WESTBROOK, Maine, July 25, 2014 /PRNewswire/ -- IDEXX Laboratories, Inc. (NASDAQ: IDXX) today reported that revenues for the second quarter of 2014 increased 11% versus the prior year period to $390 million. Organic revenue growth1 for the second quarter of 2014 versus the prior year period was 9%, or 10% normalized for changes in distributor inventory2. Earnings per diluted share (“EPS”) for the quarter ended June 30, 2014 increased 11% from the prior year period to $1.10.
“In the second quarter, we continued to accelerate our growth momentum. Companion Animal Group Diagnostics recurring normalized organic revenues expanded at double-digit rates in both North America and international markets. Instrument placements were very strong, supported by nearly 800 Catalyst placements globally. The Catalyst One introductory offer in North America is resonating with veterinarians, where over 60% of Catalyst placements are going to competitive customer accounts. We are seeing clear benefits from our investments in innovation and enhanced commercial capability globally, including our transformation of the North American diagnostic sales and marketing organization in 2013,” said Jonathan Ayers, the Company’s Chairman and Chief Executive Officer.
“Building on this progress, we are announcing today plans to move from a hybrid to an all-direct product distribution model in the US for Companion Animal Group diagnostics in 2015. Under this approach, we intend to take orders, ship product, invoice and receive payment, and recognize revenue for all rapid assay test kits and instrument consumables in the US, aligning with our direct model for instruments, reference lab services, and other CAG products and services,” Ayers commented.
“Moving to an all-direct product distribution in the US is a natural evolution of our business model. It aligns with both our strategy to provide an integrated diagnostic solution with world class in-house and reference lab modalities and our US sales transformation to a Veterinary Diagnostic Consultant sales role that serves our customers for our full diagnostic offering. Our new customer-centric sales model, implemented in 2013, has been highly effective and is gaining momentum each new quarter. The change to an all-direct product distribution approach will allow a significant expansion in our direct sales coverage and capacity, including an estimated 40% increase in the Veterinary Diagnostic Consultant field sales role and a 60% increase in customer field call frequency. With this increase, we will be much better equipped to support our US veterinary customers’ growth in the use of IDEXX diagnostics to provide the best medical care for their patients and clients. The change will result in an incremental annual $50 million to $55 million, or 5%, increase in our fast growing recurring diagnostic revenue, with accretive profit benefits that will scale over time, following the transition to the new model.”
Second Quarter Financial Performance Highlights
Second quarter revenues reached $390 million, an 11% increase compared to the prior year period, reflecting strong performance across regions and business segments.
- Companion Animal Group (“CAG”) organic revenue growth was nearly 10% for the second quarter of 2014 compared to the prior year period. Normalized CAG Diagnostics recurring organic revenue growth was nearly 12%, primarily driven by 13% gains in IDEXX VetLab® consumables and 11% growth in reference lab services.
- Catalyst and hematology instrument placements increased 34% and 13%, respectively, in the second quarter of 2014, compared to the prior year period. Instrument revenues in the second quarter of 2014 declined 10% organically, compared to the prior year period, reflecting approximately $3 million in deferred revenue from placements associated with the Catalyst One introductory offer.
- Livestock, Poultry and Dairy (“LPD”) organic revenues grew 6% for the second quarter of 2014, compared to the prior year period, benefitting mainly from increased sales in China and New Zealand.
- Organic revenues for Water in the second quarter of 2014 grew over 7%, compared to the prior year period, supported by strong gains in North America and Asia.
Operating margins for the second quarter of 2014 were consistent with expectations. Gross margins were basically flat compared to the prior year period, with improvements from price offset in part by the absence of prior year foreign exchange hedging gains and higher freight and distribution costs. Operating expenses for the second quarter of 2014 increased 14%, compared to the prior year period, reflecting planned increases in global commercial resources.
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