the idexx opportunity… · 8/16/2017 · 1 © 2017 idexx laboratories, inc. all rights reserved....
TRANSCRIPT
1 © 2017 IDEXX Laboratories, Inc. All rights reserved.
The IDEXX OpportunityJonathan Ayers, Chairman and Chief Executive Officer
IDEXX Investor Day I August 16, 2017
2 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Safe Harbor Disclaimer
The following information contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on management’s current expectations and beliefs, as well as a number of assumptions concerning future
events. These statements are subject to risks, uncertainties, assumptions and other important factors. You are cautioned not to put undue
reliance on such forward-looking statements because actual results may vary materially from those expressed or implied. The reports filed by
the Company pursuant to United States securities laws contain discussions of these risks and uncertainties. The Company assumes no
obligation to, and expressly disclaims any obligation to, update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. You are advised to review the Company’s filings with the United States Securities and Exchange Commission (which
are available from the SEC’s EDGAR database at www.sec.gov and via the Company’s website at www.idexx.com).
We refer in this presentation to 2017 outlook communicated on August 1, 2017; these references speak only as of August 1, 2017 and shall not
be deemed to be a reiteration or affirmation of the guidance or an indication that our expectations have not changed since that time.
Non-GAAP Financial Measures
In this presentation, we refer to some non-GAAP financial measures. For a reconciliation to the most comparable GAAP financial measures, we
refer you to our footnotes and the Appendix to this presentation, which also refer to our Definitive Proxy Statement filed March 23, 2017 and
Annual Report on Form 10-K for the year ended December 31, 2016, both of which are available at http://www.idexxproxymaterials.com.
Please refer to additional footnotes in the Appendix.
3 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX – Accelerating Momentum in a Strong Market
• Strong market growth and favorable
demographic trends
• Attractive model of leadership with
enduring recurring revenue
• Widening innovation gap and new
commercial model has accelerated
organic growth of CAG Diagnostics
Recurring Revenue
• In 2017, we are seeing a growing
opportunity to build very long-term
sustainability into the model
4 © 2017 IDEXX Laboratories, Inc. All rights reserved.
We Lead with Best-in-Class Offerings in Each Diagnostic and
Software Modality and with Global Scale
Canada
Latin
America
EMEA
Other
Asia
Japan
Australia &
New Zealand
China
U.S.
~40%
$1.5 B*
* Revenue at the manufacturer level. Includes reference lab, in-house instruments and consumables, rapid assay, digital, ultrasound and veterinary software. Excludes
bioresearch. Figures calculated in USD to best reflect our understanding of the relative regional revenue figures.
5 © 2017 IDEXX Laboratories, Inc. All rights reserved.
The Core Business Model Consists of Profitable Recurring RevenueCAG Diagnostics Recurring Revenue Leads the Way - 74% of total
Annual Recurring Revenues ($B)1,2,3
% of Total
IDEXX
Revenues
85% 86% 87% 87%
IDEXX
VetLab®**
Rapid
Assay
CAG Other
Water Testing
Livestock Testing*
Companion
Animal
Diagnostics
74%
of total IDEXX
Revenue
83%
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2012 2013 2014 2015 2016 2017E ***
($)
Reference
Labs
88%
* Livestock, poultry and dairy testing ** IDEXX VetLab includes consumables, service and accessories. 1,2,3 Please refer to the Appendix for descriptive footnotes.
*** All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
6 © 2017 IDEXX Laboratories, Inc. All rights reserved.
The Global Market is $3.8 Billion with Strong Secular Growth TrendsU.S. represents ~$2.4B, or ~65% and International represents ~$1.4B or ~35%
Canada
U.S.
Latin
America
Europe, Middle
East & Africa
Japan
Australia &
New Zealand
China &
Other Asia
$2.4B
* Revenue at the manufacturer level. Includes reference lab, in-house instruments and consumables, rapid assay, digital, ultrasound and information management. Excludes bioresearch.
Figures stated in USD, based on December 31, 2016 exchange rates.
2016 Companion Animal Diagnostics and
Software Market Estimate ($B)*
7 © 2017 IDEXX Laboratories, Inc. All rights reserved.
U.S. Market Backdrop; Pet-related Spending Growth has Significantly
Outpaced Personal Consumption
0
400
800
1,200
1,600
2,000
2,400
1980 1985 1990 1995 2000 2005 2010 2016
U.S. Personal Consumption Expenditure for Key Categories*
Indexed (1980 = 100)
Total Personal Consumption
Expenditure (PCE)
Veterinary and Related Services
Pets and Related Products
* Analysis based on data from Bureau of Economic Analysis last revised on March 31, 2017. ** Compound Annual Growth Rate.
Yet, veterinary services, pets and related products together still
comprise only ~0.8% of total consumption expenditure
CAGR**
1980-2016
8.9%
6.6%
5.7%
8 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Pet Owners Say Pets Support their Health and Well-being
80%
81%
84%
86%
88%
0% 20% 40% 60% 80% 100%
Reduce stress
Percentage of Pet Owners Who are Aware that Pets…
Help with conditions like PTSD in
war veterans
Reduce depression
Reduce anxiety
Increase our sense of well-being
Source: Pet Owner Survey conducted in 2016 by The Human Animal Bond Research Institute (HABRI) Foundation in partnership with Cohen Research Group (n = 1,995 pet owners), which had a margin of error of plus or minus 2.2%.
9 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Pet Owners View their Pets as Members of their Families and Can’t
Imagine Giving Them Up
0% 20% 40% 60% 80% 100%
“I feel that my pet is
an important part
of my family.”
“I couldn’t imagine
giving up my pet
for any reason.”
Strongly Agree Agree
98%
95%
Source: Pet Owner Survey conducted in 2016 by The Human Animal Bond Research Institute (HABRI) Foundation in partnership with Cohen Research Group (n = 1,995 pet owners), which had a margin of error of plus or minus 2.2%.
10 © 2017 IDEXX Laboratories, Inc. All rights reserved.
The Pet-human Bond Continues to Strengthen
Percentage of U.S. Pet Owners Responding Whether
Their Pets’ or Their Own Medical Needs Come First (%)
My pet’s
medical needs
come first
Not sure
whose needs
come first
Source: American Pet Products Association 2016-17 Pet Owners’ Survey. A total of 2,559 pet owner surveys were completed; Dog owner sample: 505, cat owner sample: 451;
Surveys were conducted with a nationally representative sample of the Ipsos Online Panel.
46%53%51% 50%
2014 2016 2014 2016
11 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Most Pet Owners Prioritize Pet Care with at least Annual Pet Care Visits
67% 58%39%
0%
20%
40%
60%
80%
100%
More than 1 visit per year
1 visit per year
How many times a year do you take your pet to the veterinarian?
86% 86%77%
Source: Pet Owner Survey conducted in 2016 by The Human Animal Bond Research Institute (HABRI) Foundation in partnership with Cohen Research Group (n = 1,995 pet owners), which had a margin of error of plus or minus 2.2%.
Baby Boomers(53 yrs to 71 yrs)
Millennials(19 yrs to 36 yrs)
Gen X(37 yrs to 52 yrs)
12 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Most Pet Owners Are Willing to Spend on their Pets, and Millennials
Are Taking it to a Whole New Level – 41% Say Money is No Object
Baby Boomers(53 yrs to 71 yrs)
Millennials(19 yrs to 36 yrs)
Gen X(37 yrs to 52 yrs)
41% 36%21%
0%
20%
40%
60%
80%
100%
“Money is no object
to me when it comes
to my pets.”
“I spend a moderate
amount of money on
my pet.”
“I am budget-
conscious.”
How much money do you spend on your pet each month?
Source: Pet Owner Survey conducted in 2016 by The Human Animal Bond Research Institute (HABRI) Foundation in partnership with Cohen Research Group (n = 1,995 pet owners), which had a margin of error of plus or minus 2.2%.
Average of 33%
where money is no
object to me when
it comes to my pets
13 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Today, ~40% of U.S. Clinical Visits Include a Diagnostic Test of Any Kind
2016 U.S. Pet Visits and Diagnostic Testing*
Total
Pet VisitsClinical Visits* Clinical Visits
Including
any Dx Test**
100%
41%~200M
58% of
total visits
~80M
* Based on IDEXX Practice Intelligence data, secondary data sources, modeling. “Clinical Visits” are visits that include a veterinary professional seeing a pet, and thus exclude visits for pharma, diet and product sales, boarding, grooming, etc.
** Diagnostic test includes all of the following: fecal, heartworm or vector-borne disease tests, chemistry, hematology, microbiology, biopsy and/ or cytology; whether performed in-house or at the reference lab, by any product or service provider.
Excludes radiology.
*** Roughly estimated based on the best data available.
~350M
Clinical Visits
Including a
Chemistry Panel***
~24M
~12%
14 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Chemistry Testing Represents the Majority of IDEXX VetLab
Consumables and Reference Lab Revenue
2016 Worldwide IDEXX VetLab Consumables Revenue ($MM)
81%
Revenue from
Chemistry
Consumables*Other
2016 U.S. Reference Labs Revenue ($MM)
49%
Revenue
from Test
Codes that
include a
Chemistry
Panel Other
* IDEXX VetLab chemistry consumables excluding IDEXX VetStat® consumables.
15 © 2017 IDEXX Laboratories, Inc. All rights reserved.
The Chemistry Panel Provides Essential Insight when Pets are Sick
Strong
Finding of
Likely
Disease
Catalyst® Chemistry 21 Results when Run for Canine Sick Appointments*
26% 27% 35% 44%14% 15%
16%
18%
0%
20%
40%
60%
80%
100%
Young(0 – 2 years)
Adult(3 – 6 years)
Senior(7 – 10 years)
Geriatric(11+ years)
0 - 1
2
3 or
more
* Catalyst Chemistry 21 runs, which include Chem 17 and Lyte4 CLIPs for sick and emergency patients. Date of birth used to determine age. N=44,510.
Number of Results
Exceeding Critical Values
16 © 2017 IDEXX Laboratories, Inc. All rights reserved.
…But also Uncovers a Large Amount of Hidden Disease When Seemingly
Well Pets Receive Preventive Care Testing Including a Chemistry Panel
Catalyst Chemistry 21 Results when Run for Canine Preventive
Care (Seemingly “Well” Pets)*
18% 17%23%
32%14% 14%
16%
20%
0%
20%
40%
60%
80%
100%
* Catalyst Chemistry 21 runs, which include Chem 17 and Lyte4 CLIPs for patients when “wellness” was the reason for visit. Date of birth used to determine age. N = 14,770
Strong
Finding of
Likely
Disease
0 - 1
2
3 or
more
Young(0 – 2 years)
Adult(3 – 6 years)
Senior(7 – 10 years)
Geriatric(11+ years)
Number of Results
Exceeding Critical Values
17 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX is in an “Opportunity Plus” Zone to Accelerate Growth of the
Diagnostic Annuity
• People prioritize spending on their pets
• Pets can’t tell you how they feel
• Pets age 7 times faster than humans*
• Running Diagnostics is essential,
but underutilized
• IDEXX has uniquely expanded the
diagnostics toolset
* Example: A dog becomes a senior at age 7, geriatric at 11, cats at 9 and 14 respectively.
18 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Veterinary Practices’ Routine Testing Generates a Profitable and Growing
IDEXX Recurring Revenue Annuity
CAG Diagnostics Recurring Revenues1,2,3
74% of IDEXX Total
IDEXX
VetLab*
Rapid
Assay
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2012 2013 2014 2015 2016 2017E **
$Billions
in Annual
Revenue
Reference
Labs
Growth is a function of:
• Growth in utilization – breadth and
depth of IDEXX’s unique toolkit
• Exceptional levels of customer
retention
• Steady growth from new customers
• Price realization through expanding
value
1,2,3 Please refer to the Appendix for descriptive footnotes. * IDEXX VetLab includes consumables, service and accessories.
** All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
19 © 2017 IDEXX Laboratories, Inc. All rights reserved.
1
13
82
2
14
88
1
15
98
2
18
100
2
19
101
0
20
40
60
80
100
IDEXX’s Diagnostic Innovation Expands the Value of the
Diagnostic Tool Kit to the Practice and the Pet in a Unique Fashion
IDEXX Invests More than 80%
of Industry R&D
VCA Inc.* Heska Abaxis IDEXX Laboratories
* * * * *
* VCA does not report any R&D investments in its filings with the U.S. Securities and Exchange Commission (“SEC”).
Sources: Company SEC filings; earnings releases.
Comparison of Annual R&D Investment of Major Veterinary Diagnostics Companies$MM, calendar years shown
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
20 © 2017 IDEXX Laboratories, Inc. All rights reserved.
~99% of CAG Revenue is Sold Direct or with an IDEXX In-Country Presence,
Driving Adoption of Diagnostics and IDEXX Innovation
Direct sales force Joint Direct &
Distribution
Distributor
only
21 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX U.S. Example of the Commercial Model Transformation:
We have Deepened our Presence with Customers, Accelerating
Adoption of our Unique Innovations
* Includes all field-based sales and technical services headcount, excluding management. 2012-2016 as of December 31 of each calendar year, 2017E projected as of December 31, 2017.
215235 248
358390
435
2012 2013 2014 2015 2016 2017E
Total U.S. CAG Field-Based Professional Headcount*
2x
~
22 © 2017 IDEXX Laboratories, Inc. All rights reserved.
In 2016, IDEXX U.S. Customers Had Higher Dx Utilization and are
Growing Their Diagnostics Faster Than Non-IDEXX Practices
15.9%14.6%
9.1%
3.8%
5.1% 4.9%
9.8%
5.6% 6.1% 6.4%
Q1 2016 Q2 2016 Q3 2016 Q4 2016
Quarterly Year over Year Growth of Diagnostic Revenue
per Practice
Diagnostic Revenue as a % of Total
Practice Revenue
IDEXX
Practices*
Competitive
Practices**
Competitive
Practices**
IDEXX
Practices*
* Practices using both IDEXX Catalyst for in-house chemistry and IDEXX Reference Labs at > $500 per month on average ** Use neither IDEXX Catalyst for in-house chemistry nor IDEXX Reference Labs at > $500 per month on average.
Source: Analysis based on IDEXX Loyal and Competitive practices within Practice Intelligence data set (n = 3,503).
23 © 2017 IDEXX Laboratories, Inc. All rights reserved.
$11K
$20K
Growth in Diagnostic Revenue
2016 vs. 2015
Non-IDEXX
Practices**
IDEXX
Practices*
+
+
5.7% 6.9%% YoY
Growth
$86K
Growth in Practice Revenue
2016 vs. 2015+
+
6.5% 7.0%
$126K
AND
Non-IDEXX
Practices**
IDEXX
Practices*
* Practices using both IDEXX Catalyst for in-house chemistry and IDEXX Reference Labs at > $500 per month on average ** Use neither IDEXX Catalyst for in-house chemistry nor IDEXX Reference Labs at > $500 per month on average.
Source: Analysis based on IDEXX Loyal and Competitive practices within IDEXX Practice Intelligence data set (n = 3,503).
In 2016, IDEXX U.S. Practices* Grew Faster
In Both Diagnostics and Total Practice Revenue
24 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX Loyal Customers Use of Chemistry Panel Testing Shows a
Significant Gap between the Average and Best Demonstrated Practice
6%
9%
10% 11% 13%14%
15%17%
19%
25%
28%
31%
0%
5%
10%
15%
20%
25%
30%
35%
IDEXX Loyal Practices: Percentage of 2016 Clinical Visits Including a Chemistry Panel*
Bottom
Decile
Top
Decile
23456789 Top
5%
Top
2%
Mean 13%
2.4x
• Figures rounded to nearest 1%.
Source: Analysis of IDEXX Practice Intelligence and IDEXX Internal Data for 2,730 U.S. practices that use IDEXX for both their in-house and reference lab chemistry testing..
25 © 2017 IDEXX Laboratories, Inc. All rights reserved.
A Closer Look by Modality Shows “Testing begets Testing” IDEXX Customers with higher chemistry panel testing use more of both in-house and
reference lab chemistry panels
4%6% 7% 7% 7% 8% 8% 8% 8%
10% 11% 12%2%
3%3% 4% 6% 6% 8%
9%12%
15%17%
19%
0%
5%
10%
15%
20%
25%
30%
35%
IDEXX Customers: Percentage of 2016 Clinical Visits Including a Chemistry Panel*
• Figures rounded to nearest 1%.
Source: Analysis of IDEXX Practice Intelligence and IDEXX Internal Data for 2,730 U.S. practices that use IDEXX for both their in-house and reference lab chemistry testing.
Overall Mean
13%
Ref Lab Chemistry
Panels(Average - 6.1%)
In-House Chemistry
Panels(Average - 7.0%)
Bottom
Decile
Top
Decile
23456789 Top
5%
Top
2%
26 © 2017 IDEXX Laboratories, Inc. All rights reserved.
SDMA Adds Essential Information to the Chemistry Panel -- Expanding
the Clinical Utility of both Sick Animal and Wellness Testing
* Data on file at IDEXX Laboratories, Inc. Westbrook, Maine U.S.A.
Canine IDEXX SDMA® results by age (n = 537,814)
Prevalence of Kidney Disease Increases with Age in Dogs (n= 537,814)*
Disease
hidden by
traditional
parameters
27 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX SDMA – Increasing Evidence, Recognition and Adoption
as an Essential Element of the Chemistry Panel
SDMA is earlier than creatinineKidney damage as early as 25%
SDMA is more reliable than creatininee.g., Unaffected by lean body mass
IDEXX SDMA is an essential element in the chemistry panel
Kidney as a general disease indicator
2015
2016
2017 10+ Milliontests and counting
28 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Traditional
Parasitology
Panels
Panels
Including IDEXX
Fecal Antigens
Hookworm Roundworm Whipworm
IDEXX Innovation, Another Example: Fecal Antigen Technology
U.S. Parasitology Revenue is
Augmenting U.S. Reference Lab Growth
2013 2014 2015 2016 2017
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Fecal Antigen:
IDEXX Proprietary Innovation
which finds more
intestinal parasites
and finds them earlier
29 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX VetLab Instrument Suite - Innovation that Uniquely Expands Utility
Catalyst One®
Chemistry, T4, Electrolytes,
Catalyst SDMA
ProCyte Dx®
Complete CBC,
Retics & Bands
SediVue Dx®
Urine Sediment
SNAP Pro®
New: Fecal SNAP
for Screening of
Intestinal Parasites
IDEXX VetLab Station
2-Way Integration
Practice
Management
System
Menu
Performance
Connectivity
30 © 2017 IDEXX Laboratories, Inc. All rights reserved.
U.S. Example: IDEXX Innovation and Commercial Model Augments Solid Market Growth to
Drive the Potential for Sustained Double-Digit CAG Diagnostics Recurring Revenue Growth
2017E*
Revenue
* These projections assume that foreign currency exchange rates will remain the same as in 2017. ** 2017E Revenue based on midpoint of outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
*** Estimated contribution to U.S. CAG Dx Recurring Revenue potential compound annual growth rate from this driver.
IDEXX U.S. CAG Dx Recurring Revenue
Growth Potential – Next Five Years
Constant Currency*
New and Incremental
Revenue Streams
Net Customer Additions
1% - 2%**
Base Market Growth: 5 – 6%
Dx Revenue per Pet Visit
2% - 3%**
~3%**
Pet Visit Growth
~2022
Revenue3% - 4.5%**
9% - 13% Compound Annual
Growth Rate
IDEXX Innovation and Commercial Model Impact adds 4 – 7%
31 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX Total Global Revenue Growth Potential: Ongoing 10%+ Annually,
Driven By Global CAG Diagnostics Recurring Expansion
2017E*
Revenue
$1.955B
IDEXX Total Company Annual Revenue Growth Potential 2022 vs. 2017E,
Constant Currency
CAG CapitalVeterinary Software & Digital
8% - 12%***
LPD, Water & Other
6% - 8%***
CAG Recurring
International CAG Dx
12% - 16%***
9% - 13%***
U.S. CAG Dx
~2022
Revenue
10%+ Compound Annual
Growth Rate
* These projections assume that foreign currency exchange rates will remain the same as in 2017. ** 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer. *** Estimated potential revenue compound annual growth rate for this business segment.
32 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Summary: We are in an “Opportunity Plus” Zone To Drive Sustainable
Global Business Growth with Enhanced Durability
An Enduring Recurring Revenue Business
Model with . . .
. . . favorable long-term global growth
dynamics . . .
. . . further augmented by IDEXX’s unique
innovation and commercial model . . .
. . . generating exceptional long-term
financial returns.
33 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Capturing Our OpportunityBrian McKeon, Executive Vice President and CFO
IDEXX Investor Day I August 16, 2017
34 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Strong execution towards a consistent strategy yielding excellent financial outcomes
• Accelerated revenue and EPS growth
• High cash flow conversion, high ROIC and outstanding shareholder returns
We are in an “opportunity plus” growth zone -- increasing select areas of investment
to maximize our long-term business value and durability
Strong momentum and ongoing potential positions us to continue delivering
performance aligned with our long-term financial goals
• 10%+ annual constant currency revenue growth*
• 15-20% annual constant currency EPS gains** – supported by ongoing operating margin expansion
Financial Review – Key Messages
* These projections assume that foreign currency exchange rates will remain the same as in 2017.
** EPS growth potential outlook excludes year over year changes in share-based compensation tax benefits.
35 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Core Business Characteristics
• Global market leadership –
grounded in innovation
• Robust underlying market
growth
• High-margin, durable
recurring revenue streams
• Strong cash generation
Strong Growth Driven By Consistent Focus on Core Businesses
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2006 2011 2016
IDEXX Revenue1 ($B)
Livestock Testing**
Water Testing
Companion
Animal Group
(CAG)
* Compound Annual Growth Rate (CAGR) ** Livestock, poultry and dairy testing1 Please refer to the Appendix for descriptive footnotes. 4 Non-GAAP financial measure, please refer to the Appendix for descriptive footnotes.
$
7%
6%
86%
1% Other
10% Constant Currency CAGR4,*
36 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Growth Has Accelerated – Driven By CAG Diagnostics Recurring Annuity
0%
2%
4%
6%
8%
10%
12%
14%
16%
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
* All references to 2017 YTD mean January 1, 2017 through June 30, 2017. 2,3 Please refer to the Appendix for descriptive footnotes.
5 Non-GAAP financial measure, please refer to Appendix for descriptive footnotes.
*
Growth before Normalization for Changes in Distributor Inventory and Margin Capture Related to 2015 U.S. Go-Direct
Annual CAG Diagnostics Recurring Normalized Organic Revenue Growth2,3,5
37 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Recurring Revenues Expanding
Annual Recurring Revenues ($B)1,2,3
% of Total
IDEXX
Revenues
85% 86% 87% 87%
IDEXX
VetLab®**
Rapid
Assay
CAG Other
Water Testing
Livestock Testing*
* Livestock, poultry and dairy testing ** IDEXX VetLab includes consumables, service and accessories. 1,2,3 Please refer to the Appendix for descriptive footnotes.
*** All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
Companion
Animal
Diagnostics
74%
of total IDEXX
Revenue
83%
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2012 2013 2014 2015 2016 2017E ***
$
Reference
Labs
88%
38 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Strengthened Commercial Capability Driving High U.S. CAG Growth
U.S. CAG Diagnostics Recurring
Normalized Organic Revenue Growth2,3,5
0%
5%
10%
15%
2009 2010 2011 2012 2013 2014 2015 2016 2017YTD
* Includes all field-based sales and technical services headcount, excluding management. Headcount as of December 31, 2012 and projected headcount as of December 31, 2017.2,3,5 Non-GAAP financial measures, please refer to Appendix for descriptive footnotes.
215
435
2012 2017E
~
2x
Total U.S. CAG Field-Based Professional
Headcount*
Growth Normalized for Changes in Distributor Inventory and Margin Capture Related to 2015 U.S. Go-Direct
39 © 2017 IDEXX Laboratories, Inc. All rights reserved.
U.S. Reference Lab Organic Revenue Growth5,*
8%9%
11%
13%14% 14%
2012 2013 2014 2015 2016 2017 YTD
U.S. Lab Growth Is Accelerating Driven By Test Differentiation and Commercial Capability
5 Non-GAAP financial measure, please refer to Appendix for footnotes.
* Includes Reference Lab, Bioresearch and Telemedicine revenue. International Reference Lab organic revenue will be discussed in the IDEXX Reference Labs presentation on August 17, 2017.
40 © 2017 IDEXX Laboratories, Inc. All rights reserved.
In-Clinic Trends Continue to Strengthen Following Go-Direct Transition
0
50
100
150
200
250
300
350
400
450
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017
IDEXX and Abaxis North America Competitive Chemistry Placements*
* Abaxis competitive chemistry placements based on figures reported in company conference calls.
IDEXX
Abaxis
41 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Rapid Assay Returns to Solid Growth
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2015 2016 2017
Global Rapid Assay Normalized Constant Currency Revenue Growth,
with Contribution to Growth of Rapid Assay Product Segments (year over year %)4,6
4Dx® Plus
First Generation/Feline
Other Rapid Assay
-3.3%
-8.0% -3.7%-0.8%
-0.7%
6.7%
2.1%
5.8%
11.4%
8.5%
4,6 Non-GAAP financial measures, please refer to Appendix for footnotes.
42 © 2017 IDEXX Laboratories, Inc. All rights reserved.
3,5 Non-GAAP financial measures, please refer to Appendix for footnotes.
Strong International CAG Gains Driven By Catalyst
International CAG Diagnostics Recurring
Organic Revenue Growth3,5
0%
3%
6%
9%
12%
15%
18%
2012 2013 2014 2015 2016 2017YTD
International Chemistry Instrument
Installed Base
0
5,000
10,000
15,000
20,000
25,000
30,000
2012 2013 2014 2015 2016 2017YTD
Catalyst®
VetTest®
43 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Operating Margins Are Increasing
14%
15%
16%
17%
18%
19%
20%
21%
22%
2012 2013 2014 2015 2016 2017E*
4,7 Non-GAAP financial measures, please refer to Appendix for footnotes. Operating margin includes hedges.
* All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
Adjusted Constant Currency
Reported (Adjusted for Non-Recurring Items)
Operating Margin, Reported and Adjusted Constant Currency4,7
44 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Investments in Global Commercial Capability Are Yielding High Returns
2017E vs. 2012 Global Incremental CAG Sales & Marketing Investment and Incremental Gross Profit (Constant Currency $MM)4
Sales & Marketing
Investment
Gross Profit
2012 – 2017E
CAGR (%)12% - 13% 12% - 13%
4 Non-GAAP financial measure, please refer to Appendix for footnotes.
$0
$100
$200
$300
$400
$500
45 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Delivering Higher Targeted EPS Growth
16%
25%
2016 2017E
4,7 Non-GAAP financial measures, please refer to Appendix for footnotes. * 2017E includes impact of the new accounting guidance related to share-based compensation, which we estimate will result in $0.30-$0.34 of EPS benefit in 2017.
All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
29% - 33%*
2012 – 2015
CAGR
Constant Currency Adjusted EPS Growth4,7
Excluding Impact from New Share-Based Tax Benefit Accounting
17% - 19%
46 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Driving Strong Cash Flow
* ~102% of net income in 2014 and ~86% in 2015 when adjusted for net working capital changes associated with the U.S. go-direct change.
** All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer. 8 Non-GAAP financial measure, please refer to Appendix for footnotes.
• Targeted cash conversion
95%-100% of net income
- 5-year performance and
2017 outlook consistent
with this range
• Low capital investment
intensity (4%-5% of revenues)
• ~80% of excess cash
available for U.S. deployment
104%97%
105%
75%
128%
95%
2012 2013 2014 2015 2016 2017E**
Free Cash Flow as % of Net Income8
*
*
47 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Disciplined Execution Yielding Outstanding Returns
31% 30% 29% 29%
34%
38%
2012 2013 2014 2015 2016 2017E
Return on Invested Capital Excluding Cash & Investments9
(After Tax)
*
23%
Return on Invested Capital Including Cash & Investments
(After Tax)
22% 21% 20% 23% ~25%
9 Non-GAAP financial measure, please refer to Appendix for footnotes.
* All references to 2017E reflect the midpoint of 2017 outlook communicated August 1, 2017. Please refer to our Safe Harbor Disclaimer.
48 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Looking Forward – “Opportunity Plus” Zone To Drive Sustainable
Global Business Expansion and Enhanced Durability
• Strong market growth and favorable
demographic trends
• Innovation pipeline – “early innings” of
capturing potential
• Commercial teams “hitting their stride”
• Widening competitive advantage
• High incremental returns from core
business investment
49 © 2017 IDEXX Laboratories, Inc. All rights reserved.
“Greenfield” & New Innovation Continue As Key Growth Drivers
2017E* vs. 20153.5%
Average annual contribution to growth rate
Other &
TBD
2022E vs. 2017E3% to 4.5%
Average annual contribution to growth rate
IDEXX SDMA®
+ 1.2%
SediVue®
+ 1.8%
Fecal Antigen
+ 0.5% Reference Lab
SNAP®
Slide
Reference Lab
IDEXX Greenfield and New Innovation – Annual Contribution to Revenue Growth ($MM)
Estimated Achievement & Future Potential
IDEXX SDMA
~1.5%
Fecal Antigen
+0.5% - 1%
SediVue
+ 0.5%
* 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer.
50 © 2017 IDEXX Laboratories, Inc. All rights reserved.
High U.S. CAG Diagnostics Recurring Revenue Growth Potential Driven by Solid Market Growth, Customer Acquisition and Greenfield/Innovation Benefit
2017E**
Revenue
IDEXX U.S. CAG Dx Recurring Revenue
Growth Potential – Next Five Years
Constant Currency*
New and Incremental
Revenue Streams
Net Customer Additions
1% - 2%***
Base Market Growth: 5 – 6%
Dx Revenue per Pet Visit
2% - 3%***
~3%***
Pet Visit Growth
~2022
Revenue3% - 4.5%***
9% - 13% Compound Annual
Growth Rate
IDEXX Innovation and Commercial Model Impact adds 4 – 7%
50 © 2017 IDEXX Laboratories, Inc. All rights reserved.
* These projections assume that foreign currency exchange rates will remain the same as in 2017. ** 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer. *** Estimated contribution to U.S. CAG Dx Recurring Revenue potential compound annual growth rate from this driver
51 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Higher International CAG Diagnostics Recurring Revenue Growth Potential Supported By Catalyst Expansion
2017E**
Revenue
IDEXX International CAG Dx Recurring
Revenue Growth Potential Next Five Years
Constant Currency*
Greenfield, Innovation
Benefit
Catalyst Expansion
Benefit
4% - 5%***
6% - 7%***
Base Market Growth
~2022
Revenue2% - 4%***
12% - 16% Compound Annual
Growth Rate
* These projections assume that foreign currency exchange rates will remain the same as in 2017. ** 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer. *** Estimated potential revenue compound annual growth rate from this driver.
52 © 2017 IDEXX Laboratories, Inc. All rights reserved.
IDEXX Has Ongoing 10%+ Annual Revenue Growth PotentialDriven By Expansion of CAG Diagnostics Recurring Revenue
2017E*
Revenue
$1.955B
IDEXX Total Company Annual Revenue Growth Potential 2022 vs. 2017E,
Constant Currency*
CAG CapitalVeterinary Software & Digital
8% - 12%***
LPD, Water & Other
6% - 8%***
CAG Recurring
International CAG Dx
12% - 16%***
9% - 13%***
U.S. CAG Dx
~2022
Revenue
10%+ Compound Annual
Growth Rate
* These projections assume that foreign currency exchange rates will remain the same as in 2017. ** 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer. *** Estimated potential revenue compound annual growth rate for this business segment.
53 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Targeting Continued Solid Operating Margin Gains While Supporting Near-Term Commercial and IT Investments
Margin Drivers 2016 / 2017E* 2018 Target Longer-Term Target
Gross Margin Expansion
CAG Recurring Annuity Growth (Price/Mix)
Lab Scale/Productivity
Sourcing/Manufacturing (Cost/Mix)
Operating Expense Leverage
Sales & Marketing
R&D
IT
G & A Other
Acquisition Impact
Average Annual Operating Margin Gains (ex. currency impacts)4
~150 bps ~50 - 100 bps 50 - 100+ bps
Impact on operating margin: Positive Neutral Negative
* 2017E Revenue based on midpoint of guidance range communicated on August 1, 2017. Please refer to our Safe Harbor Disclaimer. 4 Non-GAAP financial measure, please refer to Appendix for footnotes.
54 © 2017 IDEXX Laboratories, Inc. All rights reserved.
$0
$100
$200
$300
$400
$500
$600
$700
2012 2013 2014 2015 2016 2017 YTD
$2.0 billion
capital deployed
30% cumulative share count
reduction
$66 average
purchase price
Capital Allocation Aligned With Focus on Core Business Growth and
Shareholder Value Creation
Capital Allocated to Share Repurchases (Annually, $MM)
• Emphasis on organic growth
investment
- Capital spending ~4-5% of revenue
• Limited acquisitions
(core business fold-ins,
distribution and technology)
• Allocation of excess capital to
share repurchases (varied
investment pace)
55 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Discrete Projects Impact 2018/19 Capital Spending and FCF Metrics
Impact on:
Capital Spend as a % of Revenue
FCF8 as a % of Net Income
Estimated Capital Spending for Discrete Projects
German Lab Relocation & Expansion $ 15MM$ 15MM
2019E
Westbrook Expansion $ 30MM$ 30MM
$ 45MM$ 45MM
2%
~(15%)
2018E
8 Non-GAAP financial measure, please refer to Appendix for footnotes.
56 © 2017 IDEXX Laboratories, Inc. All rights reserved.
2012 2013 2014 2015 2016 2017 YTD
Debt to Adjusted EBITDA10 Ratio
3.5x
3.0x
2.5x
2.0x
1.5x
1.0x
0.5x
Capital Structure – Managing Consistent with Target Leverage Range
Net
Gross
10 Non-GAAP financial measure, please refer to Appendix for footnotes.
Optimal
Range
2.5x – 3.5x
57 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Well-Positioned to Drive Sustainable, Strong Financial Performance
Revenue Growth
10%+
Operating Margin Expansion
50-100 bps
Capital Allocation Leverage
+1%-3%Incremental
EPS Growth
Long-Term EPS Growth Potential**
15%-20%
Long-Term Financial Model*
* These projections assume that foreign currency exchange rates will remain the same as in 2017.
** EPS growth potential outlook excludes year over year changes in share-based compensation tax benefits.
Appendix
59 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Footnotes
1 IDEXX Reportable Segment Revisions and Divested Revenues: Prior to January 1, 2015, our Companion Animal Group (“CAG”) segment included herd testing diagnostic
services processed within and managed by our CAG reference laboratories. We have transitioned the responsibility for these diagnostic services to our Livestock, Poultry and Dairy
(“LPD”) segment to more effectively align our business with the nature and customers of these livestock services. Revenue and revenue growth calculations have been retrospectively
revised to reflect this change in the composition of our reportable segments. 2006 revenue also excludes divested revenue (primarily attributed to our pharmaceutical business) totaling
$15.3 million.
2 Normalization for Go-Direct Transition: Effective January 1, 2015, we fully transitioned to an all-direct sales strategy in the U.S. We incurred one-time transitional impacts related
to the drawdown of distributor inventory in the fourth quarter of 2014, and reported revenues for 2014 have been adjusted to exclude this $25 million impact. Further, During the three
months ended December 31, 2014, we began recognizing revenue on rapid assay kits and instrument consumables upon delivery to end users in the U.S., instead of at distribution. We
also began to capture additional revenue that was previously earned by our distribution partners, net of other changes related to this all direct strategy, such as free next-day shipping and
a new returns policy for expired product. We refer to this net additional revenue as distributor margin capture, and 2015 revenue has been adjusted ~$40 million to exclude this impact.
3 Recurring Revenue: Annual recurring revenue for LPD, Water, Veterinary Software Services and Diagnostic Imaging Systems and IDEXX VetLab include and exclude the following
as applicable: LPD excludes government sponsored eradication programs and herd health screening revenues, Water excludes sealer and filtration instruments, Veterinary Software
Services and Diagnostic Imaging Systems excludes client server based placements and radiography instruments, Rapid Assay excludes SNAP Pro instruments, and IDEXX VetLab
includes consumables, service and accessories.
4 Constant Currency: Constant currency references are non-GAAP financial measures and exclude the impact of changes in foreign currency exchange rates. Management believes
that constant currency information provides valuable supplemental information regarding our revenue, operating margin and EPS performance because it is consistent with how
management evaluates our performance and facilitates comparisons with prior and future periods. We estimated the net impacts of currency on our revenue, operating margin, and EPS
results by restating results to the average exchange rates or exchange rate assumptions for the comparative period, which includes adjusting for the estimated impacts of foreign currency
hedging transactions and certain impacts on our effective tax rates. The periods 2012-2017 were restated to 2017 forecast rates and may vary from previously reported constant currency
figures. See Exhibit A for the impact of currency on revenue growth for 2012-2016 and 2017 YTD results. See Exhibit B for the impact of currency on operating margin and EPS growth
for 2012-2016 results and projected full-year 2017 outlook. Note on Slide 35: The adjusted constant currency compound annual growth rate (“CAGR”) from 2006-2016 excludes the impact
of changes in foreign currency exchange rates, which had an unfavorable impact of 0.5% to the CAGR.
5 Organic Revenue Growth: Organic revenue growth is a non-GAAP financial measure. 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. See Exhibit A for impact of currency and
acquisitions to CAG Diagnostics Recurring (both U.S. and International) revenue for 2012-2017 (YTD). Note on Slide 39: For U.S. Reference Lab organic revenue growth, the impact from
currency was immaterial and the impact from acquisitions was less than 1% for all years.
60 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Footnotes
6 Rapid Assay Revenue Adjustments: See the table below for the impact of foreign exchange and go-direct normalizations to Rapid Assay revenue growth. Also refer to Footnotes
1 and 2 for more detail. Foreign exchange impacted reported growth by the following: Q1 2015 -2.7%, Q2 2015 -3.1%, Q3 2015 -2.5%, Q4 2015 -4-4%, Q1 2016 -0.5%, Q2 2016 +0.2%, Q3
2016 +0.4%, Q4 2016 -0.1%, Q1 2017 -0.3%, Q2 2017 -0.5%. Distributor Inventory drawdown impacted reported growth by: Q1 2015 -3.2%, Q2 2015 +6.5%, Q3 2015 -3.2%, Q4 2015
+43.7%. Margin capture impacted reported growth by: Q1 2015 +10.6%, Q2 2015 +10.1%, Q3 2015 +10.9%, Q4 2015 +10.5%. See footnotes 2 and 4 for more detail on constant currency
and go-direct normalization.
7 Adjusted Operating Margin and Adjusted EPS: Adjusted Operating Margin and Adjusted EPS are non-GAAP financial measures. Adjusted Operating Margin and Adjusted EPS
excludes non-recurring items. Management believes that reporting Adjusted Operating Margin and Adjusted EPS provides useful information to investors by facilitating easier comparisons
of our Operating Margin and EPS performance with prior and future periods. Refer to Exhibit B in the Appendix for a reconciliation of reported to adjusted Operating Margin and EPS
growth.
8 Free Cash Flow: Free cash flow is a non-GAAP financial measure. Free cash flow, with respect to a measurement period, is the cash generated from operations during that period,
including tax benefits attributable to share-based compensation arrangements, and specific to year ended December 31, 2012 a royalty prepayment to obtain exclusive patent rights,
reduced by the Company’s investments in property and equipment. Management believes free cash flow is a useful measure because it indicates the cash the operations of the business
are generating after appropriate reinvestment for recurring investments in property and equipment that are required to operate the business. Since adoption of ASU 2016-09 in 2017, the tax
benefit from share-based compensation is included in cash generated from operations and will no longer be an adjustment in our free cash flow calculation. Refer to Exhibit C for our
calculation of free cash flow for years ending December 31, 2011 through December 31, 2016, and calculation of estimated free cash flow for year ending December 31, 2017.
9 ROIC: After-tax return on invested capital represents after-tax income from operations for the year ended December 31, 2016, divided by average invested capital using the beginning
and ending balance sheet values. This measure is calculated both excluding and including cash and investments. After-tax return on invested capital, after-tax income from operations and
average invested capital are not measures of financial performance under GAAP and should be considered in addition to, and not as a replacement of or a superior measure to, return on
assets, net income, total assets or other financial measures reported in accordance with GAAP. Management believes that reporting after-tax return on invested capital provides useful
information to investors for evaluating the efficiency and effectiveness of our use of capital. For further information on how ROIC is calculated, please see Appendix A in the Company’s
Definitive Proxy Statement filed March 23, 2017 available at http://www.idexxproxymaterials.com.
10 Debt to Adjusted EBITDA: Adjusted EBITDA, gross debt, and net debt are non-GAAP financial measures. Adjusted EBITDA is a non-GAAP financial measure of earnings before
interest, taxes, depreciation, amortization and share-based compensation. Management believes that using Adjusted EBITDA, gross debt and net debt in the Adjusted EBITDA ratio is a
useful and recognized measure for evaluating financial leverage. Adjusted EBITDA for 2014 is further adjusted to exclude impacts in the second half of 2014 related to the U.S. all-direct
transition. For further information on how Adjusted EBITDA and the Debt to Adjusted EBITDA Ratio are calculated, see the Company's Annual Report on Form 10-K for the year ended
December 31, 2016 available at http://www.idexxproxymaterials.com.
61 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Exhibit A: Reported to Organic Growth Reconciliation
2 See Footnote 2 for detail on
adjustments to IDEXX Revenue
from the Go-direct
3 See Footnote 3 for a
description of IDEXX recurring
revenue
4 See Footnote 4 for a
description of constant
currency. Note that all years
are restated to 2017 Forecast
rates and currency impact will
vary from previously reported
figures.
CAG Diagnostics Recurring 3
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
Reported Growth 2% 6% 11% 8% 9% 8% 11% 12% 13%Currency Impact 4
-1% 1% 2% -2% 0% -1% -5% -1% -1%
Acquisition Impact 0% 1% 0% 1% 0% 0% 1% 0% 0%
Organic Growth 3% 5% 8% 8% 9% 8% 16% 12% 14%Distributor Inventory Adjustment 2
3% -3%
Margin Capture Adjustment 2-4%
Normalized Organic Growth 3% 5% 8% 8% 9% 11% 9% 12% 14%
U.S. CAG Diagnostics Recurring 3 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
Reported Growth 5% 5% 8% 10% 8% 6% 17% 10% 13%
Currency Impact 4 0% 0% 0% 0% 0% 0% 0% 0% 0%
Acquisition Impact 0% 1% 0% 2% 0% 0% 0% 0% 0%
Organic Growth 4% 4% 8% 8% 8% 6% 18% 10% 13%Distributor Inventory Adjustment 2
4% -5%
Margin Capture Adjustment 2-6%
Normalized Organic Growth 4% 4% 8% 8% 8% 10% 7% 10% 13%
International CAG Diagnostics Recurring 3
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
Reported Growth -2% 8% 16% 4% 10% 11% -2% 14% 12%Currency Impact 4
-4% 1% 7% -4% -2% -2% -15% -2% -3%
Acquisition Impact 0% 0% 0% 0% 0% 1% 1% 1% 0%
Organic Growth 2% 7% 9% 8% 11% 12% 12% 16% 15%
Reconciliation of Annual Organic Revenue Growth*
62 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Exhibit B: Reported to Adjusted Summary P&L Reconciliation
RevOp.
Profit
Op
MargEPS Rev
Op.
Profit
Op
MargEPS Rev
Op.
Profit
Op
MargEPS Rev
Op.
Profit
Op
MargEPS Rev
Op.
Profit
Op
MargEPS Rev
Op.
Profit
Op
MargEPS
Reported $1,293 262.6 20.3% $1.59 $1,377 266.8 19.4% $1.74 $1,486 260.3 17.5% $1.79 $1,602 299.9 18.7% $2.05 $1,775 350.2 19.7% $2.44 $1,955
Reported EPS Growth 14% 9% 3% 15% 19%
Impairment charge 8.2 0.06
Impact of distributor inventory drawdown 25.1 20.8 0.14
Non-recurring expenses associated with
transition to all-direct sales strategy9.5 0.06
Expense ramp-up in advance of transition to
new sales strategy5.0 0.03
Non-recurring income tax benefit related to the
deferral of intercompany profits-0.02
Third-party service provider bankruptcy 3.9 0.03
Pharmaceutical milestone payment -3.5 -0.02
Adjusted $1,293 259.1 20.0% $1.57 $1,377 270.7 19.7% $1.77 $1,511 295.6 19.6% $2.00 $1,602 308.1 19.2% $2.11 $1,775 350.2 19.7% $2.44 $1,955
Adjusted EPS Growth 15% 13% 13% 5% 16%
Adjusted Constant Currency $1,312 265.9 20.3% $1.61 $1,386 278.4 20.1% $1.82 $1,522 302.8 19.9% $2.05 $1,692 329.3 19.5% $2.27 $1,790 374.4 20.9% $2.64 $1,968
Adjusted Constant Currency Growth 126 bps 18% 10 bps 16% 20 bps 16% -10 bps 14% 170 bbs 25%
Impact of Adjustments on EPS Growth 0% 0% -0.001 0% 0% -3% -0.006 -3% -2% -12% -0.018 -10% 2% 11% 0.015 9% 0% 3% 0.005 3% 0% 0.000 0%
Impact of Fx on Adjusted EPS Growth -2% -3% -0.002 -3% -1% -3% -0.004 -3% -1% -3% -0.003 -3% -6% -7% -0.002 -8% -1% -8% -0.012 -9% ~0.5% ~0.001 ~1%
+ ~100-
125 bps
+ ~100-
125 bps
+ ~110-
135 bps
Adjusted Operating Margin
and EPS Growth
(Dollars in millions)
2012 2013 2014 2015 2016 2017
63 © 2017 IDEXX Laboratories, Inc. All rights reserved.
Exhibit C: Operating to Free Cash Flow Reconciliation
Cash Flow Reconciliation
Amounts in thousands
Year Ended December 31
2011 2012 2013 2014 2015 2016 2017
Net cash provided by operating activities 220,700 230,282 245,996 235,846 216,364 334,571 ~360,000
Royalty prepayment to obtain exclusive patent rights - 6,250 - - - - -
Financing cash flows attributable to tax benefits from share-based compensation
arrangements16,007 14,676 14,158 16,078 11,315 14,703 -
Investing cash flows attributable to purchases of property and equipment (52,464) (65,492) (77,612) (60,523) (82,921) ~(64,786) ~(90,000)
Free Cash Flow 184,243 185,716 182,542 191,401 144,758 284,488 ~270,000