IDEXX Laboratories (NASDAQ: IDXX) lifts Q2 2026 profit and cash flow
Rhea-AI Filing Summary
IDEXX Laboratories, Inc. reported Q2 2026 total revenue of $1,216,585 (in thousands), up from $1,109,457, with net income of $338,412 and diluted EPS of $4.27, both higher than a year earlier. For the first six months, revenue reached $2,357,405 (in thousands) and net income $616,858.
Growth was led by the Companion Animal Group, with Q2 segment revenue of $1,118,236 (in thousands); Water and LPD also increased. Operating cash flow for the six months rose to $613,410 (in thousands), funding $703,732 (in thousands) of share repurchases while cash increased to $196,933 (in thousands).
The balance sheet shows total assets of $3,442,335 (in thousands) and borrowings of $519,000 (in thousands) under a $1.25 billion Credit Facility, with covenant compliance and $729.2 million of remaining availability. Customer commitment arrangements support estimated future revenues of approximately $5.3 billion over several years.
Positive
- None.
Negative
- None.
Filing Explained
A September 4, 2026 debt maturity is added to the company’s obligations, while $5.3 billion of customer revenue remains tied to future performance.
The filing clarifies that the estimated
At
The company also reports its 2026 Senior Notes due on
The specific near-term milestone is the
Key Figures
Total revenue Q2 2026: 1,216,585 (in thousands of dollars)
Net income Q2 2026: 338,412 (in thousands of dollars)
Diluted EPS Q2 2026: 4.27 dollars per share
+5 more
8 metrics
Total revenue Q2 2026
1,216,585 (in thousands of dollars)
For the three months ended June 30, 2026
Net income Q2 2026
338,412 (in thousands of dollars)
For the three months ended June 30, 2026
Diluted EPS Q2 2026
4.27 dollars per share
For the three months ended June 30, 2026
Operating cash flow H1 2026
613,410 (in thousands of dollars)
Net cash provided by operating activities for six months ended June 30, 2026
Borrowings under Credit Facility
519,000 (in thousands of dollars)
Outstanding under $1.25 billion Credit Facility as of June 30, 2026
Remaining Credit Facility availability
729.2 million dollars
Unused borrowing capacity under Credit Facility as of June 30, 2026
Cost of common stock repurchases H1 2026
703,732 (in thousands of dollars)
Total cost of open market and employee surrender share repurchases for six months ended June 30, 2026
Estimated future revenue from customer commitments
5.3 billion dollars
Estimated future revenues under multi-year customer commitment arrangements as of June 30, 2026
Key Terms
Consolidated Leverage Ratio, sales-type leases, Accumulated Other Comprehensive Income, net investment hedges, +1 more
5 terms
Consolidated Leverage Ratio financial
"ratio of (a) Consolidated Total Debt ... to (b) Consolidated EBITDA"
A consolidated leverage ratio measures a business group's total debt compared with its ability to pay, by using combined figures for the parent company and its subsidiaries. Think of it like comparing the total mortgage across all properties you own to your overall income or net worth; investors use it to judge how risky the company’s capital structure is and how vulnerable it may be to rising interest rates or income drops.
sales-type leases financial
"reagent rental arrangements that effectively transfer control of instruments are classified as sales-type leases"
A sales-type lease is when the owner of an asset treats a long-term lease more like a sale: the owner records the lease as if it sold the asset and recognizes any immediate profit, while the buyer records a financed purchase. Think of it as selling a car but letting the buyer pay over time with the seller recording a sale now. Investors care because it changes reported revenue, profit, and asset balances, which can affect valuation and cash-flow analysis.
Accumulated Other Comprehensive Income financial
"The changes in Accumulated Other Comprehensive Income (“AOCI”), net of tax, consisted of the following"
Accumulated other comprehensive income is a running total on a company’s balance sheet that records certain gains and losses not included in reported profit, such as unrealized gains or losses on some investments, currency translation differences, and pension plan adjustments. Think of it like items in a shopping cart you haven’t paid for yet: it doesn’t affect current profit but changes the company’s overall equity and signals potential future swings in value that investors should watch.
net investment hedges financial
"entered into cross currency swap contracts as a hedge of our net investment in certain foreign subsidiaries"
A net investment hedge is a financial step a company takes to protect the reported value of its ownership in foreign subsidiaries from swings in exchange rates. By using derivatives or foreign‑currency borrowings to offset translation gains or losses, the company reduces how much its balance sheet and reported equity jump around when currencies move — like locking a price tag on a foreign store so its value in the home currency stays steadier for investors.
reagent rental arrangements financial
"Our reagent rental arrangements provide customers the right to use our instruments upon entering into multi-year arrangements"
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did IDEXX Laboratories (IDXX) perform financially in Q2 2026?
IDEXX reported Q2 2026 revenue of $1,216,585 (in thousands), up from $1,109,457, and net income of $338,412. Diluted EPS increased to $4.27 from $3.63, reflecting higher profitability and a lower share count.
What were IDEXX Laboratories (IDXX) cash flows for the first half of 2026?
For the six months ended June 30, 2026, IDEXX generated net cash from operating activities of $613,410 (in thousands). Investing activities used $59,040 (in thousands), while financing activities used $536,619 (in thousands), largely due to share repurchases.
How much stock did IDEXX Laboratories (IDXX) repurchase in H1 2026?
IDEXX repurchased 1,187 shares in the open market plus 17 shares via employee surrenders in H1 2026, at a total cost of $703,732 (in thousands). The average open-market repurchase price was $592.41 per share.
Which segments drive IDEXX Laboratories (IDXX) revenue?
The Companion Animal Group is the largest contributor, with Q2 2026 revenue of $1,118,236 (in thousands). The Water segment generated $58,564, and the LPD segment $35,181 (both in thousands), with additional Other revenue of $4,604 (in thousands).
What is IDEXX Laboratories (IDXX) debt position as of June 30, 2026?
IDEXX had $519,000 (in thousands) outstanding under its $1.25 billion Credit Facility and unsecured senior notes totaling $450,000 (in principal, in thousands). Remaining borrowing availability under the Credit Facility was $729.2 million, and covenants were met.
What were IDEXX Laboratories (IDXX) effective tax rates in 2026 to date?
The effective income tax rate was 18.9% for Q2 2026 and 20.2% for the first six months, matching the prior-year percentages. Rates were below the 21% U.S. federal statutory level, primarily due to tax benefits from share-based compensation.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2026
OR
For the transition period from _______________ to _______________
COMMISSION FILE NUMBER: 000-19271
IDEXX LABORATORIES, INC.
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (ZIP Code) | ||||||||||
(Registrant’s telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
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 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.
| ☒ | Accelerated filer | ☐ | ||||||||||||
| Non-accelerated filer | ☐ | Smaller 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 78,781,116 on July 31, 2026.
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 | ||||
| AOCI | Accumulated other comprehensive income or loss | ||||
| ASC | Accounting Standards Codification | ||||
| ASU | Accounting Standards Update | ||||
| CAG | Companion Animal Group, a reporting segment that provides veterinarians diagnostic products and services and information management solutions that enhance the health and well-being of pets. | ||||
| Consolidated Leverage Ratio | As of the last day of any fiscal quarter, the ratio of (a) Consolidated Total Debt as of such date minus the amount of such Indebtedness represented by issued but undrawn letters of credit or bank guarantees, and minus Indebtedness incurred as guaranties or repurchase obligations on behalf of non-Subsidiaries under equipment purchase, lease or rental agreements, to (b) Consolidated EBITDA for the Reference Period ended on such date, as defined in our Credit Facility Agreement | ||||
| Credit Facility | Our $1.25 billion five-year unsecured credit facility under our fourth amended and restated credit agreement, as amended; consisting of i) $1 billion revolving credit facility, also referred to as the revolving line of credit, ii) $250 million three-year term loan facility, and iii) flexibility to incur incremental revolving credit commitments and/or term loans in the aggregate principal amount of up to $250 million. | ||||
| FASB | U.S. Financial Accounting Standards Board | ||||
| LPD | Livestock, Poultry and Dairy, a reporting segment that provides diagnostic products and services for livestock and poultry health and measures the quality and safety of milk and improves producer efficiency. | ||||
| Organic revenue growth | A non-GAAP financial measure that represents the percentage change in revenue, compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates, and 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, revenues reported in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies. | ||||
| Prime rate | The prime rate is an interest rate determined by individual banks. It is often used as a reference rate for many types of loans. | ||||
| Reported revenue growth | The percentage change in revenue reported in accordance with U.S. GAAP, compared to the same period in the prior year. | ||||
| SaaS | Software-as-a-service | ||||
| SEC | U.S. Securities and Exchange Commission | ||||
| Senior Note Agreements | Note purchase agreements for the private placement of senior notes, referred to as senior notes or long-term debt | ||||
| SOFR | The secured overnight financing rate as administered by the Federal Reserve Board of New York (or a successor administrator of the secured overnight financing rate) | ||||
Term Loan | Three-year, unsecured term loan in the principal amount of $250 million under the Credit Facility | ||||
| U.S. GAAP | Accounting principles generally accepted in the United States of America | ||||
| Water | Water, a reporting segment that provides water microbiology testing products. | ||||
IDEXX LABORATORIES, INC.
Quarterly Report on Form 10-Q
Table of Contents
| Item No. | Page | |||||||
| PART I—FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements (unaudited) | |||||||
Condensed Consolidated Balance Sheets as of June 30, 2026 and December 31, 2025 | 3 | |||||||
Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2026 and 2025 | 4 | |||||||
Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2026 and 2025 | 5 | |||||||
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2026 and 2025 | 6 | |||||||
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 | 7 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 8 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 30 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 49 | ||||||
Item 4. | Controls and Procedures | 50 | ||||||
| PART II—OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 51 | ||||||
Item 1A. | Risk Factors | 51 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 51 | ||||||
Item 5. | Other Information | 51 | ||||||
Item 6. | Exhibits | 52 | ||||||
Signatures | 54 | |||||||
PART I— FINANCIAL INFORMATION
Item 1. Financial Statements
IDEXX LABORATORIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
| June 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Inventories | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Long-Term Assets: | |||||||||||
| Property and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Goodwill | |||||||||||
| Intangible assets, net | |||||||||||
| Other long-term assets | |||||||||||
| Total long-term assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Credit Facility | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current portion of deferred revenue | |||||||||||
| Total current liabilities | |||||||||||
| Long-Term Liabilities: | |||||||||||
| Deferred income tax liabilities | |||||||||||
| Long-term debt, net of current portion | |||||||||||
| Long-term deferred revenue, net of current portion | |||||||||||
| Long-term operating lease liabilities, net of current portion | |||||||||||
| Other long-term liabilities | |||||||||||
| Total long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
Commitments, Contingencies and Guarantees (Note 16) | |||||||||||
| Stockholders’ Equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
Deferred stock units: Outstanding: | |||||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock, at cost: | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | |||||||||
| 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 June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Product revenue | $ | $ | $ | $ | |||||||||||||||||||
| Service revenue | |||||||||||||||||||||||
| Total revenue | |||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Cost of product revenue | |||||||||||||||||||||||
| Cost of service revenue | |||||||||||||||||||||||
| Total cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Income from operations | |||||||||||||||||||||||
| Non-operating income (expense): | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Gain (loss) on equity investment | |||||||||||||||||||||||
| Income before provision for income taxes | |||||||||||||||||||||||
| Provision for income taxes | |||||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Earnings per Share: | |||||||||||||||||||||||
| Basic | $ | $ | $ | $ | |||||||||||||||||||
| Diluted | $ | $ | $ | $ | |||||||||||||||||||
| Weighted Average Shares Outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
| 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 June 30, | For the Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Net income | $ | $ | $ | $ | |||||||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | |||||||||||||||||||||
Reclassification adjustments for defined benefit plans (gain) loss included in net income, net of tax (expense) benefit of $ | |||||||||||||||||||||||
Unrealized gain (loss) on Euro-denominated notes, net of tax expense (benefit) of $ | ( | ( | |||||||||||||||||||||
| Unrealized gain (loss) on derivative instruments: | |||||||||||||||||||||||
Unrealized gain (loss) on foreign currency exchange contracts, net of tax expense (benefit) of $ | ( | ( | |||||||||||||||||||||
Unrealized gain (loss) on cross currency swaps, net of tax expense (benefit) of $ | ( | ( | |||||||||||||||||||||
Unrealized gain (loss) on interest rate swap, net of tax expense (benefit) of $ | |||||||||||||||||||||||
Reclassification adjustments for (gain) loss included in net income, net of tax (expense) benefit of $ | ( | ( | |||||||||||||||||||||
| Unrealized gain (loss) on derivative instruments | ( | ( | |||||||||||||||||||||
Other comprehensive income (loss), net of tax | |||||||||||||||||||||||
| Comprehensive income | $ | $ | $ | $ | |||||||||||||||||||
| 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 | $ | Additional Paid-in Capital | Deferred Stock Units | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock, net of issuances | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Common stock issued for share-based compensation plans, including excess tax benefit | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation cost | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2026 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock, net of issuances | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Common stock issued for share-based compensation plans, including excess tax benefit | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation cost | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2026 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||
| Number of Shares | $ | Additional Paid-in Capital | Deferred Stock Units | Retained Earnings | Accumulated Other Comprehensive (Loss) Income | Treasury Stock | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||
Balance December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock, net of issuances | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Common stock issued for share-based compensation plans, including excess tax benefit | ( | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation cost | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Balance March 31, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Other comprehensive gain, net of tax | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Repurchases of common stock, net of issuances | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
Common stock issued for share-based compensation plans, including excess tax benefit | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Share-based compensation cost | — | $ | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
| Balance June 30, 2025 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| 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 Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash Flows from Operating Activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Impairment charge | |||||||||||
| Provision for credit losses | |||||||||||
| Deferred income taxes | |||||||||||
| Share-based compensation expense | |||||||||||
| Other | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventories | ( | ( | |||||||||
| Other assets and liabilities | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
| Cash Flows from Investing Activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Acquisition of intangible assets | ( | ||||||||||
| Equity investments | ( | ||||||||||
| Proceeds from net investment hedges | |||||||||||
| Net cash used by investing activities | ( | ( | |||||||||
| Cash Flows from Financing Activities: | |||||||||||
| Borrowings (payments) on revolving credit facility, net | |||||||||||
| Payments of senior notes | ( | ||||||||||
| Repurchases of common stock, including excise tax settlements | ( | ( | |||||||||
| Proceeds from exercises of stock options and employee stock purchase plans | |||||||||||
| Shares withheld for statutory tax withholding payments on restricted stock | ( | ( | |||||||||
| Net cash used by financing activities | ( | ( | |||||||||
| Net effect of changes in exchange rates on cash | ( | ||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ||||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental Cash Flow Information: | |||||||||||
| Unpaid property and equipment, reflected in accounts payable and accrued liabilities | $ | $ | |||||||||
| 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-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.
Changes in deferred revenue during the six months ended June 30, 2025, were recast and aggregated with other assets and liabilities to reconcile net income to net cash provided by operating activities on the unaudited condensed consolidated statements of cash flows to conform to the current‑period presentation. The recast had no impact on net cash provided by operating activities for any period presented.
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, 2025, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three and six months ended June 30, 2026, 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 the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”).
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, assumptions, 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 amounts of revenues and expenses.
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 and six months ended June 30, 2026, are consistent with those discussed in “Note 2. Summary of Significant Accounting Policies” to the consolidated financial statements in our 2025 Annual Report and as updated below.
New Accounting Pronouncements Adopted
In July 2025, the U.S. Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” We adopted ASU 2025-05 effective January 1, 2026, with no material impact on our consolidated financial statements and related disclosures.
New Accounting Pronouncements Not Yet Adopted
In May 2026, the FASB issued ASU No. 2026-02, “Environmental Credits and Environmental Credit Obligations (Topic 818),” to clarify the accounting for and disclosure of environmental credits and environmental credit obligations. ASU 2026-02 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods. Early adoption is permitted as of the beginning of an annual reporting period and should be applied on
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a retrospective basis. We are evaluating ASU 2026-02 to determine its impact on our consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which amends the existing standard related to accounting for internal-use software development costs. The amendments modernize the recognition and capitalization framework to better align with current software development practices by removing references to project stages and clarify the criteria for capitalization, which begins when (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the timing of adoption and do not expect the adoption of ASU 2025-06 to have a material impact on the consolidated financial statements or related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” to require disaggregated disclosures of specific expense categories underlying all relevant income statement expense line items on an annual and interim basis. The disclosure requirements will apply on a prospective basis, with the option to apply them retrospectively. This standard is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are evaluating ASU 2024-03 to determine its impact on our consolidated financial statements and related disclosures.
NOTE 3. REVENUE
Revenues by Product and Service Categories and by Principal Geographic Areas
We present disaggregated revenue for our Companion Animal Group (“CAG”) segment based on major product and service categories. Our Water and Livestock, Poultry and Dairy (“LPD”) segments comprise a single major product category.
The following table presents revenue by major product and service categories:
| (in thousands) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| CAG segment revenue: | |||||||||||||||||||||||
| CAG Diagnostics recurring revenue: | |||||||||||||||||||||||
| IDEXX VetLab consumables | $ | $ | $ | $ | |||||||||||||||||||
| Rapid assay products | |||||||||||||||||||||||
| Reference laboratory diagnostic and consulting services | |||||||||||||||||||||||
| CAG Diagnostics services and accessories | |||||||||||||||||||||||
| Total CAG Diagnostics recurring revenue | |||||||||||||||||||||||
| CAG Diagnostics capital - instruments | |||||||||||||||||||||||
| Veterinary software, services and diagnostic imaging systems: | |||||||||||||||||||||||
| Recurring revenue | |||||||||||||||||||||||
| Systems and hardware | |||||||||||||||||||||||
| Total veterinary software, services and diagnostic imaging systems | |||||||||||||||||||||||
| CAG segment revenue | |||||||||||||||||||||||
| Water segment revenue | |||||||||||||||||||||||
| LPD segment revenue | |||||||||||||||||||||||
| Other revenue | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
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The following table presents revenue by principal geographic area, based on customers’ domiciles:
| (in thousands) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| Europe, the Middle East and Africa | |||||||||||||||||||||||
| Asia Pacific | |||||||||||||||||||||||
| Canada | |||||||||||||||||||||||
| Latin America & Caribbean | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
Contracts with Multiple Performance Obligations
We enter into arrangements with multiple performance obligations where customers purchase a combination of IDEXX products and services. We apply judgment to determine whether products and services are considered distinct performance obligations that should be accounted for separately. 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 arrangements.
We allocate revenue to each performance obligation in proportion to the relative standalone selling prices and recognize revenue when control of the related goods or services is transferred 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 plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time. We do not disclose information about remaining performance obligations that are part of arrangements with an original expected duration of one year or less.
The following customer arrangements represent our most significant customer contracts that contain multiple performance obligations:
Customer Commitment Arrangements. We offer customers incentives upon entering into multi-year arrangements to purchase minimum annual amounts of products and services.
Free or Discounted Instruments and Systems. Many of our customer commitment arrangements provide customers with free or discounted instruments or systems upon entering into multi-year arrangements to purchase minimum annual 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 assets are reclassified to accounts receivable when customers are billed for products and services over the term of the arrangement. We have determined that these arrangements do not include a significant financing component.
On December 31, 2025, our contract assets were $312.7 million, of which approximately $20.3 million and $41.0 million were reclassified to accounts receivable when customers were billed for related products and services during the three and six months ended June 30, 2026, respectively, compared to $13.0 million and $32.2 million during the three and six months ended June 30, 2025. Furthermore, as a result of new placements under commitment arrangements, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses, our contract assets were $332.6 million as of June 30, 2026. We monitor customer purchases over the term of their arrangement 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 and six months ended June 30, 2026 and 2025, were not material.
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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 minimum annual amounts of future products and 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 in the form of IDEXX Points or, to a lesser degree, cash payments, 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.
On December 31, 2025, our capitalized consideration paid to customers was $250.1 million, of which approximately $18.6 million and $37.7 million was recognized as a reduction of revenue during the three and six months ended June 30, 2026, respectively, compared to $15.8 million and $32.3 million during the three and six months ended June 30, 2025. Furthermore, as a result of new payments to customers, net of subsequent recognition, our capitalized consideration paid to customers was $271.8 million as of June 30, 2026. We monitor customer purchases over the term of their arrangement to assess the realizability of capitalized consideration paid to customers 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 and six months ended June 30, 2026 and 2025, were not material.
Rebate Arrangements. Our rebate arrangements provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the arrangement. Rebate incentives are typically offered in multi-year arrangements that include customer commitments to purchase minimum annual 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 optional future purchases that are determined to be a material right as a separate performance obligation and estimate the standalone selling price, which represents the expected value to the customer, based on historical rebate experience, the contractual rebate structure and terms, and other relevant information. 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 customer’s purchase of eligible products and services.
On December 31, 2025, our deferred revenue related to rebate and up-front consideration arrangements was $35.3 million, of which approximately $2.6 million and $5.1 million were recognized when customers purchased eligible products and services during the three and six months ended June 30, 2026, respectively, compared to $2.6 million and $5.4 million during the three and six months ended June 30, 2025. Furthermore, as a result of new customer purchases under rebate and up-front consideration arrangements, net of subsequent recognition, our deferred revenue was $35.9 million as of June 30, 2026, of which approximately 15 %, 28 %, 22 %, 17 %, and 18 % are expected to be recognized during the remainder of 2026, the full years 2027, 2028, 2029, and thereafter, respectively.
For our customer commitment arrangements, we estimate future revenues related to multi-year arrangements to be approximately $5.3 billion, of which approximately 14 %, 27 %, 24 %, 16 %, and 19 % are expected to be recognized during the remainder of 2026, the full years 2027, 2028, 2029, 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.
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Instrument Rental Arrangements. 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 arrangements provide customers the right to use our instruments upon entering into multi-year arrangements to purchase minimum annual amounts of consumables. These types of arrangements 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. Lease revenues are presented in product revenue on our consolidated income statement. Lease revenues were approximately $3.9 million and $7.7 million for the three and six months ended June 30, 2026, respectively, compared to $3.7 million and $7.0 million for the three and six months ended June 30, 2025, respectively, including both operating leases and sales-type leases.
Sales-type Reagent Rental Arrangements. Our reagent rental arrangements 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 reclassified to accounts receivable when customers are billed for products and services over the term of the arrangement. On December 31, 2025, our lease receivable assets were $18.0 million, of which approximately $1.3 million and $2.7 million was reclassified to accounts receivable when customers were billed for related products and services during the three and six months ended June 30, 2026, respectively, compared to $1.3 million and $2.7 million for the three and six months ended June 30, 2025, respectively. Furthermore, as a result of new placements under sales-type reagent rental arrangements, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses, our lease receivable assets were $17.5 million as of June 30, 2026. The impacts of discounting and unearned income as of June 30, 2026 and 2025, were not material. Profit and loss recognized at the commencement date and interest income during the three and six months ended June 30, 2026 and 2025, were not material. We monitor customer purchases over the term of their arrangement to assess the realizability of our lease receivable assets. Impairments during the three and six months ended June 30, 2026 and 2025, were not material.
Operating-type Reagent Rental Arrangements. Our reagent rental arrangements 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 arrangement. The cost of the instrument is capitalized within property and equipment. During the three and six months ended June 30, 2026, we transferred instruments of $1.8 million and $3.5 million, respectively, compared to $2.8 million and $6.1 million during the three and six months ended June 30, 2025, respectively, from inventory to property and equipment.
We estimate future revenue to be recognized related to our reagent rental arrangements of approximately $112.4 million, of which approximately 11 %, 21 %, 19 %, 17 %, and 32 % are expected to be recognized during the remainder of 2026, and the full years 2027, 2028, 2029, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied for which customers have committed to future purchases, net of expected price adjustments, and as a result are lower than stated contractual commitments by our customers.
Deferred Extended Warranties and Post-Contract Support Revenue
On December 31, 2025, our deferred revenue related to extended warranties and post-contract support was $27.1 million, of which approximately $1.5 million and $18.3 million was recognized during the three and six months ended June 30, 2026, respectively, compared to $1.4 million and $17.4 million during the three and six months ended June 30, 2025, respectively. Furthermore, as a result of new arrangements, our deferred revenue related to extended warranties and post-contract support was $27.4 million at June 30, 2026. Deferred revenue related to extended warranties and post-contract support with an original duration of more than one year was $9.7 million at June 30, 2026, of which approximately 20 %, 37 %, 24 %, 11 %, and 8 % are expected to be recognized during the remainder of 2026, and the full years 2027, 2028, 2029, and thereafter, respectively. We have determined these arrangements do not include a significant financing component. 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.
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Costs to Obtain a Contract
On December 31, 2025, our deferred commission costs, included within other current and long-term assets, were $21.4 million, of which approximately $1.9 million and $4.0 million of commission expense was recognized during the three and six months ended June 30, 2026, respectively, compared to $1.8 million and $3.6 million during the three and six months ended June 30, 2025, respectively. Furthermore, as a result of commissions related to new extended warranties and SaaS subscriptions, net of subsequent recognition, our deferred commission costs were $21.1 million at June 30, 2026. Impairments of deferred commission costs during the three and six months ended June 30, 2026 and 2025, 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 acquire reference laboratories, radiology practices, and other businesses or assets that we account for as either asset purchases or business combinations, depending on facts and circumstances. We also may acquire noncontrolling minority interests in business entities, which we recognize as equity investments, and commercial rights to certain technology through licensing agreements.
Asset Purchase
During September 2025, we acquired a customer relationship intangible asset of a privately-owned reference laboratory in the U.S. for approximately $15.6 million, including an estimated contingent payment of $2.3 million at the time of acquisition. The customer relationship intangible has an estimated life of 10 years. The revenue associated with the acquired customer relationships has been included in our CAG segment since the acquisition date.
NOTE 5. SHARE-BASED COMPENSATION
The fair values of options, restricted stock units, deferred stock units, performance-based restricted stock units, and employee stock purchase rights awarded during the three and six months ended June 30, 2026, were $5.0 million and $84.0 million, respectively, compared to $3.4 million and $68.2 million for the three and six months ended June 30, 2025, respectively. The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards outstanding as of June 30, 2026, was $104.5 million, which will be recognized over a weighted average period of approximately 1.7 years. During the three and six months ended June 30, 2026, we recognized share-based compensation expenses of $16.1 million and $32.4 million, respectively, compared to $14.9 million and $29.5 million for the three and six months ended June 30, 2025.
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 those grant dates. 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 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.
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. Additional allowances may be required if the financial condition of our customers was to deteriorate or a strengthening U.S. dollar impacts the ability of foreign customers to make payments to us for their U.S. dollar-denominated purchases. We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates, 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 do not have any off-balance sheet credit exposure related to our customers.
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Accounts Receivable
The allowance for credit losses associated with accounts receivable was $15.0 million and $11.3 million as of June 30, 2026, and December 31, 2025, respectively. The amount of accounts receivable reflected on the balance sheet is net of this allowance. As of June 30, 2026, approximately 89 % of our accounts receivable had not yet reached the invoice due date, and approximately 11 % were considered past due. As of December 31, 2025, approximately 87 % of our accounts receivable had not yet reached the invoice due date, and approximately 13 % were considered past due.
Contract Assets and Lease Receivables
The allowance for credit losses associated with contract assets and lease receivables was $9.1 million and $8.6 million as of June 30, 2026, and December 31, 2025, respectively. The assets reflected on the balance sheet are net of these allowances.
NOTE 7. INVENTORIES
The components of inventories were as follows:
| (in thousands) | June 30, 2026 | December 31, 2025 | |||||||||
| Raw materials | $ | $ | |||||||||
| Work-in-process | |||||||||||
| Finished goods | |||||||||||
| Total inventories | $ | $ | |||||||||
NOTE 8. LEASE COMMITMENTS
Maturities of operating lease liabilities were as follows:
| (in thousands) | June 30, 2026 | ||||
| 2026 (remainder of year) | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total lease payments | |||||
| Less imputed interest | ( | ||||
| Total operating lease liabilities (current and long-term) | $ | ||||
Supplemental cash flow information for leases was as follows:
| (in thousands) | For the Six Months Ended June 30, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| 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 | $ | $ | ||||||||||||
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NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS
Other Current Assets
Other current assets consisted of the following:
| (in thousands) | June 30, 2026 | December 31, 2025 | |||||||||
Contract assets, net (1) | $ | $ | |||||||||
Consideration paid to customers | |||||||||||
| Prepaid expenses | |||||||||||
| Taxes receivable | |||||||||||
| Other assets | |||||||||||
| Total other current assets | $ | $ | |||||||||
(1) Contract assets, net, are net of allowances for credit losses. Refer to "Note 6. Credit Losses."
Other Long-Term Assets
Other long-term assets consisted of the following:
| (in thousands) | June 30, 2026 | December 31, 2025 | |||||||||
Contract assets, net (1) | $ | $ | |||||||||
| Consideration paid to customers | |||||||||||
| Equity investments | |||||||||||
| Investments in long-term product supply arrangements | |||||||||||
| Deferred income taxes | |||||||||||
| Other assets | |||||||||||
| Total other long-term assets | $ | $ | |||||||||
(1) Contract assets, net, are net of allowances for credit losses. Refer to "Note 6. Credit Losses."
NOTE 10. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES
Accounts Payable - Supplier Financing Program
The changes in our outstanding payment obligations under this arrangement, which are included in on the unaudited condensed consolidated balance sheets, were as follows:
| (in thousands) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Payment obligations outstanding at the beginning of the period | $ | $ | $ | $ | |||||||||||||||||||
| Payment obligations additions during the period | |||||||||||||||||||||||
| Payment obligations settled during the period | ( | ( | ( | ( | |||||||||||||||||||
| Payment obligations outstanding at the end of the period | $ | $ | $ | $ | |||||||||||||||||||
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Accrued Liabilities
Accrued liabilities consisted of the following:
| (in thousands) | June 30, 2026 | December 31, 2025 | |||||||||
| Accrued employee compensation and related expenses | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Accrued customer incentives and refund obligations | |||||||||||
| Accrued taxes | |||||||||||
| Current lease liabilities | |||||||||||
| $ | $ | ||||||||||
Other Long-Term Liabilities
Other long-term liabilities consisted of the following:
| (in thousands) | June 30, 2026 | December 31, 2025 | |||||||||
| Accrued taxes | $ | $ | |||||||||
| Other accrued long-term expenses | |||||||||||
| Total other long-term liabilities | $ | $ | |||||||||
NOTE 11. DEBT
Credit Facility
As of June 30, 2026, we had $519.0 million in outstanding borrowings under our $1.25 billion five-year unsecured credit facility (the “Credit Facility”), of which $250.0 million is a three-year , unsecured term loan (the “Term Loan”), with a weighted average effective interest rate for the six months ended June 30, 2026, of 4.7 %, excluding any impact of our interest rate swap. At December 31, 2025, we had $398.0 million outstanding under the Credit Facility, of which $250.0 million is the Term Loan, with a weighted average effective interest rate of 5.3 %, excluding any impact of our interest rate swap. At June 30, 2026, we had remaining borrowing availability of $729.2 million under our $1.25 billion Credit Facility. The funds available under our Credit Facility reflect a reduction due to the issuance of letters of credit, which were primarily issued in connection with our workers’ compensation insurance policy, for $1.8 million.
Borrowings in U.S. dollars under our Credit Facility bear interest at a per annum rate, determined at our option, equal to either of the following as defined in the credit agreement for our Credit Facility: (1) a base rate (determined as the greatest of (i) the prime rate, (ii) the NYFRB Rate plus 0.50 % and (iii) the Adjusted Term SOFR Rate for a one-month Interest Period plus 1 % (but not less than 1 %)), plus a margin rate ranging from 0.0 % to 0.375 % based on our Consolidated Leverage Ratio; (2) the Adjusted Term SOFR Rate, plus a margin rate ranging from 0.875 % to 1.375 % based on our Consolidated Leverage Ratio; or (3) the Adjusted Daily Simple SOFR Rate, plus a margin rate ranging from 0.875 % to 1.375 % based on our Consolidated Leverage Ratio. In addition to U.S. dollar borrowings, borrowings under our Credit Facility are also available in certain specific foreign currencies, bearing interest based on rates customary for such foreign currencies and subject to the same applicable margin rates based on our Consolidated Leverage Ratio as for our U.S. dollar borrowings. Under our Credit Facility, we also pay on a quarterly basis commitment fees ranging from 0.075 % to 0.25 % per annum, based on our Consolidated Leverage Ratio, on any unused commitment.
We have entered into an interest rate swap contract to reduce the effect of variable interest obligations of our Term Loan. Refer to “Note 19. Hedging Instruments” for a discussion of our derivative instruments and hedging activity.
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The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under our 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, as amended (“ERISA”), the failure to pay specified indebtedness, and a change of control default. 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. The sole financial covenant is a Consolidated Leverage Ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, share-based compensation expense, and certain other non-cash losses and charges, which is defined as the Consolidated Leverage Ratio under the terms of our Credit Facility, not to exceed 3.5 -to-1. As of June 30, 2026, we were in compliance with the covenants of our Credit Facility.
Senior Notes
The following describes our currently outstanding unsecured senior notes issued and sold in private placements (collectively, the “Senior Notes”) as of June 30, 2026:
| (Principal Amounts in thousands) | ||||||||||||||||||||||||||||||||
| Issue Date | Due Date | Series | Principal Amount | Coupon Rate | Senior Notes Agreement | |||||||||||||||||||||||||||
| 9/4/2014 | 9/4/2026 | 2026 Senior Notes | $ | % | NY Life 2014 Note Agreement | |||||||||||||||||||||||||||
| 2/12/2015 | 2/12/2027 | 2027 Series B Notes | $ | % | MetLife 2014 Note Agreement | |||||||||||||||||||||||||||
| 3/14/2019 | 3/14/2029 | 2029 Series C Notes | $ | % | MetLife 2014 Note Agreement | |||||||||||||||||||||||||||
| 4/2/2020 | 4/2/2030 | MetLife 2030 Series D Notes | $ | % | MetLife 2014 Note Agreement | |||||||||||||||||||||||||||
| 4/14/2020 | 4/14/2030 | Prudential 2030 Series D Notes | $ | % | 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, certain restrictive agreements, and violations of sanctions 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, share-based compensation expense, and certain other non-cash losses and charges, as defined in the Senior Note Agreements, not to exceed 3.5 -to-1. As of June 30, 2026, we were in compliance with the covenants of the Senior Note Agreements.
Should we elect to prepay the 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 Agreement, 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 ERISA, the failure to pay specified indebtedness, and a change of control default.
NOTE 12. REPURCHASES OF COMMON STOCK
We primarily acquire shares of our common stock by repurchases in the open market. We also acquire shares that are surrendered by employees in payment for the 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 and six months ended June 30, 2026 and 2025, was not material. We have recognized approximately $3.1 million and $3.9 million in accrued liabilities related to the timing of settlements for share repurchases as of June 30, 2026 and December 31, 2025, respectively.
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The Inflation Reduction Act of 2022 imposed a 1% excise tax on the value of shares repurchased in the open market, net of a reduction for eligible stock issuances, which is included in the cost of treasury stock acquired in open market repurchases. During the six months ended June 30, 2026 and 2025, we incurred applicable excise taxes of $4.9 million and $6.4 million, respectively, and paid excise tax during the six months ended June 30, 2026 and 2025, of $9.1 million and $8.4 million, respectively.
The following table is a summary of our open market common stock repurchases, reported on a trade date basis, and shares acquired through employee surrenders:
(in thousands, except per share amounts) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Shares repurchased in the open market | |||||||||||||||||||||||
| Shares acquired through employee surrenders for statutory tax withholding | |||||||||||||||||||||||
| Total shares repurchased | |||||||||||||||||||||||
| Cost of shares repurchased in the open market | $ | $ | $ | $ | |||||||||||||||||||
| Cost of shares for employee surrenders | |||||||||||||||||||||||
| Total cost of shares | $ | $ | $ | $ | |||||||||||||||||||
| Average cost per share - open market repurchases | $ | $ | $ | $ | |||||||||||||||||||
| Average cost per share - employee surrenders | $ | $ | $ | $ | |||||||||||||||||||
| Average cost per share - total | $ | $ | $ | $ | |||||||||||||||||||
NOTE 13. INCOME TAXES
Our effective income tax rates were 18.9 % and 20.2 % for the three and six months ended June 30, 2026, respectively, compared to 18.9 % and 20.2 % for the three and six months ended June 30, 2025, respectively. Compared to the same periods in the prior year, our current-period effective tax rates were favorably impacted by geographic earnings mix and higher tax benefits related to share-based compensation, which were offset by a prior-year tax benefit from the resolution of international tax audits.
The effective tax rates for the three and six months ended June 30, 2026, were lower than the U.S. federal statutory tax rate of 21% primarily due to tax benefits from share-based compensation, partially offset by U.S. state taxes. Comparatively, the effective tax rates for the three and six months ended June 30, 2025 were lower than the U.S. federal statutory tax rate of 21% primarily due to tax benefits from share-based compensation and the resolution of international tax audits, partially offset by U.S. state taxes.
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NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME
The changes in Accumulated Other Comprehensive Income (“AOCI”), net of tax, consisted of the following:
| For the Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax | Unrealized Gain (Loss) on Net Investment Hedges, Net of Tax | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Exchange Contracts | Interest Rate Swap | Euro-Denominated Notes | Cross Currency Swaps | Defined Benefit Plans, Net of Tax | Cumulative Translation Adjustment | Total | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2025 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | |||||||||||||||||||||||||||||||||||||||||||
| Reclassified from accumulated other comprehensive income | ( | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ( | $ | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||||
| For the Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||||||||||||||
| Unrealized Gain (Loss) on Cash Flow Hedges, Net of Tax | Unrealized Gain (Loss) on Net Investment Hedges, Net of Tax | |||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Foreign Currency Exchange Contracts | Interest Rate Swap | Euro-Denominated Notes | Cross Currency Swaps | Defined Benefit Plans, Net of Tax | Cumulative Translation Adjustment | Total | |||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) before reclassifications | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Reclassified from accumulated other comprehensive income | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | ( | $ | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||||||||||
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The following table presents components and amounts reclassified out of AOCI to net income:
| (in thousands) | Affected Line Item in the Statements of Income | Amounts Reclassified from AOCI For the Three Months Ended June 30, | Amounts Reclassified from AOCI For the Six Months Ended June 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Cost of revenue | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||||||||||
| Provision for income taxes | ( | |||||||||||||||||||||||||||||||
| Gain (loss), net of tax | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||||||
| Interest rate swap contracts | Interest expense | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Provision for income taxes | ( | ( | ( | ( | ||||||||||||||||||||||||||||
| Gain (loss), net of tax | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Defined benefit plans | Cost of revenue and operating expenses | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||||||||
| Gain (loss), net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
NOTE 15. EARNINGS PER SHARE
The following is a reconciliation of weighted average shares outstanding for basic and diluted earnings per share:
| (in thousands) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Shares outstanding for basic earnings per share | |||||||||||||||||||||||
| Shares outstanding for diluted earnings per share: | |||||||||||||||||||||||
| Shares outstanding for basic earnings per share | |||||||||||||||||||||||
| Dilutive effect of share-based payment awards | |||||||||||||||||||||||
| Total shares outstanding for basic and diluted earnings per share | |||||||||||||||||||||||
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Certain awards and options to acquire shares have been excluded from the calculation of weighted average 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) | For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Weighted average number of shares underlying anti-dilutive awards | |||||||||||||||||||||||
| Weighted average number of shares underlying anti-dilutive options | |||||||||||||||||||||||
NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES
Commitments
Refer to “Note 8. Lease Commitments” for more information regarding our lease commitments.
Contingencies
We were a defendant in a litigation involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement. In April 2025, at the conclusion of the proceedings at the trial and appellate courts, we paid a judgment in the amount of approximately $80.0 million, which was accrued in prior years, and the plaintiff executed a satisfaction and release of judgment, which was filed with the trial court, concluding this matter.
From time to time, we receive 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 is frequently 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
When acquiring a business, we sometimes assume liability for certain events or occurrences that took place prior to the date of acquisition. As of June 30, 2026, and December 31, 2025, we do not have any material pre-acquisition liabilities recorded.
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NOTE 17. SEGMENT REPORTING
We operate primarily through three
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”) in assessing performance. The CODM, our president and Chief Executive Officer, evaluates the performance of operating segments based on revenues and gross profit. Our CODM reviews the budget and actual financial results of the operating segments, decides how to allocate resources to meet our strategic priorities, and meets with operating segment leaders on a periodic basis to determine the allocation of resources.
The accounting principles used in the preparation of the segment information are the same as those used for the consolidated financial statements. Intersegment revenues, which are not included in the tables below, were not material for the three and six months ended June 30, 2026 and 2025. Refer to “Note 3. Revenue” for a summary of disaggregated revenue by segment and by major product and service category for the three and six months ended June 30, 2026 and 2025. Assets are not allocated to segments for internal reporting purposes and are not included in the review performed by the CODM for purposes of assessing segment performance and allocation of resources. Certain corporate expenses are allocated to the segments, including depreciation and amortization. Foreign currency transaction gains and losses for all operating segments are reported within Other and are reconciled in the tables below.
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The following tables are a summary of reportable segment performance with Other to reconcile to our consolidated results for the three months ended June 30, 2026 and 2025:
| (in thousands) | For the Three Months Ended June 30, 2026 | |||||||||||||||||||||||||
| CAG | Water | LPD | Total | |||||||||||||||||||||||
| Total revenues from reportable segments | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||||||||
| Cost of revenue from reportable segments | ||||||||||||||||||||||||||
| Segment gross profit | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of operating profit (segment profit) | ||||||||||||||||||||||||||
| Segment gross profit | $ | |||||||||||||||||||||||||
| Segment operating expenses | ( | |||||||||||||||||||||||||
| Other operating profit (excluding unallocated amounts) | ( | |||||||||||||||||||||||||
| Unallocated amounts | ||||||||||||||||||||||||||
| Foreign currency transaction gains (losses) | ( | |||||||||||||||||||||||||
| Non-operating income (expense) | ( | |||||||||||||||||||||||||
| Income before provision for income taxes | $ | |||||||||||||||||||||||||
| (in thousands) | For the Three Months Ended June 30, 2025 | |||||||||||||||||||||||||
| CAG | Water | LPD | Total | |||||||||||||||||||||||
| Total revenues from reportable segments | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||||||||
| Cost of revenue from reportable segments | ||||||||||||||||||||||||||
| Segment gross profit | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of operating profit (segment profit) | ||||||||||||||||||||||||||
| Segment gross profit | $ | |||||||||||||||||||||||||
| Segment operating expenses | ( | |||||||||||||||||||||||||
| Other operating profit (excluding unallocated amounts) | ||||||||||||||||||||||||||
| Unallocated amounts | ||||||||||||||||||||||||||
| Foreign currency transaction gains (losses) | ( | |||||||||||||||||||||||||
| Non-operating income (expense) | ( | |||||||||||||||||||||||||
| Income before provision for income taxes | $ | |||||||||||||||||||||||||
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The following tables are a summary of reportable segment performance with Other to reconcile to our consolidated results for the six months ended June 30, 2026 and 2025:
| (in thousands) | For the Six Months Ended June 30, 2026 | |||||||||||||||||||||||||
| CAG | Water | LPD | Total | |||||||||||||||||||||||
| Total revenues from reportable segments | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||||||||
| Cost of revenue from reportable segments | ||||||||||||||||||||||||||
| Segment gross profit | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of operating profit (segment profit) | ||||||||||||||||||||||||||
| Segment gross profit | $ | |||||||||||||||||||||||||
| Segment operating expenses | ( | |||||||||||||||||||||||||
| Other operating profit (excluding unallocated amounts) | ||||||||||||||||||||||||||
| Unallocated amounts | ||||||||||||||||||||||||||
| Foreign currency transaction gains (losses) | ( | |||||||||||||||||||||||||
| Non-operating income (expense) | ( | |||||||||||||||||||||||||
| Income before provision for income taxes | $ | |||||||||||||||||||||||||
| (in thousands) | For the Six Months Ended June 30, 2025 | |||||||||||||||||||||||||
| CAG | Water | LPD | Total | |||||||||||||||||||||||
| Total revenues from reportable segments | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of revenue | ||||||||||||||||||||||||||
| Other revenues | ||||||||||||||||||||||||||
| Total revenue | $ | |||||||||||||||||||||||||
| Cost of revenue from reportable segments | ||||||||||||||||||||||||||
| Segment gross profit | $ | $ | $ | $ | ||||||||||||||||||||||
| Reconciliation of operating profit (segment profit) | ||||||||||||||||||||||||||
| Segment gross profit | $ | |||||||||||||||||||||||||
| Segment operating expenses | ( | |||||||||||||||||||||||||
| Other operating profit (excluding unallocated amounts) | ||||||||||||||||||||||||||
| Unallocated amounts | ||||||||||||||||||||||||||
| Foreign currency transaction gains (losses) | ( | |||||||||||||||||||||||||
| Non-operating income (expense) | ( | |||||||||||||||||||||||||
| Income before provision for income taxes | $ | |||||||||||||||||||||||||
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. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:
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| Level 1 | Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. | |||||||
| Level 2 | Observable 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 3 | Unobservable 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 for the periods presented.
Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets and are classified as derivative instruments. We measure the fair value of our cross currency swap contracts 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 and are classified as derivative instruments. We measure the fair value of our foreign currency exchange contracts 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 and are classified as derivative instruments. We measure the fair value of our interest rate swap contracts using current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk.
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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 June 30, 2026 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Balance as of June 30, 2026 | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
Money market funds (1) | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign currency exchange contracts (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Cross currency swaps (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap (3) | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
Cross currency swaps (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign currency exchange contracts (2) | $ | $ | $ | $ | ||||||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||||
| As of December 31, 2025 | Quoted 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, 2025 | ||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
Cross currency swaps (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign currency exchange contracts (2) | $ | $ | $ | $ | ||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
Cross currency swaps (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Foreign currency exchange contracts (2) | $ | $ | $ | $ | ||||||||||||||||||||||
Interest rate swap (3) | $ | $ | $ | $ | ||||||||||||||||||||||
| Contingent consideration | $ | $ | $ | $ | ||||||||||||||||||||||
(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 consisted of demand deposits.
(2)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)Interest rate swaps are included within other current assets or other long-term liabilities.
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.
We hold an investment in a private equity fund that invests in growth equity and early-stage businesses engaged in pet products and services. The fair value of this investment, measured using the net asset value (“NAV”) practical expedient, was $3.8 million at June 30, 2026, compared to $1.8 million at December 31, 2025. During the six months ended June 30, 2026, we recognized an unrealized gain of $1.2 million on our investment. We have a remaining unfunded commitment of approximately $2.4 million at June 30, 2026. Investments measured at fair value using the NAV practical expedient are not classified in the fair value hierarchy. We recognize changes in the fair value of our investment in net income as non-operating gains (losses) on equity investment because the investment is not a core business activity. Distributions occur as underlying investments are exited, with liquidation of the fund’s assets expected over a period of time of up to approximately 13 years from inception. We cannot redeem our interests until the fund’s dissolution, our interest is non-transferable without general partner consent, and no public market exists.
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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 hedging instruments and related hedged items are accounted for, and how the hedging instruments and related hedged items affect our financial position, results of operations, and cash flows.
We recognize all hedging instrument assets and liabilities on the balance sheet at fair value at the balance sheet date. Hedging instruments that do not qualify for hedge accounting treatment are recorded at fair value through earnings. To qualify for hedge accounting treatment, hedging instruments must be highly effective in offsetting changes to expected future cash flows or fair value on hedged transactions. If the hedging 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 hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated hedging 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 the unaudited condensed consolidated statements of income for the three and six months ended June 30, 2026 and 2025.
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 accompanying 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.
Our subsidiaries enter into foreign currency exchange contracts to reduce the exchange risk associated with their forecasted intercompany inventory purchases and sales for the next year. We may also enter into other foreign currency exchange contracts, cross currency swaps, or foreign-denominated debt issuances to reduce 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 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.
Cash Flow Hedges
We have designated our foreign currency exchange contracts and our interest rate swaps as cash flow hedges because these derivative instruments reduce our exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange and to interest rates on variable interest obligations of our Term Loan. 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 the six months ended June 30, 2026, or 2025. Gains and losses related to hedge ineffectiveness recognized in earnings during the six months ended June 30, 2026 and 2025, were not material. As of June 30, 2026, the estimated amount of gains, net of tax, from our foreign exchange contracts which are expected to be reclassified out of AOCI and into earnings within the next twelve months is $4.2 million if exchange rates do not fluctuate from the levels as of June 30, 2026. As of June 30, 2026, 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 $1.1 million if interest rates do not fluctuate from the levels as of June 30, 2026.
Interest Rate Swaps: We have entered into an interest rate swap contract to reduce the effect of variable interest obligations of our Term Loan. Beginning in November 2025 through November 2028, the variable interest rate associated with the $250.0 million of borrowings outstanding under our Credit Facility became effectively fixed at 3.4 % plus the applicable credit spread. Our previous interest rate swap contract, from March 2023 through October 2025, on the variable interest rate
27
associated with the $250.0 million of borrowings under our Credit Facility, was effectively fixed at 3.9 % plus the applicable credit spread.
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, Japanese yen, Canadian dollar, and Australian dollar. We have additional unhedged foreign currency exposures related to intercompany foreign transactions 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 $393.8 million and $397.6 million as of June 30, 2026, and December 31, 2025, respectively.
The following table presents the effects 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) | Financial statement line items in which effects of cash flow hedges are recorded | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||||||||
| Foreign currency exchange contracts | Cost of revenue | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Gain (loss) reclassified from accumulated other comprehensive income into net income | $ | $ | ( | $ | $ | |||||||||||||||||||||||||||
| Interest rate swap contract | Interest expense | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Gain (loss) reclassified from accumulated other comprehensive income into net income | $ | $ | $ | $ | ||||||||||||||||||||||||||||
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 that were due June 18, 2025. We designated these euro-denominated notes as a hedge of our euro net investment in certain foreign subsidiaries to reduce the volatility 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 the translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than earnings. During the three and six months ended June 30, 2025, we recorded losses of $6.0 million and $9.0 million, respectively, net of tax, within AOCI as a result of these net investment hedges. At the maturity of the 1.785 % Series C Senior Notes in June 2025, we paid the notional amount of €88.9 million, equivalent to $103.4 million at the date of payment. Refer to “Note 13. Debt” to the consolidated financial statements included in our 2025 Annual Report for further information regarding these euro-denominated notes.
Net Investment Hedges, Cross Currency Swaps
We have entered into cross currency swap contracts as a hedge of our net investment in certain foreign subsidiaries to reduce the volatility caused by changes in foreign currency exchange rates relative to the U.S. dollar. The cross currency swaps outstanding as of June 30, 2026, have maturity dates beginning on March 31, 2028, through September 11, 2032.
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The following table presents the outstanding cross currency swaps notional amounts that will be delivered to and received from the counterparties at maturity:
| (in thousands) | ||||||||||||||
| Maturity Date | Notional Amount to be Delivered at Maturity | Notional Amount to be Received at Maturity | ||||||||||||
| 3/31/2028 | € | $ | ||||||||||||
| 6/30/2028 | € | $ | ||||||||||||
| 7/17/2028 | € | $ | ||||||||||||
| 7/31/2028 | € | $ | ||||||||||||
| 6/29/2029 | € | $ | ||||||||||||
| 9/11/2032 | ¥ | $ | ||||||||||||
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 or all or a portion of the hedge no longer qualifies for hedge accounting treatment. During the three and six months ended June 30, 2026, we recorded gains of $0.7 million and $5.2 million, net of tax, within AOCI as a result of these net investment hedges, compared to losses of $10.4 million and $14.0 million during the three and six months ended June 30, 2025, respectively. We 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 $1.1 million and $2.1 million related to the excluded component as a reduction of interest expense for the three and six months ended June 30, 2026, respectively, and $0.4 million and $0.8 million for the three and six months ended June 30, 2025, respectively.
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:
| (in thousands) | Hedging Assets | |||||||||||||||||||
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||
| Derivatives and non-derivatives designated as hedging instruments | Balance Sheet Classification | |||||||||||||||||||
| Foreign currency exchange contracts | Other current assets | $ | $ | |||||||||||||||||
| Foreign currency exchange contracts | Other long-term assets | |||||||||||||||||||
| Interest rate swap contract | Other long-term assets | |||||||||||||||||||
| Cross currency swaps | Other long-term assets | |||||||||||||||||||
| Total derivative instruments presented as hedging instruments on the balance sheet | ||||||||||||||||||||
| Gross amounts subject to master netting arrangements not offset on the balance sheet | ( | ( | ||||||||||||||||||
| Net amount | $ | $ | ||||||||||||||||||
| (in thousands) | Hedging Liabilities | |||||||||||||||||||
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||
| Derivatives and non-derivatives designated as hedging instruments | Balance Sheet Classification | |||||||||||||||||||
| Foreign currency exchange contracts | Accrued liabilities | $ | $ | |||||||||||||||||
| Cross currency swaps | Other long-term liabilities | |||||||||||||||||||
| Interest rate swap contract | Other long-term liabilities | |||||||||||||||||||
| Total derivative instruments presented as hedging instruments on the balance sheet | ||||||||||||||||||||
| Gross amounts subject to master netting arrangements not offset on the balance sheet | ( | ( | ||||||||||||||||||
| Net amount | $ | $ | ||||||||||||||||||
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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 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; 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 June 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.
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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 current global conflicts, including hostilities in the Middle East, could cause further disruption to global energy markets, fuel prices, transportation networks, and supply chains particularly in the Asia Pacific and European regions, which may indirectly impact our operating costs and consumer availability and demand for our products and services.
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 six months ended June 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 six months ended June 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 revenues for the prior year period.
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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.
We present Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio, 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.
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 June 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 | $ | 393,069 | $ | 214 | $ | 393,283 | $ | 347,983 | $ | 494 | $ | 348,477 | ||||||||||||||||||||||||||
| Water | 30,258 | 16 | 30,274 | 24,606 | 36 | 24,642 | ||||||||||||||||||||||||||||||||
| LPD | 2,395 | 16 | 2,411 | (543) | 38 | (505) | ||||||||||||||||||||||||||||||||
| Other | (156) | (246) | (402) | 1,000 | (568) | 432 | ||||||||||||||||||||||||||||||||
| Total | $ | 425,566 | $ | — | $ | 425,566 | $ | 373,046 | $ | — | $ | 373,046 | ||||||||||||||||||||||||||
(in thousands) | For the Six Months Ended June 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 | $ | 730,234 | $ | 604 | $ | 730,838 | $ | 642,554 | $ | 1,078 | $ | 643,632 | ||||||||||||||||||||||||||
| Water | 53,901 | 42 | 53,943 | 45,380 | 79 | 45,459 | ||||||||||||||||||||||||||||||||
| LPD | 3,657 | 44 | 3,701 | (462) | 82 | (380) | ||||||||||||||||||||||||||||||||
| Other | 360 | (690) | (330) | 2,108 | (1,239) | 869 | ||||||||||||||||||||||||||||||||
| Total | $ | 788,152 | $ | — | $ | 788,152 | $ | 689,580 | $ | — | $ | 689,580 | ||||||||||||||||||||||||||
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Results of Operations
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Total Company. The following table presents total Company revenue by operating segment:
| For the Three Months Ended June 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 | $ | 1,118,236 | $ | 1,022,443 | $ | 95,793 | 9.4 | % | 0.6 | % | — | 8.7 | % | |||||||||||||||||||||||||||||||
| United States | 734,892 | 684,497 | 50,395 | 7.4 | % | — | — | 7.4 | % | |||||||||||||||||||||||||||||||||||
| International | 383,344 | 337,946 | 45,398 | 13.4 | % | 1.9 | % | — | 11.5 | % | ||||||||||||||||||||||||||||||||||
| Water | $ | 58,564 | $ | 51,001 | $ | 7,563 | 14.8 | % | 1.9 | % | — | 13.0 | % | |||||||||||||||||||||||||||||||
| United States | 29,621 | 26,090 | 3,531 | 13.5 | % | — | — | 13.5 | % | |||||||||||||||||||||||||||||||||||
| International | 28,943 | 24,911 | 4,032 | 16.2 | % | 3.8 | % | — | 12.4 | % | ||||||||||||||||||||||||||||||||||
| LPD | $ | 35,181 | $ | 31,762 | $ | 3,419 | 10.8 | % | 1.8 | % | — | 9.0 | % | |||||||||||||||||||||||||||||||
| United States | 6,608 | 5,767 | 841 | 14.6 | % | — | — | 14.6 | % | |||||||||||||||||||||||||||||||||||
| International | 28,573 | 25,995 | 2,578 | 9.9 | % | 2.1 | % | — | 7.8 | % | ||||||||||||||||||||||||||||||||||
| Other | $ | 4,604 | $ | 4,251 | $ | 353 | 8.3 | % | — | — | 8.3 | % | ||||||||||||||||||||||||||||||||
| Total Company | $ | 1,216,585 | $ | 1,109,457 | $ | 107,128 | 9.7 | % | 0.7 | % | — | 9.0 | % | |||||||||||||||||||||||||||||||
| United States | 772,968 | 717,869 | 55,099 | 7.7 | % | — | — | 7.7 | % | |||||||||||||||||||||||||||||||||||
| International | 443,617 | 391,588 | 52,029 | 13.3 | % | 2.0 | % | — | 11.2 | % | ||||||||||||||||||||||||||||||||||
(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 the lower placements of our IDEXX inVue DxTM Analyzer, compared to the broad commercial availability during the second quarter of 2025. Higher volumes and realized prices in recurring veterinary software subscriptions, services, and diagnostic imaging also contributed to revenue growth. Revenue growth in our Water business was primarily due to higher volumes and realized prices. The increase in LPD revenue was primarily due to higher volumes and higher realized prices. The impact of changes in foreign currency exchange rates increased revenue growth by 0.7%.
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The following table presents our consolidated Company results of operations:
| For the Three Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Total Company - Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 1,216,585 | $ | 1,109,457 | $ | 107,128 | 9.7 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 437,498 | 414,725 | 22,773 | 5.5 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 779,087 | 64.0 | % | 694,732 | 62.6 | % | 84,355 | 12.1 | % | |||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 171,277 | 14.1 | % | 161,107 | 14.5 | % | 10,170 | 6.3 | % | |||||||||||||||||||||||||||||
| General and administrative | 116,815 | 9.6 | % | 98,681 | 8.9 | % | 18,134 | 18.4 | % | |||||||||||||||||||||||||||||
| Research and development | 65,429 | 5.4 | % | 61,898 | 5.6 | % | 3,531 | 5.7 | % | |||||||||||||||||||||||||||||
| Total operating expenses | 353,521 | 29.1 | % | 321,686 | 29.0 | % | 31,835 | 9.9 | % | |||||||||||||||||||||||||||||
| Income from operations | $ | 425,566 | 35.0 | % | $ | 373,046 | 33.6 | % | $ | 52,520 | 14.1 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 140 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from proportionally higher IDEXX VetLab consumable and reference laboratory volume growth, the business mix impact associated with lower premium instrument revenue, operational productivity improvements, and net price realization, which offset inflationary costs. The increase in gross margin also reflects favorability in our Water and Livestock, Poultry and Dairy operating segments. Changes in foreign currency exchange rates increased the gross profit margin by approximately 15 basis points, including the impact of lower hedge losses during the current period compared to the prior period.
Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, as well as higher costs related to commercial expansion. General and administrative expense increased primarily due to higher personnel-related costs, and higher depreciation and amortization related to technology and infrastructure investments. Research and development expense increased primarily due to higher personnel-related costs. Changes in foreign currency exchange rates increased operating expense growth by less than 1%.
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| Companion Animal Group | ||
The following table presents revenue by product and service category for CAG:
| For the Three Months Ended June 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: | $ | 974,713 | $ | 877,995 | $ | 96,718 | 11.0 | % | 0.7 | % | — | 10.3 | % | |||||||||||||||||||||||||||||||
| IDEXX VetLab consumables | 430,337 | 375,112 | 55,225 | 14.7 | % | 1.1 | % | — | 13.6 | % | ||||||||||||||||||||||||||||||||||
| Rapid assay products | 101,575 | 100,240 | 1,335 | 1.3 | % | 0.3 | % | — | 1.1 | % | ||||||||||||||||||||||||||||||||||
| Reference laboratory diagnostic and consulting services | 406,729 | 367,694 | 39,035 | 10.6 | % | 0.3 | % | — | 10.3 | % | ||||||||||||||||||||||||||||||||||
| CAG diagnostics services and accessories | 36,072 | 34,949 | 1,123 | 3.2 | % | 1.1 | % | — | 2.1 | % | ||||||||||||||||||||||||||||||||||
| CAG Diagnostics capital - instruments | 47,174 | 58,600 | (11,426) | (19.5 | %) | 0.1 | % | — | (19.6 | %) | ||||||||||||||||||||||||||||||||||
| Veterinary software, services and diagnostic imaging systems | 96,349 | 85,848 | 10,501 | 12.2 | % | 0.4 | % | — | 11.8 | % | ||||||||||||||||||||||||||||||||||
| Recurring revenue | 76,343 | 68,954 | 7,389 | 10.7 | % | 0.5 | % | — | 10.2 | % | ||||||||||||||||||||||||||||||||||
| Systems and hardware | 20,006 | 16,894 | 3,112 | 18.4 | % | 0.2 | % | — | 18.2 | % | ||||||||||||||||||||||||||||||||||
| Net CAG revenue | $ | 1,118,236 | $ | 1,022,443 | $ | 95,793 | 9.4 | % | 0.6 | % | — | 8.7 | % | |||||||||||||||||||||||||||||||
(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 0.7%.
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 1.1%.
Rapid assay revenue increased from higher realized prices, moderated by lower volumes primarily due to lower vector-borne disease testing, and a shift of customers’ pancreatic lipase testing to our Catalyst instrument platform.
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 customers, including sales of our expanded menu of tests, and by new customers.
CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to lower placements of our IDEXX inVue Dx Analyzer, compared to the broad commercial availability in second quarter of 2025.
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.
35
The following table presents the CAG segment results of operations:
| For the Three Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 1,118,236 | $ | 1,022,443 | $ | 95,793 | 9.4 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 402,449 | 380,341 | 22,108 | 5.8 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 715,787 | 64.0 | % | 642,102 | 62.8 | % | 73,685 | 11.5 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 155,804 | 13.9 | % | 146,896 | 14.4 | % | 8,908 | 6.1 | % | |||||||||||||||||||||||||||||
| General and administrative | 106,078 | 9.5 | % | 89,478 | 8.8 | % | 16,600 | 18.6 | % | |||||||||||||||||||||||||||||
| Research and development | 60,622 | 5.4 | % | 57,251 | 5.6 | % | 3,371 | 5.9 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 322,504 | 28.8 | % | 293,625 | 28.7 | % | 28,879 | 9.8 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 393,283 | 35.2 | % | $ | 348,477 | 34.1 | % | $ | 44,806 | 12.9 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 120 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from proportionally higher IDEXX VetLab consumable and reference laboratory volumes growth, the business mix impact associated with lower premium instrument 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 lower hedge losses during the current period compared to the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, as well as higher costs related to commercial expansion. General and administrative expense increased primarily due to higher personnel-related costs, and higher depreciation and amortization related to technology and infrastructure investments. Research and development expense increased primarily due to higher personnel-related costs. Changes in foreign currency exchange rates increased operating expense growth by less than 1%.
36
| Water | ||
The following table presents the Water segment results of operations:
| For the Three Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 58,564 | $ | 51,001 | $ | 7,563 | 14.8 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 14,966 | 15,490 | (524) | (3.4 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 43,598 | 74.4 | % | 35,511 | 69.6 | % | 8,087 | 22.8 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 7,164 | 12.2 | % | 6,065 | 11.9 | % | 1,099 | 18.1 | % | |||||||||||||||||||||||||||||
| General and administrative | 4,601 | 7.9 | % | 3,345 | 6.6 | % | 1,256 | 37.5 | % | |||||||||||||||||||||||||||||
| Research and development | 1,559 | 2.7 | % | 1,459 | 2.9 | % | 100 | 6.9 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 13,324 | 22.8 | % | 10,869 | 21.3 | % | 2,455 | 22.6 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 30,274 | 51.7 | % | $ | 24,642 | 48.3 | % | $ | 5,632 | 22.9 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher volumes, particularly in the Americas and Europe, and, to a lesser extent, higher realized prices. The increase in volumes was primarily from higher demand for Colilert test products and accessories used in coliform and E. coli testing. International volumes were favorably impacted by the timing of shipments in the current period that had been delayed from the prior quarter as a result of conflict in the Middle East. Changes in foreign currency exchange rates increased revenue growth by 1.9%.
Gross Profit. Gross profit increased due to higher revenue and a 480 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to lower product costs, higher realized prices, which offset inflationary costs, and the favorable impact of changes in product mix. Changes in foreign currency exchange rates increased the gross profit margin by approximately 30 basis points, including the impact of lower hedge losses during the current period compared to the prior period.
Segment Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs and commercial investments. 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%.
37
Livestock, Poultry and Dairy | ||
The following table presents the LPD segment results of operations:
| For the Three Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 35,181 | $ | 31,762 | $ | 3,419 | 10.8 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 16,530 | 16,833 | (303) | (1.8 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 18,651 | 53.0 | % | 14,929 | 47.0 | % | 3,722 | 24.9 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 8,160 | 23.2 | % | 7,847 | 24.7 | % | 313 | 4.0 | % | |||||||||||||||||||||||||||||
| General and administrative | 4,921 | 14.0 | % | 4,555 | 14.3 | % | 366 | 8.0 | % | |||||||||||||||||||||||||||||
| Research and development | 3,159 | 9.0 | % | 3,032 | 9.5 | % | 127 | 4.2 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 16,240 | 46.2 | % | 15,434 | 48.6 | % | 806 | 5.2 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 2,411 | 6.9 | % | $ | (505) | (1.6 | %) | $ | 2,916 | (577.4 | %) | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to increases in test volumes, particularly in the Americas, and, to a lesser extent, higher realized prices. The increase in volumes was primarily due to growth in testing by existing customers, new customers, favorable timing impacts in Europe due to changes in customer ordering patterns compared to the prior year. Changes in foreign currency exchange rates increased revenue growth by 1.8%.
Gross Profit. The increase in gross profit was primarily due to higher revenue and a 600 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. Changes in foreign currency exchange rates increased the gross profit margin by approximately 160 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. General and administrative expense increased primarily due to higher personnel-related and project-related consulting 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 1%.
Non-Operating Items
Interest Expense and Income. Interest expense was $10.2 million for the three months ended June 30, 2026, compared to $11.3 million for the same period during the prior year. Interest income was $0.6 million for the three months ended June 30, 2026, and June 30, 2025.
Gain (Loss) on Equity Investments. During the second quarter, we recognized an unrealized gain on an equity investment of $1.2 million.
Provision for Income Taxes. Our effective income tax rates were 18.9% for the three months ended June 30, 2026, and June 30, 2025. Compared to the same period in the prior year, our current-period effective tax rate was favorably impacted by geographic earnings mix and higher tax benefits related to share-based compensation, which were offset by a prior-year tax benefit from the resolution of international tax audits.
We anticipate reduced tax benefits related to share-based compensation, which is expected to increase our future effective tax rates. 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.
38
Results of Operations
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Total Company. The following table presents total Company revenue by operating segment:
| For the Six Months Ended June 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 | $ | 2,172,288 | $ | 1,942,279 | $ | 230,009 | 11.8 | % | 1.7 | % | — | 10.1 | % | |||||||||||||||||||||||||||||||
| United States | 1,425,792 | 1,308,386 | 117,406 | 9.0 | % | — | — | 9.0 | % | |||||||||||||||||||||||||||||||||||
| International | 746,496 | 633,893 | 112,603 | 17.8 | % | 5.4 | % | — | 12.4 | % | ||||||||||||||||||||||||||||||||||
| Water | $ | 108,829 | $ | 96,322 | $ | 12,507 | 13.0 | % | 2.8 | % | — | 10.2 | % | |||||||||||||||||||||||||||||||
| United States | 56,014 | 49,593 | 6,421 | 12.9 | % | — | — | 12.9 | % | |||||||||||||||||||||||||||||||||||
| International | 52,815 | 46,729 | 6,086 | 13.0 | % | 5.6 | % | — | 7.4 | % | ||||||||||||||||||||||||||||||||||
| LPD | $ | 67,664 | $ | 60,358 | $ | 7,306 | 12.1 | % | 4.0 | % | — | 8.2 | % | |||||||||||||||||||||||||||||||
| United States | 12,992 | 11,555 | 1,437 | 12.4 | % | — | — | 12.4 | % | |||||||||||||||||||||||||||||||||||
| International | 54,672 | 48,803 | 5,869 | 12.0 | % | 4.8 | % | — | 7.2 | % | ||||||||||||||||||||||||||||||||||
| Other | $ | 8,624 | $ | 8,925 | $ | (301) | (3.4 | %) | — | — | (3.4 | %) | ||||||||||||||||||||||||||||||||
| Total Company | $ | 2,357,405 | $ | 2,107,884 | $ | 249,521 | 11.8 | % | 1.8 | % | — | 10.0 | % | |||||||||||||||||||||||||||||||
| United States | 1,498,200 | 1,372,730 | 125,470 | 9.1 | % | — | — | 9.1 | % | |||||||||||||||||||||||||||||||||||
| International | 859,205 | 735,154 | 124,051 | 16.9 | % | 5.3 | % | — | 11.6 | % | ||||||||||||||||||||||||||||||||||
(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 1.8%.
39
The following table presents our consolidated Company results of operations:
| For the Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Total Company - Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 2,357,405 | $ | 2,107,884 | $ | 249,521 | 11.8 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 855,579 | 789,773 | 65,806 | 8.3 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 1,501,826 | 63.7 | % | 1,318,111 | 62.5 | % | 183,715 | 13.9 | % | |||||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 346,527 | 14.7 | % | 317,330 | 15.1 | % | 29,197 | 9.2 | % | |||||||||||||||||||||||||||||
| General and administrative | 235,930 | 10.0 | % | 190,242 | 9.0 | % | 45,688 | 24.0 | % | |||||||||||||||||||||||||||||
| Research and development | 131,217 | 5.6 | % | 120,959 | 5.7 | % | 10,258 | 8.5 | % | |||||||||||||||||||||||||||||
| Total operating expenses | 713,674 | 30.3 | % | 628,531 | 29.8 | % | 85,143 | 13.5 | % | |||||||||||||||||||||||||||||
| Income from operations | $ | 788,152 | 33.4 | % | $ | 689,580 | 32.7 | % | $ | 98,572 | 14.3 | % | ||||||||||||||||||||||||||
Gross Profit. Gross profit increased due to higher revenue and a 120 basis point increase in the gross profit margin. The increase in the gross profit margin reflected benefits from proportionally higher IDEXX VetLab consumable and reference laboratory volumes growth, the business mix impact associated with lower premium instrument revenue, operational productivity improvements, and net price realization, which offset inflationary costs. The increase in gross margin also reflects favorability in our Water and Livestock, Poultry and Dairy operating segments. 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.
Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, as well as higher costs related to commercial expansion. General and administrative expense increased primarily due to a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in 2025, higher personnel-related costs, 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 approximately 1%.
40
Companion Animal Group
The following table presents revenue by product and service category for CAG:
| For the Six Months Ended June 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: | $ | 1,895,026 | $ | 1,684,262 | $ | 210,764 | 12.5 | % | 1.8 | % | — | 10.7 | % | |||||||||||||||||||||||||||||||
| IDEXX VetLab consumables | 842,919 | 719,891 | 123,028 | 17.1 | % | 2.6 | % | — | 14.5 | % | ||||||||||||||||||||||||||||||||||
| Rapid assay products | 186,513 | 184,274 | 2,239 | 1.2 | % | 0.7 | % | — | 0.5 | % | ||||||||||||||||||||||||||||||||||
| Reference laboratory diagnostic and consulting services | 792,908 | 712,100 | 80,808 | 11.3 | % | 1.4 | % | — | 10.0 | % | ||||||||||||||||||||||||||||||||||
| CAG diagnostics services and accessories | 72,686 | 67,997 | 4,689 | 6.9 | % | 2.3 | % | — | 4.6 | % | ||||||||||||||||||||||||||||||||||
| CAG Diagnostics capital - instruments | $ | 89,623 | $ | 90,594 | $ | (971) | (1.1 | %) | 1.4 | % | — | (2.5 | %) | |||||||||||||||||||||||||||||||
| Veterinary software, services and diagnostic imaging systems: | $ | 187,639 | $ | 167,423 | $ | 20,216 | 12.1 | % | 0.7 | % | — | 11.4 | % | |||||||||||||||||||||||||||||||
| Recurring revenue | 149,879 | 134,747 | 15,132 | 11.2 | % | 0.8 | % | — | 10.5 | % | ||||||||||||||||||||||||||||||||||
| Systems and hardware | 37,760 | 32,676 | 5,084 | 15.6 | % | 0.3 | % | — | 15.2 | % | ||||||||||||||||||||||||||||||||||
| Net CAG revenue | $ | 2,172,288 | $ | 1,942,279 | $ | 230,009 | 11.8 | % | 1.7 | % | — | 10.1 | % | |||||||||||||||||||||||||||||||
(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 1.8%.
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 2.6%.
Rapid assay revenue increased from higher realized prices, moderated by lower volumes primarily due to lower vector-borne disease testing, and a shift of customers’ pancreatic lipase testing to our Catalyst instrument platform. Changes in foreign currency exchange rates increased revenue growth by 0.7%
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 customers, including sales of our expanded menu of tests, and by new customers. The impact of changes in foreign currency exchange rates increased revenue growth by 1.4%.
CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to program
effects on pricing. Changes in foreign currency exchange rates increased revenue growth by 1.4%.
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 0.7%
41
The following table presents the CAG segment results of operations:
| For the Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 2,172,288 | $ | 1,942,279 | $ | 230,009 | 11.8 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 788,992 | 725,354 | 63,638 | 8.8 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 1,383,296 | 63.7 | % | 1,216,925 | 62.7 | % | 166,371 | 13.7 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 316,215 | 14.6 | % | 289,808 | 14.9 | % | 26,407 | 9.1 | % | |||||||||||||||||||||||||||||
| General and administrative | 214,659 | 9.9 | % | 171,612 | 8.8 | % | 43,047 | 25.1 | % | |||||||||||||||||||||||||||||
| Research and development | 121,584 | 5.6 | % | 111,873 | 5.8 | % | 9,711 | 8.7 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 652,458 | 30.0 | % | 573,293 | 29.5 | % | 79,165 | 13.8 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 730,838 | 33.6 | % | $ | 643,632 | 33.1 | % | $ | 87,206 | 13.5 | % | ||||||||||||||||||||||||||
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 proportionally higher IDEXX VetLab consumable and reference laboratory volumes growth, the business mix impact associated with lower premium instrument 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 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 and travel costs, as well as higher costs related to commercial expansion. General and administrative expense increased primarily due to a prior period reduction in accrued expense of approximately $9 million related to a litigation matter concluded in 2025, higher personnel-related costs, 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 approximately 1%.
42
| Water | ||
The following table presents the Water segment results of operations:
| For the Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 108,829 | $ | 96,322 | $ | 12,507 | 13.0 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 28,694 | 28,738 | (44) | (0.2 | %) | |||||||||||||||||||||||||||||||||
| Gross profit | 80,135 | 73.6 | % | 67,584 | 70.2 | % | 12,551 | 18.6 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 13,997 | 12.9 | % | 12,107 | 12.6 | % | 1,890 | 15.6 | % | |||||||||||||||||||||||||||||
| General and administrative | 8,968 | 8.2 | % | 7,123 | 7.4 | % | 1,845 | 25.9 | % | |||||||||||||||||||||||||||||
| Research and development | 3,227 | 3.0 | % | 2,895 | 3.0 | % | 332 | 11.5 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 26,192 | 24.1 | % | 22,125 | 23.0 | % | 4,067 | 18.4 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 53,943 | 49.6 | % | $ | 45,459 | 47.2 | % | $ | 8,484 | 18.7 | % | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to higher realized prices and higher volumes, particularly in the Americas and Europe. The increase in volumes was primarily 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 2.8%.
Gross Profit. Gross profit increased due to higher revenue and a 340 basis point increase in the gross profit margin. The net increase in the gross profit margin was primarily due to lower product costs and higher realized prices, which offset inflationary costs. Changes in foreign currency exchange rates decreased the gross profit margin by approximately 5 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 and commercial investments. 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%.
43
Livestock, Poultry and Dairy | ||
The following table presents the LPD segment results of operations:
| For the Six Months Ended June 30, | Change | |||||||||||||||||||||||||||||||||||||
Results of Operations (dollars in thousands) | 2026 | Percent of Revenue | 2025 | Percent of Revenue | Amount | Percentage | ||||||||||||||||||||||||||||||||
| Revenues | $ | 67,664 | $ | 60,358 | $ | 7,306 | 12.1 | % | ||||||||||||||||||||||||||||||
| Cost of revenue | 32,103 | 31,064 | 1,039 | 3.3 | % | |||||||||||||||||||||||||||||||||
| Gross profit | 35,561 | 52.6 | % | 29,294 | 48.5 | % | 6,267 | 21.4 | % | |||||||||||||||||||||||||||||
| Segment operating expenses: | ||||||||||||||||||||||||||||||||||||||
| Sales and marketing | 15,949 | 23.6 | % | 14,858 | 24.6 | % | 1,091 | 7.3 | % | |||||||||||||||||||||||||||||
| General and administrative | 9,647 | 14.3 | % | 8,929 | 14.8 | % | 718 | 8.0 | % | |||||||||||||||||||||||||||||
| Research and development | 6,264 | 9.3 | % | 5,887 | 9.8 | % | 377 | 6.4 | % | |||||||||||||||||||||||||||||
| Total segment operating expenses | 31,860 | 47.1 | % | 29,674 | 49.2 | % | 2,186 | 7.4 | % | |||||||||||||||||||||||||||||
| Segment income from operations | $ | 3,701 | 5.5 | % | $ | (380) | (0.6 | %) | $ | 4,081 | (1,073.9 | %) | ||||||||||||||||||||||||||
Revenue. The increase in revenue was primarily due to increases in test volumes, particularly in Europe and the Americas, and, to a lesser extent, higher realized prices. The increase in volumes was primarily due to new customers, favorable timing impacts in Europe due to changes in customer ordering patterns compared to the prior year, and growth in testing by existing customers. Changes in foreign currency exchange rates increased revenue growth by 4.0%.
Gross Profit. The increase in gross profit was primarily due to higher revenues and a 410 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. Changes in foreign currency exchange rates increased the gross profit margin by approximately 5 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 and travel costs. General and administrative expense increased primarily due to higher personnel-related and project-related consulting 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%.
Non-Operating Items
Interest Expense and Income. Interest expense was $17.9 million for the six months ended June 30, 2026, compared to $19.0 million for the same period during the prior year. Interest income was $1.2 million for the six months ended June 30, 2026, compared to $1.8 million for the same period during the prior year.
Gain (Loss) on Equity Investments. For the six months ended June 30, 2026, we recognized an unrealized gain on an equity investment of $1.2 million.
Provision for Income Taxes. Our effective income tax rates were 20.2% for the six months ended June 30, 2026, and June 30, 2025. Compared to the same period in the prior year, our current-period effective tax rate was favorably impacted by geographic earnings mix and higher tax benefits related to share-based compensation, which were offset by a prior-year tax benefit from the resolution of international tax audits.
We anticipate reduced tax benefits related to share-based compensation, which is expected to increase our future effective tax rates. 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.
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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 $221.8 million as of June 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 and lower accrued expenses. As of June 30, 2026, we had $196.9 million of cash and cash equivalents, compared to $180.1 million as of December 31, 2025. As of June 30, 2026, we had a remaining borrowing availability of $729.2 million under our $1.25 billion Credit Facility, with $519.0 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 $1.8 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) | June 30, 2026 | December 31, 2025 | ||||||||||||
| U.S. | $ | 27,532 | $ | 1,606 | ||||||||||
| Foreign | 169,401 | 178,464 | ||||||||||||
Total cash and cash equivalents | $ | 196,933 | $ | 180,070 | ||||||||||
Total cash and cash equivalents held in U.S. dollars by our foreign subsidiaries | $ | 27,201 | $ | 24,571 | ||||||||||
As of June 30, 2026, of the $196.9 million of cash and cash equivalents held, $187.4 million was held as bank deposits and $9.5 million was held in a U.S. government money market fund. As of December 31, 2025, more than 99% of the cash and cash equivalents held were held as bank deposits at a diversified group of institutions, primarily systemically important banks. Cash and cash equivalents as of June 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.
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The following table presents additional key information concerning working capital:
| For the Three Months Ended | |||||||||||||||||||||||||||||
| June 30, 2026 | March 31, 2026 | December 31, 2025 | September 30, 2025 | June 30, 2025 | |||||||||||||||||||||||||
Days sales outstanding (1) | 46.2 | 46.2 | 46.8 | 46.5 | 44.7 | ||||||||||||||||||||||||
Inventory turns (2) | 1.4 | 1.4 | 1.6 | 1.5 | 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 Six Months Ended June 30, | ||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | |||||||||||||||||
| Net cash provided by operating activities | $ | 613,410 | $ | 423,705 | $ | 189,705 | ||||||||||||||
| Net cash used by investing activities | (59,040) | (63,238) | 4,198 | |||||||||||||||||
| Net cash used by financing activities | (536,619) | (495,952) | (40,667) | |||||||||||||||||
| Net effect of changes in exchange rates on cash | (888) | 11,813 | (12,701) | |||||||||||||||||
| Net change in cash and cash equivalents | $ | 16,863 | $ | (123,672) | $ | 140,535 | ||||||||||||||
Operating Activities. Net cash provided by operating activities during the six months ended June 30, 2026, was $613.4 million, which was a net increase in operating cash flows of $189.7 million, compared to the same period during the prior year. Cash was provided from net income of $616.9 million, adjusted for net non-cash items of $143.2 million, partially offset by a net decrease from changes in operating assets and liabilities of $146.7 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 Six Months Ended June 30, | ||||||||||||||||||||
| (in thousands) | 2026 | 2025 | Change | |||||||||||||||||
| Accounts receivable | $ | (82,844) | $ | (74,889) | $ | (7,955) | ||||||||||||||
| Inventories | (1,787) | (4,081) | 2,294 | |||||||||||||||||
| Other assets and liabilities | (66,538) | (133,460) | 66,922 | |||||||||||||||||
| Accounts payable | 4,481 | (12,113) | 16,594 | |||||||||||||||||
| Total change in cash due to changes in operating assets and liabilities | $ | (146,688) | $ | (224,543) | $ | 77,855 | ||||||||||||||
Cash used by changes in operating assets and liabilities during the six months ended June 30, 2026, decreased $77.9 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 litigation settlement payment in the prior year for approximately $80 million and lower income tax payments in the current period, partially offset by higher annual employee incentive program payments in the current year.
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 $59.0 million during the six months ended June 30, 2026, compared to $63.2 million for the same period during the prior year. The decrease in cash used by investing activities was primarily due to lower capital expenditures.
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Our total capital expenditure plan for 2026 is estimated to be approximately $180.0 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 $536.6 million during the six months ended June 30, 2026, compared to $496.0 million used for the same period during the prior year. The increase in net cash used was primarily due to comparatively less cash provided by net borrowings under our Credit Facility, which were $121.0 million during the current period, compared to $329.0 million in the prior period. This relative reduction of $208.0 million in cash provided was partially offset by the comparative impacts from other financing activities, including the use of cash in the prior period for the payment of senior notes of $103.4 million, $41.2 million less cash used during the current period for the repurchase of our common stock, and $26.2 million higher proceeds from stock option exercises during the current 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 June 30, 2026, we had $519.0 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. The sole financial covenant is a Consolidated Leverage Ratio test as described below.
The aggregate principal amount of our 2026 Senior Notes will become due and payable on September 4, 2026. 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 2026 Senior Notes for $75.0 million when due on September 4, 2026, and 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, or 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 sole financial covenant is a Consolidated Leverage Ratio test as described below.
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.
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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, 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 Agreements and Credit Facility, not to exceed 3.5-to-1. As of June 30, 2026, we were in compliance with such covenant.
The following details our Consolidated Leverage Ratio calculation:
| (in thousands) | Twelve Months Ended | ||||
| Trailing 12 Months Adjusted EBITDA: | June 30, 2026 | ||||
Consolidated Net Income | $ | 1,139,656 | |||
Consolidated Interest Charge | 37,788 | ||||
| Provision for income taxes | 284,763 | ||||
| Depreciation and amortization | 154,082 | ||||
Non-recurring transaction expense incurred in connection with Acquisitions * | 90 | ||||
Non-cash charges associated with Share Based Payments | 62,972 | ||||
Extraordinary and other non-recurring non-cash losses and charges * | 6,520 | ||||
| Adjusted EBITDA | $ | 1,685,871 | |||
* Descriptions are contractually defined and may differ from U.S. GAAP definitions. | |||||
| (dollars in thousands) | |||||
| Debt to Adjusted EBITDA Ratio: | June 30, 2026 | ||||
Credit Facility | $ | 519,000 | |||
| Current and long-term portion of long-term debt | 449,864 | ||||
| Total debt | 968,864 | ||||
| Acquisition-related consideration payable | — | ||||
| Deferred financing costs | 136 | ||||
| Gross debt | $ | 969,000 | |||
| Gross debt to Adjusted EBITDA ratio | 0.57 | ||||
| Cash and cash equivalents | $ | 196,933 | |||
| Net debt | $ | 772,067 | |||
| Net debt to Adjusted EBITDA ratio | 0.46 | ||||
Other Commitments, Contingencies and Guarantees
Significant commitments, contingencies, and guarantees as of June 30, 2026, 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 2025 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 2025 Annual Report, except for the impact of foreign exchange rates, as discussed below.
Foreign Currency Exchange Impacts. Our foreign currency exchange impacts are comprised of three components: 1) local currency revenues and expenses; 2) the impact of foreign currency exchange hedge contracts; and 3) intercompany and monetary balances of our subsidiaries that are denominated in a currency that is different from the functional currency used by each subsidiary.
Approximately 23% of our consolidated revenue was derived from products manufactured or sourced in U.S. dollars and sold internationally in local currencies for both the three and six months ended June 30, 2026, compared to approximately 22% for both the three and six months ended June 30, 2025. Strengthening of the rate of exchange for the U.S. dollar 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 or purchased in U.S. dollars and sold internationally, and a weakening of the U.S. dollar has the opposite effects. 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 impacts of foreign currency denominated costs and expenses and foreign currency denominated supply contracts partially offset this exposure. We also enter into foreign currency exchange contracts, designated as hedges, to manage the exchange risk associated with intercompany inventory purchases and sales that are denominated in certain currencies other than the U.S. dollar.
The following table presents the estimated foreign currency exchange impacts on our revenues, operating profit, and diluted earnings per share for the current period compared to the respective prior-year period:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands, except per share amounts) | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||
| Revenue increase (decrease) | $ | 8,486 | $ | 12,454 | $ | 39,657 | $ | 201 | ||||||||||||||||||
| Operating profit increase (decrease), excluding hedge activity and exchange impacts on settlement of foreign currency denominated transactions | $ | 4,985 | $ | 5,490 | $ | 22,554 | $ | (1,795) | ||||||||||||||||||
| Hedge gains (losses) - current period | (434) | (1,180) | (284) | 2,565 | ||||||||||||||||||||||
| Foreign currency transactions gains (losses) - current period | (246) | (568) | (690) | (1,239) | ||||||||||||||||||||||
Operating profit increase (decrease) - current period | 4,305 | 3,742 | 21,580 | (469) | ||||||||||||||||||||||
| Hedge (gains) losses - comparable period in the prior year | 1,180 | (1,721) | (2,565) | (2,531) | ||||||||||||||||||||||
| Foreign currency transaction (gains) losses - comparable period in the prior year | 568 | 1,001 | 1,239 | 1,934 | ||||||||||||||||||||||
Operating profit increase (decrease) - compared to prior period | $ | 6,053 | $ | 3,022 | $ | 20,254 | $ | (1,066) | ||||||||||||||||||
Diluted earnings per share increase (decrease) - compared to prior period (1) | $ | 0.06 | $ | 0.03 | $ | 0.20 | $ | (0.01) | ||||||||||||||||||
(1) The impacts on diluted earnings per share presented may not recalculate due to rounding.
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At our current foreign exchange rate assumptions, we anticipate year-over-year changes for the remainder of the year will decrease our revenues, and increase operating profit and diluted earnings per share by approximately $13 million, $2 million and $0.02 per share, respectively. These favorable currency impacts to our operating profit 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 $7 million and $0.07 per share for the remainder of the year ending December 31, 2026. These estimates assume that the value of the U.S. dollar will reflect the euro at $1.14, the British pound at $1.32, the Canadian dollar at $0.70, and the Australian dollar at $0.69; and the Japanese yen at ¥162, the Chinese renminbi at RMB 6.80, and the Brazilian real at R$5.20 relative to the U.S. dollar for the remainder of 2026. 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.
The foreign currency exchange impacts on our projected revenues and expenses for the remainder of 2026 will be different from our estimates if actual foreign exchange rates are different from our assumptions. 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 $8 million and operating income by approximately $3 million, net of hedge positions.
Interest Rate Risk. We entered into an interest rate swap to reduce the effect of variable interest obligations of our Term Loan. Beginning in November 2025, the variable interest rate associated with our $250.0 million Term Loan became effectively fixed at 3.4%, plus the applicable credit spread, through November 12, 2028. Borrowings outstanding under our Credit Facility at June 30, 2026, were $519.0 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. Hedging Instruments.”
Effects of Inflation. We expect to continue to face higher costs for labor, commodities, energy, and transportation, as well as increased prices from suppliers. 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 is 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 June 30, 2026, 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 June 30, 2026, 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 2025 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 2025 Annual Report. The risks described in our 2025 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended June 30, 2026, we repurchased shares of common stock as described below:
| Period | Total Number of Shares Purchased (a) | Average Price Paid per Share (b)(3) | 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) | ||||||||||||||||||||||
| April 1 to April 30, 2026 | 357,000 | $ | 576.70 | 357,000 | 2,777,370 | |||||||||||||||||||||
| May 1 to May 31, 2026 | 140,545 | $ | 562.67 | 140,500 | 2,636,870 | |||||||||||||||||||||
| June 1 to June 30, 2026 | 84,784 | $ | 558.85 | 84,300 | 2,552,570 | |||||||||||||||||||||
| Total | 582,329 | (2) | 581,800 | 2,552,570 | ||||||||||||||||||||||
(1)Our Board of Directors has approved the repurchase of up to 78 million shares of our common stock in the open market or in negotiated transactions pursuant to the Company’s share repurchase program. The initial program was approved and announced on August 13, 1999, and the maximum number of shares that may be purchased under the program has been increased by the Board of Directors on numerous occasions. There is no specified expiration date for this repurchase program and it may be suspended or discontinued at any time. There were no other repurchase programs outstanding during the three months ended June 30, 2026, and no share repurchase programs expired during the period.
(2)During the three months ended June 30, 2026, we received 529 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. 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 a 1% excise tax on the value of shares repurchased in the open market, net of a reduction for eligible stock issuances.
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.
Item 5. Other Information
Rule 10b5-1 Trading Plan Elections
During the three months ended June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted terminated
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Item 6. Exhibits
| Incorporated by Reference | ||||||||||||||||||||
| Exhibit No. | Exhibit Description | Form | Exhibit | Filing Date / Period End Date | Filed / Furnished Herewith | |||||||||||||||
| Articles of incorporation and by-laws | ||||||||||||||||||||
3.1 | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of IDEXX Laboratories, Inc., dated May 13, 2026. | 8-K | 3.1 | 5/15/26 | ||||||||||||||||
3.2 | Amended and Restated By-Laws of IDEXX Laboratories, Inc., amended through May 13, 2026. | 8-K | 3.2 | 5/15/26 | ||||||||||||||||
| Material Contracts | ||||||||||||||||||||
10.1* | Amendment No. 10 to U.S. Supply Agreement, effective as of May 19, 2026, among IDEXX Operations, Inc., the Company and Ortho-Clinical Diagnostics, Inc. (“Ortho”) | X | ||||||||||||||||||
10.2* | Amendment No. 8 to European Supply Agreement, effective as of May 19, 2026, among IDEXX B.V., the Company and Ortho | X | ||||||||||||||||||
| Rule 13a-14(a)/15-14(a) certifications | ||||||||||||||||||||
31.1 | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | X | ||||||||||||||||||
31.2 | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith) | X | ||||||||||||||||||
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | X | ||||||||||||||||||
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith) | X | ||||||||||||||||||
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| Interactive data file | |||||||||||||||||
| 101 | The following financial and related information from IDEXX Laboratories, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, 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. | ||||||||||||||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026, formatted in Inline XBRL, and contained in Exhibit 101. | ||||||||||||||||
| * | Certain portions have been omitted as confidential information. | ||||||||||||||||
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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/ Andrew Emerson | |||||
| Date: August 4, 2026 | Andrew Emerson | ||||
| Executive Vice President, Chief Financial Officer and Treasurer | |||||
| (Principal Financial Officer) | |||||
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