Item 1. Financial Statements

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Item 1. Financial Statements

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(Unaudited)

September 30, 2025December 31, 2024
ASSETS
Current Assets:
Cash and cash equivalents$208,166$288,266
Accounts receivable, net566,881473,575
Inventories391,564381,877
Other current assets310,444256,179
Total current assets1,477,0551,399,897
Long-Term Assets:
Property and equipment, net739,437713,123
Operating lease right-of-use assets128,207116,129
Goodwill413,651405,100
Intangible assets, net114,790111,676
Other long-term assets513,572547,518
Total long-term assets1,909,6571,893,546
TOTAL ASSETS$3,386,712$3,293,443
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable$122,265$114,211
Accrued liabilities488,856502,119
Credit facility455,000250,000
Current portion of long-term debt149,997167,787
Current portion of deferred revenue35,69333,799
Total current liabilities1,251,8111,067,916
Long-Term Liabilities:
Deferred income tax liabilities3,72411,312
Long-term debt, net of current portion374,825449,786
Deferred revenue, net of current portion31,05126,939
Operating lease liabilities, net of current portion106,49497,836
Other long-term liabilities57,62144,341
Total long-term liabilities573,715630,214
Total liabilities1,825,5261,698,130
Commitments, Contingencies and Guarantees (Note 16)
Stockholders’ Equity:
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 108,301 shares in 2025 and 107,836 shares in 2024; Outstanding: 79,999 shares in 2025 and 81,604 shares in 202410,83010,784
Additional paid-in capital1,792,7871,673,863
Deferred stock units: Outstanding: 60 units in 2025 and 60 units in 20246,2295,885
Retained earnings6,143,7145,332,438
Accumulated other comprehensive loss(72,950)(93,645)
Treasury stock, at cost: 28,303 shares in 2025 and 26,232 shares in 2024(6,319,424)(5,334,012)
Total stockholders’ equity1,561,1861,595,313
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$3,386,712$3,293,443
The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share amounts)

(Unaudited)

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Revenue:
Product revenue$656,159$567,987$1,886,771$1,688,308
Service revenue449,080407,5561,326,3521,254,908
Total revenue1,105,239975,5433,213,1232,943,216
Cost of Revenue:
Cost of product revenue206,961176,271587,639533,683
Cost of service revenue214,924203,234624,019601,266
Total cost of revenue421,885379,5051,211,6581,134,949
Gross profit683,354596,0382,001,4651,808,267
Expenses:
Sales and marketing159,157146,281476,487438,399
General and administrative105,93691,887296,178341,154
Research and development63,41553,978184,374162,063
Total operating expense328,508292,146957,039941,616
Income from operations354,846303,8921,044,426866,651
Interest expense(10,655)(7,697)(29,642)(23,707)
Interest income5802,7142,42310,500
Income before provision for income taxes344,771298,9091,017,207853,444
Provision for income taxes70,16166,068205,931181,726
Net income$274,610$232,841$811,276$671,718
Earnings per Share:
Basic$3.43$2.83$10.06$8.12
Diluted$3.40$2.80$9.99$8.05
Weighted Average Shares Outstanding:
Basic80,09682,30480,60582,675
Diluted80,67583,05681,20783,478
The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(Unaudited)

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Net income$274,610$232,841$811,276$671,718
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(2,715)26,39758,434(1,261)
Reclassification adjustment for defined benefit plans included in net income, net of tax of $25 and $71 in 2025 and $21 and $50 in 2024134122381269
Unrealized (loss) on Euro-denominated notes, net of tax (benefit) of $0 and $(2,511) in 2025 and $(957) and $(228) in 2024—(3,068)(8,958)(732)
Unrealized gain on investments, net of tax expense of $0 and $0 in 2024———1
Reclassification adjustment on investments included in net income, net of tax expense of $0 and $51 in 2024———163
Unrealized gain (loss) on derivative instruments:
Unrealized gain (loss) on foreign currency exchange contracts, net of tax expense (benefit) of $1,553 and $(6,214) in 2025 and $(2,868) and $228 in 20244,245(7,702)(15,364)444
Unrealized gain (loss) on cross currency swaps, net of tax expense (benefit) of $340 and $(4,038) in 2025 and $(1,171) and $(116) in 20241,097(3,754)(12,950)(370)
Unrealized gain (loss) on interest rate swap, net of tax expense (benefit) of $(7) and $66 in 2025 and $(560) and $310 in 2024(20)(1,793)214997
Reclassification adjustments for (gain) loss included in net income, net of tax (expense) benefit of $428 and $(477) in 2025 and $(380) and $(1,563) in 20241,259(992)(1,062)(4,276)
Unrealized gain (loss) on derivative instruments6,581(14,241)(29,162)(3,205)
Other comprehensive income (loss), net of tax4,0009,21020,695(4,765)
Comprehensive income$278,610$242,051$831,971$666,953
The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except per share amounts)

(Unaudited)

Common Stock
Number of Shares$0.10 Par ValueAdditional Paid-in CapitalDeferred Stock UnitsRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Stockholders’ Equity
Balance December 31, 2024107,836$10,784$1,673,863$5,885$5,332,438$(93,645)$(5,334,012)$1,595,313
Net income————242,677——242,677
Other comprehensive loss, net—————3,554—3,554
Repurchases of common stock, net——————(415,260)(415,260)
Common stock issued for share-based compensation plans, including excess tax benefit8087,135(29)———7,114
Share-based compensation cost——14,615————14,615
Balance March 31, 2025107,916$10,792$1,695,613$5,856$5,575,115$(90,091)$(5,749,272)$1,448,013
Net income————293,989——293,989
Other comprehensive loss, net—————13,141—13,141
Repurchases of common stock, net——————(328,498)(328,498)
Common stock issued for share-based compensation plans, including excess tax benefit1251216,943373———17,328
Share-based compensation cost——14,854————14,854
Balance June 30, 2025108,041$10,804$1,727,410$6,229$5,869,104$(76,950)$(6,077,770)$1,458,827
Net income————274,610——274,610
Other comprehensive loss, net—————4,000—4,000
Repurchases of common stock, net——————(241,654)(241,654)
Common stock issued for share-based compensation plans, including excess tax benefit2602650,944————50,970
Share-based compensation cost—14,433————14,433
Balance September 30, 2025108,301$10,830$1,792,787$6,229$6,143,714$(72,950)$(6,319,424)$1,561,186
Common Stock
Number of Shares$0.10 Par ValueAdditional Paid-in CapitalDeferred Stock UnitsRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTreasury StockTotal Stockholders’ Equity
Balance December 31, 2023107,506$10,751$1,569,565$5,530$4,444,571$(71,206)$(4,474,681)$1,484,530
Net income————235,579——235,579
Other comprehensive income, net—————(9,191)—(9,191)
Repurchases of common stock, net——————(177,192)(177,192)
Common stock issued for share-based compensation plans, including excess tax benefit1611620,792(28)———20,780
Share-based compensation cost——14,3928———14,400
Balance March 31, 2024107,667$10,767$1,604,749$5,510$4,680,150$(80,397)$(4,651,873)$1,568,906
Net income————203,298——203,298
Other comprehensive income, net—————(4,784)—(4,784)
Repurchases of common stock, net——————(208,246)(208,246)
Common stock issued for share-based compensation plans, including excess tax benefit1924,983375———5,360
Share-based compensation cost——15,719————15,719
Balance June 30, 2024107,686$10,769$1,625,451$5,885$4,883,448$(85,181)$(4,860,119)$1,580,253
Net income————232,841——232,841
Other comprehensive income, net—————9,210—9,210
Repurchases of common stock, net——————(225,163)(225,163)
Common stock issued for share-based compensation plans, including excess tax benefit1914,994————4,995
Share-based compensation cost——15,918————15,918
Balance September 30, 2024107,705$10,770$1,646,363$5,885$5,116,289$(75,971)$(5,085,282)$1,618,054
The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

For the Nine Months Ended September 30,
20252024
Cash Flows from Operating Activities:
Net income$811,276$671,718
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization106,46296,230
Impairment charge—250
Provision for credit losses5,9795,080
Deferred income taxes99,675(28,870)
Share-based compensation expense43,90246,037
Other3,2441,034
Changes in assets and liabilities:
Accounts receivable(82,586)(56,087)
Inventories(2,202)(24,756)
Other assets and liabilities(160,944)(45,272)
Accounts payable(4,977)2,347
Deferred revenue6,216(735)
Net cash provided by operating activities826,045666,976
Cash Flows from Investing Activities:
Purchases of property and equipment(95,242)(91,667)
Acquisition of intangible assets(13,350)—
Equity investments(756)—
Acquisition of a business—(76,694)
Proceeds from net investment hedges1,2391,142
Net cash used by investing activities(108,109)(167,219)
Cash Flows from Financing Activities:
Borrowings under credit facility, net205,000—
Payments of senior notes(103,386)(75,000)
Repurchases of common stock(979,190)(591,042)
Proceeds from exercises of stock options and employee stock purchase plans75,49331,237
Shares withheld for statutory tax withholding payments on restricted stock(7,179)(10,486)
Net cash used by financing activities(809,262)(645,291)
Net effect of changes in exchange rates on cash11,226238
Net decrease in cash and cash equivalents(80,100)(145,296)
Cash and cash equivalents at beginning of period288,266453,932
Cash and cash equivalents at end of period$208,166$308,636
Supplemental Cash Flow Information:
Unpaid property and equipment, reflected in accounts payable and accrued liabilities$6,778$10,405
The accompanying notes are an integral part of these condensed consolidated financial statements.

IDEXX LABORATORIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

The accompanying unaudited condensed consolidated financial statements of IDEXX Laboratories, Inc. and its subsidiaries have been prepared in accordance with U.S. GAAP for interim financial information and with the requirements of Regulation S-X, Rule 10-01 for financial statements required to be filed as a part of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “IDEXX,” the “Company,” “we,” “our,” or “us” refer to IDEXX Laboratories, Inc. and its subsidiaries.

The accompanying unaudited condensed consolidated financial statements include the accounts of IDEXX Laboratories, Inc., and our wholly-owned and majority-owned subsidiaries. We do not have any variable interest entities for which we are the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements reflect, in the opinion of our management, all adjustments necessary for a fair statement of our financial position and results of operations. All such adjustments are of a recurring nature. The condensed consolidated balance sheet data as of December 31, 2024, was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. The results of operations for the three and nine months ended September 30, 2025, are not necessarily indicative of the results to be expected for the full year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, (the “2024 Annual Report”).

The preparation of our condensed consolidated financial statements requires us to make estimates, judgments, and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues, and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis we evaluate our estimates, judgments, assumptions, and methodologies. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenues and expenses.

NOTE 2. ACCOUNTING POLICIES

Significant Accounting Policies

The significant accounting policies used in preparation of these unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2025, are consistent with those discussed in “Note 2. Summary of Significant Accounting Policies” to the consolidated financial statements in our 2024 Annual Report, and as updated below.

New Accounting Pronouncements Adopted

We adopted ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” as of December 31, 2024. ASU 2023-07 is intended to improve reportable segment disclosures. The amendments require disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within segment profit and loss. The adoption of ASU 2023-07 did not have a material impact on our consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In September 2025, the FASB issued Accounting Standard Update (ASU) 2025-06, “Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software” which amends the existing standard related to accounting for internal-use software development costs. The amendments modernize the recognition and capitalization framework to better align with current software development practices by removing references to project stages and clarify the criteria for capitalization, which begins when (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and for interim periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the timing of adoption and the impact of this amendment on the consolidated financial statements and related disclosures.

In July 2025, the FASB issued ASU 2025-05, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets.” This amendment provides an optional practical expedient to assume that the current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when estimating expected credit losses on current accounts receivable and contract assets arising from transactions accounted for under Topic ASC 606 - Revenue from Contracts with Customers. The amendment is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods, with early adoption permitted. We are currently evaluating the timing of adoption and impact of this amendment on the consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses”, to provide disaggregated disclosures of specific expense categories underlying all relevant income statement expense line items on an annual and interim basis. The disclosure requirements will apply on a prospective basis, with the option to apply them retrospectively. This standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are evaluating ASU 2024-03 to determine its impact on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of income tax rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for annual periods beginning after December 15, 2024, and may be applied either prospectively or retrospectively. There will be no impact to our consolidated balance sheets or statements of operations; however, we anticipate providing the additional required income tax disclosures within our annual consolidated financial statements that will be included in our Annual Report on Form 10-K for the year ending December 31, 2025.

NOTE 3. REVENUE

Revenues by Product and Service Categories and by Principal Geographic Areas

We present disaggregated revenue for our CAG segment based on major product and service categories. Our Water and LPD segments comprise a single major product category.

The following table presents revenue by major product and service categories:

(in thousands)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
CAG segment revenue:
CAG Diagnostics recurring revenue:$873,273$783,443$2,557,535$2,372,041
IDEXX VetLab consumables387,813329,1281,107,704971,405
Rapid assay products88,63892,774272,912282,379
Reference laboratory diagnostic and consulting services362,725328,3831,074,8251,020,094
CAG Diagnostics services and accessories34,09733,158102,09498,163
CAG Diagnostics capital - instruments$51,479$29,528$142,073$98,912
Veterinary software, services and diagnostic imaging systems:$87,782$79,019$255,205$232,620
Recurring revenue70,98864,644205,735187,461
Systems and hardware16,79414,37549,47045,159
CAG segment revenue$1,012,534$891,990$2,954,813$2,703,573
Water segment revenue54,29750,162150,619139,959
LPD segment revenue33,94428,99294,30287,503
Other segment revenue4,4644,39913,38912,181
Total revenue$1,105,239$975,543$3,213,123$2,943,216

The following table presents revenue by principal geographic area, based on customers’ domiciles:

(in thousands)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
United States$705,040$638,058$2,077,770$1,929,213
Europe, the Middle East and Africa245,061198,605682,879599,125
Asia Pacific Region90,72480,972261,755237,711
Canada41,37736,927125,368114,630
Latin America & Caribbean23,03720,98165,35162,537
Total revenue$1,105,239$975,543$3,213,123$2,943,216

Contracts with Multiple Performance Obligations

We enter into arrangements with multiple performance obligations where customers purchase a combination of IDEXX products and services. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment. We determine the transaction price for a contract based on the total consideration we expect to receive in exchange for the transferred goods or services. To the extent the transaction price includes variable consideration, such as volume rebates or expected price adjustments, we apply judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. We evaluate constraints based on our historical and projected experience with similar customer arrangements.

We allocate revenue to each performance obligation in proportion to the relative standalone selling prices, and recognize revenue when control of the related goods or services is transferred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the promised product or service when sold separately. When standalone selling prices for our products or services are not directly observable, we determine the standalone selling prices using relevant information available and apply suitable estimation methods including, but not limited to, the cost plus a margin approach. We recognize revenue as each performance obligation is satisfied, either at a point in time or over time. We do not disclose information about remaining performance obligations that are part of arrangements with an original expected duration of one year or less.

The following customer arrangements represent our most significant customer contracts that contain multiple performance obligations:

Customer Commitment Arrangements. We offer customers incentives upon entering into multi-year arrangements to purchase minimum annual amounts of products and services.

Free or Discounted Instruments and Systems. Many of our customer commitment arrangements, such as our IDEXX 360 program, provide customers with free or discounted instruments or systems upon entering into multi-year arrangements to purchase minimum annual amounts of products and services. We allocate total consideration, including future committed purchases and expected price adjustments, based on relative standalone selling prices to identified performance obligations and recognize instrument revenue and cost at the time of installation and customer acceptance in advance of billing the customer, which is also when the customer obtains control of the instrument based on legal title transfer. Our right to future consideration related to instrument revenue is recorded as a contract asset within other current and long-term assets. The contract asset is reclassified to accounts receivable when customers are billed for products and services over the term of the arrangement. We have determined that these arrangements do not include a significant financing component.

On December 31, 2024, our contract assets were $246.3 million, of which approximately $15.5 million and $47.7 million were reclassified to accounts receivable when customers were billed for related products and services during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of new placements under commitment arrangements, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses, our contract assets were $288.7 million as of September 30, 2025. We monitor customer purchases over the term of their arrangement to assess the realizability of our contract assets and review estimates of variable consideration. Impairments and revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustments to revenue arising from contract modifications, during the three and nine months ended September 30, 2025, were not material.

Up-Front Consideration Paid to Customers. We provide customers with incentives in the form of IDEXX Points upon entering into multi-year arrangements to purchase minimum annual amounts of future products and services. If a customer breaches their agreement, they are required to refund all or a portion of the up-front consideration, or make other repayments, remedial actions, or both. Up-front incentives to customers in the form of IDEXX Points or, from time to time, cash, are not made in exchange for distinct goods or services and are capitalized as consideration paid to customers within other current and long-term assets, which are subsequently recognized as a reduction to revenue over the term of the customer arrangement. If these up-front incentives are subsequently utilized to purchase instruments, we allocate total consideration, including future committed purchases less up-front incentives and estimates of expected price adjustments, based on relative standalone selling prices, to identified performance obligations, and recognize instrument revenue and cost at the time of installation and customer acceptance. To the extent invoiced instrument revenue exceeds recognized instrument revenue, we record deferred revenue as a contract liability, which is subsequently recognized upon the purchase of products and services over the term of the contract. We have determined these arrangements do not include a significant financing component.

On December 31, 2024, our capitalized consideration paid to customers was $196.6 million, of which approximately $15.2 million and $47.5 million were recognized as a reduction of revenue during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of new payments to customers, net of subsequent recognition, our capitalized consideration paid to customers was $237.3 million as of September 30, 2025. We monitor customer purchases over the term of their arrangement to assess the realizability of our capitalized consideration paid to customers and review estimates of variable consideration. Impairments and revenue adjustments that relate to performance obligations satisfied in prior periods, including cumulative catch-up adjustments to revenue arising from contract modifications, during the three and nine months ended September 30, 2025, were not material.

Rebate Arrangements. Our rebate arrangements provide customers the opportunity to earn future rebates based on the volume of products and services they purchase over the term of the arrangement. Rebate incentives are typically offered in multi-year arrangements that include customer commitments to purchase minimum annual amounts of products and services, or, to a lesser extent, are sometimes offered without future purchase commitments. We account for the customer’s right to earn rebates on future purchases as a separate performance obligation and determine the standalone selling price based on an estimate of rebates the customer will earn over the term of the arrangement. Total consideration allocated to identified performance obligations is limited to goods and services that the customer is presently obligated to purchase and does not include estimates of future purchases that are optional. We allocate total consideration to identified performance obligations, including the customer’s right to earn rebates on future purchases, which is deferred and subsequently recognized upon the purchase of products and services.

On December 31, 2024, our deferred revenue related to rebate and up-front consideration arrangements was $30.0 million, of which approximately $2.5 million and $7.9 million were recognized when customers purchased eligible products and services during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of new customer purchases under rebate and up-front consideration arrangements, net of subsequent recognition, our deferred revenue was $34.6 million as of September 30, 2025, of which approximately 8%, 29%, 25%, 18%, and 20% are expected to be recognized during the remainder of 2025, the full years 2026, 2027, 2028, and thereafter, respectively.

For our customer commitment arrangements, we estimate future revenues related to multi-year arrangements to be approximately $4.7 billion, of which approximately 7%, 27%, 24%, 21%, and 21% are expected to be recognized during the remainder of 2025, the full years 2026, 2027, 2028, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied, for which customers have committed to future purchases, net of the expected revenue reductions from consideration paid to customers and expected price adjustments, and as a result, are lower than stated contractual commitments by our customers.

Instrument Rental Arrangements. Revenues from instrument rental and reagent rental arrangements are recognized either as operating leases on a ratable basis over the term of the arrangement or as sales-type leases at the time of installation and customer acceptance. Customers typically pay for the right to use instruments under rental arrangements in equal monthly amounts over the term of the rental arrangement. For some arrangements, customers are provided with the right to purchase the instrument at the end of the lease term. Our reagent rental arrangements provide customers the right to use our instruments upon entering into multi-year arrangements to purchase minimum

annual amounts of consumables. These types of arrangements include an embedded lease for the right to use our instrument, and we determine the amount of lease revenue allocated to the instrument based on relative standalone selling prices. Lease revenues are presented in product revenue on our consolidated income statement. Lease revenues were approximately $4.8 million and $11.8 million for the three and nine months ended September 30, 2025, respectively, compared to $3.5 million and $10.6 million and for the three and nine months ended September 30, 2024, respectively, including both operating leases and sales-type leases.

Sales-type Reagent Rental Arrangements. Our reagent rental arrangements that effectively transfer control of instruments to our customers are classified as sales-type leases, and we recognize instrument revenue and cost in advance of billing the customer, at the time of installation and customer acceptance. Our right to future consideration related to instrument revenue is recorded as a lease receivable within other current and long-term assets, and is reclassified to accounts receivable when customers are billed for products and services over the term of the arrangement. On December 31, 2024, our lease receivable assets were $19.0 million, of which approximately $1.3 million and $4.0 million were reclassified to accounts receivable when customers were billed for related products and services during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of new placements under sales-type reagent rental arrangements, net of subsequent amounts reclassified to accounts receivable, and allowances established for credit losses, our lease receivable assets were $18.2 million as of September 30, 2025. The impacts of discounting and unearned income as of September 30, 2025, were not material. Profit and loss recognized at the commencement date and interest income during the three and nine months ended September 30, 2025, were not material. We monitor customer purchases over the term of their arrangement to assess the realizability of our lease receivable assets. Impairments during the three and nine months ended September 30, 2025, were not material.

Operating-type Reagent Rental Arrangements. Our reagent rental arrangements that do not effectively transfer control of instruments to our customers are classified as operating leases, and we recognize instrument revenue and costs ratably over the term of the arrangement. The cost of the instrument is capitalized within property and equipment. During the three and nine months ended September 30, 2025, we transferred instruments of $1.8 million and $7.9 million, respectively, compared to $3.9 million and $10.5 million during the three and nine months ended September 30, 2024, respectively, from inventory to property and equipment.

We estimate future revenue to be recognized related to our reagent rental arrangements of approximately $75.6 million, of which approximately 7%, 24%, 21%, 18%, and 30% are expected to be recognized during the remainder of 2025, and the full years 2026, 2027, 2028, and thereafter, respectively. These future revenues relate to performance obligations not yet satisfied for which customers have committed to future purchases, net of expected price adjustments, and as a result, may be lower than stated contractual commitments by our customers.

Deferred Extended Warranties and Post-Contract Support Revenue

On December 31, 2024, our deferred revenue related to extended warranties and post-contract support was $25.2 million, of which approximately $1.3 million and $18.7 million were recognized during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of new arrangements, our deferred revenue related to extended warranties and post-contract support was $26.3 million at September 30, 2025. We do not disclose information about remaining performance obligations that are part of contracts with an original expected duration of one year or less, and do not adjust for the effect of the financing components when the period between customer payment and revenue recognition is one year or less. Deferred revenue related to extended warranties and post-contract support with an original duration of more than one year was $9.0 million at September 30, 2025, of which approximately 11%, 40%, 26%, 13%, and 10% are expected to be recognized during the remainder of 2025, and the full years 2026, 2027, 2028, and thereafter, respectively. We have determined these arrangements do not include a significant financing component.

Costs to Obtain a Contract

On December 31, 2024, our deferred commission costs, included within other current and long-term assets, were $22.0 million, of which approximately $1.7 million and $5.3 million of commission expense were recognized during the three and nine months ended September 30, 2025, respectively. Furthermore, as a result of commissions related to new extended warranties and SaaS subscriptions, net of subsequent recognition, our deferred commission costs were $21.5 million at September 30, 2025. Impairments of deferred commission costs during the three and nine months ended September 30, 2025, were not material.

NOTE 4. ACQUISITIONS, ASSET PURCHASES AND INVESTMENTS

We believe that our acquisitions of businesses and other assets enhance our existing businesses by either expanding our geographic range, customer base, or existing product and service lines. From time to time, we acquire businesses that we account for as either asset purchases or business combinations, and noncontrolling minority interests in business entities, which we recognize under either the equity or cost method, in accordance with our policy.

Asset Purchase

On September 8, 2025, we acquired a customer relationship intangible asset of a privately-owned reference laboratory in the U.S. for approximately $15.6 million, including an estimated contingent payment of $2.3 million. The customer relationship intangible has an estimated life of 10 years. The revenue associated with the acquired customer relationships has been included in our CAG segment since the acquisition date.

Business Combinations

During the first quarter of 2024, we acquired the assets of a privately-owned software and data platform business based in the U.S. that extended our practice management system cloud-native workflow and delivers strategic data solutions to our customers and their clients, for approximately $81.1 million, including a contingent payment valued at $4.4 million at the time of purchase. The fair values and the lives of the assets and liabilities acquired were as follows: completed technology of $17.1 million, with a life of 6 years; customer relationship intangibles of $12.5 million, with a life of 10 years; a non-compete agreement of $4.7 million, with a life of 5 years; and a trademark of $0.7 million, with a life of 10 years. We also recognized goodwill of $45.8 million, which represents synergies with our software business, and $0.3 million of net tangible assets, including accounts receivable. Goodwill related to this acquisition is expected to be deductible for tax purposes. Pro forma information has not been presented for this acquisition because such information is not material to the financial statements. The results of operations have been included in our CAG segment since the acquisition date. The acquisition expenses were not significant.

NOTE 5. SHARE-BASED COMPENSATION

The fair value of options, restricted stock units, deferred stock units, performance-based restricted stock units, and employee stock purchase rights awarded during the three and nine months ended September 30, 2025, totaled $2.0 million and $70.2 million, respectively, compared to $1.2 million and $71.4 million for the three and nine months ended September 30, 2024, respectively. The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards outstanding as of September 30, 2025, was $80.9 million, which will be recognized over a weighted average period of approximately 1.5 years. During the three and nine months ended September 30, 2025, we recognized share-based compensation expenses of $14.4 million and $43.9 million, respectively, compared to $15.9 million and $46.0 million for the three and nine months ended September 30, 2024, respectively.

We determine the assumptions used in the valuation of option awards as of the date of grant. Differences in the expected stock price volatility, expected term, or risk-free interest rate may necessitate distinct valuation assumptions at each grant date. As such, we may use different assumptions for options granted throughout the year. Option awards are granted with an exercise price equal to or greater than the closing market price of our common stock at the date of grant. We have never paid any cash dividends on our common stock, and we have no intention to pay such a dividend at this time; therefore, we assume that no dividends will be paid over the expected terms of option awards.

The weighted averages of the valuation assumptions used to determine the fair value of each option award on the date of grant and the weighted average estimated fair values were as follows:

For the Nine Months Ended September 30,
20252024
Expected stock price volatility33%32%
Expected term, in years7.37.0
Risk-free interest rate4.5%4.3%
Weighted average fair value of options granted$206.80$239.49

NOTE 6. CREDIT LOSSES

We are exposed to credit losses primarily through sales of products and services to our customers. We maintain allowances for credit losses for potentially uncollectible receivables. We base our estimates on a detailed analysis of specific customer situations and a percentage of our accounts receivable by aging category. Additionally, our estimates are developed based on historical credit loss experience, estimates of recoveries, current economic conditions, and future expectations.

We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors, including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer. We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. We may require collateralized asset support or a prepayment to mitigate credit risk. Our activities include timely account reconciliations, dispute resolution, and payment confirmations. We may employ collection agencies and legal counsel to pursue recovery of defaulted receivables. Historically, we have experienced low credit loss rates on our accounts receivables, customer commitment programs and lease receivables. Additional allowances may be required if either the financial condition of our customers was to deteriorate, or a strengthening U.S. dollar impacts the ability of foreign customers to make payments to us on their U.S. dollar-denominated purchases.

Account balances are charged off against the allowance when we believe it is probable the receivable will not be recovered. We do not have any off-balance sheet credit exposure related to our customers.

Accounts Receivable

The allowance for credit losses associated with accounts receivable was $11.7 million and $12.6 million as of September 30, 2025, and December 31, 2024, respectively. The amount of accounts receivable reflected on the balance sheet is net of this allowance. Based on an aging analysis, as of September 30, 2025, approximately 88% of our accounts receivable had not yet reached the invoice due date, and approximately 12% were considered past due. As of December 31, 2024, approximately 85% of our accounts receivable had not yet reached the invoice due date, and approximately 15% were considered past due.

Contract Assets and Lease Receivables

The allowance for credit losses associated with contract assets and lease receivables was $8.0 million and $6.8 million as of September 30, 2025, and December 31, 2024, respectively. The assets reflected on the balance sheet are net of these allowances.

NOTE 7. INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out) or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The components of inventories were as follows:

(in thousands)September 30, 2025December 31, 2024
Raw materials$102,497$104,195
Work-in-process33,97231,907
Finished goods255,095245,775
Total inventories$391,564$381,877

NOTE 8. LEASE COMMITMENTS

Maturities of operating lease liabilities were as follows:

(in thousands)September 30, 2025
2025 (remainder of year)$5,955
202634,203
202729,090
202822,846
202918,148
Thereafter43,247
Total lease payments153,489
Less imputed interest(20,348)
Total operating lease liabilities (current and long-term)$133,141

Supplemental cash flow information for leases was as follows:

(in thousands)For the Nine Months Ended September 30,
20252024
Cash paid for amounts included in the measurement of operating lease liabilities$24,804$21,398
Right-of-use assets obtained in exchange for operating lease obligations, net of early lease terminations (1)$28,717$22,331

(1) Additions for the nine months ended September 30, 2024, include $1.0 million of right-of-use assets obtained in connection with a business acquisition in the first quarter of 2024.

NOTE 9. OTHER CURRENT AND LONG-TERM ASSETS

Other Current Assets

Other current assets consisted of the following:

(in thousands)September 30, 2025December 31, 2024
Taxes receivable$76,132$26,990
Contract assets, net (1)71,95360,751
Consideration paid to customers70,01061,653
Prepaid expenses60,81558,626
Other assets31,53448,159
Total other current assets$310,444$256,179

(1) Contract assets, net, are net of allowances for credit losses. Refer to "Note 6. Credit Losses."

Other Long-Term Assets

Other long-term assets consisted of the following:

(in thousands)September 30, 2025December 31, 2024
Contract assets, net (1)$216,778$185,506
Consideration paid to customers167,256134,896
Equity investments31,76031,004
Deferred income taxes31,497125,630
Investments in long-term product supply arrangements27,30526,714
Other assets38,97643,768
Total other long-term assets$513,572$547,518

(1) Contract assets, net, are net of allowances for credit losses. Refer to "Note 6. Credit Losses."

NOTE 10. ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER LONG-TERM LIABILITIES

Accounts Payable - Supplier Financing Program

We have an agreement with a third party to provide a supplier financing program, which facilitates participating suppliers’ ability to finance payment obligations from us with a designated third-party financial institution. Participating suppliers may, at their sole discretion, make offers to finance one or more of our payment obligations prior to their scheduled due dates at a discounted price. Our obligations to our suppliers, including amounts due and scheduled payment dates, are not impacted by suppliers’ decisions to finance amounts under these arrangements. The terms of payments are consistent with the terms of our trade payables. Activity related to the obligations is presented within operating activities on the unaudited condensed consolidated statements of cash flows. The changes in our outstanding payment obligations under this arrangement, which are included in accounts payable on the unaudited condensed consolidated balance sheets, were as follows:

(in thousands)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Payment obligations outstanding at the beginning of the period$7,237$8,747$5,967$9,057
Payment obligations additions during the period15,64811,72545,47635,049
Payment obligations settled during the period(15,640)(14,968)(44,198)(38,602)
Payment obligations outstanding at the end of the period$7,245$5,504$7,245$5,504

Accrued Liabilities

Accrued liabilities consisted of the following:

(in thousands)September 30, 2025December 31, 2024
Accrued employee compensation and related expenses$192,517$174,583
Accrued expenses94,110165,550
Accrued taxes89,19762,252
Accrued customer incentives and refund obligations86,38578,195
Current lease liabilities26,64721,539
Total accrued liabilities$488,856$502,119

Other Long-Term Liabilities

Other long-term liabilities consisted of the following:

(in thousands)September 30, 2025December 31, 2024
Accrued taxes$14,780$20,898
Other accrued long-term expenses42,84123,443
Total other long-term liabilities$57,621$44,341

NOTE 11. DEBT

Credit Facility

At September 30, 2025, we had $455.0 million in outstanding borrowings under the Credit Facility, of which $250.0 million is under the Term Loan, and $205.0 million is under the revolving credit facility, with a weighted average effective interest rate for the nine months ended September 30, 2025, on the total outstanding borrowings of 5.3%, excluding any impact of our interest rate swap. At December 31, 2024, we had $250.0 million outstanding under the Credit Facility, all of which was under the $250.0 million Term Loan, with a full year weighted average effective interest rate of 6.2%, excluding any impact of our interest rate swap. At September 30, 2025, we had remaining borrowing availability of $793.2 million under our $1.25 billion Credit Facility. The funds available under the Credit Facility reflect a reduction due to the issuance of letters of credit, which were primarily in connection with our workers’ compensation insurance policy, for $1.8 million.

The applicable interest rate for the Credit Facility is calculated at a per annum rate equal to either (at our option) (i) a prime rate plus a margin ranging from 0.0% to 0.375% based on our consolidated leverage ratio, (ii) an adjusted term SOFR rate, plus 0.10%, plus a margin ranging from 0.875% to 1.375% based on our consolidated leverage ratio, or (iii) an adjusted daily simple SOFR rate, plus 0.10%, plus a margin ranging from 0.875% to 1.375% based on our consolidated leverage ratio. In March 2023, we entered into an interest rate swap contract to manage the economic effect of $250.0 million of variable interest borrowings under the Credit Facility. Refer to “Note 19. Hedging Instruments” for a discussion of our derivative instruments and hedging activity.

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, certain restrictive agreements, and violations of sanctions laws and regulations. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation, which is defined as the consolidated leverage ratio under the terms of the Credit Facility, not to exceed 3.5-to-1. As of September 30, 2025, we were in compliance with the covenants of the Credit Facility.

Senior Notes

The following describes all of our currently outstanding unsecured senior notes issued and sold in private placements (collectively, the “Senior Notes”) as of September 30, 2025:

(Principal Amount in thousands)
Issue DateDue DateSeriesPrincipal AmountCoupon RateSenior Notes Agreement
12/11/201312/11/20252025 Series B Notes$75,0004.04%NY Life 2013 Note Agreement
9/4/20149/4/20262026 Senior Notes$75,0003.72%NY Life 2014 Note Agreement
2/12/20152/12/20272027 Series B Notes$75,0003.72%MetLife 2014 Note Agreement
3/14/20193/14/20292029 Series C Notes$100,0004.19%MetLife 2014 Note Agreement
4/2/20204/2/2030MetLife 2030 Series D Notes$125,0002.50%MetLife 2014 Note Agreement
4/14/20204/14/2030Prudential 2030 Series D Notes$75,0002.50%Prudential 2015 Amended Agreement

On June 18, 2025, we repaid the aggregate principal amount of our 2025 Series C Notes for €88.9 million (US$103.4 million) at maturity.

The Senior Note Agreements contain affirmative, negative, and financial covenants customary for agreements of this type. The negative covenants include restrictions on liens, indebtedness of our subsidiaries, priority indebtedness, fundamental changes, investments, transactions with affiliates, certain restrictive agreements, and violations of sanctions laws and regulations. The sole financial covenant is a consolidated leverage ratio test that requires our ratio of debt to earnings before interest, taxes, depreciation, amortization, and share-based compensation, as defined in the Senior Note Agreements, not to exceed 3.5-to-1. As of September 30, 2025, we were in compliance with the covenants of the Senior Note Agreements.

NOTE 12. REPURCHASES OF COMMON STOCK

We primarily acquire shares of our common stock by repurchases in the open market. We also acquire shares that are surrendered by employees in payment for the statutory withholding taxes due on the vesting of restricted stock units and the settlement of deferred stock units, otherwise referred to herein as employee surrenders. We issue shares of treasury stock upon the vesting of certain restricted stock units and upon the exercise of certain stock options. The Inflation Reduction Act of 2022 imposed a 1% excise tax on the net value of certain stock repurchases, which is included in the cost of treasury stock acquired in open market repurchases. The number of shares of treasury stock issued during the three and nine months ended September 30, 2025, and 2024, was not material.

The following table is a summary of our open market common stock repurchases, reported on a trade date basis, and shares acquired through employee surrenders:

(in thousands, except per share amounts)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Shares repurchased in the open market4114592,0551,177
Shares acquired through employee surrenders for statutory tax withholding—11619
Total shares repurchased4114602,0711,196
Cost of shares repurchased in the open market$241,568$224,945$978,313$600,216
Cost of shares for employee surrenders852187,17910,486
Total cost of shares$241,653$225,163$985,492$610,702
Average cost per share - open market repurchases$587.50$490.23$475.92$509.81
Average cost per share - employee surrenders$647.08$465.27$454.46$557.64
Average cost per share - total$587.52$490.20$475.76$510.57

NOTE 13. INCOME TAXES

Our effective income tax rates were 20.4% and 20.2% for the three and nine months ended September 30, 2025, respectively, compared to 22.1% and 21.3% for the three and nine months ended September 30, 2024, respectively. The decrease in our effective tax rate for the three months ended September 30, 2025, compared to the same period during the prior year, was primarily due to an increase in tax benefits related to share-based compensation, partially offset by a reduction in our U.S. tax benefit associated with Foreign-Derived Intangible Income as a result of accelerating our research and development deductions as allowed by recent U.S. tax law changes. The decrease in our effective tax rate for the nine months ended September 30, 2025, compared to the same period during the prior year, was primarily driven by the increase in tax benefits related to share-based compensation and the resolution of international tax audits, partially offset by the impacts related to recent U.S. tax law changes.

The effective tax rate for the three and nine months ended September 30, 2025, was lower than the U.S. federal statutory tax rate of 21% primarily due to tax benefits from share-based compensation, partially offset by U.S. state taxes.

Cash paid for income taxes, net of refunds, during the nine months ended September 30, 2025, and 2024, was $150.1 million and $233.1 million, respectively. The reduction in income taxes paid during the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to the acceleration of our research and development deductions as allowed by recent U.S. tax law changes.

NOTE 14. ACCUMULATED OTHER COMPREHENSIVE INCOME

The changes in Accumulated Other Comprehensive Income (“AOCI”), net of tax, consisted of the following:

For the Nine Months Ended September 30, 2025
Unrealized Gain (Loss) on Cash Flow Hedges, Net of TaxUnrealized Gain (Loss) on Net Investment Hedges, Net of Tax
(in thousands)Foreign Currency Exchange ContractsInterest Rate SwapEuro-Denominated NotesCross Currency SwapsDefined Benefit Plans, Net of TaxCumulative Translation AdjustmentTotal
Balance as of December 31, 2024$12,785$542$6,451$7,409$(3,908)$(116,924)$(93,645)
Other comprehensive income (loss) income before reclassifications(15,364)214(8,958)(12,950)—58,43421,376
Reclassified from accumulated other comprehensive income(346)(716)——381—(681)
Balance as of September 30, 2025$(2,925)$40$(2,507)$(5,541)$(3,527)$(58,490)$(72,950)
For the Nine Months Ended September 30, 2024
Unrealized Gain (Loss) on Cash Flow Hedges, Net of TaxUnrealized Gain (Loss) on Net Investment Hedges, Net of Tax
(in thousands)Unrealized Loss on Investments, Net of TaxForeign Currency Exchange ContractsInterest Rate SwapEuro-Denominated NotesCross Currency SwapsDefined Benefit Plans, Net of TaxCumulative Translation AdjustmentTotal
Balance as of December 31, 2023$(164)$(2,397)$1,106$2,346$1,428$(3,559)$(69,966)$(71,206)
Other comprehensive income (loss) before reclassifications1444997(732)(370)—(1,261)(921)
Reclassified from accumulated other comprehensive income163(2,144)(2,132)——269—(3,844)
Balance as of September 30, 2024$—$(4,097)$(29)$1,614$1,058$(3,290)$(71,227)$(75,971)

The following table presents components and amounts reclassified out of AOCI to net income:

(in thousands)Affected Line Item in the Statements of IncomeAmounts Reclassified from AOCI For the Three Months Ended September 30,Amounts Reclassified from AOCI For the Nine Months Ended September 30,
2025202420252024
Foreign currency exchange contractsCost of revenue$(1,965)$512$600$3,043
Provision for income taxes494(176)(254)(899)
(Loss) gain, net of tax$(1,471)$336$346$2,144
Interest rate swap contractsInterest expense$278$860$939$2,796
Provision for income taxes(66)(204)(223)(664)
Gain, net of tax$212$656$716$2,132
InvestmentsGeneral and administrative expense$—$—$—$(214)
Provision for income taxes———51
Loss, net of tax$—$—$—$(163)
Defined benefit plansCost of revenue and operating expenses$(159)$(143)$(452)$(319)
Provision for income taxes25217150
Loss, net of tax$(134)$(122)$(381)$(269)

NOTE 15. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to our stockholders by the weighted average number of shares of common stock and vested deferred stock units outstanding during the period. The computation of diluted earnings per share is similar to the computation of basic earnings per share, except that the denominator is increased for the assumed exercise of dilutive options and assumed issuance of unvested restricted stock units and unvested deferred stock units using the treasury stock method unless the effect is anti-dilutive. The treasury stock method assumes that proceeds, including cash received from the exercise of employee stock options and the total unrecognized compensation expense for unvested share-based compensation awards, would be used to purchase our common stock at the average market price during the period. Vested deferred stock units outstanding are included in shares outstanding for basic and diluted earnings per share because the associated shares of our common stock are issuable for no cash consideration, the number of shares of our common stock to be issued is fixed, and issuance is not contingent. Refer to “Note 5. Share-Based Compensation” to the consolidated financial statements in our 2024 Annual Report for additional information regarding deferred stock units.

The following is a reconciliation of weighted average shares outstanding for basic and diluted earnings per share:

(in thousands)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Shares outstanding for basic earnings per share80,09682,30480,60582,675
Shares outstanding for diluted earnings per share:
Shares outstanding for basic earnings per share80,09682,30480,60582,675
Dilutive effect of share-based payment awards579752602803
80,67583,05681,20783,478

Certain awards and options to acquire shares have been excluded from the calculation of weighted average shares outstanding for diluted earnings per share because they were anti-dilutive. The following table presents information concerning those anti-dilutive awards and options:

(in thousands)For the Three Months Ended September 30,For the Nine Months Ended September 30,
2025202420252024
Weighted average number of shares underlying anti-dilutive awards239140
Weighted average number of shares underlying anti-dilutive options236481551460

NOTE 16. COMMITMENTS, CONTINGENCIES AND GUARANTEES

Commitments

Refer to “Note 8. Lease Commitments” for more information regarding our lease commitments.

Contingencies

We are subject to claims that may arise in the ordinary course of business, including with respect to actual and threatened litigation and other matters. We accrue for loss contingencies when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. However, the results of legal actions cannot be predicted with certainty, and therefore our actual losses with respect to these contingencies could exceed our accruals. As of September 30, 2025, our accruals with respect to actual and threatened litigation were not material.

In 2018, a lawsuit was filed against us involving an alleged breach of contract for underpayment of royalty payments made from 2004 through 2017 under an expired patent license agreement. On April 17, 2025, we paid a judgment in the amount of approximately $80 million, which was accrued in prior years, to conclude the litigation, and the plaintiff executed a satisfaction and release of judgment, which was filed with the trial court on that date.

From time to time, we have received notices alleging that our products infringe third-party proprietary rights, although we are not aware of any pending litigation with respect to such claims. Patent litigation frequently is complex and expensive, and the outcome of patent litigation can be difficult to predict. There can be no assurance that we will prevail in any infringement proceedings that may be commenced against us. If we lose any such litigation, we may be stopped from selling certain products and/or we may be required to pay damages as a result of the litigation.

Guarantees

We enter into agreements with third parties in the ordinary course of business under which we are obligated to indemnify such third parties for and against various risks and losses. The precise terms of such indemnities vary with the nature of the agreement. In many cases, we limit the maximum amount of our indemnification obligations, but in some cases, those obligations may be theoretically unlimited. We have not incurred material expenses in discharging any of these indemnification obligations, and based on our analysis of the nature of the risks involved, we believe that the fair value of potential indemnification under these agreements is minimal. Accordingly, we have no liabilities recognized for these obligations as of September 30, 2025, and December 31, 2024.

When acquiring a business, we sometimes assume liability for certain events or occurrences that took place prior to the date of acquisition. As of September 30, 2025, and December 31, 2024, we have no material liabilities recognized for pre-acquisition liabilities.

NOTE 17. SEGMENT REPORTING

We have three reportable segments: Companion Animal Group (“CAG”), water quality products (“Water”), and Livestock, Poultry and Dairy (“LPD”). CAG provides products and services for veterinarians and the biomedical research community, primarily related to diagnostics and information management. Water provides innovative testing solutions for the detection and quantification of various microbiological parameters in water. LPD provides diagnostic tests, services, and related instrumentation that are used to manage the health status of livestock and poultry, to improve producer efficiency, and to ensure the quality and safety of milk. Other information combines and presents our human medical diagnostic business (“OPTI Medical”) with our out-licensing arrangements because they do not meet the quantitative or qualitative thresholds for reportable segments. OPTI Medical develops, manufactures, and distributes human medical diagnostic products and services.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker (“CODM”) in assessing performance. The CODM, our president and Chief Executive Officer, evaluates the performance of operating segments based on revenues and gross profit. Our CODM reviews budget and actual results of the operating segments and decides how to allocate resources to meet our strategic priorities, and he also meets with operating segment leaders on a periodic basis to determine allocation of resources.

The accounting principles used in the preparation of the segment information are the same as those used for the consolidated financial statements. Intersegment revenues, which are not included in the tables below, were not material for the three and nine months ended September 30, 2025, and 2024. Assets are not allocated to segments for internal reporting purposes and are not included in the review performed by the CODM for purposes of assessing segment performance and allocation of resources. Certain corporate expenses are allocated to the segments, including depreciation and amortization. Foreign currency transaction gains and losses for all operating segments are reported within Other and are reconciled in the table below.

The following tables are a summary of reportable segment performance with Other to reconcile to the total consolidated for the three months ended September 30, 2025, and 2024:

(in thousands)For the Three Months Ended September 30, 2025
CAGWaterLPDTotal
Total revenues from reportable segments$1,012,534$54,297$33,944$1,100,775
Reconciliation of revenue
Other revenues4,464
Total consolidated revenue1,105,239
Cost of revenue385,07816,24017,999
Segment gross profit$627,456$38,057$15,945$681,458
Reconciliation of operating profit (segment profit)
Segment gross profit$681,458
Segment operating expenses(326,101)
Other operating profit (excluding unallocated amounts)1,076
Unallocated amounts
Foreign currency transaction gains (losses)(1,587)
Interest expense(10,655)
Interest income580
Income before provision for income taxes$344,771
(in thousands)For the Three Months Ended September 30, 2024
CAGWaterLPDTotal
Total revenues from reportable segments$891,990$50,162$28,992$971,144
Reconciliation of revenue
Other revenues4,399
Total consolidated revenue975,543
Cost of revenue347,52915,40714,365
Segment gross profit$544,461$34,755$14,627$593,843
Reconciliation of operating profit (segment profit)
Segment gross profit$593,843
Segment operating expenses(292,264)
Other operating profit (excluding unallocated amounts)932
Unallocated amounts
Foreign currency transaction gains (losses)1,381
Interest expense(7,697)
Interest income2,714
Income before provision for income taxes$298,909

The following tables are a summary of reportable segment performance with Other to reconcile to the total consolidated for the nine months ended September 30, 2025, and 2024:

(in thousands)For the Nine Months Ended September 30, 2025
CAGWaterLPDTotal
Total revenues from reportable segments$2,954,813$150,619$94,302$3,199,734
Reconciliation of revenue
Other revenues$13,389
Total consolidated revenue3,213,123
Cost of revenue1,110,43244,97849,063
Segment gross profit$1,844,381$105,641$45,239$1,995,261
Reconciliation of operating profit (segment profit)
Segment gross profit$1,995,261
Segment operating expenses(951,193)
Other operating profit (excluding unallocated amounts)3,184
Unallocated amounts
Foreign currency transaction gains (losses)(2,826)
Interest expense(29,642)
Interest income2,423
Income before provision for income taxes$1,017,207
(in thousands)For the Nine Months Ended September 30, 2024
CAGWaterLPDTotal
Total revenues from reportable segments$2,703,573$139,959$87,503$2,931,035
Reconciliation of revenue
Other revenues12,181
Total consolidated revenue2,943,216
Cost of revenue1,043,80542,63342,084
Segment gross profit$1,659,768$97,326$45,419$1,802,513
Reconciliation of operating profit (segment profit)
Segment gross profit$1,802,513
Segment operating expenses(937,389)
Other operating profit (excluding unallocated amounts)2,080
Unallocated amounts
Foreign currency transaction gains (losses)(553)
Interest expense(23,707)
Interest income10,500
Income before provision for income taxes$853,444

Refer to “Note 3. Revenue” for a summary of disaggregated revenue by reportable segment and by major product and service category for the three and nine months ended September 30, 2025, and 2024.

NOTE 18. FAIR VALUE MEASUREMENTS

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

We have certain financial assets and liabilities that are measured at fair value on a recurring basis, certain nonfinancial assets and liabilities that may be measured at fair value on a non-recurring basis, and certain financial assets and liabilities that are not measured at fair value in our unaudited condensed consolidated balance sheets but for which we disclose the fair value. The fair value disclosures of these assets and liabilities are based on a three-level hierarchy, which is defined as follows:

Level 1Quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We did not have any transfers between Level 1 and Level 2, or transfers in or out of Level 3, of the fair value hierarchy during the three and nine months ended September 30, 2025.

Our cross currency swap contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets and are classified as derivative instruments. We measure the fair value of our cross currency swap contracts using prevailing market conditions as of the close of business on each balance sheet date. The product of this calculation is then adjusted for counterparty risk.

Our foreign currency exchange contracts are measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets and are classified as derivative instruments. We measure the fair value of our foreign currency exchange contracts using an income approach, based on prevailing market forward exchange rates less the contract rate, multiplied by the notional amount. The product of this calculation is then adjusted for counterparty risk.

Our interest rate swap contract is measured at fair value on a recurring basis in our accompanying unaudited condensed consolidated balance sheets and classified as a derivative instrument. We measure the fair value of our interest rate swap contract using current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk.

The amounts outstanding under the unsecured Credit Facility and Senior Notes (“long-term debt”) are measured at carrying value in our unaudited condensed consolidated balance sheets though we disclose the fair value of these financial instruments. We determine the fair value of the amount outstanding under the Credit Facility and long-term debt using an income approach, utilizing a discounted cash flow analysis based on current market interest rates for debt issues with similar remaining years to maturity, adjusted for applicable credit risk. The Credit Facility and long-term debt are valued using Level 2 inputs. The estimated fair value of the Credit Facility approximates its carrying value. The estimated fair values and carrying values of our long-term debt, including the current portion of our long-term debt, were $513.9 million and $525.0 million, respectively, as of September 30, 2025, and $594.3 million and $617.8 million, respectively, as of December 31, 2024.

The following tables set forth our assets and liabilities that were measured at fair value on a recurring basis by level within the fair value hierarchy:

(in thousands)
As of September 30, 2025Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Balance as of September 30, 2025
Assets
Money market funds (1)$5,515$—$—$5,515
Foreign currency exchange contracts (2)$—$2,312$—$2,312
Cross currency swaps (2)$—$480$—$480
Interest rate swap (3)$—$51$—$51
Liabilities
Cross currency swaps (2)$—$14,062$—$14,062
Foreign currency exchange contracts (2)$—$6,529$—$6,529
Contingent consideration$—$—$3,800$3,800
(in thousands)
As of December 31, 2024Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Balance as of December 31, 2024
Assets
Money market funds (1)$139,626$—$—$139,626
Cross currency swaps (2)$—$3,501$—$3,501
Foreign currency exchange contracts (2)$—$16,921$—$16,921
Interest rate swap (3)$—$710$—$710
Liabilities
Cross currency swaps (2)$—$33$—$33
Contingent consideration$—$—$2,300$2,300

(1)Money market funds with an original maturity of less than ninety days are included within cash and cash equivalents.

(2)Cross currency swaps and foreign currency exchange contracts are included within other current assets, other long-term assets, accrued liabilities, or other long-term liabilities depending on the gain (loss) position and anticipated settlement dates.

(3)The interest rate swap is included within other current assets.

The estimated fair values of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate their respective carrying values due to their short maturity.

NOTE 19. HEDGING INSTRUMENTS

Disclosure within this note is presented to provide transparency about how and why we use derivative and non-derivative instruments (collectively “hedging instruments”), how the instruments and related hedged items are accounted for, and how the instruments and related hedged items affect our financial position, results of operations, and cash flows.

We recognize all hedging instrument assets and liabilities at fair value at the balance sheet date. Instruments that do not qualify for hedge accounting treatment are recorded at fair value through earnings. To qualify for hedge accounting treatment, cash flow and net investment hedges must be highly effective in offsetting changes to expected future cash flows or fair value on hedged transactions. If the hedging instrument qualifies for hedge accounting, changes in the fair value of the hedging instrument from the effective portion of the hedge are deferred in AOCI, net of tax, and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. We immediately record in earnings the extent to which a hedging instrument is not effective in achieving offsetting changes in fair value. We de-designate hedging instruments from hedge accounting when the likelihood of the hedged transaction occurring becomes less than probable. For de-designated instruments, the gain or loss from the time of de-designation through maturity of the instrument is recognized in earnings. Any gain or loss in AOCI at the time of de-designation is reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Refer to “Note 14. Accumulated Other Comprehensive Income” for further information regarding the effect of hedging instruments on our unaudited condensed consolidated statements of income for the three and nine months ended September 30, 2025, and 2024.

We enter into master netting arrangements with the counterparties to our derivative transactions, which permit certain outstanding receivables and payables to be offset in the event of default. Our derivative contracts do not require either party to post cash collateral. We elect to present our derivative assets and liabilities in the unaudited condensed consolidated balance sheets on a gross basis. All cash flows related to our foreign currency exchange contracts are classified as operating cash flows, which is consistent with the cash flow treatment of the underlying items being hedged.

We are exposed to certain risks related to our ongoing business operations. We utilize hedging instruments to manage a portion of our foreign currency exchange risk and interest rate risk. The primary purpose of our foreign currency hedging activities is to protect against the volatility associated with foreign currency transactions, including transactions denominated in the euro, British pound, Japanese yen, Canadian dollar, and Australian dollar. We also utilize natural hedges to mitigate our transaction and commitment exposures. Our corporate policy prescribes the range of allowable hedging activity. We enter into foreign currency exchange contracts with large well-capitalized multinational financial institutions, and we do not hold or engage in transactions involving derivative instruments for purposes other than risk management. Our accounting policies for these contracts are based on our designation of such instruments as hedging transactions.

Our subsidiaries enter into foreign currency exchange contracts to manage the exchange risk associated with their forecasted intercompany inventory purchases and sales for the next year. From time to time, we may also enter into other foreign currency exchange contracts, cross currency swaps, or foreign-denominated debt issuances to minimize the impact of foreign currency fluctuations associated with specific balance sheet exposures, including net investments in certain foreign subsidiaries.

Cash Flow Hedges

We have designated our foreign currency exchange contracts and our interest rate swap as cash flow hedges because these derivative instruments reduce our exposure to variability in the cash flows of forecasted transactions attributable to foreign currency exchange and to interest rates on variable interest obligations under the terms of the Credit Facility. Unless noted otherwise, we have also designated our derivative instruments as qualifying for hedge accounting treatment.

We did not de-designate any instruments from hedge accounting treatment during the three and nine months ended September 30, 2025, or 2024. As of September 30, 2025, the estimated amount of losses, net of tax, from our foreign exchange contracts which are expected to be reclassified out of AOCI and into earnings within the next 12 months is $2.5 million if exchange rates do not fluctuate from the levels as of September 30, 2025. Upon the maturity of the term loan on October 20, 2025, the amount of gains, net of tax, from our interest rate swap contract, that will be reclassified out of AOCI and into earnings is less than $0.1 million.

Interest Rate Swap: We entered into an interest rate swap contract to manage the effect of variable interest obligations on amounts borrowed under the terms of the Credit Facility. Beginning on March 31, 2023, the variable interest rate associated with $250.0 million of borrowings outstanding under the Credit Facility became effectively fixed at 3.9% plus the applicable credit spread, through October 20, 2025.

Foreign Currency Exchange Contracts: We target to hedge approximately 75% to 85% of the estimated exposure from intercompany product purchases and sales denominated in the euro, British pound, Canadian dollar, Japanese yen, and Australian dollar. We have additional unhedged foreign currency exposures related to intercompany foreign transactions and emerging markets where it is not practical to hedge. We primarily utilize foreign currency exchange contracts with durations of less than 24 months. Quarterly, we enter into contracts to hedge incremental portions of anticipated foreign currency transactions for the current and following year. As a result, our risk with respect to foreign currency exchange rate fluctuations and the notional value of foreign currency exchange contracts may vary throughout the year. The U.S. dollar is the currency purchased or sold in all of our foreign currency exchange contracts. The notional amount of foreign currency exchange contracts to hedge forecasted intercompany inventory purchases and sales totaled $333.4 million and $325.7 million as of September 30, 2025, and December 31, 2024, respectively.

The following table presents the effects of cash flow hedge accounting on our unaudited condensed consolidated statements of income and comprehensive income, and provides information regarding the location and amounts of pretax gains or losses of derivatives:

(in thousands)Financial statement line items in which effects of cash flow hedges are recordedThree Months Ended September 30,Nine Months Ended September 30,
2025202420252024
Foreign currency exchange contractsCost of revenue$421,885$379,505$1,211,658$1,134,949
Amount of gain (loss) reclassified from accumulated other comprehensive income into net income$(1,965)$512$600$3,043
Interest rate swap contractInterest expense$(10,655)$(7,697)$(29,642)$(23,707)
Amount of gain reclassified from accumulated other comprehensive income into net income$278$860$939$2,796

Net Investment Hedges, Euro-Denominated Notes

In June 2015, we issued and sold through a private placement an aggregate principal amount of €88.9 million in euro-denominated 1.785% Series C Senior Notes that were due June 18, 2025. We designated these euro-denominated notes as a hedge of our euro net investment in certain foreign subsidiaries to reduce the volatility caused by changes in foreign currency exchange rates in the euro relative to the U.S. dollar. As a result of this designation, gains and losses from the change in the translated U.S. dollar value of these euro-denominated notes are recorded in AOCI rather than earnings. We recorded losses of $9.0 million, net of tax, within AOCI as a result of this net investment hedge for the nine months ended September 30, 2025, and losses of $3.1 million and $0.7 million for the three and nine months ended September 30, 2024, respectively. No gains or losses were recorded in the current period, as the euro-denominated notes matured in the second quarter of 2025.

At the maturity of the 1.785% Series C Senior Notes on June 18, 2025, we paid the notional amount of €88.9 million, equivalent to $103.4 million at the date of payment. The related cumulative unrealized loss of $2.5 million, net of tax, will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated. Refer to “Note 13. Debt” to the consolidated financial statements included in our 2024 Annual Report for further information regarding the issuance of these euro-denominated notes.

Net Investment Hedges, Cross Currency Swaps

We have entered into cross currency swap contracts as a hedge of our net investment in certain foreign subsidiaries to reduce the volatility caused by changes in foreign currency exchange rates relative to the U.S. dollar. The cross currency swaps outstanding as of September 30, 2025, have maturity dates beginning on March 31, 2028, through September 11, 2032.

The following table presents the outstanding cross currency swaps notional amounts that will be delivered to and received from the counterparties at maturity:

(in thousands)
Maturity DateNotional Amount to be Delivered at MaturityNotional Amount to be Received at Maturity
3/31/2028€35,000$37,755
6/30/2028€90,000$98,217
6/29/2029€20,000$21,268
7/17/2028€76,000$88,113
7/31/2028€39,000$45,735
9/11/2032¥3,683,750$25,000

On June 18, 2025, we settled two cross currency swaps at maturity for a total notional amount of €15 million. As a result of this settlement, we received a net amount of $0.1 million.

The changes in fair value of the cross currency swap contracts are recorded in AOCI and will be reclassified to earnings when the foreign subsidiaries are sold or substantially liquidated or all or a portion of the hedge no longer qualifies for hedge accounting treatment. During the three and nine months ended September 30, 2025, we recorded gains of $1.1 million and losses of $13.0 million, respectively, net of tax, within AOCI as a result of these net investment hedges, and losses of $3.8 million and $0.4 million during the three and nine months ended September 30, 2024, respectively. We receive quarterly interest payments from the counterparties based on a fixed interest rate until maturity of the cross currency swaps. This interest rate component is excluded from the assessment of hedge effectiveness and is recognized as a reduction to interest expense over the life of the hedge instrument. We recognized approximately $0.8 million and $1.6 million related to the excluded component as a reduction of interest expense for the three and nine months ended September 30, 2025, respectively, and $0.4 million and $1.1 million for the three and nine months ended September 30, 2024, respectively.

Fair Values of Derivative and Non-Derivative Instruments Designated as Hedges in Consolidated Balance Sheets

The fair values of hedging instruments and their respective classification on our unaudited condensed consolidated balance sheets and amounts subject to offset under master netting arrangements consisted of the following:

(in thousands)Hedging Assets
September 30, 2025December 31, 2024
Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification
Foreign currency exchange contractsOther current assets$1,988$16,921
Cross currency swapsOther current assets—1,839
Interest rate swap contractOther current assets51710
Foreign currency exchange contractsOther long-term assets324—
Cross currency swapsOther long-term assets4801,662
Total derivative instruments presented as hedging instruments on the balance sheet2,84321,132
Gross amounts subject to master netting arrangements not offset on the balance sheet(1,641)—
Net amount$1,202$21,132
(in thousands)Hedging Liabilities
September 30, 2025December 31, 2024
Derivatives and non-derivatives designated as hedging instrumentsBalance Sheet Classification
Foreign currency exchange contractsAccrued liabilities$5,583$—
Cross currency swapsOther long-term liabilities14,06233
Foreign currency exchange contractsOther long-term liabilities946—
Total derivative instruments presented as hedging instruments on the balance sheet20,59133
Non-derivative foreign currency denominated debt designated as net investment hedge on the balance sheet (1)Short-term debt—92,803
Total hedging instruments presented on the balance sheet20,59192,836
Gross amounts subject to master netting arrangements not offset on the balance sheet(1,641)—
Net amount$18,950$92,836

(1) Amounts represent reported carrying amounts of our foreign currency-denominated debt. Refer to “Note 18. Fair Value Measurements” for information regarding the fair value of our long-term debt.

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