Business boomed for Idexx Laboratories (NASDAQ:IDXX) in 2019. But there were plenty of questions for the animal health company in the first quarter of 2020 due to the COVID-19 pandemic. Those questions have now been answered.
Idexx Labs announced its first-quarter results before the market opened on Thursday. The company's business is still booming. Here are the highlights from Idexx's Q1 update.
By the numbers
Idexx reported first-quarter revenue of $626 million, a 9% year-over-year jump. This result also handily beat the average analysts' revenue estimate of $617.4 million.
The company announced Q1 net income of $111.9 million, or $1.29 per share, based on generally accepted accounting principles (GAAP). Idexx's bottom line improved from the prior-year period, when the company recorded GAAP earnings of $102.7 million, or $1.17 per share. The animal health company's Q1 earnings also topped the consensus analysts' earnings estimate of $1.20 per share.
Idexx ended the first quarter with cash, cash equivalents, and short-term investments of $81.4 million, down from a cash stockpile of $90.3 million as of March 31, 2019.
Behind the numbers
COVID-19 both helped and hurt Idexx Labs in the first quarter. On the positive side, the company's livestock, poultry, and dairy (LPD) business benefited from accelerated customer stock orders due to the pandemic. LPD revenue jumped 12% higher than the total in the prior-year period.
It was a similar story for Idexx's water microbiology testing business. Revenue for the unit rose 13% year over year thanks in large part to customers stocking up because of the COVID-19 outbreak.
But Idexx's companion animal group, which generates 88% of the company's total revenue, was negatively impacted by the coronavirus. The business reported 8% year-over-year revenue growth, led by diagnostics recurring revenue growth of 10%.
However, companion animal group revenue began to slide in the latter part of the first quarter. Even though most states recognized veterinary care as an essential business, veterinary visits fell as customers stayed home and delayed elective procedures and wellness visits for their pets.
The next few months hold a lot of uncertainty for many healthcare stocks. Idexx Labs is no exception. The company withdrew its previous full-year 2020 guidance due to a lack of visibility on how the COVID-19 pandemic could impact its business. However, there are reasons to be optimistic.
Idexx remains strong financially. The company increased its financial flexibility in Q1 by increasing its credit facility to $1 billion and issuing $200 million in notes. It also reduced spending by around $25 million compared to its planned levels through temporary pay cuts for executives and most salaried employees and suspending cash compensation for board members.
New COVID-19 diagnostic products could also boost sales. Idexx launched a new COVID-19 test for pets in April in response to both customer demand and increased evidence that pets can be infected by the novel virus that causes COVID-19. The company also awaits FDA emergency use authorization for a human COVID-19 test developed by its human health business, OPTI Medical Systems.
Perhaps most importantly, Idexx stated that it has seen "meaningful improvements" in its tracking of clinical visit and diagnostic testing trends in mid- to late April. The company said that areas that have begun to allow businesses to reopen and moderate social distancing requirements appear to be driving these improvements.