, raw materials, and consumables used in or with our products. In addition, as a global business, our products and services are sold in more than 175 countries. For the year ended December 31, 2024, approximately 35% of our overall revenues were attributable to sales of products and services to customers outside the United States, with less than 1% of our overall revenues attributable to sales of products and services to customers domiciled in China. Accordingly, changes in tariff and trade policies may adversely affect our business, financial condition, and operating results.

Current wording

Changes in Tariff and Trade Policies. Although we manufacture many of our companion animal and water quality products, as well as certain of our LPD testing products, in the United States, we rely on third-party suppliers located in the United States and other regions (such as Europe and Asia Pacific) for certain components, raw materials, and consumables used in or with our products. In addition, as a global business, our products and services are sold in more than 175 countries. For the year ended December 31, 2024, approximately 35% of our overall revenues were attributable to sales of products and services to customers outside the United States, with less than 1% of our overall revenues attributable to sales of products and services to customers domiciled in China. Accordingly, changes in tariff and trade policies may adversely affect our business, financial condition, and operating results.

Previous 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.

Current wording

The U.S. government has periodically 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

U.S. Tax Law Changes. On July 4, 2025, H.R. 1 of the 119th Congress, also referred to as the “One Big Beautiful Bill Act” (“OBBBA”), was signed into law. The OBBBA includes significant changes to federal tax law, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, as well as modifications to the international tax framework and other regulatory provisions. We are in the process of evaluating the impact of the OBBBA on our financial statements and results of operations.

Current wording

U.S. Tax Law Changes. On July 4, 2025, H.R. 1 of the 119th Congress, also referred to as the “One Big Beautiful Bill Act” (“OBBBA”), was signed into law. The OBBBA includes significant changes to federal tax law, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, as well as modifications to the international tax framework and other regulatory provisions. The OBBBA also reinstates the ability to immediately expense domestic research and development costs for tax years beginning after December 31, 2024, and allows previously capitalized research and development costs not amortized to be deducted in the current period. During the third quarter we recognized the impact of accelerating the research and development deductions, and the resulting reduction of our Foreign-Derived Intangible Income benefit, which resulted in an increase to income tax expense. The acceleration of our research and development deductions is expected to reduce our projected taxes due for the current year by approximately $105 million.

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 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.”

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 nine months ended September 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 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.

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 nine months ended September 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

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.

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.” 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 relationships 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

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.

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, or superior measure to, 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

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.

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, or superior measure to, 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 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 TM Analyzer. Higher volumes and price gains in recurring veterinary software, services, and diagnostic imaging also contributed to revenue growth. Higher revenue in Water revenue was primarily due to the benefit of realized price increases and increased volumes. The increase in LPD revenue was primarily due to higher realized prices and higher volume. The change in foreign currency exchange rates increased revenue growth by 1.2%.

Current wording

Total Company Revenue. The increase in revenue primarily reflected growth in CAG Diagnostics recurring revenue, including higher volumes and the benefit from higher realized prices. Volume growth was supported by new business gains, our expanded menu of available tests, and high customer retention rates, partially constrained by macroeconomic and sector headwinds. Instrument revenue gains were primarily due to placements of our new IDEXX inVue Dx TM Analyzer. Higher realized prices and volumes in recurring veterinary software subscriptions, services, and diagnostic imaging also contributed to revenue growth. Higher revenue in Water was primarily due to the benefit of higher realized prices and volumes. The increase in LPD revenue was primarily due to higher volumes and realized prices. The change in foreign currency exchange rates increased revenue growth by 1.3%.

Previous 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%.

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 partially offset by macroeconomic and sector headwinds, as well as benefits from higher realized prices. The change in foreign currency exchange rates increased revenue growth by 1.3%.

Previous wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher test volumes and price realization. Volume gains were supported by increases in testing across regions, including the benefits from 10% growth in our active installed base of premium instruments, which reflected new customers and continued high customer retention rates, and our expanded menu of available tests, including the launch of the pancreatic lipase test on our Catalyst instrument platform. The change in foreign currency exchange rates increased revenue growth by 1.7%.

Current wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher test volumes and higher realized prices. Volume gains were supported by increases in testing across major regions, including the benefits from 10% growth in our active installed base of premium instruments, which reflected new customers and continued high customer retention rates, and our expanded menu of available tests. The change in foreign currency exchange rates increased revenue growth by 1.9%.

Previous wording

The decreasein rapid 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. The change in foreign currency exchange rates increased revenue growth by 0.4%.

Current wording

The decreasein rapid assay revenue resulted primarily from a shift of customers’ pancreatic lipase testing to our Catalyst instrument platform, partially offset by higher realized prices. The change in foreign currency exchange rates increased revenue growth by 0.5%.

Previous 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%.

Current wording

The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes across regions and higher realized prices. 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 the 10% growth in our active installed base of premium instruments. The change in foreign currency exchange rates increased revenue growth by 1.7%.

Current wording

The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 10% growth in our installed base of premium instruments. The change in foreign currency exchange rates increased revenue growth by 1.5%.

Previous wording

CAG Diagnostics Capital – Instrument Revenue. The increase in instrument revenue was primarily due to placements of our recently launched IDEXX inVue Dx Analyzer, as well as program pricing effects, partially offset by lower placements of other premium instruments. The change in foreign currency exchange rates increased revenue growth by 3.5%.

Current wording

CAG Diagnostics Capital – Instrument Revenue. The increase in instrument revenue was primarily due to placements of our new IDEXX inVue Dx Analyzer. The change in foreign currency exchange rates increased revenue growth by 3.6%.

Previous 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 from 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 decreased revenue growth by 0.2%. Acquisitions increased revenue growth by 0.9%.

Current wording

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher realized prices and higher subscription and support services volume from our expanded SaaS installed base. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales.

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 reflected proportionately higher IDEXX VetLab consumable volume growth 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.

Current wording

Gross Profit. Gross profit increased due to higher revenue and a 100 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from recurring revenue growth in IDEXX VetLab consumable and Reference Lab volumes, along with operational productivity and pricing benefits, which offset inflationary cost effects. 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, includingthe impact of hedge losses during the current period compared to hedge gains in the prior period.

Previous wording

Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes. The increase in volumes was due to placements of instruments, including the placements of our new UA Viewer Plus, and higher testing volumes, primarily in Europe and Asia Pacific. The change inforeign currency exchange rates increased revenue by approximately 0.8%.

Current wording

Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes. The increase in volumes was primarily due to placements of instruments and accessories, including the placements of our new UV Viewer Plus. The change inforeign currency exchange rates increased revenue by approximately 1.2%.

Previous wording

Revenue. The increase in revenue was primarily due to higher realized prices and an increase in test volumes in Asia Pacific and North America, partially offset by lower volumes in Europe. The change in foreign currency exchange rates increased revenue growth by 2.2%.

Current wording

Revenue. The increase in revenue was primarily due to an increase in test volumes, primarily in North America, Europe, and Asia, and to a lesser extent, higher realized prices. The change in foreign currency exchange rates increased revenue growth by 2.9%.

Previous wording

Gross Profit. The decrease in gross profit was primarily due to a 430 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. The change in foreign currency exchange rates decreased the gross profit margin by approximately 180 basis points, including the impact ofhedge losses during the current period compared to hedge gains in the prior period.

Current wording

Gross Profit. The increase in gross profit was primarily due to higher revenue, partially offset by a 350 basis point decrease in the gross profit margin. The net decrease in the gross profit margin was primarily due to higher product costs, partially offset by the impact from higher realized prices. The change in foreign currency exchange rates decreased the gross profit margin by approximately 80 basis points, including the impact ofhedge losses during the current period compared to hedge gains in the prior period.

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The following table presents the Other results of operations:

Current wording

Other information combines and presents our OPTI Medical with our out-licensing arrangements and consolidated foreign currency transaction gains and losses for all operating segments. The following table presents the Other results of operations:

Previous wording

Gross Profit. Gross profit decreased primarily due to a 630 basis point decrease in the gross profit margin. The decrease in the gross profit margin was largely due to higher product and freight costs. The change in foreign currency exchange rates did not have a significant impact on the gross profit margin.

Current wording

Gross Profit. Gross profit decreased primarily due to a 740 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. 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 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.

Current wording

Operating Expenses. Sales and marketing expense and research and development expense decreased due to lower personnel-related costs. General and administrative expense increased primarily due to foreign currency transaction losses during the current period, compared to gains in the prior period.

Previous 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.

Current wording

Interest Expense and Income. Interest expense was $10.7 million for the three months ended September 30, 2025, as compared to $7.7 million for the same period during the prior year. The increase in interest expense was primarily due to higher average debt levels and higher interest rates. Interest income was $0.6 million for the three months ended September 30, 2025, compared to $2.7 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 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.

Current wording

Provision for Income Taxes. Our effective income tax rate was 20.4% for the three months ended September 30, 2025, compared to 22.1% for the three months ended September 30, 2024. The decrease in our effective tax rate was primarily due to an increase in tax benefits related to share-based compensation, partially offset by the impacts related to recent U.S. tax law changes.

Previous 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%.

Current wording

Total Company Revenue. The increase in revenue primarily reflected growth in CAG Diagnostics recurring revenue, including benefits from higher volumes and higher realized prices. Volume growth was supported by new business gains, our expanded menu of available tests, and high customer retention rates, partially offset by continued pressure of macroeconomic and sector headwinds. Instrument revenue gains were primarily due to the placements of our new IDEXX inVue Dx Analyzer. Higher price and volume 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 benefits from higher realized prices and higher volumes. The increase in LPD revenue was primarily due to higher volumes and higher realized prices.

Previous wording

Gross Profit. Gross profit increased due to higher revenue and a 90 basis point increase inthe gross profit margin. The increase in the gross profit margin reflected proportionately higher IDEXX VetLab consumable volume growth, productivity improvements, and the benefit from net price realization, offsetting the inflationary impacts. The overall change in foreign currency exchange rates decreased the gross profit margin by approximately 20 basis points, including the impact of hedge losses during the current period compared to hedge gains in the prior period.

Current wording

Gross Profit. Gross profit increased due to higher revenue and a 90 basis point increase in the gross profit margin. The increases in the gross profit margin reflected benefits from recurring revenue growth in IDEXX VetLab consumable and Reference Lab volumes, along with operational productivity and pricing benefits, which offset inflationary cost effects. These increases in the gross profit margin were reduced by the business mix impact from higher instrument revenue. Thechange 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.

Previous 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.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and commercial expenses. General and administrative expense decreased primarily due to a $61.5 million expense in the prior year and a reduction in accrued expense of approximately $9 million in the first quarter of the current period related to a now-concluded litigation matter, partially offset by higher personnel-related, information technology, and facility costs. Research and development expense increased primarily due to higher personnel-related and project costs. The change in foreign currency exchange rates increased operating expense growth by less than 1%.

Previous wording

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher volumes in IDEXX VetLab consumables and reference laboratory testing, partially offset by macroeconomic and sector headwinds, and higher realized prices offsetting inflationary cost impacts.

Current wording

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher volumes in IDEXX VetLab consumables and reference laboratory testing partially offset by macroeconomic and sector headwinds, as well as benefits from higher realized prices. The change in foreign currency exchange rates increased revenue growth by 0.4%.

Previous wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher volume and price realization. Volume gains were supported by the benefits from 10% growth in our active installed base of premium instruments, which reflected new customers and continued high customer retention rates, and our expanded menu of available tests. Thechange in foreign currency exchange rates did not have a significant impact on revenue growth.

Current wording

The increase in IDEXX VetLab consumables revenue was primarily due to higher volumes and higher realized prices. Volume gains were supported by increases in testing including the benefits from 10% growth in our active installed base of premium instruments, which reflected new customers and continued high customer retention rates, as well as our expanded menu of available tests. The change in foreign currency exchange rates increased revenue growth by 0.6%.

Previous 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%.

Current wording

The decrease inrapid assay revenue resulted primarily from a shift of customers’ pancreatic lipase testing to our Catalyst instrument platform, partially offset by higher realized prices.

Previous wording

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

Current wording

The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes in the U.S., Europe, and Asia Pacific, and higher realized prices. Thechange in foreign currency exchange rates increased revenue growth by 0.4%.

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.

Current wording

The increase in CAG Diagnostics services and accessories revenue was primarily a result of growth in our installed base of premium instruments. Thechange in foreign currency exchange rates increased revenue growth by 0.6%.

Previous 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%.

Current wording

CAG Diagnostics Capital – Instrument Revenue. The increase in instrument revenue was primarily due to placements of our new IDEXX inVue Dx Analyzer, partially offset by lower placements of other premium instruments. The change in foreign currency exchange rates increased revenue growth by 1.2%.

Previous 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%.

Current wording

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher subscription and support services volume from our expanded SaaS installed base and from higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales. Acquisitions increased revenue growth by 0.6%.

Previous wording

Gross Profit. Gross profit increased due to higher revenue, as well as a 100 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to higher realized prices, and to a lesser extent, lower product costs. These increases were partially offset by higher distribution costs. The change in foreign currency exchange rates decreased the gross profit margin by approximately 50 basis points, includingthe impact of hedge losses during the current period compared to hedge gains in the prior period.

Current wording

Gross Profit. Gross profit increased due to higher revenue and a 100 basis point increase in the gross profit margin. The increases in the gross profit margin reflected benefits from recurring revenue growth in IDEXX VetLab consumable and Reference Lab volumes, along with operational productivity and pricing benefits, which offset inflationary cost effects. These increases in the gross profit margin were reduced by the business mix impact from higher instrument revenue. The change in foreign currency exchange rates on the gross profit margin was not significant, includingthe impact of lower hedge gains during the current period compared to the prior period.

Previous 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.

Current wording

Segment 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 and a reduction in accrued expense of approximately $9 million in the first quarter of the current period related to a now-concluded litigation matter, partially offset 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 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%.

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 Latin America and Europe, as well as placements of instruments and accessories. The change in foreign currency exchange rates decreased revenue growth by 0.1%.

Previous 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.

Current wording

Gross Profit. Gross profit increased due to higher revenueas well as a 60 basis point increase in the gross profit margin. The net increase in the gross profit margin was due to higher realized prices, reduced by the impact of higher product and distribution costs. Thechange 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.