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IDEXX Laboratories Separates From the Pack

By Brian Orelli, PhD - Feb 5, 2018 at 3:31PM

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The animal-testing company is growing faster than its customers.

IDEXX Laboratories (IDXX -2.01%) rounded out 2017 on a high note with accelerating revenue growth, which the animal-testing company looks set to build on this year.

IDEXX results: The raw numbers 


Q4 2017

Q4 2016

Year-Over-Year Change


$506 million

$443 million


Income from operations

$97.8 million

$80.6 million


Earnings per share




Data source: IDEXX Laboratories.

What happened with IDEXX this quarter?

  • Even though revenue benefited by changes in currencies, it was still up an impressive 12% on an organic basis, boosted by 13% growth in companion-animal diagnostic recurring revenues.
  • There was a 15% growth in premium-instrument placements, including 25% growth in placements of the company's workhorse Catalyst, mostly into international markets, and 37% growth in placements of its urine analyzer SediVue Dx.
  • Those instruments didn't boost revenue that much because some of the sales went into deferred revenue that will be captured in future years. But the placements are important because they'll drive recurring revenue for tests run on the systems in future quarters.
  • The reference laboratory and consulting services, a segment providing diagnostic tests for veterinarians, continues to grow well with revenue up 12% organically despite fewer days in 2017's fourth quarter than in the year-ago quarter.
  • After a rough third quarter, revenue on tests for livestock, poultry, and dairy bounced back to organic growth of 8% thanks to higher-than-projected year-end orders from government programs and distributors, as well as a boost from the company's pregnancy-testing platform.
  • Sales in water-testing products increased 16% organically, but some of that was due to changes in inventory for the year-ago quarter. Adjusting for that change, the water division's organic revenue growth was about 9%.
  • As is the case for many companies, IDEXX's earnings in the fourth quarter were hurt by changes in the U.S. tax law. Adjusting for the one-time items, earnings per share grew 19% year over year on a constant-currency basis.
Catalyst Dx in use

Image source: IDEXX Laboratories.

What management had to say 

IDEXX's 11% organic growth in the U.S. is quite remarkable when considered in context of the growth of the average veterinarian clinic, as Brian McKeon, IDEXX's chief financial officer and treasurer, pointed out:

IDEXX's performance continues to significantly outpace solid U.S. veterinary practice market growth reflected in our dataset from about 5,200 clinics. In Q4, patient visits increased 2% and clinic revenues increased 6.1% compared to the prior year period.

The launch of the long-awaited SDMA kidney-function test appears to be going well, according to Jonathan Ayers, IDEXX Laboratories' chairman, president, and CEO, which should continue to drive recurring revenue in future quarters:

[W]e have close to 30,000 Catalysts instruments in customers around the world, and these Catalyst customers have been anxiously awaiting for the availability of this slide as evidenced by the over 3,500 unique practices in North America that have already bought the test since our pre-launch 60 days ago and [began] shipping just a couple weeks ago.

Looking forward

Management is looking for revenue to grow 9.5% to 11.5% on an organic basis this year. In addition to the aforementioned SDMA test, IDEXX is also planning to launch the SNAP Fecal test midyear, which should help boost revenue in the second half of the year.

With improved operating margins, a small decrease in the share count, and the benefits from the new tax law, earnings per share are expected to increase a whopping 29% to 33% this year on a comparable constant-currency basis.

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