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Rising Margins Allow IDEXX Laboratories to Boost Guidance

By Brian Feroldi - May 1, 2019 at 4:19PM

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Expense control is helping the animal diagnostic company drive double-digit profit growth.

IDEXX Laboratories (IDXX 2.10%), a diversified pet healthcare company, reported its first-quarter result on Wednesday.

The reported revenue growth came in at 7%, which represents a continued deceleration from what it has been able to post in recent quarters. Thankfully, management is keeping a close watch on the company's spending and was able to translate the single-digit gain into double-digit growth where it counts.

IDEXX Laboratories quarterly results: The raw numbers


Q1 2019

Q1 2018

Year-Over-Year Change


$576 million

$538 million


Net Income 

$103 million

$90 million


Earnings per share




Data source: IDEXX Laboratories.

What happened with IDEXX Laboratories this quarter?

  • On an organic basis, revenue growth was 10%.
  • Companion Animal Group (CAG) revenue grew 8%. Recurring revenue from this division jumped 9%.
  • 2,775 instruments were placed during the period, growing the install base 20%. Much of the growth is driven by strong demand for the company's Catalyst chemistry analyzer product.
  • IDEXX's water division revenue grew 4% on a reported basis and 8% on an organic basis.
  • Livestock division revenue dropped 2% on a reported basis, but it grew 4% on an organic basis.
  • Gross margin expanded 120 basis points to 57.6%. Management credited the gains to sales mix and sales leverage.
  • Operating margin jumped 210 basis points to 23.1%. The big jump was partially attributable to delayed spending on certain items. 
  • On a currency-neutral basis, EPS growth would have come in at 27%.
Two veterinarians with a happy dog in their hands

Image source: Getty Images.

What management had to say

IDEXX's CEO, Jonathan Ayers, was pleased with how the first quarter shook out: 

"Our strong business performance continued in the first quarter, sustaining high organic growth in CAG Diagnostics recurring revenues. With great runway ahead and a robust start to the year, we are well positioned to execute our unique innovation-based and multimodality strategy, enabled by our expanded global commercial capability, as we continue to deliver outstanding financial results aligned with our long-term goals." 

Looking forward

Management reaffirmed its call for organic revenue growth of 9.5% to 11% for the full year. That translates into a revenue range of $2.385 billion to $2.425 billion. However, management was quick to point out that if exchange rates remain where they are today, then its revenue growth rate would be negatively impacted by about 1.5%.

Bottom-line guidance was favorably tweaked. The company expects its margin profile to remain strong, so earnings per share guidance for the full year was raised by a dime to a new range of $4.76 to $4.88. This range represents growth of 12% to 15% on a reported basis and includes currency headwinds of about $0.03 per share.

Management continues to project that its free cash flow will only be about 60% to 65% of net income because the company is spending heavily to expand its headquarters in Maine and relocating a laboratory in Germany. 

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