UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549 
FORM 10-Q 
 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended March 31, 20232024
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from _______________ to _______________. 
  
COMMISSION FILE NUMBER: 000-19271 

idxx-20180331x10qg001a06.jpgIDEXX Logo.gif
  IDEXX LABORATORIES, INC. 
(Exact name of registrant as specified in its charter) 
Delaware01-0393723
(State or other jurisdiction of incorporation 
or organization)
(IRS Employer Identification No.)
One IDEXX DriveWestbrookMaine04092
(Address of principal executive offices)(ZIP Code)
207-556-0300
(Registrant’s telephone number, including area code)

Securities Registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 par value per shareIDXXNASDAQ Global Select Market
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨


    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No  ¨

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large Accelerated Fileraccelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant’s Common Stock, $0.10 par value per share, was 83,004,93682,587,328 on April 25, 2023.26, 2024.



GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS

    In order to aid the reader, we have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q below:
Term / Abbreviation
 
Definition
 
AOCIAccumulated other comprehensive income or loss
ASCAccounting Standards Codification
ASUAccounting Standards Update
CAGCompanion Animal Group, a reporting segment that provides veterinarians diagnostic products and services and information management solutions that enhance the health and well-being of petspets.
Credit FacilityOur $1.25 billion five-year unsecured credit facility under an amended and restated credit agreement; consisting of i) $1 billion revolving credit facility, also referred to as line of credit, and ii) $250 million three-year term loan.
Clinical visitsThe reason for the visit involves an interaction between a clinician and a pet
FASBU.S. Financial Accounting Standards Board
LIBORLondon Interbank Offered-Rate
LPDLivestock, Poultry and Dairy, a reporting segment that provides diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk and improve producer efficiencyefficiency.
OPTI Medical
OPTI Medical Systems, Inc., a wholly-ownedwholly owned subsidiary of IDEXX Laboratories Inc., located in Roswell, Georgia. This business provides point-of-care and laboratory diagnostics (including electrolyte and blood gas analyzers and related consumable products) for the human medical diagnostics sector, as well as COVID-19 testing products and services.sector. The Roswell facility also manufactures electrolytes slides (instrument consumables) to run Catalyst One®, Catalyst Dx®, and blood gas analyzers and consumables for the veterinary sector; also referred to as OPTI. OPTI Medical is reported in our Other operating segment.
Organic revenue growthA non-GAAP financial measure and represents the percentage change in revenue, as 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.
PCRPolymerase chain reaction, a technique used to amplify small segments of DNA
Reported revenue growthRepresents the percentage change in revenue reported in accordance with U.S. GAAP, as compared to the same period in the prior yearyear.
SaaSSoftware-as-a-service
SECU.S. Securities and Exchange Commission
Senior Note AgreementsNote purchase agreements for the private placement of senior notes, referred to as senior notes or long-term debtdebt.
SOFRThe secured overnight financing rate as administered by the Federal Reserve Board of New York (or a successor administrator of the secured overnight financing rate).
U.S. GAAPAccounting principles generally accepted in the United States of America
WaterWater, a reporting segment that provides water microbiology testing productsproducts.




IDEXX LABORATORIES, INC. 
Quarterly Report on Form 10-Q 
Table of Contents 

  
Item No. Page
  
PART I—FINANCIAL INFORMATION 
 
PART II—OTHER INFORMATION
 






PART I— FINANCIAL INFORMATION 
Item 1.  Financial Statements  
IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands, except per share amounts) 
(Unaudited)

March 31, 2024March 31, 2024December 31, 2023
March 31, 2023December 31, 2022
ASSETS
ASSETS
ASSETSASSETS    
Current Assets:Current Assets:  Current Assets:  
Cash and cash equivalentsCash and cash equivalents$111,367 $112,546 
Accounts receivable, netAccounts receivable, net446,025 400,619 
InventoriesInventories391,011 367,823 
Other current assetsOther current assets201,043 220,489 
Total current assetsTotal current assets1,149,446 1,101,477 
Long-Term Assets:Long-Term Assets:
Property and equipment, netProperty and equipment, net665,439 649,474 
Property and equipment, net
Property and equipment, net
Operating lease right-of-use assetsOperating lease right-of-use assets115,060 118,618 
GoodwillGoodwill362,942 361,795 
Intangible assets, netIntangible assets, net94,361 97,672 
Other long-term assetsOther long-term assets421,150 417,729 
Total long-term assetsTotal long-term assets1,658,952 1,645,288 
TOTAL ASSETSTOTAL ASSETS$2,808,398 $2,746,765 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:Current Liabilities:
Current Liabilities:
Current Liabilities:
Accounts payable
Accounts payable
Accounts payableAccounts payable$117,709 $110,221 
Accrued liabilitiesAccrued liabilities403,595 433,662 
Credit facilityCredit facility431,500 579,000 
Current portion of long-term debtCurrent portion of long-term debt74,986 74,982 
Current portion of deferred revenueCurrent portion of deferred revenue37,839 37,938 
Total current liabilitiesTotal current liabilities1,065,629 1,235,803 
Long-Term Liabilities:Long-Term Liabilities:
Deferred income tax liabilitiesDeferred income tax liabilities5,826 8,150 
Deferred income tax liabilities
Deferred income tax liabilities
Long-term debt, net of current portionLong-term debt, net of current portion696,362 694,387 
Long-term deferred revenue, net of current portionLong-term deferred revenue, net of current portion30,439 30,862 
Long-term operating lease liabilities98,177 101,239 
Long-term operating lease liabilities, net of current portion
Other long-term liabilitiesOther long-term liabilities70,864 67,587 
Total long-term liabilitiesTotal long-term liabilities901,668 902,225 
Total liabilitiesTotal liabilities1,967,297 2,138,028 
Commitments and Contingencies (Note 16)
Commitments, Contingencies and Guarantees (Note 16)
Commitments, Contingencies and Guarantees (Note 16)
Commitments, Contingencies and Guarantees (Note 16)
Stockholders’ Equity:Stockholders’ Equity:
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 107,321 shares in 2023 and 107,193 shares in 2022; Outstanding: 83,004 shares in 2023 and 82,894 shares in 202210,732 10,719 
Stockholders’ Equity:
Stockholders’ Equity:
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 107,667 shares in 2024 and 107,506 shares in 2023; Outstanding: 82,873 shares in 2024 and 83,032 shares in 2023
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 107,667 shares in 2024 and 107,506 shares in 2023; Outstanding: 82,873 shares in 2024 and 83,032 shares in 2023
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 107,667 shares in 2024 and 107,506 shares in 2023; Outstanding: 82,873 shares in 2024 and 83,032 shares in 2023
Additional paid-in capitalAdditional paid-in capital1,489,903 1,463,215 
Deferred stock units: Outstanding: 58 units in 2023 and 58 units in 20225,164 5,182 
Deferred stock units: Outstanding: 59 units in 2024 and 59 units in 2023
Retained earningsRetained earnings3,813,583 3,599,529 
Accumulated other comprehensive lossAccumulated other comprehensive loss(76,615)(77,796)
Treasury stock, at cost: 24,318 shares in 2023 and 24,299 shares in 2022(4,401,666)(4,392,112)
Treasury stock, at cost: 24,794 shares in 2024 and 24,474 shares in 2023
Total stockholders’ equityTotal stockholders’ equity841,101 608,737 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITYTOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,808,398 $2,746,765 
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(in thousands, except per share amounts) 
(Unaudited)  

For the Three Months Ended
March 31,
2024
2024
2024
For the Three Months Ended March 31,
Revenue:
20232022
Revenue:
Revenue:Revenue:
Product revenueProduct revenue$505,942 $478,377 
Product revenue
Product revenue
Service revenue
Service revenue
Service revenueService revenue394,253 358,172 
Total revenueTotal revenue900,195 836,549 
Total revenue
Total revenue
Cost of Revenue:
Cost of Revenue:
Cost of Revenue:Cost of Revenue:
Cost of product revenueCost of product revenue173,610 162,071 
Cost of product revenue
Cost of product revenue
Cost of service revenue
Cost of service revenue
Cost of service revenueCost of service revenue183,614 175,725 
Total cost of revenueTotal cost of revenue357,224 337,796 
Total cost of revenue
Total cost of revenue
Gross profit
Gross profit
Gross profitGross profit542,971 498,753 
Expenses:Expenses:
Expenses:
Expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing147,804 132,292 
General and administrativeGeneral and administrative70,101 77,949 
General and administrative
General and administrative
Research and development
Research and development
Research and developmentResearch and development44,667 40,168 
Income from operationsIncome from operations280,399 248,344 
Income from operations
Income from operations
Interest expense
Interest expense
Interest expenseInterest expense(13,127)(6,996)
Interest incomeInterest income416 143 
Interest income
Interest income
Income before provision for income taxes
Income before provision for income taxes
Income before provision for income taxesIncome before provision for income taxes267,688 241,491 
Provision for income taxesProvision for income taxes53,634 47,526 
Net income attributable to IDEXX Laboratories, Inc. stockholders$214,054 $193,965 
Provision for income taxes
Provision for income taxes
Net income
Net income
Net income
Earnings per Share:
Earnings per Share:
Earnings per Share:Earnings per Share:
BasicBasic$2.58 $2.30 
Basic
Basic
Diluted
Diluted
DilutedDiluted$2.55 $2.27 
Weighted Average Shares Outstanding:Weighted Average Shares Outstanding:
Weighted Average Shares Outstanding:
Weighted Average Shares Outstanding:
BasicBasic82,992 84,410 
Basic
Basic
Diluted
Diluted
DilutedDiluted83,959 85,564 
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
(in thousands) 
(Unaudited) 
For the Three Months Ended March 31,
20232022
Net income$214,054 $193,965 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments4,258 3,277 
Reclassification adjustment for benefit plans included in net income, net of tax of $20 in 2023 and $– in 2022119 — 
Unrealized gain (loss) on Euro-denominated notes, net of tax expense (benefit) of $(465) in 2023 and $439 in 2022(1,490)1,409 
Unrealized gain (loss) on investments, net of tax expense (benefit) of $2 in 2023 and $(5) in 2022(17)
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on foreign currency exchange contracts, net of tax expense (benefit) of $(26) in 2023 and $1,436 in 2022(209)2,097 
Unrealized gain (loss) on cross currency swaps, net of tax expense (benefit) of $(387) in 2023 and $311 in 2022(1,240)996 
Unrealized (loss) on interest rate swap, net of tax (benefit) of $(14) in 2023 and $– in 2022(45)— 
Reclassification adjustments for (gain) included in net income, net of tax benefit (expense) of $(117) in 2023 and $(610) in 2022(218)(1,626)
Unrealized gain (loss) on derivative instruments(1,712)1,467 
Other comprehensive income, net of tax1,181 6,136 
Comprehensive income attributable to IDEXX Laboratories, Inc.$215,235 $200,101 
The accompanying notes are an integral part of these condensed consolidated financial statements.
For the Three Months Ended
March 31,
20242023
Net income$235,579 $214,054 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(19,773)4,258 
Reclassification adjustment for defined benefit plans included in net income, net of tax of $19 in 2024 and $20 in 202394 119 
Unrealized gain (loss) on Euro-denominated notes, net of tax expense (benefit) of $505 in 2024 and $(465) in 20231,618 (1,490)
Unrealized gain (loss) on investments, net of tax expense (benefit) of $0 in 2024 and $2 in 2023
Reclassification adjustment on investments included in net income, net of tax of $51 in 2024 and $0 in 2023163 — 
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on foreign currency exchange contracts, net of tax expense (benefit) of $2,252 in 2024 and $(26) in 20235,848 (209)
Unrealized gain (loss) on cross currency swaps, net of tax expense (benefit) of $638 in 2024 and $(387) in 20232,049 (1,240)
Unrealized gain (loss) on interest rate swap, net of tax expense (benefit) of $656 in 2024 and $(14) in 20232,106 (45)
Reclassification adjustments for (gain) loss included in net income, net of tax (expense) benefit of $(470) in 2024 and $(117) in 2023(1,297)(218)
Unrealized gain (loss) on derivative instruments8,706 (1,712)
Other comprehensive (loss) income, net of tax(9,191)1,181 
Comprehensive income$226,388 $215,235 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


IDEXX LABORATORIES, INC.  AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts) 
(Unaudited)  
Common Stock
Number of Shares$0.10 Par ValueAdditional Paid-in CapitalDeferred Stock UnitsRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Stockholders’ Equity
Balance December 31, 2022107,193 $10,719 $1,463,215 $5,182 $3,599,529 $(77,796)$(4,392,112)$608,737 
Common Stock
Number of Shares
Number of Shares
Number of Shares$0.10 Par ValueAdditional Paid-in CapitalDeferred StockRetained EarningsAccumulated Other Comprehensive
(Loss) Income
Treasury StockTotal Stockholders’ Equity
Balance December 31, 2023
Net incomeNet income— — — 214,054 — — 214,054 
Other comprehensive income, net— — — — — 1,181 — 1,181 
Other comprehensive loss, net
Repurchases of common stock, netRepurchases of common stock, net— — — — — — (9,554)(9,554)
Common stock issued under stock plans, including excess tax benefitCommon stock issued under stock plans, including excess tax benefit128 13 12,765 (25)— — — 12,753 
Share-based compensation costShare-based compensation cost— — 13,923 — — — 13,930 
Balance March 31, 2023107,321 $10,732 $1,489,903 $5,164 $3,813,583 $(76,615)$(4,401,666)$841,101 
Balance March 31, 2024

Balance December 31, 2021106,878 $10,688 $1,377,320 $5,719 $2,920,440 $(53,484)$(3,570,691)$689,992 
Common Stock
Number of Shares
Number of Shares
Number of Shares$0.10 Par ValueAdditional Paid-in CapitalDeferred StockRetained EarningsAccumulated Other Comprehensive
(Loss) Income
Treasury StockTotal Stockholders’ Equity
Balance December 31, 2022
Net incomeNet income— — — — 193,965 — — 193,965 
Other comprehensive income, netOther comprehensive income, net— — — — — 6,136 — 6,136 
Repurchases of common stock, netRepurchases of common stock, net— — — — — — (273,058)(273,058)
Common stock issued under stock plans, including excess tax benefitCommon stock issued under stock plans, including excess tax benefit125 12 11,583 (5)— — — 11,590 
Share-based compensation costShare-based compensation cost— — 11,122 51 — — — 11,173 
Balance March 31, 2022107,003 $10,700 $1,400,025 $5,765 $3,114,405 $(47,348)$(3,843,749)$639,798 
Balance March 31, 2023
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


IDEXX LABORATORIES, INC.  AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
(Unaudited) 

For the Three Months Ended
March 31,
20232022
  
Cash Flows from Operating Activities:  
Net income$214,054 $193,965 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization28,331 26,511 
Provision for credit losses2,325 2,092 
Deferred income taxes(3,757)(5,028)
Share-based compensation expense13,930 11,173 
Other(362)235 
Changes in assets and liabilities:
Accounts receivable(44,133)(37,531)
Inventories(23,887)(18,854)
Other assets and liabilities(5,307)(52,904)
Accounts payable3,327 (4,016)
Deferred revenue(609)(937)
Net cash provided by operating activities183,912 114,706 
Cash Flows from Investing Activities:
Purchases of property and equipment(39,511)(31,838)
Acquisition of intangible assets— (10,000)
Net cash used by investing activities(39,511)(41,838)
Cash Flows from Financing Activities:
(Repayments) borrowings under credit facility, net(147,500)326,500 
Payment of senior debt— (75,000)
Payments of acquisition-related holdbacks(1,780)— 
Repurchases of common stock, net— (266,295)
Proceeds from exercises of stock options and employee stock purchase plans12,796 11,653 
Shares withheld for statutory tax withholding payments on restricted stock(9,597)(10,338)
Net cash used by financing activities(146,081)(13,480)
Net effect of changes in exchange rates on cash501 776 
Net decrease in cash and cash equivalents(1,179)60,164 
Cash and cash equivalents at beginning of period112,546 144,454 
Cash and cash equivalents at end of period$111,367 $204,618 
  
Supplemental Cash Flow Information:
Cash paid for income taxes$7,200 $11,400 
Unpaid property and equipment, reflected in accounts payable and accrued liabilities$12,453 $11,016 
The accompanying notes are an integral part of these condensed consolidated financial statements.

For the Three Months Ended
March 31,
20242023
  
Cash Flows from Operating Activities:  
Net income$235,579 $214,054 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization29,904 28,331 
Impairment charge250 — 
Provision for credit losses1,530 2,325 
Deferred income taxes(2,571)(3,757)
Share-based compensation expense14,400 13,930 
Other909 (362)
Changes in assets and liabilities:
Accounts receivable(53,841)(44,133)
Inventories(2,412)(23,887)
Other assets and liabilities(21,416)(5,307)
Accounts payable(4,450)3,327 
Deferred revenue703 (609)
Net cash provided by operating activities198,585 183,912 
Cash Flows from Investing Activities:
Purchases of property and equipment(30,273)(39,511)
Acquisitions of a business(77,000)— 
Proceeds from net investment hedges329 — 
Net cash used by investing activities(106,944)(39,511)
Cash Flows from Financing Activities:
Repayments under credit facility, net— (147,500)
Payments of acquisition-related holdbacks— (1,780)
Repurchases of common stock, net(154,764)— 
Proceeds from exercises of stock options and employee stock purchase plans20,879 12,796 
Shares withheld for statutory tax withholding payments on restricted stock(10,189)(9,597)
Net cash used by financing activities(144,074)(146,081)
Net effect of changes in exchange rates on cash(4,066)501 
Net decrease in cash and cash equivalents(56,499)(1,179)
Cash and cash equivalents at beginning of period453,932 112,546 
Cash and cash equivalents at end of period$397,433 $111,367 
  
Supplemental Cash Flow Information:
Cash paid for income taxes$13,233 $7,200 
Unpaid property and equipment, reflected in accounts payable and accrued liabilities$15,182 $12,453 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
(Unaudited)




NOTE 1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION 

The accompanying unaudited condensed consolidated financial statements of IDEXX Laboratories, Inc. and its subsidiaries have been prepared in accordance with U.S. GAAP for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “IDEXX,” the “Company,” “we,” “our,” or “us” refer to IDEXX Laboratories, Inc. and its subsidiaries.

The accompanying unaudited condensed consolidated financial statements include the accounts of IDEXX Laboratories, Inc. and our wholly-ownedwholly owned and majority-owned subsidiaries. We do not have any variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of our management, all adjustments necessary for a fair statement of our financial position and results of operations. All such adjustments are of a recurring nature. The condensed consolidated balance sheet data as of December 31, 2022,2023, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three months ended March 31, 2023,2024, are not necessarily indicative of the results to be expected for the full year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023,audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022,2023, (the “2022“2023 Annual Report”) filed with the SEC..

The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments, and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenues and expenses.

We have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q in the “Glossary of Terms and Selected Abbreviations.”

8


NOTE 2. ACCOUNTING POLICIES  

Significant Accounting Policies

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2023,2024, are consistent with those discussed in “Note 2. Summary of Significant Accounting Policies” to the consolidated financial statements in our 20222023 Annual Report, and as updated below.

Accounts Payable - Supplier Financing Program

We have an agreement with a third party to provide a supplier finance program, which facilitates participating suppliers’ ability to finance payment obligations from us with a designated third-party financial institution. Participating suppliers may, at their sole discretion, make offers to finance one or more of our payment obligations prior to their scheduled due dates at a discounted price. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements. The terms of payments are in-line with the terms of our trade payables. The amount of payment obligations outstanding at the end of December 31, 2022, was $10.2 million. The roll-forward of our outstanding payment obligations under this arrangement, which are included in accounts payable on the unaudited condensed consolidated balance sheets, are as follows:
(in thousands)For the Three Months Ended
March 31,
20232022
  
Payment obligations outstanding at the beginning of the period$10,171 $4,775 
  Payment obligations during the period13,031 13,341 
  Payment obligation paid during the period(15,666)(12,752)
Payment obligations outstanding at the end of the period$7,536 $5,364 

New Accounting Pronouncements Not Yet Adopted

We adoptedIn November 2023, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50)2023-07, “Segment Reporting (Topic 280): Disclosure of Supplier Finance Program Obligations,Improvements to Reportable Segment Disclosures,as of January 1, 2023, which adds certain disclosure requirements for a buyer in a supplier finance program. The amendments in this update require that a buyer in a supplier finance program discloses sufficient information about the program to allow a user of financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude.

We adopted ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities,” as of January 1, 2023. ASU 2021-08 is intended to improve comparabilityreportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. The amendments will require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The amendments are effective for bothannual periods beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted, and will be applied retrospectively to all prior periods presented in the recognition and measurementfinancial statements. The implementation of acquired revenue contracts with customers at the date of and afterASU 2023-07 is not expected to have a business combination by providing consistent recognition guidance.
NOTE 3. REVENUE RECOGNITIONmaterial impact on our consolidated financial statements.

Our revenue is recognized when,In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of income tax rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, with early adoption permitted, and may be applied either prospectively or as, performance obligations under the terms of a contractretrospectively. We are satisfied, which occurs when control of the promised products or services is transferredcurrently evaluating ASU 2023-09 to a customer. We exclude sales, use, value-added, and other taxes we collectdetermine its impact on behalf of third parties from revenue. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To accurately present the consideration received in exchange for promised products or services, we apply the five-step model outlined below:

1.Identification of a contract or agreement with a customer
2.Identification of our performance obligations in the contract or agreement
3.Determination of the transaction price
4.Allocation of the transaction price to the performance obligations
5.Recognition of revenue when, or as, we satisfy a performance obligation        

consolidated financial statements.

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NOTE 3.      REVENUE

Revenues by Product and Service Categories and by Principal Geographic Areas

We enter into contracts where customers purchase combinationspresent disaggregated revenue for our CAG segment based on major product and service categories. Our Water and LPD segments are comprised of productsa single major product category.

The following table presents revenue by major product and services, which are generally capable of being distinct and accounted for as separate performance obligations. service categories:
(in thousands)For the Three Months Ended
March 31,
20242023
CAG segment revenue:  
CAG Diagnostics recurring revenue:$780,144 $726,902 
IDEXX VetLab consumables316,929 291,114 
Rapid assay products86,315 82,032 
Reference laboratory diagnostic and consulting services344,338 323,180 
CAG Diagnostics services and accessories32,562 30,576 
CAG Diagnostics capital - instruments34,092 33,144 
Veterinary software, services and diagnostic imaging systems:75,049 67,233 
Recurring revenue59,700 51,707 
Systems and hardware15,349 15,526 
CAG segment revenue889,285 827,279 
Water segment revenue43,071 38,883 
LPD segment revenue28,205 29,208 
Other segment revenue3,534 4,825 
Total revenue$964,095 $900,195 

The timing offollowing table presents revenue recognition, billings, and cash collections results in accounts receivable, lease receivables, and contract assets as a result of revenue recognized in advance of billings, and contract liabilities or deferred revenue as a result of receiving consideration in advance of revenue recognition within our unaudited condensed consolidated balance sheet. Our general payment terms range from 30 to 60 days, with exceptions in certain geographies.by principal geographic area, based on customers’ domiciles:
(in thousands)For the Three Months Ended
March 31,
20242023
United States$631,009 $590,413 
Europe, the Middle East and Africa199,831 176,008 
Asia Pacific Region76,304 78,360 
Canada36,711 35,962 
Latin America & Caribbean20,240 19,452 
Total revenue$964,095 $900,195 

Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. A modification is considered to be a separate contract, and revenue is recognized prospectively, when the modification creates new performance obligations to deliver additional goods or services and the related increase in consideration approximates the standalone selling price for the additional goods or services. If a contract modification does not create a new performance obligation to deliver new goods and/or services but the goods and/or services to be delivered after the contract modification date are distinct from the goods and/or services delivered on or before the contract modification date, then this contract modification is not accounted for as a separate contract, and we account for the goods and/or services to be delivered after the contract modification date prospectively. We account for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. The effect that these contract modifications have on the transaction price, and on our measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue at the date of the contract modification, with the adjustment to revenue made on a cumulative catch-up basis.Multiple Performance Obligations

Below is a listing of our major categories of revenue for our products and services:

Diagnostic Products and Accessories. Diagnostic products and accessories revenues, including IDEXX VetLab® consumables and accessories, rapid assay, LPD, Water, and OPTI testing products, are predominantly recognized and invoiced at the time of shipment, which is when the customer obtains control of the product based on legal title transfer and we have the right to payment. We also provide customers with certain consumables that are recognized upon utilization by the customer, which is when we have the right to payment and the risks and rewards of ownership transfer. Shipping costs reimbursed by the customer are included in revenue and cost of sales. As a practical expedient, we do not account for shipping activities as a separate performance obligation.

Laboratory Diagnostic and Consulting Services. Laboratory diagnostic and consulting services revenues are recognized and invoiced when the laboratory diagnostic service is performed.

Instruments, Software and Systems. CAG Diagnostics capital instruments, veterinary software, and diagnostic imaging systems revenues are recognized and invoiced when the customer obtains control of the products based on legal title transfer and we have the right to payment, which generally occurs at the time of installation and customer acceptance. Our instruments, software, and systems are often included in one of our significant customer programs, as further described below. For veterinary software systems that include multiple performance obligations, such as perpetual software licenses and computer hardware, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.

Lease Revenue. Revenues from instrument rental agreements and reagent rental programs are recognized either as operating leases on a ratable basis over the term of the agreement or as sales-type leases at the time of installation and customer acceptance. Customers typically pay for the right to use instruments under rental agreements in equal monthly amounts over the term of the rental agreement. Our reagent rental programs provide our customers the right to use our instruments upon entering into multi-year agreements to purchase annual minimum amounts of consumables. These types of agreements include an embedded lease for the right to use our instruments. For some agreements, the customers are provided with the right to purchase the instrument at the end of the lease term. Lease revenues from these agreements are presented in product revenue on our unaudited condensed consolidated income statement. Lease revenue was approximately $4.5 million for the three months ended March 31, 2023, as compared to $5.0 million for the three months ended March 31, 2022, including both operating leases and sales-type leases under ASC 842, Leases, for leases entered into after January 1, 2019, and ASC 840, “Leases,”for leases entered into prior to 2019. Refer to below for revenue recognition under our reagent rental programs.

Extended Warranties and Post-Contract Support. CAG Diagnostics capital instruments and diagnostic imaging systemsextended warranties typically provide customers with continued coverage for a period of one to five years beyond the first-year standard warranty. Customers can either pay in full for the extended warranty at the time of instrument or system purchase or can be billed on a quarterly basis over the term of the contract. We recognize revenue associated with extended
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warranties over time on a ratable basis using a time-elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

Veterinary software post-contract support provides customers with access to technical support when and as needed through access to call centers and online customer assistance. Post-contract support contracts typically have a term of 12 months and customers are billed for post-contract support in equal quarterly amounts over the term. We recognize revenue for post-contract support services over time on a ratable basis using a time-elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

On December 31, 2022, our deferred revenue related to extended warranties and post-contract support was $26.4 million, of which approximately $15.1 million were recognized during the three months ended March 31, 2023. Furthermore, as a result of new agreements, our deferred revenue related to extended warranties and post-contract support was $26.3 million as of March 31, 2023. We do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less and do not adjust for the effect of the financing components when the period between customer payment and revenue recognition is one year or less. Deferred revenue related to extended warranties and post-contract support with an original duration of more than one year was $10.2 million as of March 31, 2023, of which approximately 36%, 34%, 17%, 8%, and 5% are expected to be recognized during the remainder of 2023, the full years 2024, 2025, 2026, and thereafter, respectively. Additionally, we have determined these agreements do not include a significant financing component.

SaaS Subscriptions.We offer a variety of veterinary software and diagnostic imaging SaaS subscriptions including ezyVet®, Animana®, Neo®, Cornerstone® Cloud, Pet Health Network® Pro, Petly® Plans, Web PACS, rVetLink®, and Smart Flow. We recognize revenue for our SaaS subscriptions over time on a ratable basis over the contract term, beginning on the date our service is made available to the customer. Our subscription contracts vary in term from monthly to two years. Customers typically pay for our subscription contracts in equal monthly amounts over the term of the agreement. Deferred revenue related to our SaaS subscriptions is not material.

Contracts with Multiple Performance Obligations. We enter into contractsarrangements with multiple performance obligations where customers purchase a combination of IDEXX products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment. We determine the transaction price for a contract based on the total consideration we expect to receive in exchange for the transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or expected price adjustments, we apply judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. We evaluate constraints based on our historical and projected experience with similar customer contracts.arrangements.

We allocate revenue to each performance obligation in proportion to the relative standalone selling prices, and recognize revenue when transfer of the related goods or services has occurred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the promised product or service when sold separately. When standalone selling prices for our products or services are not directly observable, we determine the standalone selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost
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plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time, as described in the revenue categories above. We do not disclose information about remaining performance obligations that are part of contractsarrangements with an original expected duration of one year or less.

The following customer programsarrangements represent our most significant customer contracts that contain multiple performance obligations:

Customer Commitment ProgramsArrangements. We offer customercustomers incentives upon entering into multi-year agreementsarrangements to purchase annual minimum amounts of products and services.

Up-Front Customer Loyalty ProgramsFree or Discounted Instruments and Systems. Our up-front loyalty programs provide customers with incentives in the form of cash payments or IDEXX Points upon entering into multi-year agreements to purchase annual minimum amounts of future products or services. If a customer breaches their agreement, they are required to refund all or a portion of the up-front cash or IDEXX Points, or make other repayments, remedial actions, or both. Up-front incentives to customers in the form of cash or IDEXX Points are not made in exchange for distinct goods or services and are capitalized as customer acquisition costs within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer agreement. If these up-front incentives are subsequently utilized to purchase instruments, we
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allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance. To the extent invoiced instrument revenue exceeds recognized instrument revenue, we record deferred revenue as a contract liability, which is subsequently recognized upon the purchase of products and services over the term of the contract. We have determined these agreements do not include a significant financing component. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition.

On December 31, 2022, our capitalized customer acquisition costs were $158.0 million, of which approximately $13.4 million were recognized as a reduction of revenue during the three months ended March 31, 2023. Furthermore, as a result of new up-front customer loyalty payments, net of subsequent recognition, our capitalized customer acquisition costs were $158.9 million as of March 31, 2023. We monitor customer purchases over the term of their agreement to assess the realizabilityMany of our capitalized customer acquisition costs and review estimates of variable consideration. Impairments and revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustments to revenue arising from contract modifications during the three months ended March 31, 2023, were not material.

Volume Commitment Programs. Our volume commitment programs,arrangements, such as our IDEXX 360 program, provide customers with free or discounted instruments or systems upon entering into multi-year agreementsarrangements to purchase annual minimum amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is transferred to accounts receivable when customers are billed for future products and services over the term of the contract.arrangement. We have determined that these agreementsarrangements do not include a significant financing component. Differences between estimated and actual customer purchases may impact the timing and amount of revenue recognition.

On December 31, 2022,2023, our volume commitment contract assets were $190.8$223.1 million, of which approximately $11.1$14.5 million were was reclassified to accounts receivable when customers were billed for related products and services during the three months ended March 31, 2023.2024. Furthermore, as a result of new placements under volume commitment programs,arrangements, net of subsequent amounts reclassified to accounts receivable and allowances established for credit losses, our volume commitment contract assets were $198.9$230.0 million as of March 31, 2023.2024. We monitor customer purchases over the term of their agreementarrangement to assess the realizability of our contract assets and review estimates of variable consideration. Impairments and revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustments to revenue arising from contract modifications, during the three months ended March 31, 2023,2024, were not material.

Up-Front Consideration Paid to Customers. We provide customers with incentives in the form of IDEXX Points upon entering into multi-year arrangements to purchase annual minimum amounts of future products and/or services. If a customer breaches their agreement, they are required to refund all or a portion of the up-front consideration, or make other repayments, remedial actions, or both. Up-front incentives to customers (previously referred to as “customer acquisition costs”) in the form of IDEXX Points or, from time to time, cash, are not made in exchange for distinct goods or services and are capitalized as consideration paid to customers within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer arrangement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices, to identified performance obligations, and recognize instrument revenue and cost at the time of installation and customer acceptance. To the extent invoiced instrument revenue exceeds recognized instrument revenue, we record deferred revenue as a contract liability, which is subsequently recognized upon the purchase of products and services over the term of the contract. We have determined these arrangements do not include a significant financing component.

ForOn December 31, 2023, our up-front customer loyalty and volume commitment programs, we estimate future revenues relatedcapitalized consideration paid to multi-year agreements to be approximately $3.0 billion,customers was $168.9 million, of which approximately 22%, 26%, 21%, 17%, and 14% are expected to be$14.4 million was recognized as a reduction of revenue during the remainderthree months ended March 31, 2024. Furthermore, as a result of 2023,new payments to customers, net of subsequent recognition, our capitalized consideration paid to customers was $168.2 million as of March 31, 2024. We monitor customer purchases over the full years 2024, 2025, 2026,term of their arrangement to assess the realizability of our capitalized consideration paid to customers and thereafter, respectively. These future revenuesreview estimates of variable consideration. Impairments and revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustments to revenue arising from contract modifications, during the three months ended March 31, 2024, were not yet satisfied, for which customers have committed to future purchases, net of the expected revenue reductions from customer acquisition costs and expected price adjustments, and, as a result, are lower than stated contractual commitments by our customers.material.

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Instrument
Rebate ProgramsArrangements. Our instrument rebate programs require an instrument purchase andarrangements provide customers the opportunity to earn future rebates based on the volume of products andand/or services they purchase over the term of the program.arrangement. Rebate incentives are typically offered in multi-year arrangements that include customer commitments to purchase annual minimum amounts of products and services, or, to a lesser extent, are sometimes offered without future purchase commitments. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the program.arrangement. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products andand/or services, partly offsetting rebates as they are earned.

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On December 31, 2022,2023, our deferred revenue related to instrument rebate programsand up-front consideration arrangements was $25.6$32.9 million, of which approximately $2.6$3.0 million werewas recognized when customers purchased eligible products and services and earned rebates during the three months ended March 31, 2023.2024. Furthermore, as a result of new instrumentcustomer purchases under rebate programs,and up-front consideration arrangements, net of subsequent recognition, our deferred revenue was $24.9$31.9 million as of March 31, 2023,2024, of which approximately 26%, 28%, 27%, 20%21%, 14%, and 11% are expected to be recognized during the remainder of 2023,2024, the full years 2024, 2025, 2026, 2027, and thereafter, respectively.

For our customer commitment arrangements, we estimate future revenues related to multi-year arrangements to be approximately $3.9 billion, of which approximately 22%, 25%, 22%, 17%, and 14% are expected to be recognized during the remainder of 2024, the full years 2025, 2026, 2027, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied, for which customers have committed to future purchases, net of the expected revenue reductions from consideration paid to customers and expected price adjustments, and as a result, are lower than stated contractual commitments by our customers.

ReagentInstrument Rental ProgramsArrangements. Revenues from instrument rental and reagent rental arrangements are recognized either as operating leases on a ratable basis over the term of the arrangement or as sales-type leases at the time of installation and customer acceptance. Customers typically pay for the right to use instruments under rental arrangements in equal monthly amounts over the term of the rental arrangement. For some arrangements, customers are provided with the right to purchase the instrument at the end of the lease term. Our reagent rental programsarrangements provide our customers the right to use our instruments upon entering into multi-year agreementsarrangements to purchase annual minimum amounts of consumables. These types of agreementsarrangements include an embedded lease for the right to use our instrument, and we determine the amount of lease revenue allocated to the instrument based on relative standalone selling prices. We evaluateLease revenues are presented in product revenue on our consolidated income statement. Lease revenue was approximately $3.8 million for the terms of these embeddedthree months ended March 31, 2024, compared to $4.5 million for the three months ended March 31, 2023, including both operating leases to determine classification as either aand sales-type lease or an operating lease.leases.

Sales-type Reagent Rental ProgramsArrangements. Our reagent rental programsarrangements that effectively transfer control of instruments to our customers are classified as sales-type leases, and we recognize instrument revenue and cost in advance of billing the customer, at the time of installation and customer acceptance. Our right to future consideration related to instrument revenue is recorded as a lease receivable within other current and long-term assets, and is transferred to accounts receivable when customers are billed for future products and services over the term of the contract.arrangement. On December 31, 2022,2023, our lease receivable assets were $18.4$23.1 million, of which approximately $1.1approximately $1.5 million were was reclassified to accounts receivable when customers were billed for related products and services during the three months ended March 31, 2023.2024. Furthermore, as a result of new placements under sales-type reagent rental programs,arrangements, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses, our lease receivable assets were $20.3$21.8 million as of March 31, 2023.2024. The impacts of discounting and unearned income as of March 31, 20232024, were not material. Profit and loss recognized at the commencement date and interest income during the three months ended March 31, 2023,2024, were not material. We monitor customer purchases over the term of their agreementarrangement to assess the realizability of our lease receivable assets. Impairments during the three months ended March 31, 20232024, were not material.

Operating-type Reagent Rental ProgramsArrangements. Our reagent rental programsarrangements that do not effectively transfer control of instruments to our customers are classified as operating leases and we recognize instrument revenue and costs ratably over the term of the agreement.arrangement. The cost of the instrument is
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capitalized within property and equipment. During the three months ended March 31, 2023,2024, we transferred instruments of $3.4 million, compared to $3.8 million as compared to $3.0 million forduring the three months ended March 31, 2022,2023, from inventory to property and equipment.

We estimate future revenue to be recognized related to our reagent rental programsarrangements of approximately $43.5$59.9 million, of which approximately 21%20%25%23%21%20%, 15%16%, and 18%21% are expectedexpected to be recognized during the remainder of 2023,2024, and the full years 2024, 2025, 2026, 2027, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied for which customers have committed to future purchases, net of any expected price adjustments, and as a result, may be lower than stated contractual commitments by our customers.

Deferred Extended Warranties and Post-Contract Support Revenue
Other Customer Incentive Programs
. Certain agreements with customers include discounts or rebates on the sale
On December 31, 2023, our deferred revenue related to extended warranties and post-contract support was $26.0 million, of products and services applied retrospectively, such as volume rebates achieved by purchasing a specified purchase threshold of goods and services. We account for these discounts as variable consideration and estimate the likelihood of a customer meeting the threshold in order to determine the transaction price using the most predictive approach. We typically use the most-likely-amount method for incentives that are offered to individual customers and the expected-value method for programs that are offered to a broad group of customers. Revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustment to revenue arising from contract modifications,which approximately $15.8 million was recognized during the three months ended March 31, 2023, were not material. Refund obligations2024. Furthermore, as a result of new arrangements, our deferred revenue related to customer incentive programsextended warranties and post-contract support was $26.0 million at March 31, 2024. We do not disclose information about remaining performance obligations that are recorded in accrued liabilitiespart of contracts with an original expected duration of one year or less, and do not adjust for the actual issuanceeffect of incentives, incentives earned but not yet issued,the financing components when the period between customer payment and estimatesrevenue recognition is one year or less. Deferred revenue related to extended warranties and post-contract support with an original duration of incentivesmore than one year was $9.5 million at March 31, 2024, of which approximately 32%, 33%, 20%, 8%, and 7% are expected to be earned inrecognized during the future.remainder of 2024, and the full years 2025, 2026, 2027, and thereafter, respectively. We have determined these arrangements do not include a significant financing component.

Program Combinations. At times, we combine elements of our significant customer programs within a single customer contract. We separate each significant program element and include the contract assets, customer acquisition costs, deferred revenues, and estimated future revenues within the most relevant program disclosures above. Each customer contract is presented as a net contract asset or net contract liability on our unaudited condensed consolidated balance sheet.

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IDEXX Points. IDEXX Points may be applied to trade receivables due to us, converted to cash, or applied against the purchase price of IDEXX products and services. We consider IDEXX Points equivalent to cash. IDEXX Points that have not yet been used by customers are included in accrued liabilities until utilized or expired. Breakage is not material because customers can apply IDEXX Points to trade receivables at any time.

Accounts Receivable. We recognize revenue when it is probable that we will collect substantially all of the consideration to which we will be entitled, based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers that purchase our products and services and we have no significant customers that accounted for greater than 10% of our consolidated revenues during the three months ended March 31, 2023.

Disaggregated Revenues. We present disaggregated revenue for our CAG segment based on major product and service categories. Our Water segment is comprised of a single major product category. Although our LPD segment does not meet the quantitative requirements to be reported as a separate segment, we believe it is important to disaggregate these revenues as a major product and service category separately from our Other reportable segment given its distinct markets, and therefore we have elected to report LPD as a reportable segment.

The following table presents disaggregated revenue by major product and service categories:
(in thousands)For the Three Months Ended March 31,
20232022
CAG segment revenue:  
CAG Diagnostics recurring revenue:$726,902 $664,810 
IDEXX VetLab consumables291,114 267,173 
Rapid assay products82,032 74,519 
Reference laboratory diagnostic and consulting services323,180 295,075 
CAG Diagnostics services and accessories30,576 28,043 
CAG Diagnostics capital - instruments33,144 36,997 
Veterinary software, services and diagnostic imaging systems67,233 59,377 
CAG segment revenue827,279 761,184 
Water segment revenue38,883 36,371 
LPD segment revenue29,208 30,870 
Other segment revenue4,825 8,124 
Total revenue$900,195 $836,549 

Revenue by principal geographic area, based on customers’ domiciles, was as follows:
(in thousands)For the Three Months Ended March 31,
20232022
United States$590,413 $525,906 
Europe, the Middle East and Africa176,008 173,808 
Asia Pacific Region78,360 83,861 
Canada35,962 35,232 
Latin America & Caribbean19,452 17,742 
Total revenue$900,195 $836,549 

Costs to Obtain a Contract. We capitalize sales commissions, and the related fringe benefits earned by our sales force when considered incremental, and recoverable costs of obtaining a contract. Our contracts include performance obligations related to various goods and services, some of which are satisfied at a point in time and others over time. Commission costs related to performance obligations satisfied at a point in time are expensed at the time of sale, which is when revenue is recognized. Commission costs related to long-term service contracts and performance obligations satisfied over time, including extended warranties and SaaS subscriptions, are deferred and recognized on a systematic basis that is consistent with the transfer of the goods or services to which the asset relates. We apply judgment in estimating the amortization period, which ranges from 3 to 7 years, by taking into consideration our customer contract terms, history of renewals, and expected length of
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customer relationship, , as well as the useful life of the underlying technology and products. Amortization expense is included in sales and marketing expenses in the accompanying unaudited condensed consolidated statements of income. Deferred commission costs are periodically reviewed for impairment.

On December 31, 2022,2023, our deferred commission costs, included within other current and long-term assets, were $19.2$19.7 million, of which approximately $1.7$1.8 million of commission expense was recognized during the three months ended March 31, 2023.2024. Furthermore, as a result of commissions related to new extended warranties and SaaS subscriptions, net of subsequent recognition, our deferred commission costs were $19.3$19.7 million as ofat March 31, 2023.2024. Impairments of deferred commission costs during the three months ended March 31, 2023,2024, were not material.


NOTE 4. ACQUISITIONS, ASSET PURCHASES AND INVESTMENTS

We believe that our acquisitions of businesses and other assets enhance our existing businesses by either expanding our geographic range, customer base, or existing product and service lines. From time to time, we may acquire small reference laboratories or radiology practices that we account for as either asset purchases or business combinations.

Asset Purchases and Investments

During the first quarter of 2022 we made a $10.0 million payment for a perpetual intellectual property license, which will be amortized over 10 years. The related amortization expense is recorded in our CAG segment.

During the second quarter of 2022, we entered into two discrete arrangements to license intellectual property for which we paid $65.0 million over the course of the 2022, and accrued $15.0 million in subsequent payments, all of which was charged to research and development expense. The $15.0 million milestone payment was made in the first quarter of 2023. These two arrangements were treated as asset acquisitions under U.S. GAAP and resulted in the full amount being expensed to research and development expense as in-process research and development costs with no alternative future use. The acquisition of these licensing arrangements supports new instrument platform advancements.

During the second quarter of 2022 we purchased $25.0 million of preferred shares for a noncontrolling minority interest in one of the entities with which we have a license agreement. We elected to measure the investment as an equity security investment, under ASC 321, “Investment - Equity Securities,” and recorded the investment at cost.

Business Combinations

During the third quarter of 2022,On February 1, 2024, we acquired the assets of an international water testing company locateda privately-owned software and data platform business based in Canadathe U.S. that extends our practice management system cloud-native workflow and delivers strategic data solutions to our customers and their clients, for approximately $12.8$81.4 million, in cash, including a holdbackan estimated contingent payment of approximately $1.3$4.4 million. This acquisition expands our product offering inWe estimate the Water segment. Thepreliminary fair values and the lives of the assets and liabilities acquired consistsare as follows: completed technology of technologyapproximately $17.1 million, with a life of 6 years; customer relationship intangibles of approximately $3.4$12.5 million, with a life of 10 years; customer relationship intangiblesa non-compete agreement of approximately $1.2$4.7 million, with a life of 5 years; a trademark of approximately $0.7 million, with a life of 10 years; approximately $6.9$45.8 million of goodwill, representing synergies with our Water testing portfolio;software business; and approximately $1.3$0.6 million of net tangible assets, including inventory and accounts receivable. Goodwill related to this acquisition is expected to be deductible for tax purposes. Pro forma information has not been presented for this acquisition because such information is not material to the financial statements. The results of operations have been included in our WaterCAG segment since the acquisition date. The purchase price allocation is subject to revision as additional information becomes available regarding working capital adjustments, tax-related matters, contingencies, and certain assets and liabilities. The acquisition expenses were not material.significant.
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NOTE 5. SHARE-BASED COMPENSATION 

The fair value of options, restricted stock units, deferred stock units, performance-based restricted stock units, and employee stock purchase rights awarded during the three months ended March 31, 2023,2024, totaled $57.3$65.6 million, as compared to $51.0$57.3 million for the three months ended March 31, 2022.2023. The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards outstanding as of March 31, 20232024, was $106.6$107.2 million, which will be recognized over a weighted average period of approximately 1.9 years. During the three months ended March 31, 2023,2024, we recognized share-based compensation expenses of $13.9$14.4 million, as compared to $11.2$13.9 million for the three months ended March 31, 2022, related to share-based compensation.2023.

During the first quarter of 2024, we granted approximately $11.5 million of performance-based restricted stock units that are contingent upon our performance against pre-established financial performance metrics over a period beginning on January 1, 2024, and ending on December 31, 2026. Earned shares will vest on the later of the third anniversary of the grant date or the date of certification of our performance under the terms of the performance-based restricted stock units grant.

We determine the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term, or risk-free interest rate may necessitate distinct valuation assumptions at each grant date. As such, we may use different assumptions for options granted throughout the year. Option awards are granted with an exercise price equal to or greater than the closing market price of our common stock at the date of grant. We have never paid
15


any cash dividends on our common stock, and we have no intention to pay such a dividend at this time; therefore, we assume that no dividends will be paid over the expected terms of option awards.

The weighted averages of the valuation assumptions used to determine the fair value of each option award on the date of grant and the weighted average estimated fair values were as follows:
For the Three Months Ended
March 31,
20232022
Expected stock price volatility32 %30 %
Expected term, in years6.76.4
Risk-free interest rate3.7 %2.0 %
Weighted average fair value of options granted$201.71 $170.22 

For the Three Months Ended
March 31,
20242023
Expected stock price volatility32 %32 %
Expected term, in years7.06.7
Risk-free interest rate4.3 %3.7 %
Weighted average fair value of options granted$241.72 $201.71 
NOTE 6. CREDIT LOSSES  

We are exposed to credit losses primarily through our sales of products and services to our customers. We maintain allowances for credit losses for potentially uncollectible receivables. We base our estimates on a detailed analysis of specific customer situations and a percentage of our accounts receivable by aging category. HistoricalAdditionally, our estimates are developed based on historical credit loss experience, provides the basis for the estimationestimates of expected credit losses. Adjustments to historical loss information are made for differences inrecoveries, current economic conditions.conditions, and future expectations.

Additional allowances may be required if either the financial condition of our customers were to deteriorate, or a strengthening U.S. dollar impacts the ability of foreign customers to make payments to us on their U.S. dollar-denominated purchases. We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliations, dispute resolution, and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables.

Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We may require collateralized asset support or a prepayment to mitigate credit risk. We do not have any off-balance sheet credit exposure related to our customers.

Accounts Receivable

The allowance for credit losses associated with accounts receivable was $9.1$10.6 million and $8.3$9.5 million as of March 31, 20232024, and December 31, 2022,2023, respectively. The amount of accounts receivable reflected on the balance sheet is net of this reserve. Based on an aging analysis, as of March 31, 2023,2024, approximately 92%84% of our accounts receivable had not yet reached the invoice due date, and approximately 8%16% was considered past due, of which less than 1%approximately 1.8% was greater than 60 days past due. As of December 31, 2022,2023, approximately 86%83% of our accounts receivable had not yet reached the invoice due date, and approximately 14%17% was considered past due, of which approximately 2%1.7% was greater than 60 days past due.
13



Contract assetsAssets and lease receivablesLease Receivables

The allowance for credit losses associated with the contract assets and lease receivables was $5.8$6.6 million and $5.5$6.4 million as of March 31, 20232024, and December 31, 2022,2023, respectively. The assets reflected on the balance sheet are net of these reserves. Historically, we have experienced low credit loss rates on our customer commitment programs and lease receivables. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
16


NOTE 7. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The components of inventories were as follows:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
    
Raw materialsRaw materials$101,952 $92,796 
Work-in-processWork-in-process31,791 28,041 
Finished goodsFinished goods257,268 246,986 
InventoriesInventories$391,011 $367,823 

NOTE 8. LEASES

Maturities of operating lease liabilities were as follows:
(in thousands)March 31, 2023
 
2023 (remainder of year)$17,093 
202422,735 
202518,495 
202615,733 
202712,409 
Thereafter52,204 
Total lease payments138,669 
Less imputed interest(21,288)
Total$117,381 
(in thousands)March 31, 2024
 
2024 (remainder of year)$17,626 
202525,203 
202623,061 
202718,201 
202813,146 
Thereafter48,114 
Total lease payments145,351 
Less imputed interest(22,185)
Total$123,166 

Total minimum future lease payments for leases that have not commenced as of March 31, 2023,2024, are approximately $0.6 million, and those leases will commence between 2023 and 2024.not material.

Supplemental cash flow information for leases was as follows:
(in thousands)(in thousands)For the Three Months Ended
March 31, 2023
For the Three Months Ended
March 31, 2022
(in thousands)For the Three Months Ended
March 31,
202420242023
 
Cash paid for amounts included in the measurement of operating leases liabilities$7,775 $6,186 
Cash paid for amounts included in the measurement of operating lease liabilities
Cash paid for amounts included in the measurement of operating lease liabilities
Cash paid for amounts included in the measurement of operating lease liabilities
Right-of-use assets obtained in exchange for operating lease obligations, net of early
lease terminations(1)
Right-of-use assets obtained in exchange for operating lease obligations, net of early
lease terminations(1)
$2,282 $7,169 

(1)Additions for the three months ended March 31, 2024, include $1.0 million of right-of-use assets obtained with the business acquisition in the first quarter of 2024.
1714


NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS

Other Current Assets

Other current assets consisted of the following:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
    
Customer acquisition costs$50,882 $50,776 
Contract assets, net (1)
Contract assets, net (1)
46,644 41,854 
Consideration paid to customers (2)
Prepaid expensesPrepaid expenses40,084 41,742 
Taxes receivableTaxes receivable27,192 48,430 
Foreign currency exchange contracts4,314 5,185 
Cross currency swap contracts6,877 8,135 
Deferred sales commissions6,495 6,472 
Other assetsOther assets18,555 17,895 
Other current assetsOther current assets$201,043 $220,489 

(1) Contract assets, net, are net of allowances for credit loss.losses. Refer to "Note 6. Credit Losses."
(2) Refer to “Note 3. Revenue. Up-Front Consideration Paid to Customers” for more information regarding consideration paid to customers.

Other Long-Term Assets

Other long-term assets consisted of the following:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
Contract assets, net (1)
Contract assets, net (1)
$152,209 $148,971 
Customer acquisition costs107,971 107,205 
Contract assets, net (1)
Contract assets, net (1)
Consideration paid to customers (2)
Deferred income taxesDeferred income taxes57,136 55,215 
Equity investmentsEquity investments30,250 30,250 
Investment in long-term product supply arrangementsInvestment in long-term product supply arrangements24,021 25,250 
Deferred sales commissions12,765 12,718 
Taxes receivable1,548 717 
Other assetsOther assets35,250 37,403 
Other long-term assetsOther long-term assets$421,150 $417,729 

(1) Contract assets, net, are net of allowances for credit loss.losses. Refer to "Note 6. Credit Losses."
(2) Refer to “Note 3. Revenue. Up-Front Consideration Paid to Customers” for more information regarding consideration paid to customers.

15


NOTE 10. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accounts Payable - Supplier Financing Program

We have an agreement with a third party to provide a supplier finance program, which facilitates participating suppliers’ ability to finance payment obligations from us with a designated third-party financial institution. Participating suppliers may, at their sole discretion, make offers to finance one or more of our payment obligations prior to their scheduled due dates at a discounted price. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements. The terms of payments are consistent with the terms of our trade payables. Activity related to the obligations is presented within operating activities on the unaudited consolidated statements of cash flows. The changes in our outstanding payment obligations under this arrangement, which are included in accounts payable on the unaudited condensed consolidated balance sheets, are as follows:

(in thousands)For the Three Months Ended
March 31,
20242023
Payment obligations outstanding at the beginning of the period$9,057 $10,171 
  Payment obligation additions during the period13,068 13,031 
  Payment obligations settled during the period(11,725)(15,666)
Payment obligations outstanding at the end of the period$10,400 $7,536 

Accrued Liabilities

Accrued liabilities consisted of the following:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
    
Accrued taxes
Accrued expensesAccrued expenses$123,608 $149,446 
Accrued employee compensation and related expensesAccrued employee compensation and related expenses110,845 142,994 
Accrued customer incentives and refund obligationsAccrued customer incentives and refund obligations77,106 72,250 
Accrued taxes72,832 48,547 
Current lease liabilitiesCurrent lease liabilities19,204 20,425 
Accrued liabilitiesAccrued liabilities$403,595 $433,662 

Other Long-Term Liabilities

Other long-term liabilities consisted of the following:
(in thousands)(in thousands)March 31, 2023December 31, 2022(in thousands)March 31, 2024December 31, 2023
Accrued taxesAccrued taxes$51,559 $49,142 
Accrued taxes
Accrued taxes
Other accrued long-term expensesOther accrued long-term expenses19,305 18,445 
Other long-term liabilitiesOther long-term liabilities$70,864 $67,587 

1816



NOTE 11. DEBT

Credit Facility

As ofAt March 31, 2023,2024, we had $431.5$250.0 million in outstanding borrowings under our Credit Facility, all of which consisted of $181.5 million drawn under our line of credit and ais the $250.0 million Term Loan, with a weighted average effective interest rate of 5.8%. As6.3%, excluding any impact of our interest rate swap. At December 31, 2022,2023, we had $579.0$250.0 million in outstanding borrowings under our Credit Facility, all of which consisted of $329.0 million draw under our line of credit and awas the $250.0 million Term Loan, with a weighted average effective interest rate of 5.1%6.0%. As ofAt March 31, 2023,2024, we had a remaining borrowing availability of $817.0$998.5 million under our $1.25 billion Credit Facility. The funds available under the Credit Facility reflect a further reduction due to the issuance of letters of credit, which were primarily issued in connection with our workers’ compensation policy, for $1.5 million.

The applicable interest rate for the Credit Facility is calculated at a per annum rate equal to either (at our option) (1)(i) a prime rate plus a margin ranging from 0.0% to 0.375% based on our consolidated leverage ratio, (2)(ii) an adjusted term SOFR rate, plus 0.10%, plus a margin ranging from 0.875% to 1.375% based on our consolidated leverage ratio, or (3)(iii) an adjusted daily simple SOFR rate, plus 0.10%, plus a margin ranging from 0.875% to 1.375% based on our consolidated leverage ratio. In March 2023, we entered into an interest rate swap agreementcontract to manage the economic effect of $250$250.0 million of variable interest borrowings under our Credit Facility. Refer to Note 19“Note 19. Hedging Instruments” for a discussion of our derivative instruments and hedging activity.

The 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, and certain restrictive agreements. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation, which is defined as the consolidated leverage ratio under the terms of the Credit Facility, not to exceed 3.5-to-1. AtAs of March 31, 2023 and December 31, 2022,2024, we were in compliance with the covenants of the Credit Facility.

Senior Notes

The following describes all of our currently outstanding unsecured senior notes issued and sold in private placements (collectively, the “Senior Notes”) as of March 31, 2023:2024:
(Principal Amount in thousands)
(Principal Amount in thousands)
(Principal Amount in thousands)
Issue DateIssue DateDue DateSeriesPrincipal AmountCoupon RateSenior Note AgreementIssue DateDue DateSeriesPrincipal AmountCoupon RateSenior Note Agreement
12/11/2013
12/11/201312/11/201312/11/20232023 Series A Notes$75,000 3.94 %NY Life 2013 Note Agreement
12/11/201312/11/201312/11/20252025 Series B Notes$75,000 4.04 %NY Life 2013 Note Agreement12/11/20252025 Series B Notes$75,000 4.04 4.04 %NY Life 2013 Note Agreement
9/4/20149/4/20149/4/20262026 Senior Notes$75,000 3.72 %NY Life 2014 Note Agreement9/4/20149/4/20262026 Senior Notes$75,000 3.72 3.72 %NY Life 2014 Note Agreement
7/21/20147/21/20147/21/20242024 Series B Notes$75,000 3.76 %Prudential 2015 Amended Agreement7/21/20147/21/20242024 Series B Notes$75,000 3.76 3.76 %Prudential 2015 Amended Agreement
6/18/20156/18/20156/18/20252025 Series C Notes88,857 1.785 %Prudential 2015 Amended Agreement6/18/20156/18/20252025 Series C Notes88,857 1.785 1.785 %Prudential 2015 Amended Agreement
2/12/20152/12/20152/12/20272027 Series B Notes$75,000 3.72 %MetLife 2014 Note Agreement2/12/20152/12/20272027 Series B Notes$75,000 3.72 3.72 %MetLife 2014 Note Agreement
3/14/20193/14/20193/14/20292029 Series C Notes$100,000 4.19 %MetLife 2014 Note Agreement3/14/20193/14/20292029 Series C Notes$100,000 4.19 4.19 %MetLife 2014 Note Agreement
4/2/20204/2/20204/2/2030MetLife 2030 Series D Notes$125,000 2.50 %MetLife 2014 Note Agreement4/2/20204/2/2030MetLife 2030 Series D Notes$125,000 2.50 2.50 %MetLife 2014 Note Agreement
4/14/20204/14/20204/14/2030Prudential 2030 Series D Notes$75,000 2.50 %Prudential 2015 Amended Agreement4/14/20204/14/2030Prudential 2030 Series D Notes$75,000 2.50 2.50 %Prudential 2015 Amended Agreement

The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, fundamental changes, investments, transactions with affiliates, and certain restrictive agreements.agreements, and violations of laws and regulations. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation, as defined in the Senior Note Agreements, not to exceed 3.5-to-1. AtAs of March 31, 2023 and December 31, 2022,2024, we were in compliance with the covenants of the Senior Note Agreements.
1917




NOTE 12. REPURCHASES OF COMMON STOCK

We primarily acquire shares by repurchases in the open market. However, weWe also acquire shares that are surrendered by employees in payment for the minimum required statutory withholding taxes due on the vesting of restricted stock units and the settlement of deferred stock units, otherwise referred to herein as employee surrenders. We issue shares of treasury stock upon the vesting of certain restricted stock units and upon the exercise of certain stock options. The number of shares of treasury stock issued during the three months ended March 31, 20232024, and 20222023, was not material.

The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022, and is included in the cost of treasury stock acquired in open market repurchases.

The following is a summary of our open market common stock repurchases, reported on a trade date basis, and shares acquired through employee surrender:surrenders:
(in thousands, except per share amounts)(in thousands, except per share amounts)For the Three Months Ended March 31,
2024
2024
2024
20232022
  
Shares repurchased in the open marketShares repurchased in the open market— 502 
Shares acquired through employee surrender for statutory tax withholding19 21 
Shares repurchased in the open market
Shares repurchased in the open market
Shares acquired through employee surrenders for statutory tax withholding
Shares acquired through employee surrenders for statutory tax withholding
Shares acquired through employee surrenders for statutory tax withholding
Total shares repurchased
Total shares repurchased
Total shares repurchasedTotal shares repurchased19 523 
Cost of shares repurchased in the open marketCost of shares repurchased in the open market$— $262,783 
Cost of shares repurchased in the open market
Cost of shares repurchased in the open market
Cost of shares for employee surrendersCost of shares for employee surrenders9,597 10,338 
Cost of shares for employee surrenders
Cost of shares for employee surrenders
Total cost of shares
Total cost of shares
Total cost of sharesTotal cost of shares$9,597 $273,121 
Average cost per share - open market repurchasesAverage cost per share - open market repurchases$— $523.04 
Average cost per share - open market repurchases
Average cost per share - open market repurchases
Average cost per share - employee surrenders
Average cost per share - employee surrenders
Average cost per share - employee surrendersAverage cost per share - employee surrenders$503.65 $505.53 
Average cost per share - totalAverage cost per share - total$503.65 $522.36 
Average cost per share - total
Average cost per share - total
NOTE 13. INCOME TAXES 

Our effective income tax rate was 20.3% for the three months ended March 31, 2024, as compared to 20.0% for the three months ended March 31, 2023, as compared to 19.7% for the three months ended March 31, 2022.2023. The increase in our effective tax rate for the three months ended March 31, 2023, as2024, compared to the same periodsperiod in the prior year, was primarily driven by a decreasegeographical income mix partially offset by an increase in the tax rate benefits related to share-based compensation.

The effective tax rate for the three months ended March 31, 2023 and 2022,2024, differed from the U.S. federal statutory tax rate of 21% primarily due to tax benefits from share-based compensation.

2018


NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in AOCI,Accumulated Other Comprehensive Income (“AOCI”), net of tax, consisted of the following:
For the Three Months Ended March 31, 2023
Unrealized Gain (Loss) on Cash Flow Hedges, Net of TaxUnrealized Gain (Loss) on
Net Investment Hedges, Net of Tax
For the Three Months Ended March 31, 2024For the Three Months Ended March 31, 2024
Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax
(in thousands)
(in thousands)
(in thousands)(in thousands)Unrealized Gain (Loss) on Investments,
Net of Tax
Foreign Currency Exchange ContractsInterest Rate SwapEuro-Denominated NotesCross Currency SwapsDefined Benefit Plans, Net of TaxCumulative Translation
Adjustment
TotalUnrealized (Loss) Gain on Investments,
Net of Tax
Foreign Currency Exchange ContractsInterest Rate SwapEuro-Denominated NotesCross Currency SwapsDefined Benefit Plans, Net of TaxCumulative Translation
Adjustment
Total
          
Balance as of December 31, 2022$(172)$839 $— $4,947 $7,057 $(2,776)$(87,691)$(77,796)
Balance as of December 31, 2023
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications(209)(45)(1,490)(1,240)— 4,258 1,280 
Reclassified from accumulated other comprehensive incomeReclassified from accumulated other comprehensive income— (218)— — — 119 — (99)
Balance as of March 31, 2023$(166)$412 $(45)$3,457 $5,817 $(2,657)$(83,433)$(76,615)
Balance as of March 31, 2024

For the Three Months Ended March 31, 2022
Unrealized Gain (Loss) on Cash Flow Hedges,
Net of Tax
Unrealized Gain (Loss) on
Net Investment Hedges, Net of Tax
For the Three Months Ended March 31, 2023For the Three Months Ended March 31, 2023
Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax
(in thousands)
(in thousands)
(in thousands)(in thousands)Unrealized (Loss) Gain on Investments,
Net of Tax
Foreign Currency Exchange ContractsEuro-Denominated NotesCross Currency SwapsCumulative Translation
Adjustment
TotalUnrealized (Loss) on Investments,
Net of Tax
Foreign Currency Exchange ContractsInterest Rate SwapEuro-Denominated NotesCross Currency SwapsDefined Benefit Plans, Net of TaxCumulative Translation
Adjustment
Total
     
Balance as of December 31, 2021$(126)$4,979 $422 $3,240 $(61,999)$(53,484)
Balance as of December 31, 2022
Balance as of December 31, 2022
Balance as of December 31, 2022
Other comprehensive income (loss) before reclassificationsOther comprehensive income (loss) before reclassifications(17)2,097 1,409 996 3,277 7,762 
Reclassified from accumulated other comprehensive incomeReclassified from accumulated other comprehensive income— (1,626)— — — (1,626)
Balance as of March 31, 2022$(143)$5,450 $1,831 $4,236 $(58,722)$(47,348)
Balance as of March 31, 2023

2119


The following table presents components and amounts reclassified out of AOCI to net income:
(in thousands)(in thousands)Affected Line Item in the Statements of IncomeAmounts Reclassified from AOCI For the Three Months Ended March 31,
 20232022
 
Foreign currency exchange contractsCost of revenue$335 $2,236 
Tax expense117 610 
Gain, net of tax$218 $1,626 
Foreign currency exchange contracts
Foreign currency exchange contracts
Foreign currency exchange contracts
Tax expense
Tax expense
Tax expense
Gain, net of tax
Gain, net of tax
Gain, net of tax
Interest rate swap contracts
Interest rate swap contracts
Interest rate swap contracts
Tax expense
Tax expense
Tax expense
Gain, net of tax
Gain, net of tax
Gain, net of tax
Investments
Investments
Investments
Tax benefit
Tax benefit
Tax benefit
Loss, net of tax
Loss, net of tax
Loss, net of tax
Defined benefit plansDefined benefit plansCost of revenue and operating expenses$(139)$— 
Tax benefit(20)— 
Defined benefit plans
Loss, net of tax$(119)$— 
Defined benefit plans
Tax benefit
Tax benefit
Tax benefit
Loss, net of tax
Loss, net of tax
Loss, net of tax

NOTE 15. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to our stockholders by the weighted average number of shares of common stock and vested deferred stock units outstanding during the year. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and assumed issuance of unvested restricted stock units and unvested deferred stock units using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the total unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase our common stock at the average market price during the period. Vested deferred stock units outstanding are included in shares outstanding for basic and diluted earnings per share because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common stock to be issued is fixed, and issuance is not contingent. Refer to Note 5“Note 5. Share Based Compensation” to the consolidated financial statements in our 20222023 Annual Report for additional information regarding deferred stock units.

The following is a reconciliation of weighted average shares outstanding for basic and diluted earnings per share:
(in thousands)(in thousands)For the Three Months Ended March 31,
2024
2024
2024
20232022
  
Shares outstanding for basic earnings per shareShares outstanding for basic earnings per share82,992 84,410 
Shares outstanding for basic earnings per share
Shares outstanding for basic earnings per share
Shares outstanding for diluted earnings per share:
Shares outstanding for diluted earnings per share:
Shares outstanding for diluted earnings per share:Shares outstanding for diluted earnings per share:
Shares outstanding for basic earnings per shareShares outstanding for basic earnings per share82,992 84,410 
Shares outstanding for basic earnings per share
Shares outstanding for basic earnings per share
Dilutive effect of share-based payment awardsDilutive effect of share-based payment awards967 1,154 
83,959 85,564 
Dilutive effect of share-based payment awards
Dilutive effect of share-based payment awards
83,957
83,957
83,957
20


Certain awards and options to acquire shares have been excluded from the calculation of shares outstanding for diluted earnings per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive awards and options:
(in thousands)(in thousands)For the Three Months Ended March 31,
2024
2024
2024
20232022
  
Weighted average number of shares underlying anti-dilutive awardsWeighted average number of shares underlying anti-dilutive awards35 
Weighted average number of shares underlying anti-dilutive awards
Weighted average number of shares underlying anti-dilutive awards
Weighted average number of shares underlying anti-dilutive optionsWeighted average number of shares underlying anti-dilutive options345 212
Weighted average number of shares underlying anti-dilutive options
Weighted average number of shares underlying anti-dilutive options

22


NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments

Refer to “Note 8. Leases,”Leases” for more information regarding our lease commitments.

Contingencies

We are subject to claims that may arise in the ordinary course of business, including with respect to actual and threatened litigation and other matters. We accrue for loss contingencies when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. However, the results of legal actions cannot be predicted with certainty, and therefore our actual losses with respect to these contingencies could exceed our accruals. Except for the litigation matter described below, as of March 31, 2023,2024, our accruals with respect to actual and threatened litigation were not material.

We are a defendant in an ongoing litigation matter involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement. The plaintiff has asserted a claim of approximately $50 million, inclusive of interest through June 30, 2020, alleging that the incorrect royalty provision was applied to certain licensed products and services throughout the agreement term and that royalties were also due on non-licensed diagnostic services that were provided concurrently with licensed services. The trial court previously ruled in favor of the plaintiff in this matter. The appellate court reversed the trial court’s decision, and the plaintiff has petitioned the state supreme court granted the plaintiff’s petition for review. The state supreme court held a hearing to review the appellate court decision in January 2024, and a ruling is pending. While we believe the claim is without merit and will continue to vigorously defend ourselves against the plaintiff’s allegations, litigation is inherently unpredictable, and there can be no assurance that we will prevail in this matter. During the third quarter of 2020, we established an accrual of $27.5 million related to this ongoing matter, which represents the amount of the contingent loss that we have determined to be probable and estimable. We have not made any adjustments to this accrual since it was established. The actual cost of resolving this matter may be higher or lower than the amount we have accrued.

From time to time, we have received notices alleging that our products infringe third-party proprietary rights, although we are not aware of any pending litigation with respect to such claims. Patent litigation frequently is complex and expensive, and the outcome of patent litigation can be difficult to predict. There can be no assurance that we will prevail in any infringement proceedings that may be commenced against us. If we lose any such litigation, we may be stopped from selling certain products and/or we may be required to pay damages as a result of the litigation.

Guarantees

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties for and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases, those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations and, based on our analysis of the nature of the risks involved, we believe that the fair value of potential indemnification under these agreements is minimal. Accordingly, we have recorded no liabilities for these obligations as of March 31, 20232024, and December 31, 2022.2023.
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NOTE 17. SEGMENT REPORTING

We operate primarily through three business segments: Companion Animal Group (“CAG”), Waterwater quality products (“Water”), and Livestock, Poultry and Dairy (“LPD”). CAG provides products and services for veterinarians and the biomedical research community, primarily related to diagnostics and information management. Water provides innovative testing solutions 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 ensure the quality and safety of milk. Our Other operating segment combines and presents our human medical diagnostic business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. OPTI Medical develops, manufactures, and distributes human medical diagnostic products and provides human medical diagnostic services. 

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. Our CODM is our Chief Executive Officer. Our reportable segments include:are CAG, Water, LPD, and Other. Assets are not allocated to segments for internal reporting purposes. Intersegment revenues, which are not included in the table below, were not material for the periods ended March 31, 2024 and 2023.

The following is a summary of segment performance:
(in thousands)(in thousands)For the Three Months Ended March 31,
CAGWaterLPDOtherConsolidated Total
2023
(in thousands)
(in thousands)For the Three Months Ended March 31,
CAGCAGWaterLPDOtherConsolidated Total
2024
Revenue
Revenue
RevenueRevenue$827,279 $38,883 $29,208 $4,825 $900,195 
Income from operations
Income from operations
Income from operationsIncome from operations$261,750 $16,971 $1,308 $370 $280,399 
Interest expense, netInterest expense, net(12,711)
Income before provision for income taxesIncome before provision for income taxes267,688 
Provision for income taxesProvision for income taxes53,634 
Net income attributable to IDEXX Laboratories, Inc. stockholdersNet income attributable to IDEXX Laboratories, Inc. stockholders$214,054 
2022
2023
2023
2023
Revenue
Revenue
RevenueRevenue$761,184 $36,371 $30,870 $8,124 $836,549 
Income from operations
Income from operations
Income from operationsIncome from operations$223,125 $16,654 $6,737 $1,828 $248,344 
Interest expense, netInterest expense, net(6,853)
Income before provision for income taxesIncome before provision for income taxes241,491 
Provision for income taxesProvision for income taxes47,526 
Net income attributable to IDEXX Laboratories, Inc. stockholdersNet income attributable to IDEXX Laboratories, Inc. stockholders$193,965 

Refer to “Note 3. Revenue Recognition”Revenue” for a summary of disaggregated revenue by reportable segment and by major product and service category for the three months ended March 31, 20232024, and 2022.2023. 
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NOTE 18. FAIR VALUE MEASUREMENTS 

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis, and certain financial assets and liabilities that are not measured at fair value in our unaudited condensed consolidated balance sheets but for which we disclose the fair value.
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The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows: 
Level 1Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We did not have any transfers between Level 1 and Level 2, or transfers in or out of Level 3, of the fair value hierarchy during the three months ended March 31, 2023.2024.

Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets.sheets and are classified as derivative instruments. We measure the fair value of our cross currency swap contracts classified as derivative instruments using prevailing market conditions as of the close of business on each balance sheet date. The product of this calculation is then adjusted for counterparty risk.

Our foreign currency exchange contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets.sheets and are classified as derivative instruments. We measure the fair value of our foreign currency exchange contracts classified as derivative instruments using an income approach, based on prevailing market forward exchange rates less the contract rate multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.

Our interest rate swap contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets.sheets and are classified as derivative instruments. We measure the fair value of our interest rate swap contracts classified as derivative instruments using current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk.

The amounts outstanding under our unsecured revolving credit facility (“Credit Facility” or “line of credit”)Facility and senior notesSenior Notes (“long-term debt”) are measured at carrying value in our unaudited condensed consolidated balance sheets though we disclose the fair value of these financial instruments. We determine the fair value of the amount outstanding under our Credit Facility and long-term debt using an income approach, utilizing a discounted cash flow analysis based on current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk. Our Credit Facility and long-term debt are valued using Level 2 inputs. The estimated fair value of our Credit Facility approximates its carrying value. The estimated fair value and carrying value of our long-term debt were $740.5$660.6 million and $771.7$696.1 million, respectively, as of March 31, 2023,2024, and $725.6$670.0 million and $769.8$698.2 million, respectively, as of December 31, 2022.2023.


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The following tables set forth our assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy:
(in thousands)
As of March 31, 2023Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of March 31, 2023
    
Assets    
Equity mutual funds (1)
$292 $— $— $292 
Cross currency swaps (2)
$— $7,906 $— $7,906 
Foreign currency exchange contracts (2)
$— $4,355 $— $4,355 
Liabilities
Cross currency swaps (2)
$— $271 $— $271 
Foreign currency exchange contracts (2)
$— $3,770 $— $3,770 
Interest rate swap (3)
$— $59 $— $59 
Deferred compensation (4)
$292 $— $— $292 
Contingent payments - acquisitions$— $— $120 $120 
(in thousands)
As of March 31, 2024Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of March 31, 2024
    
Assets    
Money market funds (1)
$251,669 $— $— $251,669 
Equity mutual funds (2)
$26 $— $— $26 
Cross currency swaps (3)
$— $1,046 $— $1,046 
Foreign currency exchange contracts (3)
$— $4,774 $— $4,774 
Interest rate swap (4)
$— $3,256 $— $3,256 
Liabilities
Cross currency swaps (3)
$— $2,736 $— $2,736 
Foreign currency exchange contracts (3)
$— $1,080 $— $1,080 
Deferred compensation (5)
$26 $— $— $26 
Contingent Consideration$— $— $4,400 $4,400 
(in thousands)
As of December 31, 2022Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of December 31, 2022
    
Assets    
Equity mutual funds (1)
$385 $— $— $385 
Cross currency swaps (2)
$— $9,262 $— $9,262 
Foreign currency exchange contracts (2)
$— $5,185 $— $5,185 
Liabilities
Foreign currency exchange contracts (2)
$— $4,572 $— $4,572 
Deferred compensation (4)
$385 $— $— $385 
Contingent payments - acquisitions$— $— $120 $120 
(in thousands)
As of December 31, 2023Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance as of December 31, 2023
    
Assets    
Money market funds (1)
$290,807 $— $— $290,807 
Equity mutual funds (2)
$99 $— $— $99 
Cross currency swaps (3)
$— $664 $— $664 
Foreign currency exchange contracts (3)
$— $1,783 $— $1,783 
Interest rate swap (4)
$— $1,451 $— $1,451 
Liabilities
Cross currency swaps (3)
$— $5,041 $— $5,041 
Foreign currency exchange contracts (3)
$— $5,532 $— $5,532 
Deferred compensation (5)
$99 $— $— $99 

(1)Money market funds with an original maturity of less than ninety days are included within cash and cash equivalents. The remaining balance of cash and cash equivalents as of March 31, 2024, consists of demand deposits.
(2)Equity mutual funds relate to a deferred compensation plan that was assumed as part of a previous business combination. This amount is included within other long-termcurrent assets. Refer to footnote (4)(5) below for a discussion of the related deferred compensation liability.
(2)(3)Cross currency swaps and foreign currency exchange contracts are included within other current assets, other long-term assets, accrued liabilities, or other long-term liabilities depending on the gain (loss) position and anticipated settlement date.
(3)(4)Interest rate swap is included within other long-term liabilities.assets.
(4)(5)A deferred compensation plan assumed as part of a previous business combination is included within accrued liabilities and other long-term liabilities. The fair value of our deferred compensation plan is indexed to the performance of the underlying equity mutual funds discussed in footnote (1)(2) above.

The estimated fair values of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate their respective carrying values due to their short maturity.
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Contingent Consideration

We have classified our liabilities for contingent consideration related to acquisitions within Level 3 of the fair value hierarchy because the fair value is determined using significant unobservable inputs, which includesinclude the achievements of future revenues. The contingent consideration is included within other short-term and long-term liabilities.


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We record changes Changes in the estimated fair value of contingent consideration are recorded in the unaudited condensed consolidated statements of income. Changes in

The fair values of liabilities for contingent consideration liabilities are measured at fair value on a recurring basis using unobservable inputs (Level 3) and duringfor the three months ended March 31, 2024 and 2023, are as follows:

(in thousands)Fair Value
Contingent consideration as of December 31, 2022$120 
Payment of contingent consideration— 
Contingent consideration as of March 31, 2023$120 
Three Months Ended
March 31,
(in thousands)20242023
 
Contingent consideration at the beginning of the period$— $120 
Contingent consideration recorded from acquisition4,400 — 
Contingent consideration at the end of the period$4,400 $120 

Contingent consideration associated with a software business acquired during the first quarter of 2024 is based on the achievement of certain future revenue milestones during each annual period following the acquisition date, over a three-year period, and a cumulative revenue target for the three-year period, up to a maximum of $30.0 million (undiscounted) payable in cash. The fair value of the contingent consideration liability for the 2024 acquisition was determined using a probability-weighted model. The balance at March 31, 2024, includes $1.7 million recorded as a current liability for amounts expected to be paid within the next 12 months. Future revenue results are uncertain by nature and actual results may differ from estimates.
NOTE 19. HEDGING INSTRUMENTS
 
Disclosure within this note is presented to provide transparency about how and why we use derivative and non-derivative instruments (collectively “hedging instruments”), how the instruments and related hedged items are accounted for, and how the instruments and related hedged items affect our financial position, results of operations, and cash flows.

We are exposed to certain risks related to our ongoing business operations. The primary risk that we currently manage by usingWe utilize hedging instruments isto manage a portion of our foreign currency exchange risk. During the first quarter of 2023, we entered into anrisk and interest rate swap torisk. To manage the impact of interest rate fluctuations associated with $250.0 million of borrowings under our variable-rate Credit Facility.Facility, we entered into an interest rate swap in 2023. We have designated the interest rate swap as a cash flow hedge.

Our subsidiaries enter into foreign currency exchange contracts to manage the exchange risk associated with their forecasted intercompany inventory purchases and sales for the next year. From time to time, we may also enter into other foreign currency exchange contracts, cross currency swaps, or foreign-denominated debt issuances to minimize the impact of foreign currency fluctuations associated with specific balance sheet exposures, including net investments in certain foreign subsidiaries.

The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions, including transactions denominated in the euro, British pound, Japanese yen, Canadian dollar, and Australian dollar. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our corporate policy prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with large well-capitalized multinational financial institutions, and we do not hold or engage in transactions involving derivative instruments for purposes other than risk management. Our accounting policies for these contracts are based on our designation of such instruments as hedging transactions.

We recognize all hedging instruments on the balance sheetinstrument assets and liabilities at fair value at the balance sheet date. Instruments that do not qualify for hedge accounting treatment must beare recorded at fair value through earnings. To qualify for hedge accounting treatment, cash flow and net investment hedges must be highly effective in offsetting changes to expected future cash flows or fair value on hedged transactions. If the instrument qualifies for hedge accounting, changes in the fair value of the hedging instrument from the effective portion of the hedge are deferred in AOCI, net of tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. We immediately record in earnings the extent to which a hedging instrument is not effective in achieving offsetting changes in fair value. We de-designate hedging instruments from
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hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated instruments, the gain or loss from the time of de-designation through maturity of the instrument is recognized in earnings. Any gain or loss in AOCI at the time of de-designation is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Refer to “Note 14. Accumulated Other Comprehensive Income” for further information regarding the effect of hedging instruments on our unaudited condensed consolidated statements of income for the three months ended March 31, 20232024, and 2022.2023.

We enter into master netting arrangements with the counterparties to our derivative transactions, which permit certain outstanding receivables and payables to be offset in the event of default. Our derivative contracts do not require either party to post cash collateral. We elect to present our derivative assets and liabilities in the unaudited condensed consolidated balance sheets on a gross basis. All cash flows related to our foreign currency exchange contracts are classified as operating cash flows, which is consistent with the cash flow treatment of the underlying items being hedged. 

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Cash Flow Hedges 

We have designated our foreign currency exchange contracts and our interest rate swap as cash flow hedges as these derivative instruments manage theour exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange and to interest rates on variable interest obligations under the terms of our Credit Facility. Unless noted otherwise, we have also designated our derivative instruments as qualifying for hedge accounting treatment.

We did not de-designate any instruments from hedge accounting treatment during either the three months ended March 31, 20232024, or 2022.2023. As of March 31, 2023,2024, the estimated amount of net gains, net of tax, from our foreign currency exchange contracts which are expected to be reclassified out of AOCI and into earnings within the next 12 months is $0.6$2.9 million if exchange rates do not fluctuate from the levels as of March 31, 2023. 2024. As of March 31, 2024, the estimated amount of gains, net of tax, from our interest rate swap contract which are expected to be reclassified out of AOCI and into earnings within the next twelve months is $2.2 million if interest rates do not fluctuate from the levels as of March 31, 2024.

Foreign Currency Exchange Contracts: We target to hedge approximately 75% to 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, and Australian dollar. We have additional unhedged foreign currency exposures related to intercompany foreign servicestransactions and emerging markets where it is not practical to hedge. We primarily utilize foreign currency exchange contracts with durations of less than 24 months. Quarterly, we enter into contracts to hedge incremental portions of anticipated foreign currency transactions for the current and following year. As a result, our risk with respect to foreign currency exchange rate fluctuations and the notional value of foreign currency exchange contracts may vary throughout the year. The U.S. dollar is the currency purchased or sold in all of our foreign currency exchange contracts. The notional amount of foreign currency exchange contracts to hedge forecasted intercompany inventory purchases and sales totaled $248.7$285.9 million and $258.2$294.0 million as of March 31, 20232024, and December 31, 2022,2023, respectively.

The following table presents the effect of cash flow hedge accounting on our unaudited condensed consolidated statements of income and comprehensive income, and provides information regarding the location and amounts of pretax gains or losses of derivatives:
(in thousands) Three Months Ended
March 31,
 20232022
Financial statement line items in which effects of cash flow hedges are recordedCost of revenue$357,224 $337,796 
Foreign exchange contracts
Amount of gain (loss) reclassified from accumulated other comprehensive income into income$335 $2,236 

Interest Rate Swap: We entered into an interest rate swap agreementcontract to manage the economic effect of variable interest obligations on amounts borrowed under the terms of the Credit Facility. Beginning on March 31, 2023, the variable interest rate associated with $250.0 million of borrowings outstanding under the Credit Facility became effectively fixed at 3.9% plus the applicable credit spread, through October 20, 2025. Due to

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The following table presents the effective dateeffect of the interest rate swap being March 31, 2023, no amount was reclassified outcash flow hedge accounting on our unaudited condensed consolidated statements of otherincome and comprehensive income, to interest expense forand provides information regarding the first quarterlocation and amounts of 2023.pretax gains or losses of derivatives:
(in thousands) Three Months Ended
March 31,
 20242023
Financial statement line items in which effects of cash flow hedges are recordedCost of revenue$371,025 $357,224 
Foreign exchange contracts
Amount of gain reclassified from accumulated other comprehensive income into net income$810 $335 
Financial statement line items in which effects of cash flow hedges are recordedInterest expense$(7,911)$(13,127)
Interest rate swap contract
Amount of gain reclassified from accumulated other comprehensive income into net income$957 $— 

Net Investment Hedges, Euro-Denominated Notes

In June 2015, we issued and sold through a private placement an aggregate principal amount of €88.9 million in euro-denominated 1.785% Series C Senior Notes due June 18, 2025. We have designated these euro-denominated notes as a hedge of our euro net investment in certain foreign subsidiaries to reduce the volatility in stockholders’ equity caused by changes in foreign currency exchange rates in the euro relative to the U.S. dollar. As a result of this designation, gains and losses from the change in translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than to earnings. We recorded lossesgains of $1.5$1.6 million, net of tax, within AOCI as a result of this net investment hedge for the three months ended March 31, 2023,2024, and gainslosses of $1.4$1.5 million for the three months ended March 31, 2022.2023. The related cumulative unrealized gain recorded as of March 31, 2023,2024, will not be reclassified into earnings untilwhen the completeforeign subsidiaries are sold or substantially complete liquidation of the net investment in the hedged foreign operationsliquidated or all or a portion of the hedge no longer qualifies for hedge accounting treatment. Refer to Note 13 to the consolidated financial statements included in our 20222023 Annual Report for further information regarding the issuance of these euro-denominated notes.


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Net Investment Hedges, Cross Currency Swaps

We have entered into several cross currency swap contracts as a hedge of our net investment in foreign operations to offset foreign currency translation gains and losses on the net investment. These cross currency swaps have maturity dates beginning on June 30, 2023,2025, through March 31,June 30, 2028. At maturity of the cross currency swap contracts we will deliver the notional amount of €90.0 million and will receive approximately $104.5 million from the counterparties on June 30, 2023; we will deliver the notional amount of €15 million and will receive approximately $17.5 million from the counterparties on June 18, 2025; and we will deliver the notional amount of €35 million and will receive $37.8 million from the counterparties on March 31, 2028; and we will deliver the notional amount of €90 million and will receive $98.2 million from the counterparties on June 30, 2028. The changes in fair value of the cross currency swap contracts are recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated. During the three months ended March 31, 2023,2024, we recorded lossesgains of $1.2$2.0 million, net of tax, within AOCI as a result of these net investment hedges, and gainslosses of $1.0$1.2 million during the three months ended March 31, 2022.2023. We will receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swaps. This interest rate component is excluded from the assessment of hedge effectiveness and is recognized as a reduction to interest expense over the life of the hedge instrument. We recognized approximately $0.7$0.3 million related to the excluded component as a reduction of interest expense for the three months ended March 31, 2023,2024, and $0.7 million for the three months ended March 31, 2022.2023.
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Fair Values of Hedging Instruments Designated as Hedges in Consolidated Balance Sheets

The fair values of hedging instruments and their respective classification on our unaudited condensed consolidated balance sheets and amounts subject to offset under master netting arrangements consisted of the following derivative instruments, unless otherwise noted:
(in thousands)(in thousands) Hedging Assets(in thousands) Hedging Assets
 March 31, 2023December 31, 2022 March 31, 2024December 31, 2023
Derivatives and non-derivatives designated as hedging instrumentsDerivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  
Foreign currency exchange contractsForeign currency exchange contractsOther current assets$4,314 $5,185 
Cross currency swapsCross currency swapsOther current assets6,877 8,135 
Interest rate swap contract
Foreign currency exchange contractsForeign currency exchange contractsOther long-term assets41 — 
Cross currency swapsCross currency swapsOther long-term assets1,029 1,127 
Total derivative instruments presented as hedging instruments on the balance sheetTotal derivative instruments presented as hedging instruments on the balance sheet12,261 14,447 
Gross amounts subject to master netting arrangements not offset on the balance sheetGross amounts subject to master netting arrangements not offset on the balance sheet(1,890)(3,210)
Net amountNet amount $10,371 $11,237 

(in thousands)(in thousands) Hedging Liabilities(in thousands) Hedging Liabilities
 March 31, 2023December 31, 2022 March 31, 2024December 31, 2023
Derivatives and non-derivatives designated as hedging instrumentsDerivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification  
Foreign currency exchange contractsForeign currency exchange contractsAccrued liabilities$3,525 $4,572 
Cross currency swapsCross currency swapsOther long-term liabilities271 — 
Interest rate swapOther long-term liabilities59 — 
Foreign currency exchange contractsForeign currency exchange contractsOther long-term liabilities245 — 
Total derivative instruments presented as hedging instruments on the balance sheetTotal derivative instruments presented as hedging instruments on the balance sheet4,100 4,572 
Non-derivative foreign currency denominated debt designated as net investment hedge on the balance sheet (1)
Non-derivative foreign currency denominated debt designated as net investment hedge on the balance sheet (1)
Long-term debt96,730 94,775 
Total hedging instruments presented on the balance sheetTotal hedging instruments presented on the balance sheet100,830 99,347 
Gross amounts subject to master netting arrangements not offset on the balance sheetGross amounts subject to master netting arrangements not offset on the balance sheet(1,890)(3,210)
Net amountNet amount $98,940 $96,137 
(1) Amounts represent reported carrying amounts of our foreign currency-denominated debt. Refer to “Note 18. Fair Value Measurements” for information regarding the fair value of our long-term debt.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
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 future revenue growth rates; 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; interest expense; share-based compensation expense; the projected impact of new accounting standards; critical accounting estimates; deductibility of goodwill; and future commercial and operational efforts. 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, (suchsuch as geopolitical instability (including the current war in Ukraine)wars, terrorist attacks, and armed conflicts), general economic uncertainty, inflationary pressures, severe weather and other natural conditions, and supply chain challenges)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 20222023 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 periodic reports filed with the SEC.

Any forward-looking statements represent our estimates only as of the day this Quarterly Report on Form 10-Q was filed with the SEC and should not be relied upon as representing our estimates as of any subsequent date. From time to time, oral or written forward-looking statements may also be included in other materials released to the public, and they are subject to the risk and uncertainties described or cross-referenced in this section. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates or expectations change.

You should read the following discussion and analysis in conjunction with our 20222023 Annual Report that includes additional information about us, our results of operations, our financial position, and our cash flows, and with our unaudited condensed consolidated financial statements and related notes included in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

Our fiscal quarter ended on March 31. Unless otherwise stated, the analysis and discussion of our financial condition and results of operations below, including references to growth and organic growth and increases and decreases, are being compared to the equivalent prior-year periods.

Business Overview 
 
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 design, manufacture, and distribute point of care and laboratory diagnosticspoint-of-care for the human medical diagnostics sector. Our primary products and services are:

Point-of-care veterinary diagnostic products, comprising instruments, consumables, and rapid assay test kits;
Veterinary reference laboratory diagnostic and consulting services;
Practice management and diagnostic imaging systems and services used by veterinarians;
Health monitoring, biological materials testing, and laboratory diagnostic instruments, and services used by the biomedical research community;
Diagnostic, health-monitoring products for livestock, poultry, and dairy;
Products that test water for certain microbiological contaminants; and
Point-of-care electrolytes and blood gas analyzers.


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Description of Business Segments. We operate primarily through three business 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 products and services for livestock and poultry health and to ensure the quality and safety of milk and improve producer efficiency, which we refer to as Livestock, Poultry and
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Dairy (“LPD”). Our Other operating segment combines and presents our human medical diagnosticsdiagnostic products and services business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. 

CAG develops, designs, manufactures, and distributes products and software, and performs services for veterinarians and the biomedical analytics sector, primarily related to diagnostics and information management. Water develops, designs, manufactures, and distributes a range of products used in the detection of various microbiological parameters in water. LPD develops, designs, manufactures, and distributes diagnostic tests and related software and performs services that are used to manage the health status of livestock and poultry, to improve bovine reproductive efficiency, and to ensure the quality and safety of milk. OPTI Medical develops, designs, manufactures, and distributes point-of-care and laboratory diagnostics (including electrolyte and blood gas analyzers and related consumable products) for the human medical diagnostics sector. During the first quarter of 2023, we discontinued actively marketing our OPTI COVID-19 PCR testing products and services.products.

Currency and Other Items

Currency Impact. Refer to “Part I, Item 3. Quantitative and Qualitative Disclosures about Market Risk” included in this Quarterly Report on Form 10-Q for additional information regarding the impact of foreign currency exchange rates.

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 20222023 Annual Report for additional information regarding trends in companion animal healthcare, distributor purchasing and inventories, economic conditions, and patent expiration.

Critical Accounting Estimates and Assumptions 

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 months ended March 31, 2023,2024, are consistent with those discussed in our 20222023 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.”

Recent Accounting Pronouncements 

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.

Non-GAAP Financial Measures

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 months ended March 31, 2023,2024, as 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.

31


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. 

30


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, process,processes, and outputs are present, consistent with ASU 2017-01, “BusinessBusiness Combinations: (Topic 805) Clarifying the Definition of a Business.Business.” In a business combination, 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 list 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 acquisitions represents revenues during the current year period, limited to the initial 12 months from the date of the acquisition, that are directly attributable to business acquisitions.

We also use Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio in this Quarterly Report on Form 10-Q, 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.


3231


Results of Operations

Three Months Ended March 31, 2023,2024, Compared to Three Months Ended March 31, 20222023

Total Company. The following table presents total Company revenue by operating segment:
For the Three Months Ended March 31,
For the Three Months Ended March 31,
Net Revenue
(dollars in thousands)
Net Revenue
(dollars in thousands)
Net Revenue
(dollars in thousands)
Net Revenue
(dollars in thousands)
20232022Dollar Change
Reported Revenue Growth (1)
Percentage Change from CurrencyPercentage Change from Acquisitions
Organic Revenue Growth (1)
20242023Dollar Change
Reported Revenue Growth (1)
Percentage Change from CurrencyPercentage Change from Acquisitions
Organic Revenue Growth (1)
CAG
CAG
CAGCAG$827,279 $761,184 $66,095 8.7 %(2.2 %) 10.9 %$889,285 $$827,279 $$62,006 7.5 7.5 % 0.3 0.3 %7.2 %
United StatesUnited States564,527 499,766 64,761 13.0 %— — 13.0 %United States602,195 564,527 564,527 37,668 37,668 6.7 6.7 %— 0.4 0.4 %6.3 %
InternationalInternational262,752 261,418 1,334 0.5 %(6.2 %)— 6.8 %International287,090 262,752 262,752 24,338 24,338 9.3 9.3 %— — — 9.2 9.2 %
WaterWater38,883 36,371 2,512 6.9 %(2.9 %)1.6 %8.2 %
Water
Water43,071 38,883 4,188 10.8 %0.2 % 10.6 %
United StatesUnited States19,920 17,831 2,089 11.7 %— — 11.7 %United States22,199 19,920 19,920 2,279 2,279 11.4 11.4 %— — — 11.4 11.4 %
InternationalInternational18,963 18,540 423 2.3 %(5.5 %)3.2 %4.6 %International20,872 18,963 18,963 1,909 1,909 10.1 10.1 %0.4 %— 9.7 9.7 %
LPD
LPD
LPDLPD29,208 30,870 (1,662)(5.4 %)(3.8 %)— (1.6 %)28,205 29,208 29,208 (1,003)(1,003)(3.4 (3.4 %)(0.1 %) (3.3 (3.3 %)
United StatesUnited States4,543 3,860 683 17.7 %— — 17.7 %United States5,164 4,543 4,543 621 621 13.7 13.7 %— — — 13.7 13.7 %
InternationalInternational24,665 27,010 (2,345)(8.7 %)(4.2 %)— (4.5 %)International23,041 24,665 24,665 (1,624)(1,624)(6.6 (6.6 %)(0.1 %)— (6.5 (6.5 %)
OtherOther4,825 8,124 (3,299)(40.6 %)(0.1 %)— (40.5 %)
Other
Other3,534 4,825 (1,291)(26.7 %)  (26.7 %)
Total Company
Total Company
Total CompanyTotal Company$900,195 $836,549 $63,646 7.6 %(2.3 %)0.1 %9.8 %$964,095 $$900,195 $$63,900 7.1 7.1 % 0.2 0.2 %6.8 %
United StatesUnited States590,413 525,906 64,507 12.3 %— — 12.3 %United States631,009 590,413 590,413 40,596 40,596 6.9 6.9 %— 0.4 0.4 %6.5 %
InternationalInternational309,782 310,643 (861)(0.3 %)(5.9 %)0.2 %5.5 %International333,086 309,782 309,782 23,304 23,304 7.5 7.5 %— — — 7.5 7.5 %
(1)Reported revenue growth and organic revenue growth may not recalculate due to rounding.

Total Company Revenue. The increase in organic revenue reflects growth in CAG Diagnostics recurring revenue, including benefits from higher realized prices globally and increased volumevolumes globally. Higher volumes and price gains in the U.S. Increases in our subscription-based veterinary software and diagnostic imaging servicessystems recurring revenue also contributed to higher revenue. The higherrevenue, supported by demand for subscription-based software. Higher revenue in our Water business was primarily due to the benefit of price increases and our acquisitionincreased volume in the third quarter of 2022.U.S. and certain international regions. The decline in our LPD business was primarily due to lower herd health screening volume.and other diagnostic test volumes impacted by lower demand in China, partially offset by higher realized prices and volume growth in the U.S. and Europe. The decrease in Other revenue reflects was primarily due to lower salesvolumes of our OPTI COVID-19 PCR testing productsMedical instruments and servicesconsumables. The impact ofoverall change in foreign currency movements decreased totalexchange rates was not significant to revenue growth by 2.3%.growth.
3332


The following table presents total Company results of operations:
For the Three Months Ended March 31,Change
For the Three Months Ended March 31,For the Three Months Ended March 31,Change
Total Company - Results of Operations
(dollars in thousands)
Total Company - Results of Operations
(dollars in thousands)
2023Percent of Revenue2022Percent of RevenueAmountPercentage
Total Company - Results of Operations
(dollars in thousands)
2024Percent of Revenue2023Percent of RevenueAmountPercentage
Revenues
Revenues
RevenuesRevenues$900,195 $836,549 $63,646 7.6 %$964,095 $$900,195 $$63,900 7.1 7.1 %
Cost of revenueCost of revenue357,224 337,796 19,428 5.8 %Cost of revenue371,025 357,224 357,224 13,801 13,801 3.9 3.9 %
Gross profitGross profit542,971 60.3 %498,753 59.6 %44,218 8.9 %Gross profit593,070 61.5 61.5 %542,971 60.3 60.3 %50,099 9.2 9.2 %
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing147,804 16.4 %132,292 15.8 %15,512 11.7 %149,453 15.5 15.5 %147,804 16.4 16.4 %1,649 1.1 1.1 %
General and administrativeGeneral and administrative70,101 7.8 %77,949 9.3 %(7,848)(10.1 %)General and administrative92,024 9.5 9.5 %70,101 7.8 7.8 %21,923 31.3 31.3 %
Research and developmentResearch and development44,667 5.0 %40,168 4.8 %4,499 11.2 %Research and development52,635 5.5 5.5 %44,667 5.0 5.0 %7,968 17.8 17.8 %
Total operating expensesTotal operating expenses262,572 29.2 %250,409 29.9 %12,163 4.9 %Total operating expenses294,112 30.5 30.5 %262,572 29.2 29.2 %31,540 12.0 12.0 %
Income from operationsIncome from operations$280,399 31.1 %$248,344 29.7 %$32,055 12.9 %Income from operations$298,958 31.0 31.0 %$280,399 31.1 31.1 %$18,559 6.6 6.6 %

Gross Profit. Gross profit increased due to higher revenue and a 70120 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to recurring revenue net price gains, improveddriven by sales mix, including the effects from higher CAG Diagnostic consumable growth, lower instrument costs, software services gross margins, the benefit of our reference laboratory productivity initiatives, and product mix associated with lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product, labor, and distribution costs, which reflect the effects of inflation, as well investments in productivity initiativesmargin expansion, and to support future growth.a lesser extent, gross margin expansion in our Livestock, Poultry and Dairy and Water lines of business. Higher realized prices related to CAG Diagnostic recurring revenues mitigated inflationary cost impacts. The impact fromoverall change in foreign currency movements decreasedexchange rates on the gross profit margin by approximately 50 basis points, including the impact of lower hedge gains in the current year as compared to the prior year.was not significant.

Operating Expenses. Sales and marketing expense increased primarily due to higher travel and personnel-related and travel costs, including investments in our global commercial capability.costs. General and administrative expense decreasedincreased primarily due to the comparison to the prior year benefit of a $16 million customer contract resolution payment received during the first quarter, partially offset bygain and higher personnel-relatedthird-party costs. Research and development expense increased primarily due to project costs, including software development, and higher personnel-related costs. The overall change in foreign currency exchange rates resulted in a decrease inwas not significant to operating expenses growth by approximately 2%.expense growth.

3433


Companion Animal Group

The following table presents revenue by product and service category for CAG: 
For the Three Months Ended March 31,
Net Revenue
(dollars in thousands)
20232022Dollar Change
Reported Revenue Growth (1)
Percentage Change from CurrencyPercentage Change from Acquisitions
Organic Revenue Growth (1)
CAG Diagnostics recurring revenue:$726,902 $664,810 $62,092 9.3 %(2.3 %)— 11.6 %
IDEXX VetLab consumables291,114 267,173 23,941 9.0 %(3.0 %)— 11.9 %
Rapid assay products82,032 74,519 7,513 10.1 %(1.4 %)— 11.5 %
Reference laboratory diagnostic and consulting services323,180 295,075 28,105 9.5 %(1.9 %)— 11.4 %
CAG diagnostics services and accessories30,576 28,043 2,533 9.0 %(3.1 %)— 12.1 %
CAG Diagnostics capital - instruments33,144 36,997 (3,853)(10.4 %)(2.9 %)— (7.5 %)
Veterinary software, services and diagnostic imaging systems67,233 59,377 7,856 13.2 %(0.8 %)— 14.0 %
Net CAG revenue$827,279 $761,184 $66,095 8.7 %(2.2 %)— 10.9 %

For the Three Months Ended March 31,
Net Revenue
(dollars in thousands)
20242023Dollar Change
Reported Revenue Growth (1)
Percentage Change from CurrencyPercentage Change from Acquisitions
Organic Revenue Growth (1)
CAG Diagnostics recurring revenue:$780,144 $726,902 $53,242 7.3 %  7.3 %
IDEXX VetLab consumables316,929 291,114 25,815 8.9 %— — 8.9 %
Rapid assay products86,315 82,032 4,283 5.2 %(0.1 %)— 5.3 %
Reference laboratory diagnostic and consulting services344,338 323,180 21,158 6.5 %0.1 %— 6.4 %
CAG diagnostics services and accessories32,562 30,576 1,986 6.5 %(0.3 %)— 6.8 %
CAG Diagnostics capital - instruments34,092 33,144 948 2.9 %(0.4 %)— 3.2 %
Veterinary software, services and diagnostic imaging systems:75,049 67,233 7,816 11.6 % 3.3 %8.4 %
Recurring revenue59,700 51,707 7,993 15.5 % 4.2 %11.2 %
Systems and hardware15,349 15,526 (177)(1.1 %) — (1.1 %)
Net CAG revenue$889,285 $827,279 $62,006 7.5 % 0.3 %7.2 %
(1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher realized prices and, strong demand in the U.S. for companion animal diagnostics across modalities. International volume growth was constrained by macroeconomic conditions.to a lesser extent, higher volumes. The impactoverall change of foreign currency movements decreasedon CAG Diagnostics recurring revenue was not significant to revenue growth by 2.3%.

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and to a lesser extent, volume increases supported by the expansion of our installed base of instruments and our expanded menu of available tests in certain regions.tests. The impact ofoverall change in foreign currency movements decreasedexchange rateswas not significant to revenue growth by 3.0%.growth.

The increase in rapid assay revenue resulted primarily from higher price realization, and, to a lesser extent, higher clinic testing levels, primarily from SNAP 4Dx Plus.partially offset by lower volumes. The overall change in foreign currency exchange rates decreased revenue growth by 0.1%.

The increase in reference laboratory diagnostic and consulting services revenue was primarily due to higher price realization and to a lesser extent, higher testing volumes in our U.S. labs. Growth in other regions was primarily due to higher price realization, partially offset by lower volumes in international regions, reflecting challenging regional macroeconomic conditions.volumes. The impact ofoverall change in foreign currency movements decreasedexchange rates increased revenue growth by 1.9%0.1%.

The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 11% growth in our active installed base of instruments.The overall change in foreign currency exchange rates decreased revenue growth by 0.3%.

CAG Diagnostics Capital – Instrument Revenue. The decreaseincrease in instrument revenue was primarily due to regional mix ofhigher premium instrument placements and program pricing effects. Overall instrument placements were higher than the prior year.sales mix. The impact ofoverall change in foreign currency movementsexchange rates decreased revenue growth by 2.9%0.4%.

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in veterinary software and services revenue was primarily due to higher subscription and servicesrecurring revenue supported byfrom the expansion inof our active installed base, resulting in higher subscription and support revenue, and higher realized prices on service offerings.prices. The increasedecrease in our diagnostic imaging systems and hardware revenue was primarily due to higher serviceslower placements. The overall change in foreign currency exchange rateswas not significant to revenue supportedgrowth. The overall change of acquisitions increased revenue growth by the expansion in our installed base.3.3%.

3534


The following table presents the CAG segment results of operations:
For the Three Months Ended March 31,Change
For the Three Months Ended March 31,For the Three Months Ended March 31,Change
Results of Operations
(dollars in thousands)
Results of Operations
(dollars in thousands)
2023Percent of Revenue2022Percent of RevenueAmountPercentage
Results of Operations
(dollars in thousands)
2024Percent of Revenue2023Percent of RevenueAmountPercentage
Revenues
Revenues
RevenuesRevenues$827,279 $761,184 $66,095 8.7 %$889,285 $$827,279 $$62,006 7.5 7.5 %
Cost of revenueCost of revenue328,522 312,085 16,437 5.3 %Cost of revenue343,049 328,522 328,522 14,527 14,527 4.4 4.4 %
Gross profitGross profit498,757 60.3 %449,099 59.0 %49,658 11.1 %Gross profit546,236 61.4 61.4 %498,757 60.3 60.3 %47,479 9.5 9.5 %
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing135,596 16.4 %121,660 16.0 %13,936 11.5 %136,903 15.4 15.4 %135,596 16.4 16.4 %1,307 1.0 1.0 %
General and administrativeGeneral and administrative61,251 7.4 %68,881 9.0 %(7,630)(11.1 %)General and administrative81,803 9.2 9.2 %61,251 7.4 7.4 %20,552 33.6 33.6 %
Research and developmentResearch and development40,160 4.9 %35,433 4.7 %4,727 13.3 %Research and development47,834 5.4 5.4 %40,160 4.9 4.9 %7,674 19.1 19.1 %
Total operating expensesTotal operating expenses237,007 28.6 %225,974 29.7 %11,033 4.9 %Total operating expenses266,540 30.0 30.0 %237,007 28.6 28.6 %29,533 12.5 12.5 %
Income from operationsIncome from operations$261,750 31.6 %$223,125 29.3 %$38,625 17.3 %Income from operations$279,696 31.5 31.5 %$261,750 31.6 31.6 %$17,946 6.9 6.9 %

Gross Profit. Gross profit increased primarily due to higher revenue as well asand a 130110 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to recurringsales mix, including the effects from higher CAG Diagnostic consumable growth, lower instrument costs, and software services gross margin expansion. Recurring revenue net price gains improved software services gross margins, the benefit of our reference laboratory productivity initiatives and supply savings, and product mix associated with lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product, labor, and distribution costs, which reflect the effects of inflation, as well as investmentsinflationary cost impacts. The overall change in productivity initiatives and to support future growth. The impact from foreign currency movements decreasedexchange rates on the gross profit margin by approximately 40 basis points and included the impact of lower hedge gains in the current year as compared to the prior year.was not significant.

Operating Expenses. Sales and marketing expense increased primarily due to higher travel and personnel-related and travel costs, including investments in our global commercial capability.costs. General and administrative expense decreasedincreased primarily due to the comparison to the prior year benefit of a $16 million customer contract resolution payment received during the first quarter, partially offset bygain and higher personnel-relatedthird-party costs. Research and development expense increased primarily due to higher project costs, including software development, and higher personnel-related costs. The overall change in foreign currency exchange rates resulted in a decrease inwas not significant to operating expenses growth by approximately 1%.expense growth.
3635


Water

The following table presents the Water segment results of operations:
For the Three Months Ended March 31,Change
For the Three Months Ended March 31,For the Three Months Ended March 31,Change
Results of Operations
(dollars in thousands)
Results of Operations
(dollars in thousands)
2023Percent of Revenue2022Percent of RevenueAmountPercentage
Results of Operations
(dollars in thousands)
2024Percent of Revenue2023Percent of RevenueAmountPercentage
Revenues
Revenues
RevenuesRevenues$38,883 $36,371 $2,512 6.9 %$43,071 $$38,883 $$4,188 10.8 10.8 %
Cost of revenueCost of revenue11,615 10,634 981 9.2 %Cost of revenue12,574 11,615 11,615 959 959 8.3 8.3 %
Gross profitGross profit27,268 70.1 %25,737 70.8 %1,531 5.9 %Gross profit30,497 70.8 70.8 %27,268 70.1 70.1 %3,229 11.8 11.8 %
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing5,241 13.5 %4,598 12.6 %643 14.0 %5,516 12.8 12.8 %5,241 13.5 13.5 %275 5.2 5.2 %
General and administrativeGeneral and administrative3,901 10.0 %3,282 9.0 %619 18.9 %General and administrative4,307 10.0 10.0 %3,901 10.0 10.0 %406 10.4 10.4 %
Research and developmentResearch and development1,155 3.0 %1,203 3.3 %(48)(4.0 %)Research and development1,244 2.9 2.9 %1,155 3.0 3.0 %89 7.7 7.7 %
Total operating expensesTotal operating expenses10,297 26.5 %9,083 25.0 %1,214 13.4 %Total operating expenses11,067 25.7 25.7 %10,297 26.5 26.5 %770 7.5 7.5 %
Income from operationsIncome from operations$16,971 43.6 %$16,654 45.8 %$317 1.9 %Income from operations$19,430 45.1 45.1 %$16,971 43.6 43.6 %$2,459 14.5 14.5 %

Revenue. The increase in revenue was due to higher realized prices and tohigher volumes. The increase in volumes in U.S. and Europe was primarily from our Colilert test products and related accessories used in coliform and E. coli testing, which included a lesser extent,benefit in the current period from order timing delayed from the prior quarter, as well as higher testing primarilyTecta instrument placements. The overall change in North America and Brazil. The impact offoreign currency movements decreased revenue growth by 2.9%. The impact of the acquisition completed during the third quarter of 2022exchange rates increased revenue growth by 1.6%0.2%.

Gross Profit. Gross profit increased due to higher revenue.revenue and a 70 basis point increase in the gross profit margin. Excluding the impact of foreign currency movements, theThe increase in the gross profit margin was primarily due to higher realized prices, partially offset by higher product and freight costs. The impact fromoverall change in foreign currency movements, exchange ratesincluding the impact of lower hedge gains in the current year compared to the prior year, decreased increased the gross profit margin by approximately 10 100 basis points.points.

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs. General and administrative expense increased primarily due to higher personnel-related costs and incremental costs associated with the acquisition that occurredan increase in the third quarter of 2022.bad debt expense. Research and development expense decreasedincreased primarily due to lowerhigher third-party costs. The overall change in foreign currency exchange rates resulted in a decrease inwas not significant to operating expenses growth by approximately 2%.expense growth.

3736


Livestock, Poultry and Dairy 

The following table presents the LPD segment results of operations:
For the Three Months Ended March 31,Change
For the Three Months Ended March 31,For the Three Months Ended March 31,Change
Results of Operations
(dollars in thousands)
Results of Operations
(dollars in thousands)
2023Percent of Revenue2022Percent of RevenueAmountPercentage
Results of Operations
(dollars in thousands)
2024Percent of Revenue2023Percent of RevenueAmountPercentage
Revenues
Revenues
RevenuesRevenues$29,208 $30,870 $(1,662)(5.4 %)$28,205 $$29,208 $$(1,003)(3.4 (3.4 %)
Cost of revenueCost of revenue14,155 11,323 2,832 25.0 %Cost of revenue12,971 14,155 14,155 (1,184)(1,184)(8.4 (8.4 %)
Gross profitGross profit15,053 51.5 %19,547 63.3 %(4,494)(23.0 %)Gross profit15,234 54.0 54.0 %15,053 51.5 51.5 %181 1.2 1.2 %
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing6,460 22.1 %5,568 18.0 %892 16.0 %6,739 23.9 23.9 %6,460 22.1 22.1 %279 4.3 4.3 %
General and administrativeGeneral and administrative4,201 14.4 %4,161 13.5 %40 1.0 %General and administrative4,308 15.3 15.3 %4,201 14.4 14.4 %107 2.5 2.5 %
Research and developmentResearch and development3,084 10.6 %3,081 10.0 %0.1 %Research and development3,321 11.8 11.8 %3,084 10.6 10.6 %237 7.7 7.7 %
Total operating expensesTotal operating expenses13,745 47.1 %12,810 41.5 %935 7.3 %Total operating expenses14,368 50.9 50.9 %13,745 47.1 47.1 %623 4.5 4.5 %
Income from operationsIncome from operations$1,308 4.5 %$6,737 21.8 %$(5,429)(80.6 %)Income from operations$866 3.1 3.1 %$1,308 4.5 4.5 %$(442)(33.8 (33.8 %)

Revenue. Revenue decreased primarily due to lower herd health screening volume related to pandemic closureslevels in China, as well as lower volumes in our food safety product distribution business in Brazil. These decreases wereAsia Pacific, partially offset by higher realized price gainsprices and higher volumesvolume increases in our ruminantthe U.S. and poultry testing.Europe. The unfavorable impact ofoverall change in foreign currency movementsexchange rates decreased revenue growth by 3.8%0.1%.

Gross ProfitThe decreaseincrease in gross profit was primarily due to lower sales volumes and a 1,180250 basis point decreaseincrease in the gross profit margin. The decrease increase in the gross profit margin iswas primarily due to higherlower product costs sales mix, and to a lesser extent, higher freight and distribution costs,realized prices, partially offset by higher realized prices.unfavorable sales mix. The The impact fromoverall change in foreign currency movementsexchange rates decreasedincreased the gross profit margin by approximately 29050 basis points, including the impact of hedge lossesgains in the current year compared to hedge gainslosses in the prior year.year.

Operating Expenses. Sales and marketing expense increased primarily due to increases in personnel-related and travel costs. General and administrative and researchexpense increased primarily due to higher bad debt expense. Research and development costs were relatively constant comparedexpense increased primarily due to the prior year.an increase in personnel-related costs. The overall change in foreign currency exchange rates resulted in a decrease inwas not significant to operating expenses growth by approximately 2%.

expense growth.
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Other

The following table presents the Other results of operations:
For the Three Months Ended March 31,Change
For the Three Months Ended March 31,For the Three Months Ended March 31,Change
Results of Operations
(dollars in thousands)
Results of Operations
(dollars in thousands)
2023Percent of Revenue2022Percent of RevenueAmountPercentage
Results of Operations
(dollars in thousands)
2024Percent of Revenue2023Percent of RevenueAmountPercentage
Revenues
Revenues
RevenuesRevenues$4,825 $8,124 $(3,299)(40.6 %)$3,534 $$4,825 $$(1,291)(26.8 (26.8 %)
Cost of revenueCost of revenue2,932 3,754 (822)(21.9 %)Cost of revenue2,431 2,932 2,932 (501)(501)(17.1 (17.1 %)
Gross profitGross profit1,893 39.2 %4,370 53.8 %(2,477)(56.7 %)Gross profit1,103 31.2 31.2 %1,893 39.2 39.2 %(790)(41.7 (41.7 %)
Operating expenses:Operating expenses:
Operating expenses:
Operating expenses:
Sales and marketing
Sales and marketing
Sales and marketingSales and marketing507 10.5 %466 5.7 %41 8.8 %295 8.3 8.3 %507 10.5 10.5 %(212)(41.8 (41.8 %)
General and administrativeGeneral and administrative748 15.5 %1,625 20.0 %(877)(54.0 %)General and administrative1,606 45.4 45.4 %748 15.5 15.5 %858 114.7 114.7 %
Research and developmentResearch and development268 5.6 %451 5.6 %(183)(40.6 %)Research and development236 6.7 6.7 %268 5.6 5.6 %(32)(11.9 (11.9 %)
Total operating expensesTotal operating expenses1,523 31.6 %2,542 31.3 %(1,019)(40.1 %)Total operating expenses2,137 60.5 60.5 %1,523 31.6 31.6 %614 40.3 40.3 %
Income from operationsIncome from operations$370 7.7 %$1,828 22.5 %$(1,458)(79.8 %)Income from operations$(1,034)(29.3 (29.3 %)$370 7.7 7.7 %$(1,404)(379.5 (379.5 %)

Revenue. The decrease in revenue was primarily due to lower sales of OPTI COVID-19 PCR testing products and services in the U.S., partially offset by higher volumes of our OPTI Medical instruments and consumables, internationally.partially offset by higher realized prices.

Gross Profit. Gross profit decreased due to lower sales volume and a 1,460an 800 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to sales mix with lower OPTI COVID-19 PCR testing volumes and higher product and freight costs.service costs, partially offset by higher realized prices. The overall change in foreign currency exchange rates had an immaterialdid not have a significant impact on the gross profit.profit margin.

Operating Expenses. Sales and marketing expense increaseddecreased primarily due to higher personnel-related costs. General and administrative expense decreasedincreased primarily due to lowerhigher foreign exchange losses on settlements of foreign currency denominated transactions as compared to the prior year. Foreign exchange gains and losses on settlements for all operating segments are reported within our Other segment. Research and development expense decreased primarily due to lower product development costs compared to investments in the development of infectious disease tests during the prior year.Other.

Non-Operating Items

Interest Expense and Income. Interest expenseexpense was $13.1 $7.9 million forfor the three months ended March 31, 2023, as2024, compared to $7.0$13.1 million for the same period in the prior year. The increasedecrease in interest expense was primarily the result of higher interest ratesdue to lower average debt levels and, to a lesser extent, higher average debt levels.lower interest rates. Interest income was $4.4 million for the three months ended March 31, 2024, compared to $0.4 million. This increase in interest income is primarily due to the increase in money market investments, as compared to the same period in the prior year.

Provision for Income Taxes. Our effective income tax rate was 20.3% for the three months ended March 31, 2024, compared to 20.0% for the three months ended March 31, 2023, compared to 19.7% for the three months ended March 31, 2022.2023. The increase in our effective tax rate was primarily driven by a decreasegeographical income mix, partially offset by an increase in the tax benefits fromrate benefit related to share-based compensation.
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39


Liquidity and Capital Resources  
  
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, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. As of March 31, 2023,2024, we had $111.4$397.4 million of cash and cash equivalents, as compared to $112.5$453.9 million as of December 31, 2022.2023. Working capital totaled $83.8$545.1 million as of March 31, 2023, as2024, compared to negative $134.3$543.7 million as of December 31, 2022. The change in working capital is primarily due to lower borrowings under our Credit Facility.2023. As of March 31, 2023,2024, we had a remaining borrowing availability of $817.0$998.5 million under our $1.25 billion Credit Facility, with $431.5$250.0 million in outstanding borrowings under the Credit Facility. The general availability of funds under our Credit Facility is reduced by $1.5 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.

We manage our worldwide cash requirements considering available funds among all of our subsidiaries. Our foreign cash and cash equivalents and marketable securities are generally available without restrictions to fund ordinary business operations outside the U.S. 
The following table presents cash and cash equivalents and marketable securities held domestically and by our foreign subsidiaries:
Cash, cash equivalents and marketable securities
(in thousands)
March 31, 2023December 31, 2022
Cash and cash equivalents

(dollars in thousands)
Cash and cash equivalents

(dollars in thousands)
March 31, 2024December 31, 2023
    
U.S.U.S.$2,725 $16,112 
ForeignForeign108,642 96,434 
TotalTotal$111,367 $112,546 
    
Total cash, cash equivalents, and marketable securities held in U.S. dollars by our foreign subsidiaries$6,860 $6,647 
Total cash and cash equivalents held in U.S. dollars by our foreign subsidiaries
Of the $111.4$397.4 million of cash and cash equivalents held as of March 31, 2023, greater than2024, approximately 99%$145.7 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks.banks, and $251.7 million was held in a U.S. government money market fund. As of December 31, 2023, of the $453.9 million of cash and cash equivalents held, $163.1 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks, and $290.8 million was held in a U.S. government money market fund. Cash and cash equivalents as of March 31, 2023,2024, included approximately USD $2.6$1.0 million ofin cash denominated in non-U.S. currencies held in countriesa country with currency control restrictions, which limit our ability to transfer funds outside of the country in which they are held. The currency control restricted cash is generally available for use within the country where it is held.

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The following table presents additional key information concerning working capital: 
For the Three Months Ended
March 31, 2023December 31, 2022September 30, 2022June 30, 2022March 31, 2022
For the Three Months EndedFor the Three Months Ended
March 31, 2024March 31, 2024December 31, 2023September 30, 2023June 30, 2023March 31, 2023
  
Days sales outstanding (1)
Days sales outstanding (1)
42.9 43.4 43.4 43.2 42.0 
Days sales outstanding (1)
Days sales outstanding (1)
Inventory turns (2)
Inventory turns (2)
1.3 1.3 1.3 1.5 1.6 
(1)     Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.
(2)     Inventory turns represent inventory-related cost of product revenue for the 12 months preceding each quarter-end divided by the average inventory balances at the beginning and end of each quarter.

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Sources and Uses of Cash 

The following table presents cash provided (used):
For the Three Months Ended March 31,
(in thousands)20232022Dollar Change
For the Three Months Ended March 31,For the Three Months Ended March 31,
(dollars in thousands)(dollars in thousands)20242023Change
      
Net cash provided by operating activitiesNet cash provided by operating activities$183,912 $114,706 $69,206 
Net cash used by investing activitiesNet cash used by investing activities(39,511)(41,838)2,327 
Net cash used by financing activitiesNet cash used by financing activities(146,081)(13,480)(132,601)
Net effect of changes in exchange rates on cashNet effect of changes in exchange rates on cash501 776 (275)
Net change in cash and cash equivalentsNet change in cash and cash equivalents$(1,179)$60,164 $(61,343)

Operating Activities. The increase in cashCash provided by operating activities of $69.2during the three months ended March 31, 2024, increased $14.7 million, was drivencompared to the same period in the prior year, primarily bydue to an increase in net income and changesless cash used for inventory, partially offset by an increase in cash used for other assets and liabilities.liabilities and for accounts receivable. The following table presents cash flow impacts from changes in operating assets and liabilities: 
For the Three Months Ended March 31,
(in thousands)20232022Dollar Change
For the Three Months Ended March 31,For the Three Months Ended March 31,
(dollars in thousands)(dollars in thousands)20242023Change
      
Accounts receivableAccounts receivable$(44,133)$(37,531)$(6,602)
InventoriesInventories(23,887)(18,854)(5,033)
Accounts payableAccounts payable3,327 (4,016)7,343 
Deferred revenueDeferred revenue(609)(937)328 
Other assets and liabilitiesOther assets and liabilities(5,307)(52,904)47,597 
Total change in cash due to changes in operating assets and liabilitiesTotal change in cash due to changes in operating assets and liabilities$(70,609)$(114,242)$43,633 

Cash used decreased due to changes in operating assets and liabilities during the three months ended March 31, 2023, as2024, compared to the same period in the prior year, by approximately $43.6increased $10.8 million. The decrease ofin cash used by inventories was primarily due to planned inventory growth in the prior year to mitigate supply chain risks and support demand. The increase in cash used for other assets and liabilities was primarily due to higher non-cash operating expenses recorded as accrued liabilities for personnel-related costs including lower annual employee incentive program payments in the current year,period, as compared to the same period in the prior year, and higher income taxes paid in the current year, compared to the same period in the prior year. These increases in cash used were partially offset by the $15$15.0 million milestone payment to license intellectual property made in the currentprior year. The increase in cash used by accounts receivable was primarily due to year over yearhigher revenue growth in revenues. The increase in cash providedduring the current period and, to a lesser extent, to extended payment terms negotiated by accounts payable was primarily due to timing of payments, as compared to the same period in the prior year.certain large customers.

We have historically experienced proportionally lower net cash flows from operating activities during the first quarter and proportionally higher cash flows from operating activities for the remainder of the year driven primarily by payments related to annual employee incentive programs in the first quarter following the year for which the bonuses were earned.

Investing Activities. Cash used by investing activities was $39.5$106.9 million forduring the three months ended March 31, 2023, as2024, compared to $41.8$39.5 million for the same period in the prior year. The decreaseincrease in cash used by investing activities was primarily due to the acquisition of intangible assets in the prior year, partially offset by higher purchases of property equipmenta software business in the current year as we continue construction of our facility in Scarborough, Maine.year.

40


Our total capital expenditure planoutlook for 20232024 is estimated to be approximately $180.0$180 million, which includes capital investments to support growth in manufacturing and operations facilities and in customer-facing software.software development.

Financing Activities. Cash used by financing activities was $146.1$144.1 million forduring the three months ended March 31, 2023, as2024, compared to $13.5$146.1 million of cash used for the same period in the prior year. The increasedecrease in cash used by financing activities was primarily due to $147.5 million cash used forno net borrowings or repayments under our Credit Facility in the current year, compared to borrowingsrepayments of $326.5$147.5 million under our Credit Facility partly offset by cash used to pay off our $75.0 million 2022 Series A Notes in the prior year, as well as higher proceeds from exercises of stock options in the current year. The increaseThese comparative increases in cash used by financing activities was partlywere partially offset by $266.3$154.8 million cash used to repurchase our common stock in the prior year.

During the three months ended March 31, 2023, we did not purchase any sharesof repurchases of our common stock in the open market. Duringcurrent year, compared to no repurchases in the three months ended March 31, 2022, we purchased $266.3 million of shares of our common stock. We
41


prior year.
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. 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.

Under our Credit Facility, the net borrowing activity during the three months ended March 31, 2023,2024, as compared to the same period in the prior year, decreasedincreased cash $147.5 million. As of March 31, 2023,2024, we had $431.5$250.0 million in outstanding borrowings under the Credit Facility. The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under the 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.

The 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, and certain restrictive agreements. The financial covenant is a consolidated leverage ratio test.

In February 2022,During the three months ended March 31, 2024, we paidpurchased $154.8 million of shares of our common stock. During the three months ended March 31, 2023, we purchased no shares of our common stock. 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. 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.

The aggregate principal amounts of our 2024 Series B Notes will become due and payable on July 21, 2024, and we anticipate paying off our 2024 Series B Notes for $75.0 million 2022 Series A Noteswhen due in July 2024 with available cash provided by operations and financing activity. on hand.

Should we elect to prepay any of our senior notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company, the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the senior notes. The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, each of 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 ERISA, the failure to pay specified indebtedness, and cross-acceleration to specified indebtedness.indebtedness, and a change of control default.

Effect of Currency Translation on Cash. The net effect of changes in foreign currency exchange rates is related to changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries. These changes will fluctuate for each period presented as the value of the U.S. dollar relative to the value of foreign currencies changes. A currency’s value depends on many factors, including interest rates and the issuing governments’ debt levels and strength of economy.

Off-Balance Sheet Arrangements. We have no off-balance sheet arrangements or variable interest entities, except for letters of credit and third-party guarantees.

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Financial Covenant. The sole financial covenant of our Credit Facility and Senior Note Agreements is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation and amortization, non-recurring transaction expenses incurred in connection with acquisitions, share-based compensation expense, and certain other non-cash losses and charges (“Adjusted EBITDA”), as defined in the Senior Note Agreement and Credit Facility, not to exceed 3.5-to-1. As of March 31, 2023,2024, we were in compliance with such covenant. The following details our consolidated leverage ratio calculation:
(dollars in thousands)Twelve Months Ended
Trailing 12 Months Adjusted EBITDA:March 31, 20232024
 
Net income attributable to stockholders (as reported)$699,178866,567 
Interest expense45,98936,365 
Provision for income taxes186,991222,400 
Depreciation and amortization113,720116,481 
Acquisition-related expense585288 
Share-based compensation expense52,52760,209 
Extraordinary and other non-recurring non-cash charges1,734 
Adjusted EBITDA$1,098,9901,304,044 
 
(dollars in thousands)
Debt to Adjusted EBITDA Ratio:March 31, 20232024
 
Line of Credit facility$431,500250,000 
Current and long-term portions of long-term debt771,348695,776 
Total debt1,202,848945,776 
Acquisition-related contingent consideration payable1,6634,687 
Financing leases— 
Deferred financing costs382287 
Gross debt$1,204,893950,750 
Gross debt to Adjusted EBITDA ratio1.100.73 
Less: Cash and cash equivalents$111,367397,433 
Net debt$1,093,526553,317 
Net debt to Adjusted EBITDA ratio1.000.42

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. 

Other Commitments, Contingencies and Guarantees 

Significant commitments, contingencies, and guarantees as of March 31, 2023,2024, are described in Note 16 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk 
 
For quantitative and qualitative disclosures about market risk affecting us, refer to the section under the heading “Part II. Item 7A. Quantitative and Qualitative Disclosure About Market Risk” of our 20222023 Annual Report. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the market risks described in our 20222023 Annual Report, except for the impact of foreign exchange rates, as discussed below. 

Foreign Currency Exchange Impacts. Approximately 21% of our consolidated revenue was derived from products manufactured in the U.S. and sold internationally in local currencies for the three months ended March 31, 2023,2024, as compared to 23%approximately 21% for the three months ended March 31, 2022.2023. Strengthening of the U.S. dollar exchange rate relative to other currencies has a negative impact on our revenues derived in currencies other than the U.S. dollar and on profits of products manufactured in the U.S. and sold internationally, and a weakening of the U.S. dollar has the opposite effect. Similarly, to the extent that the U.S. dollar is stronger in current or future periods relative to the exchange rates in effect in the corresponding prior periods, our growth rate will be negatively affected. The impact of foreign currency denominated costs and expenses and foreign currency denominated supply contracts partlypartially offsets this exposure. Additionally, our designated hedges of intercompany inventory purchases and sales help delay the impact of certain exchange rate fluctuations on non-U.S. dollar denominated revenues.

Our foreign currency exchange impacts on operating results are comprised of three components: 1) local currency revenues and expenses; 2) the impact of hedge contracts; and 3) intercompany and monetary balances for our subsidiaries that are denominated in a currency that is different from the functional currency used by each subsidiary.

The following table presents the estimated foreign currency exchange impact on our revenues, operating profit, and diluted earnings per share for the current period and as compared to the respective prior-year period:
For the Three Months Ended
March 31,
(in thousands, except per share amounts)20232022
  
Revenue impact$(18,350)$(15,064)
Operating profit impact, excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions$(10,436)$(7,939)
Hedge gains - current period335 2,236 
Exchange (losses) on settlements of foreign currency denominated transactions - current period(82)(775)
Operating profit impact - current period$(10,183)$(6,478)
Hedge (gains) losses - prior period(2,236)2,430 
Exchange losses on settlement of foreign currency denominated transactions - prior period775 70 
Operating profit impact - as compared to prior period$(11,644)$(3,978)
Diluted earnings per share impact - as compared to prior period$(0.11)$(0.04)

For the Three Months Ended
March 31,
(in thousands, except per share amounts)20242023
  
Revenue increase (decrease)$247 $(18,350)
Operating profit increase (decrease), excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions$173 $(10,436)
Hedge gains - current period810 335 
Exchange (losses) on settlements of foreign currency denominated transactions - current period(933)(82)
Operating profit increase (decrease) - current period$50 $(10,183)
Hedge (gains) losses - prior period(335)(2,236)
Exchange losses on settlement of foreign currency denominated transactions - prior period82 775 
Operating profit decrease - as compared to prior period$(203)$(11,644)
Diluted earnings per share decrease - as compared to prior period$ $(0.11)
At our current foreign currency exchange rate assumptions, we anticipate the effect of a weaker U.S. dollaryear-over-year changes for the remainder of the year, as compared to the respective prior-year period, will have a netreduce our revenues, operating profit, and diluted earnings per share by approximately $36 million, $10 million, and $0.09 per share, respectively. These unfavorable impact oncurrency impacts to our operating resultsprofit and diluted earnings per share include net year-over-year impacts of foreign currency hedging activity, which is expected to increase our total operating profit by approximately $8 million and $0.08 per share for the remainder of the year ending December 31, 2023 by increasing our revenues by approximately $12 million, and decreasing our operating profit and diluted earnings per share by approximately $14 million and $0.13 per share, respectively. This unfavorable year-over-year currency impact includes foreign currency hedging activity, which is expected to decrease our total operating profit by approximately $20 million and $0.18 per share for the remainder of the year ended December 31, 2023.2024. The actual impact of changes in the value of the U.S. dollar against foreign currencies in which we transact may materially differ from our expectations described above. The above estimates assume that the value of the U.S. dollar will reflect the euro at $1.08,$1.05, the British pound at $1.23,$1.21, the Canadian dollar at $0.73,$0.72, and the Australian dollar at $0.66;$0.63; and the Japanese yen at ¥135,¥157, the Chinese renminbi at RMB 6.99,7.35, and the Brazilian real at R$5.145.28 relative to the U.S. dollar for the remainder of 2023.2024.

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Based on projected revenues and expenses for the remainder of 2023,2024, excluding the impact of intercompany and trade balances denominated in currencies other than the functional subsidiary currencies, we project a 1% strengthening of the U.S. dollar would reduce revenue by approximately $9.0$9 million and operating income by approximately $2.5$3 million, net of hedge positions.

Interest Rate ImpactsRisk and Effects of Inflation:. We entered into an interest rate swap to manage the effect of variable interest obligations on amounts borrowed under the terms of the Credit Facility. Beginning on March 31, 2023, the variable interest rate associated with $250.0 million of borrowings outstanding under the Credit Facility became effectively fixed at 3.9%, plus the applicable credit spread, through October 20, 2025. Borrowings outstanding under the Credit Facility at March 31, 20232024, were $431.5$250.0 million. We have designated the interest rate swap as a cash flow hedge. For more information regarding our interest rate swap, refer to “Part I, Item 1. Financial Statements, Note 19. HedgeHedging Instruments.”

During the three months ended March 31, 2024, we experienced inflationary pressure on our operating costs and we expect to continue to face higher costs for labor, commodities, energy, and transportation, as well as increased prices from suppliers during the remainder of 2024. We may not be able to offset these higher costs through productivity initiatives and price increases, which may materially and adversely affect our business, results of operations, and financial condition. Any price increases we may impose may lead to declines in sales volume or loss of business, if competitors do not similarly adjust their prices, or customers refuse to purchase at the higher prices.

Item 4. Controls and Procedures 
 
Disclosure Controls and Procedures 
 
Our management is responsible for establishing and maintaining disclosure controls and procedures, as defined by the SEC in its Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as amended (the “Exchange Act”). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2023,2024, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. 
 
Changes in Internal Control Over Financial Reporting 
 
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2023,2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 


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PART II — OTHER INFORMATION 
 
Item 1. Legal Proceedings

Due to the nature of our activities, we are at times subject to pending and threatened legal actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such currently pending or threatened matters is not expected to have a material effect on our results of operations, financial condition, or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that our results of operations, financial condition, or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions.

Item 1A. Risk Factors 
 
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in “Part I. Item 1A. Risk Factors” in our 20222023 Annual Report, which could materially affect our business, financial condition, or future results. There have been no material changes from the risk factors previously disclosed in the 20222023 Annual Report. The risks described in our 20222023 Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 
 
During the three months ended March 31, 2023,2024, we repurchased shares of common stock as described below:  
PeriodTotal Number of Shares Purchased
(a) 
Average Price Paid per Share
(b)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(c)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(d)
    
January 1 to January 31, 2023— $— — 3,029,242 
February 1 to February 28, 202319,055 $503.65 — 3,029,242 
March 1 to March 31, 2023— $— — 3,029,242 
Total19,055 (2)— 3,029,242 
PeriodTotal Number of Shares Purchased
(a) 
Average Price Paid per Share (3)
(b)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)
(c)
Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1)
(d)
    
January 1 to January 31, 2024— $— — 2,874,308 
February 1 to February 29, 202478,575 $567.65 60,400 2,813,908 
March 1 to March 31, 2024242,925 $546.21 242,923 2,570,985 
Total321,500 (2)303,323 2,570,985 

(1)On August 13, 1999,As of December 31, 2023, our Board of Directors had approved and announced the repurchase of up to 73 million shares of our common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program. The authorizationshare repurchase program was approved and announced on August 13, 1999, and the maximum number of shares that may be purchased under the share repurchase program has been increased by the Board of Directors on numerous occasions; most recently, on February 12, 2020, the maximum level of shares that may be repurchased under the program was increased from 68 million to 73 million shares.occasions. There is no specified expiration date for this share repurchase program. There were no other repurchase programs outstanding during the three months ended March 31, 2023,2024, and no share repurchase programs expired during the period. There were no303,323 share repurchases made during the three months ended March 31, 2023,2024, in transactions made pursuant to our share repurchase program.

(2)During the three months ended March 31, 2023,2024, we received 19,05518,177 shares of our common stock that were surrendered by employees in payment for the minimum required withholding taxes due on the vesting of restricted stock units and settlement of deferred stock units. In the above table, these shares are included in columns (a) and (b), but excluded from columns (c) and (d). These shares do not reduce the number of shares that may yet be purchased under the share repurchase program.

(3)Includes the nondeductible 1% excise tax for shares repurchased in the open market.

The total shares repurchased include shares surrendered for employee statutory tax withholding. 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.

Item 5. Other Information

Rule 10b5-1 Trading Plan Elections

During the three months ended March 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted, modified, or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as such terms are defined in Item 408(a) of Regulation S-K of the Securities Act of 1933).
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Item 6. Exhibits 
Exhibit No.Description
101The following financial and related information from IDEXX Laboratories, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023,2024, formatted in Inline eXtensible Business Reportable Language (iXBRL) includes: (i) the Condensed Consolidated Balance Sheet; (ii) the Condensed Consolidated Statement of Income; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statement of Changes in Stockholders' Equity; (v) the Condensed Consolidated Statement of Cash Flows; and, (vi) Notes to Consolidated Financial Statements.
104The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023,2024, formatted in Inline XBRL and contained in Exhibit 101.

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SIGNATURES 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
IDEXX LABORATORIES, INC.
/s/ Brian P. McKeon 
Date: May 2, 20231, 2024Brian P. McKeon
Executive Vice President, Chief Financial Officer and Treasurer
(Principal Financial Officer)

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