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; deductibility of goodwill; and future commercial and operational efforts. Forward-looking statements can be identified by the use of words such as “expects,” “may,” “anticipates,” “intends,” “would,” “will,” “plans,” “believes,” “estimates,” “should,” “project,” and similar words and expressions. These forward-looking statements are intended to provide our current expectations or forecasts of future events; are based on current estimates, projections, beliefs, and assumptions; and are not guarantees of future performance. Actual events or results may differ materially from those described in the forward-looking statements. These forward-looking statements involve a number of risks and uncertainties, including, among other things, the adverse impact, and the duration, of macroeconomic events, conditions, and uncertainties, such as geopolitical instability (including wars, terrorist attacks, and armed conflicts), general economic uncertainty, inflationary pressures, 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 2022 Annual Report and in the corresponding sections of this Quarterly Report on Form 10-Q, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023, and June 30, 2023, as well as those described from time to time in our other periodic reports filed with the SEC.

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

You should read the following discussion and analysis in conjunction with our 2022 Annual Report that includes additional information about us, our results of operations, our financial position, and our cash flows, and with our unaudited condensed consolidated financial statements and related notes included in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

Our fiscal quarter ended on September 30. Unless otherwise stated, the analysis and discussion of our financial condition and results of operations below, including references to growth and organic growth and increases and decreases, are being compared to the equivalent prior-year periods.

Business Overview

We develop, manufacture, and distribute products and provide services primarily for the companion animal veterinary, livestock, poultry and dairy, and water testing sectors. We also design, manufacture, and distribute point of care and laboratory diagnostics for the human medical diagnostics sector. Our primary products and services are:

• Point-of-care veterinary diagnostic products, comprising instruments, consumables, and rapid assay test kits;

• Veterinary reference laboratory diagnostic and consulting services;

• Practice management and diagnostic imaging systems and services used by veterinarians;

• Health monitoring, biological materials testing, and laboratory diagnostic instruments and services used by the biomedical research community;

• Diagnostic, health-monitoring products for livestock, poultry, and dairy;

• Products that test water for certain microbiological contaminants; and

• Point-of-care electrolytes and blood gas analyzers.

Description of Business Segments. We operate primarily through three business segments: diagnostic and information management-based products and services for the companion animal veterinary industry, which we refer to as the Companion Animal Group (“CAG”), water quality products (“Water”), and diagnostic products and services for livestock and poultry

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

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

Currency and Other Items

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

Other Items. Refer to “Part I, Item 1. Business - Patents and Licenses” and “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Annual Report for additional information regarding trends in companion animal healthcare, distributor purchasing and inventories, economic conditions, and patent expiration.

Critical Accounting Estimates and Assumptions

The discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The critical accounting policies and the significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023, are consistent with those discussed in our 2022 Annual Report in the section under the heading “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates and Assumptions.”

Recent Accounting Pronouncements

For more information regarding the impact that recent accounting standards and amendments will have on our consolidated financial statements, refer to Note 2 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measures

The following revenue analysis and discussion focuses on organic revenue growth, and references in this analysis and discussion to “revenue,” “revenues,” or “revenue growth” are references to “organic revenue growth.” Organic revenue growth is a non-GAAP financial measure and represents the percentage change in revenue during the three and nine months ended September 30, 2023, as compared to the same periods 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 year period and the comparable prior-year period to foreign currency denominated revenues for the prior-year period.

We also exclude from organic revenue growth the effect of certain business acquisitions and divestitures because the nature, size, and number of these transactions can vary dramatically from period to period, and because they either require or generate cash as an inherent consequence of the transaction, and therefore can also obscure underlying business and operating trends. We consider acquisitions to be a business when all three elements of inputs, process, and outputs are present, consistent with ASU 2017-01, “Business Combinations: (Topic 805) Clarifying the Definition of a Business.” In a business combination, if substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, we do not consider these assets to be a business. A typical acquisition that we do not consider a business is a customer list asset acquisition, which does not have all elements necessary to operate a business, such as employees or infrastructure. We believe the efforts required to convert and retain these acquired customers are similar in nature to our existing customer base and therefore are included in organic revenue growth. The percentage change in revenue resulting from acquisitions represents revenues during the current year period, limited to the initial 12 months from the date of the acquisition, that are directly attributable to business acquisitions.

We also use Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio and net debt to Adjusted EBITDA ratio, in this Quarterly Report on Form 10-Q, all of which are non-GAAP financial measures that should be considered in addition to, and not as a replacement for, financial measures presented according to U.S. GAAP. Management believes that reporting these non-GAAP financial measures provides supplemental analysis to help investors further evaluate our business performance and available borrowing capacity under our Credit Facility.

Results of Operations

Three Months Ended September 30, 2023, Compared to Three Months Ended September 30, 2022

Total Company. The following table presents total Company revenue by operating segment:

						For the Three Months Ended September 30,
Net Revenue (dollars in thousands)						2023						2022						Dollar Change						Reported Revenue Growth (1)						Percentage Change from Currency						Percentage Change from Acquisitions						Organic Revenue Growth (1)
CAG						$	837,160					$	764,990					$	72,170					9.4		%				1.0		%				—						8.4		%
United States						573,830						530,758						43,072						8.1		%				—						—						8.1		%
International						263,330						234,232						29,098						12.4		%				3.4		%				—						9.0		%
Water						44,450						40,840						3,610						8.8		%				1.2		%				1.1		%				6.6		%
United States						22,804						20,940						1,864						8.9		%				—						0.7		%				8.2		%
International						21,646						19,900						1,746						8.8		%				2.4		%				1.5		%				4.9		%
LPD						29,747						28,452						1,295						4.6		%				2.5		%				—						2.0		%
United States						5,040						4,452						588						13.2		%				—						—						13.2		%
International						24,707						24,000						707						2.9		%				2.9		%				—						—
Other						4,170						7,379						(3,209)						(43.5		%)				0.1		%				—						(43.5		%)
Total Company						$	915,527					$	841,661					$	73,866					8.8		%				1.1		%				0.1		%				7.6		%
United States						603,046						560,292						42,754						7.6		%				—						—						7.6		%
International						312,481						281,369						31,112						11.1		%				3.3		%				0.1		%				7.7		%

(1)Reported revenue growth and organic revenue growth may not recalculate due to rounding.

Total Company Revenue. The increase in organic revenue reflects higher realized prices and demand for

companion animal diagnostics globally, supported by higher CAG Diagnostics recurring revenue. Increases in our subscription-based veterinary software and diagnostic imaging services also contributed to higher revenue. Higher revenue in our Water business was primarily due to higher realized prices, as well as the benefit of an acquisition in the third quarter of 2022. The increase in LPD revenue was primarily due to higher realized prices and to volume growth in North and South America, partially offset by lower herd health screening revenues. The decrease in Other revenue reflects lower sales of OPTI COVID-19 PCR testing products and services, and lower volumes of our OPTI Medical instruments and consumables internationally. The impact of foreign currency movements increased total revenue growth by 1.1%.

The following table presents total Company results of operations:

						For the Three Months Ended September 30,																								Change
Total Company - Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	915,527											$	841,661											$	73,866					8.8		%
Cost of revenue						367,545												335,035												32,510						9.7		%
Gross profit						547,982						59.9		%				506,626						60.2		%				41,356						8.2		%
Operating expenses:
Sales and marketing						135,698						14.8		%				130,021						15.4		%				5,677						4.4		%
General and administrative						89,034						9.7		%				83,764						10.0		%				5,270						6.3		%
Research and development						47,967						5.2		%				48,013						5.7		%				(46)						(0.1		%)
Total operating expenses						272,699						29.8		%				261,798						31.1		%				10,901						4.2		%
Income from operations						$	275,283					30.1		%				$	244,828					29.1		%				$	30,455					12.4		%

Gross Profit. Gross profit increased due to higher revenue, partially offset by a 30 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 60 basis points, including the impact of lower hedge gains in the current year, as compared to the prior year. Excluding the impact of foreign currency movements, the increase in the gross profit margin was primarily due to recurring revenue net price gains, improved software services gross margins, and product mix including effects from lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product and labor costs, which reflect the effects of inflation, as well as investments in productivity initiatives and to support future growth.

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, partially offset by lower meeting and conference costs. General and administrative expense increased primarily due to higher personnel-related and outside services costs. Research and development expense was relatively constant compared to the prior year as increases in personnel-related costs were offset by the favorable comparison to higher project costs in the prior year including the acquisition of certain intellectual property licenses. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Companion Animal Group

The following table presents revenue by product and service category for CAG:

						For the Three Months Ended September 30,
Net Revenue (dollars in thousands)						2023						2022						Dollar Change						Reported Revenue Growth (1)						Percentage Change from Currency						Percentage Change from Acquisitions						Organic Revenue Growth (1)
CAG Diagnostics recurring revenue:						$	733,958					$	667,309					$	66,649					10.0		%				1.1		%				—						8.9		%
IDEXX VetLab consumables						296,042						262,820						33,222						12.6		%				1.2		%				—						11.4		%
Rapid assay products						87,562						80,542						7,020						8.7		%				0.5		%				—						8.2		%
Reference laboratory diagnostic and consulting services						320,294						295,590						24,704						8.4		%				1.0		%				—						7.3		%
CAG diagnostics services and accessories						30,060						28,357						1,703						6.0		%				1.3		%				—						4.7		%
CAG Diagnostics capital - instruments						32,254						35,176						(2,922)						(8.3		%)				1.9		%				—						(10.2		%)
Veterinary software, services and diagnostic imaging systems						70,948						62,505						8,443						13.5		%				0.2		%				—						13.3		%
Net CAG revenue						$	837,160					$	764,990					$	72,170					9.4		%				1.0		%				—						8.4		%

(1) Reported revenue growth and organic revenue growth may not recalculate due to rounding.

CAG Diagnostics Recurring Revenue. The increase in CAG Diagnostics recurring revenue was primarily due to higher realized prices and continued demand globally. The impact of foreign currency movements increased CAG Diagnostics recurring revenue growth by 1.1%.

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and volume increases supported by the expansion of our installed base of instruments and our expanded menu of available tests. The impact of foreign currency movements increased revenue growth by 1.2%.

The increase in rapid assay revenue resulted primarily from higher price realization and, to a lesser extent, higher volumes.

The increase in reference laboratory diagnostic and consulting services revenue was primarily due to higher price realization and to higher testing volumes in our U.S. labs. Growth in other regions was primarily due to higher price realization, partially offset by lower volumes in international regions, reflecting challenging regional macroeconomic conditions. The impact of foreign currency movements increased revenue growth by 1.0%.

The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 11% growth in our active installed base of instruments. The impact of foreign currency movements increased revenue growth by 1.3%.

CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to program pricing effects, comparisons to higher prior year instrument placements, and regional mix of instrument placements. The impact of foreign currency movements increased revenue growth by 1.9%.

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in veterinary software, services and diagnostic imaging systems revenue was primarily due to higher subscription and services revenue, supported by the expansion in our active installed base, and higher realized prices on service offerings.

The following table presents the CAG segment results of operations:

						For the Three Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	837,160											$	764,990											$	72,170					9.4		%
Cost of revenue						337,869												308,656												29,213						9.5		%
Gross profit						499,291						59.6		%				456,334						59.7		%				42,957						9.4		%
Operating expenses:
Sales and marketing						123,657						14.8		%				119,173						15.6		%				4,484						3.8		%
General and administrative						78,770						9.4		%				72,123						9.4		%				6,647						9.2		%
Research and development						43,506						5.2		%				43,584						5.7		%				(78)						(0.2		%)
Total operating expenses						245,933						29.4		%				234,880						30.7		%				11,053						4.7		%
Income from operations						$	253,358					30.3		%				$	221,454					28.9		%				$	31,904					14.4		%

Gross Profit. Gross profit increased due to higher revenue, partially offset by a 10 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 40 basis points, including the impact of lower hedge gains in the current year as compared to the prior year. Excluding the impact of foreign currency movements, the increase in the gross profit margin was primarily due to recurring revenue net price gains, the benefit of reference laboratory and operational productivity initiatives, improved software services gross margins, and sales mix including effects from lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product and labor costs, which reflect the effects of inflation, as well as investments in productivity initiatives and to support future growth.

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related costs, partially offset by lower meeting and conference costs. General and administrative expense increased primarily due to higher personnel-related costs. Research and development expense was relatively constant compared to the prior year as increases in personnel-related costs were offset by the favorable comparison to higher project costs in the prior year including the acquisition of certain intellectual property licenses. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Water

The following table presents the Water segment results of operations:

						For the Three Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	44,450											$	40,840											$	3,610					8.8		%
Cost of revenue						13,416												11,434												1,982						17.3		%
Gross profit						31,034						69.8		%				29,406						72.0		%				1,628						5.5		%
Operating expenses:
Sales and marketing						5,345						12.0		%				4,645						11.4		%				700						15.1		%
General and administrative						4,125						9.3		%				3,747						9.2		%				378						10.1		%
Research and development						1,236						2.8		%				1,090						2.7		%				146						13.4		%
Total operating expenses						10,706						24.1		%				9,482						23.2		%				1,224						12.9		%
Income from operations						$	20,328					45.7		%				$	19,924					48.8		%				$	404					2.0		%

Revenue. The increase in revenue was primarily due to higher realized prices. The impact of foreign currency movements increased revenue by approximately 1.2%. The impact of the acquisition completed during the third quarter of 2022 increased revenue growth by 1.1%.

Gross Profit. Gross profit increased due to higher revenue, partially offset by a 220 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 170 basis points, including the impact of lower hedge gains in the current year compared to the prior year. Excluding the impact of foreign currency movements, the decrease in the gross profit margin was primarily due to higher product costs, partially offset by higher realized prices.

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 costs related to our acquisition in the prior year. Research and development expense increased primarily due to higher personnel-related and project costs. The overall change in foreign currency exchange rates resulted in an increase in operating expense growth by approximately 1%.

Livestock, Poultry and Dairy

The following table presents the LPD segment results of operations:

						For the Three Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	29,747											$	28,452											$	1,295					4.6		%
Cost of revenue						13,911												10,990												2,921						26.6		%
Gross profit						15,836						53.2		%				17,462						61.4		%				(1,626)						(9.3		%)
Operating expenses:
Sales and marketing						6,253						21.0		%				5,783						20.3		%				470						8.1		%
General and administrative						4,199						14.1		%				4,231						14.9		%				(32)						(0.8		%)
Research and development						2,979						10.0		%				2,968						10.4		%				11						0.4		%
Total operating expenses						13,431						45.2		%				12,982						45.6		%				449						3.5		%
Income from operations						$	2,405					8.1		%				$	4,480					15.7		%				$	(2,075)					(46.3		%)

Revenue. The increase in revenue was primarily due to higher realized prices, as well as higher volumes in swine, poultry, and ruminant testing in North and South America, partially offset by lower herd health screening revenues related to reduced live animal imports by China. The favorable impact of foreign currency movements increased revenue growth by 2.5%.

Gross Profit. The decrease in gross profit was primarily due to an 820 basis point decrease in the gross profit margin, partially offset by higher revenue. The impact from foreign currency movements decreased the gross profit margin by approximately 580 basis points, including the impact of lower hedge gains in the current year as compared to the prior year. Excluding the impact of foreign currency movements, the decrease in the gross profit margin was primarily due to higher product costs and unfavorable sales mix impacts related to lower herd health screening volumes, partially offset by higher realized prices.

Operating Expenses. Sales and marketing expense increased primarily due to increases in personnel-related costs. General and administrative expense and research and development costs were relatively constant compared to the prior year. The overall change in foreign currency exchange rates resulted in an increase in operating expense growth by approximately 1%.

Other

The following table presents the Other results of operations:

						For the Three Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	4,170											$	7,379											$	(3,209)					(43.5		%)
Cost of revenue						2,349												3,955												(1,606)						(40.6		%)
Gross profit						1,821						43.7		%				3,424						46.4		%				(1,603)						(46.8		%)
Operating expenses:
Sales and marketing						443						10.6		%				420						5.7		%				23						5.5		%
General and administrative						1,940						46.5		%				3,663						49.6		%				(1,723)						(47.0		%)
Research and development						246						5.9		%				371						5.0		%				(125)						(33.7		%)
Total operating expenses						2,629						63.0		%				4,454						60.4		%				(1,825)						(41.0		%)
Income from operations						$	(808)					(19.4		%)				$	(1,030)					(14.0		%)				$	222					(21.6		%)

Revenue. The decrease in revenue was primarily due to lower sales of OPTI COVID-19 PCR testing products and services in the U.S., following our discontinuation of active marketing of such products and services in the first quarter of 2023, and lower volumes of our OPTI Medical instruments and consumables internationally, partially offset by higher realized prices.

Gross Profit. Gross profit decreased due to lower sales volume and a 270 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to higher product costs and unfavorable sales mix impacts from lower OPTI COVID-19 PCR testing volumes, partially offset by higher realized prices. The overall change in foreign currency exchange rates did not have a significant impact on gross profit.

Operating Expenses. General and administrative expense decreased primarily due to lower foreign exchange losses on settlements of foreign currency denominated transactions, as compared to the prior year. Foreign exchange losses on settlements for all operating segments are reported within Other. Research and development expense decreased primarily due to lower product development costs related to human medical diagnostic products.

Non-Operating Items

Interest Expense. Interest expense was $8.6 million for the three months ended September 30, 2023, as compared to $11.0 million for the same period in the prior year. The decrease in interest expense was primarily due to lower average debt levels, partially offset by higher interest rates.

Provision for Income Taxes. Our effective income tax rate was 20.8% for the three months ended September 30, 2023, as compared to 22.7% for the three months ended September 30, 2022. The decrease in our effective tax rate was primarily due to a comparative increase in the tax rate benefits related to share-based compensation and, to a lesser extent, research and development tax credits and geographical income mix.

Results of Operations

Nine Months Ended September 30, 2023, Compared to Nine Months Ended September 30, 2022

Total Company. The following table presents total Company revenue by operating segment:

						For the Nine Months Ended September 30,
Net Revenue (dollars in thousands)						2023						2022						Dollar Change						Reported Revenue Growth (1)						Percentage Change from Currency						Percentage Change from Acquisitions						Organic Revenue Growth (1)
CAG						$	2,531,091					$	2,310,261					$	220,830					9.6		%				(0.5		%)				—						10.1		%
United States						1,732,752						1,563,150						169,602						10.8		%				—						—						10.8		%
International						798,339						747,111						51,228						6.9		%				(1.6		%)				—						8.5		%
Water						126,362						116,406						9,956						8.6		%				(0.9		%)				1.5		%				8.0		%
United States						63,932						58,304						5,628						9.7		%				—						0.7		%				8.9		%
International						62,430						58,102						4,328						7.4		%				(1.8		%)				2.2		%				7.0		%
LPD						88,866						89,211						(345)						(0.4		%)				(0.7		%)				—						0.3		%
United States						14,005						12,054						1,951						16.2		%				—						—						16.2		%
International						74,861						77,157						(2,296)						(3.0		%)				(0.8		%)				—						(2.2		%)
Other						13,033						22,878						(9,845)						(43.0		%)				—						—						(43.0		%)
Total Company						$	2,759,352					$	2,538,756					$	220,596					8.7		%				(0.6		%)				0.1		%				9.2		%
United States						1,815,066						1,646,023						169,043						10.3		%				—						—						10.2		%
International						944,286						892,733						51,553						5.8		%				(1.5		%)				0.1		%				7.2		%

(1)Reported revenue growth and organic revenue growth may not recalculate due to rounding.

Total Company Revenue. The increase in organic revenue reflects growth in CAG Diagnostics recurring revenue, including benefits from higher realized prices globally and higher demand in the U.S. for companion animal diagnostics across modalities. Increases in our subscription-based veterinary software and diagnostic imaging services also contributed to higher revenue. Higher revenue in our Water business was primarily due to higher realized prices and higher testing volumes in certain international regions, as well as the benefit of an acquisition in the third quarter of 2022. The decline in our LPD business was primarily due to lower herd health screening volume, partially offset by higher realized prices and volume growth in North and South America. The decrease in Other revenue reflects lower sales of OPTI COVID-19 PCR testing products and services, and lower volumes of our OPTI Medical instruments and consumables. The impact of foreign currency movements decreased total revenue growth by 0.6%.

The following table presents total Company results of operations:

						For the Nine Months Ended September 30,																								Change
Total Company - Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	2,759,352											$	2,538,756											$	220,596					8.7		%
Cost of revenue						1,095,549												1,019,345												76,204						7.5		%
Gross profit						1,663,803						60.3		%				1,519,411						59.8		%				144,392						9.5		%
Operating expenses:
Sales and marketing						424,034						15.4		%				392,570						15.5		%				31,464						8.0		%
General and administrative						248,804						9.0		%				243,201						9.6		%				5,603						2.3		%
Research and development						139,139						5.0		%				211,402						8.3		%				(72,263)						(34.2		%)
Total operating expenses						811,977						29.4		%				847,173						33.4		%				(35,196)						(4.2		%)
Income from operations						$	851,826					30.9		%				$	672,238					26.5		%				$	179,588					26.7		%

Gross Profit. Gross profit increased due to higher revenue and a 50 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to recurring revenue net price gains, the benefit of reference laboratory and operational productivity initiatives, improved software services gross margins, and product mix including effects from lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product and labor costs, which reflect the effects of inflation, as well as investments in productivity initiatives and to support future growth. The impact from foreign currency movements decreased the gross profit margin by approximately 60 basis points, including the impact of lower hedge gains in the current year as compared to the prior year.

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs, including investments in our global commercial capability. General and administrative expense increased primarily due to higher personnel-related costs, partially offset by a $16 million customer contract resolution payment recognized during the first quarter of 2023. Research and development expense decreased primarily due to the comparison to the prior year acquisition of rights to use certain technology for $84 million, partially offset by higher personnel-related costs. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Companion Animal Group

The following table presents revenue by product and service category for CAG:

						For the Nine Months Ended September 30,
Net Revenue (dollars in thousands)						2023						2022						Dollar Change						Reported Revenue Growth (1)						Percentage Change from Currency						Percentage Change from Acquisitions						Organic Revenue Growth (1)
CAG Diagnostics recurring revenue:						$	2,223,336					$	2,017,532					$	205,804					10.2		%				(0.6		%)				—						10.8		%
IDEXX VetLab consumables						890,891						796,072						94,819						11.9		%				(0.8		%)				—						12.7		%
Rapid assay products						266,934						242,542						24,392						10.1		%				(0.4		%)				—						10.4		%
Reference laboratory diagnostic and consulting services						973,580						894,795						78,785						8.8		%				(0.4		%)				—						9.2		%
CAG diagnostics services and accessories						91,931						84,123						7,808						9.3		%				(0.8		%)				—						10.1		%
CAG Diagnostics capital - instruments						99,452						108,400						(8,948)						(8.3		%)				(0.4		%)				—						(7.8		%)
Veterinary software, services and diagnostic imaging systems						208,303						184,329						23,974						13.0		%				(0.3		%)				—						13.3		%
Net CAG revenue						$	2,531,091					$	2,310,261					$	220,830					9.6		%				(0.5		%)				—						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 realized prices and higher demand in the U.S. for companion animal diagnostics across modalities. International volume growth was constrained by macroeconomic conditions. The impact of foreign currency movements decreased CAG Diagnostics recurring revenue growth by 0.6%.

The increase in IDEXX VetLab consumables revenue was primarily due to higher price realization and volume increases supported by the expansion of our installed base of instruments and our expanded menu of available tests. The impact of foreign currency movements decreased revenue growth by 0.8%.

The increase in rapid assay revenue resulted primarily from higher price realization and, to a lesser extent, growth in SNAP 4Dx Plus volumes.

The increase in reference laboratory diagnostic and consulting services revenue was primarily due to higher price realization and to higher testing volumes in our U.S. labs. Growth in other regions was primarily due to higher price realization, partially offset by lower volumes in international regions, reflecting challenging regional macroeconomic conditions. The impact of foreign currency movements decreased revenue growth by 0.4%.

The increase in CAG Diagnostics services and accessories revenue was primarily a result of the 11% growth in our active installed base of instruments. The impact of foreign currency movements decreased revenue growth by 0.8%.

CAG Diagnostics Capital – Instrument Revenue. The decrease in instrument revenue was primarily due to program pricing effects and regional mix of instrument placements, partially offset by higher premium instrument placements. The impact of foreign currency movements decreased revenue growth by 0.4%

Veterinary Software, Services and Diagnostic Imaging Systems Revenue. The increase in veterinary software, services and diagnostic imaging systems revenue was primarily due to higher subscription and services revenue, supported by the expansion in our active installed base, and higher realized prices on service offerings.

The following table presents the CAG segment results of operations:

						For the Nine Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	2,531,091											$	2,310,261											$	220,830					9.6		%
Cost of revenue						1,007,334												938,574												68,760						7.3		%
Gross profit						1,523,757						60.2		%				1,371,687						59.4		%				152,070						11.1		%
Operating expenses:
Sales and marketing						387,695						15.3		%				359,732						15.6		%				27,963						7.8		%
General and administrative						219,758						8.7		%				213,083						9.2		%				6,675						3.1		%
Research and development						125,687						5.0		%				197,767						8.6		%				(72,080)						(36.4		%)
Total operating expenses						733,140						29.0		%				770,582						33.4		%				(37,442)						(4.9		%)
Income from operations						$	790,617					31.2		%				$	601,105					26.0		%				$	189,512					31.5		%

Gross Profit. Gross profit increased primarily due to higher revenue, as well as an 80 basis point increase in the gross profit margin. The increase in the gross profit margin was primarily due to recurring revenue net price gains, the benefit of reference laboratory and operational productivity initiatives, improved software services gross margins, and product mix including effects from lower CAG Diagnostics instrument revenue. These increases were partially offset by higher product and labor costs, which reflect the effects of inflation, as well as investments in productivity initiatives and to support future growth. The impact from foreign currency movements decreased the gross profit margin by approximately 40 basis points, including the impact of lower hedge gains in the current year as compared to the prior year.

Operating Expenses. Sales and marketing expense increased primarily due to higher personnel-related and travel costs,

including investments in our global commercial capability. General and administrative expense increased due to higher personnel-related costs, partially offset by a $16 million customer contract resolution payment recognized during the first quarter of 2023. Research and development expense decreased primarily due to the comparison to the prior year acquisition of rights to use certain technology for $84 million, partially offset by higher personnel-related costs. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Water

The following table presents the Water segment results of operations:

						For the Nine Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	126,362											$	116,406											$	9,956					8.6		%
Cost of revenue						37,741												33,904												3,837						11.3		%
Gross profit						88,621						70.1		%				82,502						70.9		%				6,119						7.4		%
Operating expenses:
Sales and marketing						15,814						12.5		%				13,954						12.0		%				1,860						13.3		%
General and administrative						12,054						9.5		%				10,652						9.2		%				1,402						13.2		%
Research and development						3,634						2.9		%				3,398						2.9		%				236						6.9		%
Total operating expenses						31,502						24.9		%				28,004						24.1		%				3,498						12.5		%
Income from operations						$	57,119					45.2		%				$	54,498					46.8		%				$	2,621					4.8		%

Revenue. The increase in revenue was due to higher realized prices and, to a lesser extent, higher volumes. The impact of foreign currency movements decreased revenue growth by 0.9%. The impact of the acquisition completed during the third quarter of 2022 increased revenue growth by 1.5%.

Gross Profit. Gross profit increased due to higher revenue, partially offset by an 80 basis point decrease in the gross profit margin. The impact from foreign currency movements decreased the gross profit margin by approximately 150 basis points, including the impact of lower hedge gains in the current year compared to the prior year. Excluding the impact of foreign currency movements, the increase in the gross profit margin was primarily due to higher realized prices, partially offset by higher product costs.

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 costs related to our acquisition in the prior year. Research and development expense increased primarily due to higher personnel-related and project costs, partially offset by lower third-party costs. The overall change in foreign currency exchange rates resulted in a decrease in operating expense growth by approximately 1%.

Livestock, Poultry and Dairy

The following table presents the LPD segment results of operations:

						For the Nine Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	88,866											$	89,211											$	(345)					(0.4		%)
Cost of revenue						41,891												35,206												6,685						19.0		%
Gross profit						46,975						52.9		%				54,005						60.5		%				(7,030)						(13.0		%)
Operating expenses:
Sales and marketing						19,153						21.6		%				17,567						19.7		%				1,586						9.0		%
General and administrative						13,075						14.7		%				12,924						14.5		%				151						1.2		%
Research and development						9,083						10.2		%				9,067						10.2		%				16						0.2		%
Total operating expenses						41,311						46.5		%				39,558						44.3		%				1,753						4.4		%
Income from operations						$	5,664					6.4		%				$	14,447					16.2		%				$	(8,783)					(60.8		%)

Revenue. Revenue decreased primarily due to lower herd health screening revenues related to reduced live animal imports by China, partially offset by higher realized prices and higher volumes in swine, poultry, and ruminant testing in certain regions. The unfavorable impact of foreign currency movements decreased revenue growth by 0.7%.

Gross Profit. The decrease in gross profit was primarily due to a 760 basis point decrease in the gross profit margin and lower sales volumes. The impact from foreign currency movements decreased the gross profit margin by approximately 450 basis points, including the impact of hedge losses in the current year compared to hedge gains in the prior year. Excluding the impact of foreign currency movements, the decrease in the gross profit margin was primarily due to higher product costs and, to a lesser extent, unfavorable sales mix, partially offset by higher realized prices.

Operating Expenses. Sales and marketing expense increased primarily due to increases in personnel-related costs. General and administrative and research and development expenses were relatively constant compared to the prior year. The overall change in foreign currency exchange rates was not significant to operating expense growth.

Other

The following table presents the Other results of operations:

						For the Nine Months Ended September 30,																								Change
Results of Operations (dollars in thousands)						2023						Percent of Revenue						2022						Percent of Revenue						Amount						Percentage
Revenues						$	13,033											$	22,878											$	(9,845)					(43.0		%)
Cost of revenue						8,583												11,661												(3,078)						(26.4		%)
Gross profit						4,450						34.1		%				11,217						49.0		%				(6,767)						(60.3		%)
Operating expenses:
Sales and marketing						1,372						10.5		%				1,317						5.8		%				55						4.2		%
General and administrative						3,917						30.1		%				6,542						28.6		%				(2,625)						(40.1		%)
Research and development						735						5.6		%				1,170						5.1		%				(435)						(37.2		%)
Total operating expenses						6,024						46.2		%				9,029						39.5		%				(3,005)						(33.3		%)
Income from operations						$	(1,574)					(12.1		%)				$	2,188					9.6		%				$	(3,762)					(171.9		%)

Revenue. The decrease in revenue was primarily due to lower sales of OPTI COVID-19 PCR testing products and services in the U.S., following our discontinuation of active marketing of such products and services in the first quarter of 2023, and lower volumes of our OPTI Medical instruments and consumables, partially offset by higher realized prices.

Gross Profit. Gross profit decreased due to lower sales volume and a 1,490 basis point decrease in the gross profit margin. The decrease in the gross profit margin was primarily due to higher product costs and unfavorable sales mix impacts from lower OPTI COVID-19 PCR testing volumes, partially offset by higher realized prices. The overall change in foreign currency exchange rates did not have a significant impact on gross profit.

Operating Expenses. General and administrative expense decreased primarily due to lower foreign exchange losses on settlements of foreign currency denominated transactions, as compared to the prior year. Foreign exchange losses on settlements for all operating segments are reported within Other. Research and development expense decreased primarily due to lower product development costs related to human medical diagnostic products.

Non-Operating Items

Interest Expense. Interest expense was $32.3 million for the nine months ended September 30, 2023, as compared to $26.3 million for the same period in the prior year. The increase in interest expense was primarily due to higher interest rates, partially offset by lower average debt levels.

Provision for Income Taxes. Our effective income tax rate was 20.8% for the nine months ended September 30, 2023, compared to 21.6% for the nine months ended September 30, 2022. The decrease in our effective tax rate was primarily due to geographical income mix and, to a lesser extent, a comparative increase in the tax rate benefits related to share-based compensation.

Liquidity and Capital Resources

We fund the capital needs of our business through cash on hand, funds generated from operations, proceeds from long-term senior note financings, and amounts available under our Credit Facility. We generate cash primarily through the payments made by customers for our companion animal veterinary, livestock, poultry, dairy, and water products and services, consulting services, and other various systems and services. Our cash disbursements are primarily related to compensation and benefits for our employees, inventory and supplies, taxes, research and development, capital expenditures, rents, occupancy-related charges, interest expense, and business acquisitions. As of September 30, 2023, we had $331.7 million of cash and cash equivalents, as compared to $112.5 million as of December 31, 2022. Working capital totaled $414.0 million as of September 30, 2023, as compared to negative $134.3 million as of December 31, 2022. The change in working capital is primarily due to lower outstanding borrowings under our Credit Facility and higher cash balances. As of September 30, 2023, we had borrowing availability of $998.5 million under our $1.25 billion Credit Facility, with $250.0 million in outstanding borrowings under the Credit Facility. We believe that, if necessary, we could obtain additional borrowings to fund our growth objectives. We further believe that current cash and cash equivalents, funds generated from operations, and committed borrowing availability will be sufficient to fund our operations, capital purchase requirements, and anticipated growth needs for the next twelve months. We believe that these resources, coupled with our ability, as needed, to obtain additional financing, will also be sufficient to fund our business as currently conducted for the foreseeable future. We may enter into new financing arrangements or refinance or retire existing debt in the future depending on market conditions. Should we require more capital than is generated by our operations, for example, to fund significant discretionary activities, we could elect to raise capital 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 and cash equivalents held domestically and by our foreign subsidiaries:

Cash and cash equivalents (dollars in thousands)						September 30, 2023						December 31, 2022
U.S.						$	212,401					$	16,112
Foreign						119,295						96,434
Total						$	331,696					$	112,546
Total cash and cash equivalents held in U.S. dollars by our foreign subsidiaries						$	10,343					$	6,647

Of the $331.7 million of cash and cash equivalents held as of September 30, 2023, approximately $165.9 million was held as bank deposits at a diversified group of institutions, primarily systemically important banks, and $165.8 million was held in a U.S. government money market fund. As of December 31, 2022, more than 99% of our cash was held as bank deposits at a diversified group of institutions, primarily systemically important banks. Cash and cash equivalents as of September 30, 2023, included approximately $2.0 million in cash denominated in non-U.S. currencies held in countries with currency control restrictions, which limit our ability to transfer funds outside of the countries in which they are held. The currency control restricted cash is generally available for use within the country where it is held.

The following table presents additional key information concerning working capital:

			For the Three Months Ended
			September 30, 2023						June 30, 2023						March 31, 2023						December 31, 2022						September 30, 2022
Days sales outstanding (1)			45.6						43.9						42.9						43.4						43.4
Inventory turns (2)			1.3						1.3						1.3						1.3						1.3

(1) Days sales outstanding represents the average of the accounts receivable balances at the beginning and end of each quarter divided by revenue for that quarter, the result of which is then multiplied by 91.25 days.

(2) Inventory turns represent inventory-related cost of product revenue for the 12 months preceding each quarter-end divided by the average inventory balances at the beginning and end of each quarter.

Sources and Uses of Cash

The following table presents cash provided (used):

						For the Nine Months Ended September 30,
(dollars in thousands)						2023						2022						Change
Net cash provided by operating activities						$	656,659					$	369,556					$	287,103
Net cash used by investing activities						(94,819)						(146,121)						51,302
Net cash used by financing activities						(340,152)						(254,216)						(85,936)
Net effect of changes in exchange rates on cash						(2,538)						(14,497)						11,959
Net change in cash and cash equivalents						$	219,150					$	(45,278)					$	264,428

Operating Activities. The increase in cash provided by operating activities of $287.1 million was driven primarily by an increase in net income, in part due to the comparison to the prior year acquisition of rights to use certain licensed technology that resulted in higher research and development expenses, and to changes in other assets and liabilities. The following table presents cash flow impacts from changes in operating assets and liabilities:

						For the Nine Months Ended September 30,
(dollars in thousands)						2023						2022						Change
Accounts receivable						$	(54,557)					$	(35,061)					$	(19,496)
Inventories						(31,647)						(99,621)						67,974
Accounts payable						(6,799)						(3,930)						(2,869)
Deferred revenue						(3,347)						(3,419)						72
Other assets and liabilities						(17,902)						(87,566)						69,664
Total change in cash due to changes in operating assets and liabilities						$	(114,252)					$	(229,597)					$	115,345

Cash used decreased due to changes in operating assets and liabilities during the nine months ended September 30, 2023, as compared to the same period in the prior year, by approximately $115.3 million. The increase in cash used by accounts receivable was primarily due to higher revenue growth during the current period. The decrease in cash used by inventories was primarily due to inventory increases during the prior year to mitigate supply chain risks and support demand. The decrease of cash used for other assets and liabilities was primarily due to higher non-cash operating expenses recorded as accrued liabilities for personnel-related costs and lower annual employee incentive program payments in the current year, and lower tax payments in the current year, as compared to the same period in the prior year, partially offset by milestone payments to license intellectual property made during the current year.

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

Investing Activities. Cash used by investing activities was $94.8 million for the nine months ended September 30, 2023, as compared to $146.1 million for the same period in the prior year. The decrease in cash used by investing activities was primarily due to the comparison to the prior year equity investment and acquisition of intangible assets.

Our total capital expenditure outlook for 2023 is estimated to be between $160 million and $180 million, which includes capital investments to support growth in manufacturing and operations facilities and in customer-facing software.

Financing Activities. Cash used by financing activities was $340.2 million for the nine months ended September 30, 2023, as compared to $254.2 million of cash used for the same period in the prior year. The increase in cash used by financing activities was primarily due to $329.0 million cash used for repayments under our Credit Facility in the current year, compared to borrowings of $559.5 million under our Credit Facility in the prior year. The increase in cash used by financing activities was partially offset by $745.7 million cash used to repurchase our common stock in the prior year, as compared to $35.1 million of repurchases in the current year, and by cash used to pay our $75.0 million 2022 Series A Notes in the prior year.

Under our Credit Facility, the net borrowing activity during the nine months ended September 30, 2023, as compared to the same period in the prior year, decreased $888.5 million. As of September 30, 2023, we had $250.0 million in outstanding borrowings under the Credit Facility. The obligations under our Credit Facility may be accelerated upon the occurrence of an event of default under the Credit Facility, which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency-related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under the Employee Retirement Income Security Act of 1974 (“ERISA”), the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default. The Credit Facility contains affirmative, negative, and financial covenants customary for financings of this type. The negative covenants include restrictions on liens, indebtedness of subsidiaries of the Company, fundamental changes, investments, transactions with affiliates, and certain restrictive agreements. The financial covenant is a consolidated leverage ratio test.

During the nine months ended September 30, 2023, we purchased $35.1 million of shares of our common stock. During the nine months ended September 30, 2022, we purchased $745.7 million of shares of our common stock. We believe that the repurchase of our common stock is a favorable means of returning value to our stockholders, and we also repurchase our stock to offset the dilutive effect of our share-based compensation programs. Repurchases of our common stock may vary depending upon the level of other investing and deployment activities, as well as share price and prevailing interest rates. Refer to Note 12 to the unaudited condensed consolidated financial statements in “Part I. Item 1. Financial Statements” of this Quarterly Report on Form 10-Q for additional information about our share repurchases.

In February 2022, we paid off our $75.0 million 2022 Series A Notes with cash provided by operations and financing activities. The aggregate principal amounts of our 2023 Series A Notes will become due and payable on December 11, 2023 and we anticipate paying off our 2023 Series A Notes for $75.0 million when due in December 2023 with cash provided by operations. The aggregate principal amounts of our 2024 Series B Notes will become due and payable on July 21, 2024 and we anticipate paying off our 2024 Series B Notes for $75.0 million when due in July 2024 with cash provided by operations.

Should we elect to prepay any of our senior notes, such aggregate prepayment will include the applicable make-whole amount(s), as defined within the applicable Senior Note Agreements. Additionally, in the event of a change in control of the Company or upon the disposition of certain assets of the Company, the proceeds of which are not reinvested (as defined in the Senior Note Agreements), we may be required to prepay all or a portion of the senior notes. The obligations under the senior notes may be accelerated upon the occurrence of an event of default under the applicable Senior Note Agreements, each of which includes customary events of default including payment defaults, defaults in the performance of the affirmative, negative and financial covenants, the inaccuracy of representations or warranties, bankruptcy and insolvency-related defaults, defaults relating to judgments, certain events related to employee pension benefit plans under ERISA, the failure to pay specified indebtedness, cross-acceleration to specified indebtedness, and a change of control default.

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

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

Financial Covenant. The sole financial covenant of our Credit Facility and Senior Note Agreements is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation and amortization, non-recurring transaction expenses incurred in connection with acquisitions, share-based compensation expense, and certain other non-cash losses and charges (“Adjusted EBITDA”), as defined in the Senior Note Agreement and Credit Facility, not to exceed 3.5-to-1. As of September 30, 2023, we were in compliance with such covenant. The following details our consolidated leverage ratio calculation:

(dollars in thousands)			Twelve Months Ended
Trailing 12 Months Adjusted EBITDA:			September 30, 2023
Net income attributable to stockholders (as reported)			$	822,728
Interest expense			45,863
Provision for income taxes			211,995
Depreciation and amortization			113,891
Acquisition-related expense			80
Share-based compensation expense			57,795
Extraordinary and other non-recurring non-cash charges			—
Adjusted EBITDA			$	1,252,352
Debt to Adjusted EBITDA Ratio:			September 30, 2023
Credit facility			$	250,000
Current and long-term portions of long-term debt			768,803
Total debt			1,018,803
Acquisition-related contingent consideration payable			1,543
Financing leases			—
Deferred financing costs			332
Gross debt			$	1,020,678
Gross debt to Adjusted EBITDA ratio			0.82
Less: Cash and cash equivalents			$	331,696
Net debt			$	688,982
Net debt to Adjusted EBITDA ratio			0.55

Adjusted EBITDA, gross debt, net debt, gross debt to Adjusted EBITDA ratio, and net debt to Adjusted EBITDA ratio are non-GAAP financial measures which should be considered in addition to, and not as a replacement for, financial measures presented according to U.S. GAAP. Management believes that reporting these non-GAAP financial measures provides supplemental analysis to help investors further evaluate our business performance and available borrowing capacity under our Credit Facility.

Other Commitments, Contingencies and Guarantees

Significant commitments, contingencies, and guarantees as of September 30, 2023, 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.