IDEXX Laboratories Inc.
11/02/2026 | Press release | Distributed by Public on 11/02/2026 15:29
Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)
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 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; critical accounting estimates; deductibility of goodwill; and inflation. 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, such as geopolitical instability (including wars, terrorist attacks, and armed conflicts), general economic uncertainty, changes in U.S. and other countries' tariff and trade policies, inflationary pressures, severe weather and other natural conditions, and supply chain 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 2025 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 filings 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 risks 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 2025 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 September 30. 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 manufacture and sell human medical point-of-care diagnostic products. Our primary products and services are:
•Point-of-care veterinary diagnostic products, comprised of instruments, consumables, and rapid assay test kits;
•Veterinary reference laboratory diagnostic and consulting services;
•Practice management systems, software and diagnostic imaging systems and services used by veterinarians;
•Health monitoring, biological materials testing, laboratory diagnostic instruments, and services used by the biomedical research community;
•Diagnostic and health-monitoring products for livestock, poultry, and dairy; and
•Products that test water for certain microbiological contaminants.
Description of Operating Segments. We operate primarily through three reportable segments: Companion Animal Group ("CAG"), Water quality products ("Water"), and Livestock, Poultry and Dairy ("LPD"). CAG provides diagnostics and information management products and services for the companion animal veterinary industry and the biomedical research community. Water provides testing solutions and related instrumentation 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 measure the quality and safety of milk. Our Other non-reportable segment results combine and present our human medical diagnostic business with our out-licensing arrangement because they do not meet the quantitative or qualitative thresholds for reportable segments.
Global Conflicts. The current macroeconomic environment and ongoing global conflicts, including hostilities in the Middle East, have contributed to volatility in global energy markets and higher fuel prices, and could further disrupt transportation networks and supply chains, particularly in the Asia Pacific and European regions. Higher fuel prices increase our freight and distribution costs. These conditions may also cause other impacts on our operating costs and consumer availability and demand for our products and services, and contribute to foreign currency exchange rate volatility.
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. Intellectual Property, Including Patents and Licenses" and "Part II. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our 2025 Annual Report for additional information regarding trends in companion animal healthcare, supply chain and logistics challenges, economic conditions, changes in tariff and trade policies, distributor purchasing and inventories, 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 disclosures 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 and nine months ended September 30, 2026, are consistent with those discussed in our 2025 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. Accounting Policies" 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 includes organic revenue growth, and references in this analysis and discussion to "revenue," "revenues," or "revenue growth" apply equally to revenue growth reported in accordance with U.S. GAAP and to "organic revenue growth." Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the three and nine months ended September 30, 2026, 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.
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 period and the comparable prior year period to foreign currency denominated revenue for the prior year period.
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, processes, and outputs are present, consistent with ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business." We do not consider acquired assets to be a business if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. A typical acquisition that we do not consider a business is a customer relationship asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. Revenue from these customers acquired is included in organic revenue growth because we believe the efforts required to convert and retain these acquired customers are similar in nature to our efforts to obtain and retain our existing customer base.
Segment Income from Operations. We report segment income from operations in our discussion of the results of the operations of our segments below. Segment income from operations is a non-GAAP financial measure that adjusts for the impact of foreign currency transaction gains and losses and should be considered in addition to, and not as a replacement for, or superior measure to, income from operations. We exclude foreign currency transaction gains and losses for each reportable segment (CAG, Water, and LPD) from segment income from operations and report the full amount of foreign currency transaction gains and losses in Other. We believe that reporting segment income from operations provides supplemental analysis to help investors further evaluate each reportable segment's business performance by excluding foreign currency transaction gains and losses, which are centrally managed by our corporate treasury function and which we do not consider relevant for assessing the results of each reportable segment's operations.
The reconciliation of these non-GAAP financial measures is as follows:
|
(in thousands)
|
For the Three Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| Income from Operations | Impact from Foreign Currency | Segment and Other Income from Operations | Income from Operations | Impact from Foreign Currency | Segment and Other Income from Operations | |||||||||||||||||||||||||||||||||
| CAG | $ | 370,216 | $ | (713) | $ | 369,503 | $ | 327,095 | $ | 1,376 | $ | 328,471 | ||||||||||||||||||||||||||
| Water | 29,624 | (50) | 29,574 | 26,311 | 104 | 26,415 | ||||||||||||||||||||||||||||||||
| LPD | 1,948 | (49) | 1,899 | 364 | 107 | 471 | ||||||||||||||||||||||||||||||||
| Other | 560 | 812 | 1,372 | 1,076 | (1,587) | (511) | ||||||||||||||||||||||||||||||||
| Total | $ | 402,348 | $ | - | $ | 402,348 | $ | 354,846 | $ | - | $ | 354,846 | ||||||||||||||||||||||||||
|
(in thousands)
|
For the Nine Months Ended September 30, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| Income from Operations | Impact from Foreign Currency | Segment and Other Income from Operations | Income from Operations | Impact from Foreign Currency | Segment and Other Income from Operations | |||||||||||||||||||||||||||||||||
| CAG | $ | 1,100,450 | $ | (109) | $ | 1,100,341 | $ | 969,649 | $ | 2,454 | $ | 972,103 | ||||||||||||||||||||||||||
| Water | 83,525 | (8) | 83,517 | 71,691 | 183 | 71,874 | ||||||||||||||||||||||||||||||||
| LPD | 5,605 | (5) | 5,600 | (98) | 189 | 91 | ||||||||||||||||||||||||||||||||
| Other | 920 | 122 | 1,042 | 3,184 | (2,826) | 358 | ||||||||||||||||||||||||||||||||
| Total | $ | 1,190,500 | $ | - | $ | 1,190,500 | $ | 1,044,426 | $ | - | $ | 1,044,426 | ||||||||||||||||||||||||||
Results of Operations
Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025
Total Company. The following table presents total Company revenue by operating segment:
| For the Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
|
Net Revenue
(dollars in thousands)
|
2026 | 2025 | Dollar Change |
Reported Revenue Growth (1)
|
Percentage Change from Currency | Percentage Change from Acquisitions |
Organic Revenue Growth (1)
|
|||||||||||||||||||||||||||||||||||||
| CAG | $ | 1,115,968 | $ | 1,012,534 | $ | 103,434 | 10.2 | % | (0.2 | %) | 0.1 | % | 10.4 | % | ||||||||||||||||||||||||||||||
| United States | 725,876 | 668,418 | 57,458 | 8.6 | % | - | 0.1 | % | 8.5 | % | ||||||||||||||||||||||||||||||||||
| International | 390,092 | 344,116 | 45,976 | 13.4 | % | (0.7 | %) | - | 14.0 | % | ||||||||||||||||||||||||||||||||||
| Water | $ | 58,836 | $ | 54,297 | $ | 4,539 | 8.4 | % | 0.6 | % | - | 7.8 | % | |||||||||||||||||||||||||||||||
| United States | 31,297 | 28,070 | 3,227 | 11.5 | % | - | - | 11.5 | % | |||||||||||||||||||||||||||||||||||
| International | 27,539 | 26,227 | 1,312 | 5.0 | % | 1.1 | % | - | 3.9 | % | ||||||||||||||||||||||||||||||||||
| LPD | $ | 34,828 | $ | 33,944 | $ | 884 | 2.6 | % | (0.4 | %) | - | 3.0 | % | |||||||||||||||||||||||||||||||
| United States | 7,651 | 6,861 | 790 | 11.5 | % | - | - | 11.5 | % | |||||||||||||||||||||||||||||||||||
| International | 27,177 | 27,083 | 94 | 0.3 | % | (0.5 | %) | - | 0.8 | % | ||||||||||||||||||||||||||||||||||
| Other | $ | 4,605 | $ | 4,464 | $ | 141 | 3.2 | % | - | - | 3.2 | % | ||||||||||||||||||||||||||||||||
| Total Company | $ | 1,214,237 | $ | 1,105,239 | $ | 108,998 | 9.9 | % | (0.2 | %) | 0.1 | % | 10.0 | % | ||||||||||||||||||||||||||||||
| United States | 766,582 | 705,040 | 61,542 | 8.7 | % | - | 0.1 | % | 8.6 | % | ||||||||||||||||||||||||||||||||||
| International | 447,655 | 400,199 | 47,456 | 11.9 | % | (0.5 | %) | - | 12.4 | % | ||||||||||||||||||||||||||||||||||
(1)Reported revenue growth and organic revenue growth may not recalculate due to rounding.
Total Company Revenue. The increase in revenue primarily reflected growth in CAG Diagnostics recurring revenue, including benefits from higher volumes and higher realized prices. Volume growth was supported by high customer retention rates with increased testing by existing customers, including our expanded menu of available tests, as well as new customer additions. Instrument revenue was relatively constant primarily due to higher instrument placements offset with lower price realization. Higher volumes and realized prices in recurring veterinary software subscriptions, services, and diagnostic imaging also contributed to revenue growth. Revenue growth in our Water and LPD businesses were primarily due to higher realized prices and volumes. The impact on revenue from our acquisition of CoVet on September 15, 2026, was immaterial for the period. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
The following table presents our consolidated Company results of operations:
| For the Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Total Company - Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 1,214,237 | $ | 1,105,239 | $ | 108,998 | 9.9 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 449,939 | 421,885 | 28,054 | 6.6 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 764,298 | 62.9 | % | 683,354 | 61.8 | % | 80,944 | 11.8 | % | |||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 169,850 | 14.0 | % | 159,157 | 14.4 | % | 10,693 | 6.7 | % | |||||||||||||||||||||||||||||
| General and administrative | 123,283 | 10.2 | % | 105,936 | 9.6 | % | 17,347 | 16.4 | % | |||||||||||||||||||||||||||||
| Research and development | 68,817 | 5.7 | % | 63,415 | 5.7 | % | 5,402 | 8.5 | % | |||||||||||||||||||||||||||||
| Total operating expenses | 361,950 | 29.8 | % | 328,508 | 29.7 | % | 33,442 | 10.2 | % | |||||||||||||||||||||||||||||
| Income from operations | $ | 402,348 | 33.1 | % | $ | 354,846 | 32.1 | % | $ | 47,502 | 13.4 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 110 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from higher IDEXX VetLab consumable volume growth and the business mix impact associated with proportionally higher revenue, operational productivity improvements, and net price realization which offset inflationary costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 20 basis points, including the impact of hedge gains during the current period compared to hedge losses in the prior period.
Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, including costs to support our commercial expansion, and higher travel expenses. General and administrative expense increased primarily due to higher consulting and professional services fees, higher compensation and benefits expenses, and higher depreciation and amortization related to technology and infrastructure investments. Research and development expense increased primarily due to higher personnel-related and project costs. Changes in foreign currency exchange rates decreased operating expense growth by less than 1%.
| Companion Animal Group | ||
The following table presents revenue by product and service category for CAG:
| For the Three Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
|
Net Revenue
(dollars in thousands)
|
2026 | 2025 | Dollar Change |
Reported Revenue Growth (1)
|
Percentage Change from Currency | Percentage Change from Acquisitions |
Organic Revenue Growth (1)
|
|||||||||||||||||||||||||||||||||||||
| CAG Diagnostics recurring revenue: | $ | 967,351 | $ | 873,273 | $ | 94,078 | 10.8 | % | (0.2 | %) | - | 11.0 | % | |||||||||||||||||||||||||||||||
| IDEXX VetLab consumables | 443,245 | 387,813 | 55,432 | 14.3 | % | (0.3 | %) | - | 14.6 | % | ||||||||||||||||||||||||||||||||||
| Rapid assay products | 89,135 | 88,638 | 497 | 0.6 | % | (0.2 | %) | - | 0.7 | % | ||||||||||||||||||||||||||||||||||
| Reference laboratory diagnostic and consulting services | 399,079 | 362,725 | 36,354 | 10.0 | % | (0.2 | %) | - | 10.2 | % | ||||||||||||||||||||||||||||||||||
| CAG diagnostics services and accessories | 35,892 | 34,097 | 1,795 | 5.3 | % | (0.1 | %) | - | 5.4 | % | ||||||||||||||||||||||||||||||||||
| CAG Diagnostics capital - instruments | 51,492 | 51,479 | 13 | - | (0.3 | %) | - | 0.4 | % | |||||||||||||||||||||||||||||||||||
| Veterinary software, services and diagnostic imaging systems | 97,125 | 87,782 | 9,343 | 10.6 | % | 0.1 | % | 0.7 | % | 9.9 | % | |||||||||||||||||||||||||||||||||
| Recurring revenue | 77,472 | 70,988 | 6,484 | 9.1 | % | 0.2 | % | 0.8 | % | 8.2 | % | |||||||||||||||||||||||||||||||||
| Systems and hardware | 19,653 | 16,794 | 2,859 | 17.0 | % | - | - | 17.0 | % | |||||||||||||||||||||||||||||||||||
| Net CAG revenue | $ | 1,115,968 | $ | 1,012,534 | $ | 103,434 | 10.2 | % | (0.2 | %) | 0.1 | % | 10.4 | % | ||||||||||||||||||||||||||||||
(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 sales volumes of IDEXX VetLab consumables and reference laboratory testing, as well as higher realized prices.
The increase in IDEXX VetLab consumables revenue was primarily due to higher volumes and higher realized prices. Volume gains were supported by increases in testing across major regions, reflecting growth in testing by existing customers, including sales of our expanded menu of available tests, and the benefits from 11% growth in our installed base of premium instruments. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
Rapid assay revenue increased from higher realized prices, largely offset by lower volumes primarily due to reduced point-of-care vector-borne disease testing volumes, and a shift of customers' pancreatic lipase testing to our CatalystTM instrument platform. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes across all major regions and higher realized prices. Volume growth was supported by increased testing by existing and new customers, including sales of our expanded menu of tests. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
CAG Diagnostics Capital - Instrument Revenue. Instrument revenue was relatively constant compared to the prior period with higher instrument placements, primarily from higher placements of our SediVue DxTM and IDEXX inVue DxTM Analyzers, offset by lower price realization due to program effects on pricing. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher subscription and integrated services volumes from our expanded software installed base and from higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging
system sales. The impact on revenue from our acquisition of CoVet on September 15, 2026, was immaterial for the period. Changes in foreign currency exchange rates did not have a significant impact on revenue growth.
The following table presents the CAG segment results of operations:
| For the Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 1,115,968 | $ | 1,012,534 | $ | 103,434 | 10.2 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 414,623 | 385,078 | 29,545 | 7.7 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 701,345 | 62.8 | % | 627,456 | 62.0 | % | 73,889 | 11.8 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 154,476 | 13.8 | % | 144,608 | 14.3 | % | 9,868 | 6.8 | % | |||||||||||||||||||||||||||||
| General and administrative | 113,403 | 10.2 | % | 95,498 | 9.4 | % | 17,905 | 18.7 | % | |||||||||||||||||||||||||||||
| Research and development | 63,963 | 5.7 | % | 58,879 | 5.8 | % | 5,084 | 8.6 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 331,842 | 29.7 | % | 298,985 | 29.5 | % | 32,857 | 11.0 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 369,503 | 33.1 | % | $ | 328,471 | 32.4 | % | $ | 41,032 | 12.5 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and an 80 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from higher IDEXX VetLab consumable volume growth and the business mix impact associated with proportionally higher revenue, operational productivity improvements, and net price realization which offset inflationary costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 10 basis points, including the impact of hedge gains during the current period compared to hedge losses in the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, including costs to support our commercial expansion, and higher travel expenses. General and administrative expense increased primarily due to higher consulting and professional services fees, higher compensation and benefits expenses, and higher depreciation and amortization related to technology and infrastructure investments. Research and development expense increased primarily due to higher personnel-related and project costs. Changes in foreign currency exchange rates decreased operating expense growth by less than 1%.
| Water | ||
The following table presents the Water segment results of operations:
| For the Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 58,836 | $ | 54,297 | $ | 4,539 | 8.4 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 16,122 | 16,240 | (118) | (0.7 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 42,714 | 72.6 | % | 38,057 | 70.1 | % | 4,657 | 12.2 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 7,303 | 12.4 | % | 6,431 | 11.8 | % | 872 | 13.6 | % | |||||||||||||||||||||||||||||
| General and administrative | 4,246 | 7.2 | % | 3,841 | 7.1 | % | 405 | 10.5 | % | |||||||||||||||||||||||||||||
| Research and development | 1,591 | 2.7 | % | 1,370 | 2.5 | % | 221 | 16.1 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 13,140 | 22.3 | % | 11,642 | 21.4 | % | 1,498 | 12.9 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 29,574 | 50.3 | % | $ | 26,415 | 48.6 | % | $ | 3,159 | 12.0 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes in the Americas. The increase in volumes benefited from higher demand for Colilert test products and related accessories used in coliform and E. coli testing. Changes in foreign currency exchange rates increased revenue growth by 0.6%.
Gross Profit. Gross profit increased due to higher revenue and a 250 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to higher realized prices, partially offset by inflationary costs including higher freight and distribution costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 50 basis points, including the impact of hedge gains during the current period compared to hedge losses in the prior period.
Segment Operating Expenses. Higher personnel-related costs contributed to increases in sales and marketing, general and administrative, and research and development expenses. Changes in foreign currency exchange rates did not have a significant impact on operating expense growth.
|
Livestock, Poultry and Dairy
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The following table presents the LPD segment results of operations:
| For the Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 34,828 | $ | 33,944 | $ | 884 | 2.6 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 16,518 | 17,999 | (1,481) | (8.2 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 18,310 | 52.6 | % | 15,945 | 47.0 | % | 2,365 | 14.8 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 7,939 | 22.8 | % | 7,898 | 23.3 | % | 41 | 0.5 | % | |||||||||||||||||||||||||||||
| General and administrative | 5,300 | 15.2 | % | 4,481 | 13.2 | % | 819 | 18.3 | % | |||||||||||||||||||||||||||||
| Research and development | 3,172 | 9.1 | % | 3,095 | 9.1 | % | 77 | 2.5 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 16,411 | 47.1 | % | 15,474 | 45.6 | % | 937 | 6.1 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 1,899 | 5.5 | % | $ | 471 | 1.4 | % | $ | 1,428 | 303.2 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher realized prices and increases in test volumes, particularly in the Americas. The increase in volumes was largely attributable to expanded testing and new customers, partially offset by declines in swine testing in Asia. Changes in foreign currency exchange rates decreased revenue growth by 0.4%.
Gross Profit. The increase in gross profit was primarily due to higher revenue and a 560 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to lower per-unit costs and higher realized prices, which offset inflationary costs and higher depreciation expense. Changes in foreign currency exchange rates increased the gross profit margin by approximately 200 basis points, including the impact of hedge gains during the current period compared to hedge losses in the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher travel costs, partially offset by lower personnel-related costs. General and administrative expense increased primarily due to project-related consulting costs and higher personnel-related costs. Research and development expense increased primarily due to higher consulting costs. Changes in foreign currency exchange rates did not have a significant impact on operating expenses.
Non-Operating Items
Interest Expense and Income. Interest expense was $7.5 million for the three months ended September 30, 2026, compared to $10.7 million for the same period during the prior year primarily due to lower average debt levels. Interest income was $1.0 million and $0.6 million for the three months ended September 30, 2026, and September 30, 2025, respectively.
Gain (Loss) on Equity Investments. For the three months ended September 30, 2026, we recognized realized and unrealized gains on an equity investment of $3.5 million.
Provision for Income Taxes. Our effective income tax rates were 20.6% and 20.4% for the three months ended September 30, 2026, and September 30, 2025, respectively. The increase, compared to the prior period, was primarily due to lower tax benefits from share-based compensation and higher international taxes on foreign earnings. These unfavorable impacts were partially offset by the favorable comparative impact from a prior-year reduction in our U.S. tax benefit associated with FDII that resulted from the acceleration of research and development deductions permitted under changes in U.S. tax law that were enacted in July 2025, and by lower state income tax expense.
We anticipate reductions in share-based compensation tax benefits during the three months ending December 31, 2026, compared to the same period in the prior year, which increases our future effective tax rate. The anticipated reduction in these future tax benefits is due to the elimination of the exception for certain compensation deduction limits as a result of the Tax Cuts and Jobs Act of 2017.
Results of Operations
Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025
Total Company. The following table presents total Company revenue by operating segment:
| For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
|
Net Revenue
(dollars in thousands)
|
2026 | 2025 | Dollar Change |
Reported Revenue Growth (1)
|
Percentage Change from Currency | Percentage Change from Acquisitions |
Organic Revenue Growth (1)
|
|||||||||||||||||||||||||||||||||||||
| CAG | $ | 3,288,256 | $ | 2,954,813 | $ | 333,443 | 11.3 | % | 1.1 | % | - | 10.2 | % | |||||||||||||||||||||||||||||||
| United States | 2,151,668 | 1,976,804 | 174,864 | 8.8 | % | - | - | 8.8 | % | |||||||||||||||||||||||||||||||||||
| International | 1,136,588 | 978,009 | 158,579 | 16.2 | % | 3.3 | % | - | 13.0 | % | ||||||||||||||||||||||||||||||||||
| Water | $ | 167,665 | $ | 150,619 | $ | 17,046 | 11.3 | % | 2.0 | % | - | 9.3 | % | |||||||||||||||||||||||||||||||
| United States | 87,311 | 77,663 | 9,648 | 12.4 | % | - | - | 12.4 | % | |||||||||||||||||||||||||||||||||||
| International | 80,354 | 72,956 | 7,398 | 10.1 | % | 4.0 | % | - | 6.2 | % | ||||||||||||||||||||||||||||||||||
| LPD | $ | 102,492 | $ | 94,302 | $ | 8,190 | 8.7 | % | 2.3 | % | - | 6.3 | % | |||||||||||||||||||||||||||||||
| United States | 20,643 | 18,416 | 2,227 | 12.1 | % | - | - | 12.1 | % | |||||||||||||||||||||||||||||||||||
| International | 81,849 | 75,886 | 5,963 | 7.9 | % | 2.9 | % | - | 5.0 | % | ||||||||||||||||||||||||||||||||||
| Other | $ | 13,229 | $ | 13,389 | $ | (160) | (1.2 | %) | - | - | (1.2 | %) | ||||||||||||||||||||||||||||||||
| Total Company | $ | 3,571,642 | $ | 3,213,123 | $ | 358,519 | 11.2 | % | 1.1 | % | - | 10.0 | % | |||||||||||||||||||||||||||||||
| United States | 2,264,782 | 2,077,770 | 187,012 | 9.0 | % | - | - | 9.0 | % | |||||||||||||||||||||||||||||||||||
| International | 1,306,860 | 1,135,353 | 171,507 | 15.1 | % | 3.3 | % | - | 11.9 | % | ||||||||||||||||||||||||||||||||||
(1)Reported revenue growth and organic revenue growth may not recalculate due to rounding.
Total Company Revenue. The increase in revenue primarily reflected growth in CAG Diagnostics recurring revenue, including benefits from higher volumes and higher realized prices. Volume growth was supported by high customer retention rates with increased testing by existing customers, including our expanded menu of available tests, as well as new customer additions. Lower instrument revenue was primarily due to program effects on pricing. Higher volumes and realized price gains in recurring veterinary software, services, and diagnostic imaging also contributed to revenue growth. Revenue growth in our Water business was primarily due to higher realized prices and volumes. The increase in LPD revenue was primarily due to higher volumes and higher realized prices. Changes in foreign currency exchange rates increased revenue growth by 1.1%.
The following table presents our consolidated Company results of operations:
| For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Total Company - Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 3,571,642 | $ | 3,213,123 | $ | 358,519 | 11.2 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 1,305,518 | 1,211,658 | 93,860 | 7.7 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 2,266,124 | 63.4 | % | 2,001,465 | 62.3 | % | 264,659 | 13.2 | % | |||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 516,377 | 14.5 | % | 476,487 | 14.8 | % | 39,890 | 8.4 | % | |||||||||||||||||||||||||||||
| General and administrative | 359,213 | 10.1 | % | 296,178 | 9.2 | % | 63,035 | 21.3 | % | |||||||||||||||||||||||||||||
| Research and development | 200,034 | 5.6 | % | 184,374 | 5.7 | % | 15,660 | 8.5 | % | |||||||||||||||||||||||||||||
| Total operating expenses | 1,075,624 | 30.1 | % | 957,039 | 29.8 | % | 118,585 | 12.4 | % | |||||||||||||||||||||||||||||
| Income from operations | $ | 1,190,500 | 33.3 | % | $ | 1,044,426 | 32.5 | % | $ | 146,074 | 14.0 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 110 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from higher IDEXX VetLab consumable volume growth and the business mix impact associated with proportionally higher revenue; operational productivity improvements, partially offset by higher depreciation cost; and net price realization, which offset inflationary costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 20 basis points, including the impact of lower hedge gains during the current period compared to the prior period.
Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, including costs to support our commercial expansion, and higher travel expenses. General and administrative expense increased primarily due to higher personnel-related costs, higher consulting and professional services fees, a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in 2025, higher depreciation and amortization related to technology and infrastructure investments, and a $5 million expense for the full impairment of an equity investment in the first quarter of the current year. Research and development expense increased primarily due to higher personnel-related and project costs. Changes in foreign currency exchange rates increased operating expense growth by less than 1%.
Companion Animal Group
The following table presents revenue by product and service category for CAG:
| For the Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||||
|
Net Revenue
(dollars in thousands)
|
2026 | 2025 | Dollar Change |
Reported Revenue Growth (1)
|
Percentage Change from Currency | Percentage Change from Acquisitions |
Organic Revenue Growth (1)
|
|||||||||||||||||||||||||||||||||||||
| CAG Diagnostics recurring revenue: | $ | 2,862,377 | $ | 2,557,535 | $ | 304,842 | 11.9 | % | 1.1 | % | - | 10.8 | % | |||||||||||||||||||||||||||||||
| IDEXX VetLab consumables | 1,286,164 | 1,107,704 | 178,460 | 16.1 | % | 1.6 | % | - | 14.5 | % | ||||||||||||||||||||||||||||||||||
| Rapid assay products | 275,648 | 272,912 | 2,736 | 1.0 | % | 0.4 | % | - | 0.6 | % | ||||||||||||||||||||||||||||||||||
| Reference laboratory diagnostic and consulting services | 1,191,987 | 1,074,825 | 117,162 | 10.9 | % | 0.8 | % | - | 10.1 | % | ||||||||||||||||||||||||||||||||||
| CAG diagnostics services and accessories | 108,578 | 102,094 | 6,484 | 6.4 | % | 1.5 | % | - | 4.9 | % | ||||||||||||||||||||||||||||||||||
| CAG Diagnostics capital - instruments | $ | 141,115 | $ | 142,073 | $ | (958) | (0.7 | %) | 0.8 | % | - | (1.4 | %) | |||||||||||||||||||||||||||||||
| Veterinary software, services and diagnostic imaging systems: | $ | 284,764 | $ | 255,205 | $ | 29,559 | 11.6 | % | 0.5 | % | 0.2 | % | 10.9 | % | ||||||||||||||||||||||||||||||
| Recurring revenue | 227,351 | 205,735 | 21,616 | 10.5 | % | 0.6 | % | 0.3 | % | 9.7 | % | |||||||||||||||||||||||||||||||||
| Systems and hardware | 57,413 | 49,470 | 7,943 | 16.1 | % | 0.2 | % | - | 15.8 | % | ||||||||||||||||||||||||||||||||||
| Net CAG revenue | $ | 3,288,256 | $ | 2,954,813 | $ | 333,443 | 11.3 | % | 1.1 | % | - | 10.2 | % | |||||||||||||||||||||||||||||||
(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 sales volumes of IDEXX VetLab consumables and reference laboratory testing, as well as higher realized prices. Changes in foreign currency exchange rates increased revenue growth by 1.1%.
The increase in IDEXX VetLab consumables revenue was primarily due to higher volumes and higher realized prices. Volume gains were supported by increases in testing across major regions, reflecting growth in testing by existing customers, including sales of our expanded menu of available tests, and the benefits from 11% growth in our installed base of premium instruments. Changes in foreign currency exchange rates increased revenue growth by 1.6%.
Rapid assay revenue increased from higher realized prices, moderated by lower volumes primarily due to reduced point-of-care vector-borne disease testing volumes, and a shift of customers' pancreatic lipase testing to our Catalyst instrument platform. Changes in foreign currency exchange rates increased revenue growth by 0.4%.
The increase in reference laboratory diagnostic and consulting services revenue was due to higher testing volumes across all major regions and higher realized prices. Volume growth was supported by increased testing by existing and new customers, including sales of our expanded menu of tests. The impact of changes in foreign currency exchange rates increased revenue growth by 0.8%.
CAG Diagnostics Capital - Instrument Revenue. The decrease in instrument revenue was primarily due to program effects on pricing, partially offset by instrument sales mix. Changes in foreign currency exchange rates increased revenue growth by 0.8%.
Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in recurring revenue was primarily due to higher subscription and integrated services volumes from our expanded SaaS installed base and from higher realized prices. The increase in our systems and hardware revenue was primarily due to higher diagnostic imaging system sales. Changes in foreign currency exchange rates increased revenue growth by 0.5%. The impact on revenue from our acquisition of CoVet on September 15, 2026, was immaterial for the period.
The following table presents the CAG segment results of operations:
| For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 3,288,256 | $ | 2,954,813 | $ | 333,443 | 11.3 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 1,203,615 | 1,110,432 | 93,183 | 8.4 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 2,084,641 | 63.4 | % | 1,844,381 | 62.4 | % | 240,260 | 13.0 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 470,691 | 14.3 | % | 434,416 | 14.7 | % | 36,275 | 8.4 | % | |||||||||||||||||||||||||||||
| General and administrative | 328,062 | 10.0 | % | 267,110 | 9.0 | % | 60,952 | 22.8 | % | |||||||||||||||||||||||||||||
| Research and development | 185,547 | 5.6 | % | 170,752 | 5.8 | % | 14,795 | 8.7 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 984,300 | 29.9 | % | 872,278 | 29.5 | % | 112,022 | 12.8 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 1,100,341 | 33.5 | % | $ | 972,103 | 32.9 | % | $ | 128,238 | 13.2 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 100 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from higher IDEXX VetLab consumable volume growth and the business mix impact associated with proportionally higher revenue; operational productivity improvements, partially offset by higher depreciation costs; and net price realization, which offset inflationary costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 10 basis points, including the impact of lower hedge gains during the current period compared to the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, including costs to support our commercial expansion, and higher travel expenses. General and administrative expense increased primarily due to higher personnel-related costs, higher consulting and professional services fees, a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in 2025, higher depreciation and amortization related to technology and infrastructure investments, and a $5 million expense for the full impairment of an equity investment in the first quarter of the current year. Research and development expense increased primarily due to higher personnel-related and project costs. Changes in foreign currency exchange rates increased operating expense growth by less than 1%.
| Water | ||
The following table presents the Water segment results of operations:
| For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 167,665 | $ | 150,619 | $ | 17,046 | 11.3 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 44,816 | 44,978 | (162) | (0.4 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 122,849 | 73.3 | % | 105,641 | 70.1 | % | 17,208 | 16.3 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 21,300 | 12.7 | % | 18,538 | 12.3 | % | 2,762 | 14.9 | % | |||||||||||||||||||||||||||||
| General and administrative | 13,214 | 7.9 | % | 10,964 | 7.3 | % | 2,250 | 20.5 | % | |||||||||||||||||||||||||||||
| Research and development | 4,818 | 2.9 | % | 4,265 | 2.8 | % | 553 | 13.0 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 39,332 | 23.5 | % | 33,767 | 22.4 | % | 5,565 | 16.5 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 83,517 | 49.8 | % | $ | 71,874 | 47.7 | % | $ | 11,643 | 16.2 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes in North America. The increase in volumes benefited from higher demand for Colilert test products and related accessories used in coliform and E. coli testing. Changes in foreign currency exchange rates increased revenue growth by 2.0%.
Gross Profit. Gross profit increased due to higher revenue and a 320 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to higher realized prices, partially offset by inflationary costs including higher freight and distribution costs. Changes in foreign currency exchange rates increased the gross profit margin by approximately 10 basis points including the impact of hedge losses during the current period compared to hedge gains in the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs. General and administrative expense increased primarily due to higher bad debt costs and higher personnel-related costs. Research and development expense increased primarily due to higher personnel-related costs. Changes in foreign currency exchange rates increased operating expense growth by approximately 2%.
|
Livestock, Poultry and Dairy
|
||
The following table presents the LPD segment results of operations:
| For the Nine Months Ended September 30, | Change | |||||||||||||||||||||||||||||||||||||
|
Results of Operations
(dollars in thousands)
|
2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenue | $ | 102,492 | $ | 94,302 | $ | 8,190 | 8.7 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 48,621 | 49,063 | (442) | (0.9 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 53,871 | 52.6 | % | 45,239 | 48.0 | % | 8,632 | 19.1 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 23,888 | 23.3 | % | 22,756 | 24.1 | % | 1,132 | 5.0 | % | |||||||||||||||||||||||||||||
| General and administrative | 14,947 | 14.6 | % | 13,410 | 14.2 | % | 1,537 | 11.5 | % | |||||||||||||||||||||||||||||
| Research and development | 9,436 | 9.2 | % | 8,982 | 9.5 | % | 454 | 5.1 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 48,271 | 47.1 | % | 45,148 | 47.9 | % | 3,123 | 6.9 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 5,600 | 5.5 | % | $ | 91 | 0.1 | % | $ | 5,509 | 6,053.8 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher test volumes, particularly in Europe and the Americas, and higher realized prices. The increase in volumes was largely attributable to new customers and favorable timing impacts in Europe due to changes in customer ordering patterns compared to the same period during the prior year. Changes in foreign currency exchange rates increased revenue growth by 2.3%.
Gross Profit. The increase in gross profit was primarily due to higher revenue and a 460 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to lower per-unit costs from higher sales volumes, and higher realized prices, which offset inflationary costs and higher depreciation expense. Changes in foreign currency exchange rates increased the gross profit margin by approximately 80 basis points, including the impact of hedge gains during the current period compared to hedge losses in the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher travel costs. General and administrative expense increased primarily due to project-related consulting costs and higher personnel-related costs. Research and development expense increased primarily due to higher consulting costs. Changes in foreign currency exchange rates increased operating expense growth by approximately 1%.
Non-Operating Items
Interest Expense and Income. Interest expense was $25.4 million for the nine months ended September 30, 2026, compared to $29.6 million for the same period during the prior year primarily due to lower average debt levels and lower average interest rates. Interest income was $2.2 million for the nine months ended September 30, 2026, compared to $2.4 million for the same period during the prior year.
Gain (Loss) on Equity Investments. For the nine months ended September 30, 2026, we recognized realized and unrealized gains on an equity investment of $4.7 million.
Provision for Income Taxes. Our effective income tax rates were 20.3% and 20.2% for the nine months ended September 30, 2026, and September 30, 2025, respectively. The increase, compared with the prior-year period, was primarily due to lower tax benefits from share-based compensation and from the resolution of international tax audits in the prior year. These unfavorable impacts were partially offset by the favorable comparative impact from a prior-year reduction in our U.S. tax benefit associated with FDII that resulted from the acceleration of research and development deductions permitted under changes in U.S. tax law that were enacted in July 2025.
We anticipate reductions in share-based compensation tax benefits during the three months ending December 31, 2026, compared to the same period in the prior year, which increases our effective tax rate in 2026. The anticipated reduction in these future tax benefits is due to the elimination of the exception for certain compensation deduction limits as a result of the Tax Cuts and Jobs Act of 2017.
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, 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, repurchase of our common stock, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. Working capital totaled $235.8 million as of September 30, 2026, compared to $265.0 million as of December 31, 2025. The change in working capital is primarily due to higher current borrowings outstanding on our Credit Facility, partially offset by higher accounts receivable. As of September 30, 2026, we had $197.5 million of cash and cash equivalents, compared to $180.1 million as of December 31, 2025. As of September 30, 2026, we had a remaining borrowing availability of $773.2 million under our $1.25 billion Credit Facility, with $474.0 million in outstanding borrowings under our Credit Facility, and an option for the Company to incur incremental revolving credit commitments and/or term loans in the aggregate principal amount of up to $250.0 million. As of December 31, 2025, we had $398.0 million in outstanding borrowings under our Credit Facility. The general availability of funds under our Credit Facility is reduced by $2.8 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 incur incremental revolving credit commitments and/or term loans under our Credit Facility and otherwise 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 are generally available without restrictions to fund ordinary business operations outside the U.S.
The following table presents cash, cash equivalents, and marketable securities held domestically and by our foreign subsidiaries:
|
(in thousands)
|
September 30, 2026 | December 31, 2025 | ||||||||||||
| U.S. | $ | 14,113 | $ | 1,606 | ||||||||||
| Foreign | 183,423 | 178,464 | ||||||||||||
|
Total cash and cash equivalents
|
$ | 197,536 | $ | 180,070 | ||||||||||
|
Total cash and cash equivalents held in U.S. dollars by our foreign subsidiaries
|
$ | 23,259 | $ | 24,571 | ||||||||||
As of September 30, 2026, and December 31, 2025, more than 99% of the cash and cash equivalents were held as bank deposits at a diversified group of institutions, primarily systemically important banks. Cash and cash equivalents as of September 30, 2026, included approximately $0.9 million in cash denominated in non-U.S. currencies held in a country with currency control restrictions, which limit our ability to transfer funds outside of the country in which they are held without incurring costs. The currency control restricted cash is generally available for use within the country where it is held.
The following table presents additional key information concerning working capital:
| For the Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2026 |
June 30, 2026 |
March 31, 2026 |
December 31, 2025 |
September 30, 2025 | |||||||||||||||||||||||||
|
Days sales outstanding (1)
|
46.7 | 46.2 | 46.2 | 46.8 | 46.5 | ||||||||||||||||||||||||
|
Inventory turns (2)
|
1.5 | 1.4 | 1.4 | 1.6 | 1.5 | ||||||||||||||||||||||||
(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 are calculated as the ratio of our inventory-related cost of revenue for the quarter multiplied by four, divided by the average inventory balances at the beginning and end of each quarter.
Sources and Uses of Cash
The following table presents cash provided (used):
| For the Nine Months Ended September 30, | ||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | |||||||||||||||||
| Net cash provided by operating activities | $ | 1,063,127 | $ | 826,045 | $ | 237,082 | ||||||||||||||
| Net cash used by investing activities | (307,140) | (108,109) | (199,031) | |||||||||||||||||
| Net cash used by financing activities | (737,466) | (809,262) | 71,796 | |||||||||||||||||
| Net effect of changes in exchange rates on cash | (1,055) | 11,226 | (12,281) | |||||||||||||||||
| Net change in cash and cash equivalents | $ | 17,466 | $ | (80,100) | $ | 97,566 | ||||||||||||||
Operating Activities. Net cash provided by operating activities during the nine months ended September 30, 2026, was $1,063.1 million, which was a net increase in operating cash flows of $237.1 million, compared to the same period during the prior year. Cash was provided from net income of $934.0 million, adjusted for net non-cash items of $198.2 million, partially offset by a net decrease from changes in operating assets and liabilities of $69.1 million.
The following table presents cash flow impacts from changes in operating assets and liabilities, excluding the effects of foreign exchange rate fluctuations:
| For the Nine Months Ended September 30, | ||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | |||||||||||||||||
| Accounts receivable | $ | (72,762) | $ | (82,586) | $ | 9,824 | ||||||||||||||
| Inventories | (123) | (2,202) | 2,079 | |||||||||||||||||
| Other assets and liabilities | (18,793) | (154,728) | 135,935 | |||||||||||||||||
| Accounts payable | 22,578 | (4,977) | 27,555 | |||||||||||||||||
| Total change in cash due to changes in operating assets and liabilities | $ | (69,100) | $ | (244,493) | $ | 175,393 | ||||||||||||||
Cash used by changes in operating assets and liabilities during the nine months ended September 30, 2026, decreased $175.4 million, compared to the same period during the prior year. The decrease in cash used for other assets and liabilities was primarily due to a payment in the prior year of approximately $80 million to conclude a litigation matter and a prior year decrease in income taxes payable associated with the acceleration of research and development deductions permitted under changes in U.S. tax law that were enacted in July 2025.
We have historically experienced proportionately lower net cash flows from operating activities during the first quarter and proportionately 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. Net cash used by investing activities was $307.1 million during the nine months ended September 30, 2026, compared to $108.1 million for the same period during the prior year. The increase in cash used by investing activities was primarily due to the acquisition of a software business, CoVet, in the current year, partially offset by lower capital expenditures for property, equipment, and intangible assets.
Our total capital expenditure plan for 2026 is estimated to be approximately $160.0 million, which includes capital investments in manufacturing and operations facilities to support growth, as well as investments in customer-facing software development.
Financing Activities. Net cash used by financing activities was $737.5 million during the nine months ended September 30, 2026, compared to $809.3 million used for the same period during the prior year. The decrease in net cash used was primarily due to a $169.2 million reduction in cash used for share repurchases, compared to the same period during the prior year, and $28.4 million in lower payments on our Seniors Notes, compared to the prior period, partially offset by $129.0 million less cash provided by net borrowings under our Credit Facility, compared to the prior period.
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, and are subject to market conditions. Refer to "Note 12. Repurchases of Common Stock" 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.
As of September 30, 2026, we had $474.0 million in outstanding borrowings under our Credit Facility, of which $250.0 million was on our Term Loan under our Credit Facility. Our 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, certain restrictive agreements, and violations of sanctions laws and regulations.
We repaid the aggregate principal amount of $75.0 million on our 2026 Senior Notes at maturity during the third quarter of the current period. The aggregate principal amount of our 2027 Series B Notes will become due and payable on February 12, 2027. We anticipate funding the full repayment of our 2027 Series B Notes for $75.0 million when due on February 12, 2027, with available cash on hand, borrowings under our Credit Facility, proceeds from the issuance of new notes, or a combination thereof. 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, certain restrictive agreements, and violations of sanctions laws and regulations.
The sole financial covenant under the Credit Facility and Senior Note Agreements is a consolidated leverage ratio test, calculated in accordance with the terms of each of these agreements, not to exceed 3.5-to-1. As of September 30, 2026, our consolidated leverage ratio, as defined in the Credit Facility and Senior Notes Agreements, was 0.5-to-1, and we were in compliance with all of the covenants of the Senior Note Agreements and Credit Facility.
Refer to "Note 11. Debt" 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 Credit Facility and Senior Notes.
Effect of Currency Translation on Cash. The net effects of changes in foreign currency exchange rates are related to changes in exchange rates between the U.S. dollar and the functional currencies of our foreign subsidiaries with non-U.S. dollar functional currencies. These changes will fluctuate each year as the value of the U.S. dollar relative to the value of foreign currencies changes. The value of a currency 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.
Other Commitments, Contingencies and Guarantees
Significant commitments, contingencies, and guarantees as of September 30, 2026, are described in "Note 16. Commitments, Contingencies and Guarantees" 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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