IDEXX Laboratories (NASDAQ:IDXX) continues to post double-digit revenue growth as veterinarians increasingly use its animal diagnostic machines and tests. The company was able to parlay that top-line growth into even better growth on the earnings line.

IDEXX Laboratories results: The raw numbers


Q2 2018

Q2 2017

Year-Over-Year Change


$580.8 million

$508.9 million


Income from operations

$145.6 million

$122.6 million


Earnings per share




Data source: IDEXX Laboratories.

What happened with IDEXX Laboratories this quarter?

  • Revenue benefited from currency changes, but even factoring that out, revenue was still up a solid 12% on a constant currency basis.
  • The growth was driven by the placement of 3,241 premium instruments, a 21% year-over-year increase. The flagship Catalyst machine drove much of that growth, especially outside the U.S., where sales were up 55% year over year. Sales of consumable tests that are run on those machines increased 18% organically in the second quarter.
  • Revenue from the reference laboratory, where IDEXX runs the tests rather than the veterinarians running them in-house, and other related services jumped 13% organically.
  • Growth in sales of rapid assay tests continued to be slow, climbing just 4% year over year organically.
  • The farm animals and water divisions were flat and up 9% organically, respectively, but as the companion animal business grows, both are becoming a smaller portion of the overall revenue.
  • Earnings grew faster than revenue thanks to operating leverage -- some costs don't go up as fast as revenue increases. A lower tax rate also helped boost the bottom line.
Dog jumping over roots while running on trail in forest

Image source: Getty Images.

What management had to say

As mentioned last quarter, the launch of the SDMA kidney function test for the Catalyst machine helped drive sales in the U.S. with 42% of customers having tried the test. The international launch went even better according to Jonathan Ayers, IDEXX's chairman, president, and CEO: "We had 50% of Catalyst customers outside of the US who purchased the SDMA. This is amazing because we've only been in the market a couple of months. "

It wasn't all good news on the quarterly report, Ayers disclosed that the launch of the fecal SNAP test will be delayed even further: "We believe we have more work to do than initially appreciated to bring a fecal SNAP to the field with the level of outstanding sensitivity and specificity that we are currently able to deliver with the reference lab Fecal Dx offering. At this time, we're not in a position to provide a targeted launch date."

Looking forward

Management lowered 2018 revenue guidance, but that was solely due to changes in foreign exchange assumptions. On an organic basis, revenue guidance is higher than previously expected, with year-over-year growth now forecast to fall in the 11.5% to 12.5% range. It continues to expect earnings to grow even faster thanks to the aforementioned operating leverage with earnings expected to fall in the range of $4.10 to $4.20 per share, which would be 39% to 43% higher than in 2017.

Based on the expected growth this year and beyond, management is expanding its sales force again to try to capture even more business from veterinarians' offices. It would be nice to be able to see that revenue growth tickle down to earnings without increased expenses, but the company seems convinced that the expansion will be able to drive revenue growth even faster, making up for the added expense.