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 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.

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; and inflation. 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 2025 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 filings with the SEC.

Previous wording

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

Current wording

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

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•Practice management and diagnostic imaging systems and services used by veterinarians;

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•Practice management systems, software and diagnostic imaging systems and services used by veterinarians;

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

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

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•Products that test water for certain microbiological contaminants; and

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•Products that test water for certain microbiological contaminants.

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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.

Current wording

Description of Operating Segments. We operate primarily through three reportable segments: Companion Animal Group (“CAG”), Water quality products (“Water”), and Livestock, Poultry and Dairy (“LPD”). CAG provides diagnostics and information management products and services for the companion animal veterinary industry and the biomedical research community. Water provides testing solutions and related instrumentation for the detection and quantification of various microbiological parameters in water. LPD provides diagnostic tests, services, and related instrumentation that are used to manage the health status of livestock and poultry, to improve producer efficiency, and to measure the quality and safety of milk. Our Other operating segment combines and presents our human medical diagnostic business with our out-licensing arrangement because they do not meet the quantitative or qualitative thresholds for reportable segments.

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

Current wording

Other Items. Refer to “Part I, Item 1. Intellectual Property, Including Patents and License” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2025 Annual Report for additional information regarding trends in companion animal healthcare, supply chain and logistics challenges, economic conditions, changes in tariff and trade policies, distributor purchasing and inventories, and patent expiration.

Previous wording

The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 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 disclosures 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, 2026, are consistent with those discussed in our 2025 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

For more information regarding the impact that recent accounting standards and amendments will have on our consolidated financial statements, refer to Note 2 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

Current wording

For more information regarding the impact that recent accounting standards and amendments will have on our consolidated financial statements, refer to “Note 2. Accounting Policies” to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

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 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.

Current wording

The following revenue analysis and discussion includes organic revenue growth, and references in this analysis and discussion to “revenue,” “revenues,” or “revenue growth” apply equally to revenue growth reported in accordance with U.S. GAAP and 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, 2026, 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 exclude from organic revenue growth the effect of changes in foreign currency exchange rates because changes in foreign currency exchange rates are not under management’s control, are subject to volatility, and can obscure underlying business trends. We calculate the impact on revenue resulting from changes in foreign currency exchange rates by applying the difference between the weighted average exchange rates during the current-year period and the comparable prior-year period to foreign currency denominated revenues for the prior-year period.

Current wording

We exclude from organic revenue growth the effect of changes in foreign currency exchange rates because changes in foreign currency exchange rates are not under management’s control, are subject to volatility, and can obscure underlying business trends. We calculate the impact on revenue resulting from changes in foreign currency exchange rates by applying the difference between the weighted average exchange rates during the current period and the comparable prior year period to foreign currency denominated revenues for the prior year period.

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.” 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.

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.” We do not consider acquired assets to be 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. A typical acquisition that we do not consider a business is a customer relationship asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. Revenue from these customers acquired is included in organic revenue growth because we believe the efforts required to convert and retain these acquired customers are similar in nature to our efforts to obtain and retain our existing customer base.

Previous wording

Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio are non-GAAP financial measures which 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

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.

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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.

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.

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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%.

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. Instrument revenue gains were primarily due to placements of our IDEXX inVue Dx TM Analyzer, compared to the first quarter of 2025 when we continued a controlled launch. Higher volumes and realized prices in recurring veterinary software subscriptions, services, and diagnostic imaging also contributed to revenue growth. Revenue growth 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 impact from changes in foreign currency exchange rates increased revenue growth by 3.1%.

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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.

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 high recurring revenue growth in IDEXX VetLab consumable and reference laboratory volumes, operational productivity improvements, and net price realization, which was offset by inflationary costs and investments. The increase in gross margin also reflects favorability in our Water and Livestock, Poultry and Dairy operating segments. These increases in the gross profit margin were reduced by the business mix impact from higher premium instrument revenue. The change in foreign currency exchange rates increased the gross profit margin by approximately 10 basis points, including the impact of lower hedge gains during the current period compared to the prior period.

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Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs. General and administrative expense increased primarily due to higher personnel-related 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 approximately 2%.

Current wording

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs. General and administrative expense increased primarily due to a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in April 2025, higher personnel-related and facility costs, and a $5 million expense for the full impairment of an equity investment in the current period. Research and development expense increased primarily due to higher personnel-related and project costs. The impact from changes in foreign currency exchange rates increased operating expense growth by approximately 2%.

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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%.

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, as well as benefits from higher realized prices. The impact of changes in foreign currency exchange rates increased revenue growth by 3.1%.

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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%.

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 across major regions, reflecting the benefits from 12% growth in our installed base of premium instruments and growth in testing by existing customers, including sales of our expanded menu of available tests, as well as continued high customer retention rates. The impact of changes in foreign currency exchange rates increased revenue growth by 4.2%.

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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%.

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Rapid assay revenue increased from higher realized prices, moderated by a decrease in volumes partially due to a shift of customers’ pancreatic lipase testing to our Catalyst instrument platform, as well as sector headwinds. The impact of changes in foreign currency exchange rates increased revenue growth by 1.2%.

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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%.

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The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes across regions and higher realized prices. The impact of changes in foreign currency exchange rates increased revenue growth by 2.5%.

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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%.

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The increase in CAG Diagnostics services and accessories revenue was primarily a result of a 12% growth in our installed base of premium instruments. The impact of changes in foreign currency exchange rates increased revenue growth by 3.6%.

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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%.

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CAG Diagnostics Capital – Instrument Revenue. The increase in instrument revenue was primarily due to placements of our IDEXX inVue Dx Analyzer, compared to the first quarter of 2025 when we continued a controlled launch, partially offset by lower placements of other premium instruments. The impact of changes in foreign currency exchange rates increased revenue growth by 4.7%.

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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%.

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Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher subscription services volume and higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales. The impact of changes in foreign currency exchange rates increased revenue growth by 1.0%

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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%.

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 a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in April 2025, higher personnel-related and facility costs, and a $5 million expense for the full impairment of an equity investment in the current period. Research and development expense increased primarily due to higher personnel-related and project costs. The impact of changes in foreign currency exchange rates increased operating expense growth by approximately 2%.

Previous wording

Gross Profit. Gross profit increased due to higher revenue, as well as an 80 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to higher realized prices, reduced by the impact of higher product costs and product mix. The change in foreign currency exchange rates decreased the gross profit margin by approximately 10 basis points, includingthe impact of higher hedge losses during the current period compared to the prior period.

Current wording

Gross Profit. Gross profit increased due to higher revenue, as well as a 190 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to higher realized prices, partially reduced by higher distribution costs. The impact of changes in foreign currency exchange rates decreased the gross profit margin by approximately 50 basis points, including the impact of hedge losses during the current period compared to hedge gains in the prior period.

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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%.

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Revenue. The increase in revenue was primarily due to increases in test volumes, predominantly in Europe and, to a lesser extent, higher realized prices. The impact of changes in foreign currency exchange rates increased revenue growth by 6.4%.

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Gross Profit. The decrease in gross profit was primarily due to a 390 basis point decrease in the gross profit margin, partially offset by higher revenue. The net decrease in the gross profit margin was primarily due to higher product costs, reduced by the impact from higher realized prices. Thechange in foreign currency exchange rates decreased the gross profit margin by approximately 60 basis points, including the impact of lower hedge gains during the current period compared to the prior period.

Current wording

Gross Profit. The increase in gross profit was primarily due to higher revenue as well as a 190 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to lower product costs and higher realized prices. The impact of changes in foreign currency exchange rates decreased the gross profit margin by approximately 170 basis points, including the impact of lower hedge gains during the current period compared to the prior period.

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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.

Current wording

Interest Expense and Income. Interest expense was relatively constant at $7.7 million for the three months ended March 31, 2026 and 2025. Interest income was $0.6 million for the three months ended March 31, 2026, compared to $1.2 million for the three months ended March 31, 2025, primarily due to a decrease in money market investments.

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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.

Current wording

Provision for Income Taxes. Our effective income tax rates were 21.7% for the three months ended March 31, 2026 and 2025. Compared to the prior period, favorable impacts on the effective tax rate comprised primarily of an increase in tax benefits related to share-based compensation, while offsetting unfavorable impacts included higher non-deductible expenses.

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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 $225.2 million as of September 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 our Credit Facility in the current year. As of September 30, 2025, we had $208.2 million of cash and cash equivalents, compared to $288.3 million as of December 31, 2024. As of September 30, 2025, we had a remaining borrowing availability of $793.2 million under our $1.25 billion Credit Facility, with $455.0 million in outstanding borrowings under our Credit Facility. As of December 31, 2024, we had $250.0 million in outstanding borrowings under our Credit Facility. The general availability of funds under our Credit Facility is reduced by $1.8 million for outstanding letters of credit. We believe that, if necessary, we could obtain additional borrowings to fund our growth objectives. We further believe that current cash and cash equivalents, funds generated from operations, and committed borrowing availability will be sufficient to fund our operations, capital purchase requirements, and anticipated growth needs for the next twelve months. We believe that these resources, coupled with our ability, as needed, to obtain additional financing, will also be sufficient to fund our business as currently conducted for the foreseeable future. We may enter into new financing arrangements or refinance or retire existing debt in the future depending on market conditions. Should we require more capital in the U.S. than is generated by our operations, for example, to fund significant discretionary activities, we could elect to raise capital in the U.S. through the incurrence of debt or equity issuances, which we may not be able to complete on favorable terms or at all. In addition, these alternatives could result in increased interest expense or other dilution of our earnings.

Current wording

We fund the capital needs of our business through cash on hand, funds generated from operations, proceeds from long-term senior note financings, and amounts available under our Credit Facility. We generate cash primarily through the payments made by customers for our companion animal, livestock, poultry, dairy, and water products and services, consulting services, and other various systems and services. Our cash disbursements are primarily related to compensation and benefits for our employees, inventory and supplies, repurchase of our common stock, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. Working capital totaled $154.2 million as of March 31, 2026, compared to $265.0 million as of December 31, 2025. The change in working capital is primarily due to higher borrowings outstanding on our Credit Facility. As of March 31, 2026, we had $200.5 million of cash and cash equivalents, compared to $180.1 million as of December 31, 2025. As of March 31, 2026, we had a remaining borrowing availability of $718.2 million under our $1.25 billion Credit Facility, with $530.0 million in outstanding borrowings under our Credit Facility, and an option for the Company to incur incremental revolving credit commitments and/or term loans in the aggregate principal amount of up to $250.0 million. As of December 31, 2025, we had $398.0 million in outstanding borrowings under our Credit Facility. The general availability of funds under our Credit Facility is reduced by $1.8 million for outstanding letters of credit.

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The following table presents cash and cash equivalents held domestically and by our foreign subsidiaries:

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The following table presents cash, cash equivalents, and marketable securities held domestically and by our foreign subsidiaries:

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As of September 30, 2025, of the $208.2 million of cash and cash equivalents held, $202.7 million was held as bank deposits and $5.5 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 September 30, 2025, included approximately $1.0 million in cash denominated in a non-U.S. currency held in a country with currency control restrictions, which limits our ability to transfer funds outside of the country in which they are held without incurring costs.

Current wording

As of March 31, 2026, of the $200.5 million of cash and cash equivalents held, $197.0 million was held as bank deposits and $3.5 million was held in a U.S. government money market fund. As of December 31, 2025, more than 99% of the cash and cash equivalents held were held as bank deposits at a diversified group of institutions, primarily systemically important banks. Cash and cash equivalents as of March 31, 2026, included approximately $0.9 million in cash denominated in non-U.S. currencies held in a country with currency control restrictions, which limit our ability to transfer funds outside of the country in which they are held without incurring costs. The currency control restricted cash is generally available for use within the country where it is held.

Previous wording

Operating Activities. Cash provided by operating activities during the nine months ended September 30, 2025, was $826.0 million, which was a net increase in operating cash flows of $159.1 million, compared to the same period during the prior year. Cash was provided from net income of $811.3 million, adjusted for net non-cash items of $259.3 million, partially offset by a net decrease from changes in operating assets and liabilities of $244.5 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 three months ended March 31, 2026, was $266.2 million, which was a net increase in operating cash flows of $28.3 million, compared to the same period during the prior year. Cash was provided from net income of $278.4 million, adjusted for net non-cash items of $77.6 million, partially offset by a net decrease from changes in operating assets and liabilities of $89.7 million.

Previous wording

Cash used by changes in operating assets and liabilities during the nine months ended September 30, 2025, increased $120.0 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. The increase in contract assets arising from customer commitment arrangements, partially offset by lower tax payments and 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.

Current wording

Cash used by changes in operating assets and liabilities during the three months ended March 31, 2026, increased $29.1 million, compared to the same period during the prior year. The increase in cash used for other assets and liabilities was primarily due to higher annual employee incentive program payments and higher income tax payments.

Previous wording

Investing Activities. Cash used by investing activities was $108.1 million during the nine months ended September 30, 2025, compared to $167.2 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, compared to smaller asset acquisitions in the current-year period.

Current wording

Investing Activities. Cash used by investing activities was $33.5 million during the three months ended March 31, 2026, compared to $29.6 million for the same period during the prior year. The increase in cash used by investing activities was primarily due to higher capital expenditures, the acquisition of an intangible asset, and an equity investment.

Previous wording

Our total capital expenditure plan for 2025 is estimated to be approximately $140.0 million, which includes capital investments in manufacturing and operations facilities and technology infrastructure to support growth and efficiencies, as well as investments in customer-facing software development.

Current wording

Our total capital expenditure plan for 2026 is estimated to be approximately $180.0 million, which includes capital investments in manufacturing and operations facilities to support growth, as well as investments in customer-facing software development.

Previous wording

Financing Activities. Cash used by financing activities was $809.3 million during the nine months ended September 30, 2025, compared to $645.3 million used for the same period during the prior year. The increase in cash used was primarily due to $979.2 million of repurchases of our common stock during the current year, compared to $591.0 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 $205.0 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.

Current wording

Financing Activities. Cash used by financing activities was $211.4 million during the three months ended March 31, 2026, compared to $330.3 million used for the same period during the prior year. The decrease in cash used was primarily due to $351.0 million of repurchases of our common stock during the current period, compared to $400.9 million of repurchases during the prior period. The decrease in cash used by financing activities was also a result of $132.0 million in net borrowings under our Credit Facility during the current period, compared to $69.5 million of net borrowings in the prior period.

Previous wording

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

Current wording

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

Previous wording

As of September 30, 2025, we had $455.0 million in outstanding borrowings under our Credit Facility, of which $250.0 million is outstanding borrowings under our term loan that matures on October 20, 2025. On October 20, 2025, we paid our $250.0 million term loan with a combination of borrowings under our revolving line of credit and available cash on hand. The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under our 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. Our 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 sanctions laws and regulations. The sole financial covenant is a consolidated leverage ratio test as described below.

Current wording

As of March 31, 2026, we had $530.0 million in outstanding borrowings under our Credit Facility, of which $250.0 million was on our Term Loan under our Credit Facility. Our 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 sanctions laws and regulations. The sole financial covenant is a consolidated leverage ratio test as described below.