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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION 
WASHINGTON, D.C. 20549 
FORM 10-Q 
 
(Mark One) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended September 30, 2022
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the transition period from _______________ to _______________. 
  
COMMISSION FILE NUMBER: 000-19271 

idxx-20220930_g1.jpg
  IDEXX LABORATORIES, INC. 
(Exact name of registrant as specified in its charter) 
Delaware01-0393723
(State or other jurisdiction of incorporation 
or organization)
(IRS Employer Identification No.)
One IDEXX Drive WestbrookMaine04092
(Address of principal executive offices)(ZIP Code)
207-556-0300
(Registrant’s telephone number, including area code)

Securities Registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.10 par value per shareIDXXNASDAQ Global Select Market
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨


    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No  ¨

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant’s Common Stock, $0.10 par value per share, was 82,816,957 on October 28, 2022.



GLOSSARY OF TERMS AND SELECTED ABBREVIATIONS

    In order to aid the reader, we have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q below:
Term / Abbreviation
 
Definition
 
AOCIAccumulated other comprehensive income or loss
ASCAccounting Standards Codification
ASUAccounting Standards Update
CAGCompanion Animal Group, a reporting segment that provides veterinarians diagnostic products and services and information management solutions that enhance the health and well-being of pets
Credit FacilityOur senior unsecured credit facility, as in effect on the relevant date, including (i) our $1 billion revolving credit facility, also referred to as line of credit, and (ii) on or after October 20, 2022, our $250 million three-year term loan
Clinical visitsThe reason for the visit involves an interaction between a clinician and a pet
FASBU.S. Financial Accounting Standards Board
LIBORLondon Interbank Offered-Rate
LPDLivestock, Poultry and Dairy, a reporting segment that provides diagnostic products and services for livestock and poultry health and to ensure the quality and safety of milk and improve producer efficiency
OPTI Medical
OPTI Medical Systems, Inc., a wholly-owned subsidiary of IDEXX Laboratories Inc., located in Roswell, Georgia. This business provides point-of-care and laboratory diagnostics (including electrolyte and blood gas analyzers and related consumable products) for the human medical diagnostics sector, as well as COVID-19 testing products and services. The Roswell facility also manufactures electrolytes slides (instrument consumables) to run Catalyst One®, Catalyst Dx®, and blood gas analyzers and consumables for the veterinary sector; also referred to as OPTI. OPTI Medical is reported in our Other operating segment.
Organic revenue growthA non-GAAP financial measure and represents the percentage change in revenue, as compared to the same period for the prior year, net of the effect of changes in foreign currency exchange rates, certain business acquisitions and divestitures. Organic revenue growth should be considered in addition to, and not as a replacement for or as a superior measure to, revenue growth reported in accordance with U.S. GAAP, and may not be comparable to similarly titled measures reported by other companies.
PCRPolymerase chain reaction, a technique used to amplify small segments of DNA
Reported revenue growthRepresents the percentage change in revenue reported in accordance with U.S. GAAP, as compared to the same period in the prior year
SaaSSoftware-as-a-service
SECU.S. Securities and Exchange Commission
Senior Note AgreementsNote purchase agreements for the private placement of senior notes, referred to as senior notes or long-term debt
SOFRThe secured overnight financing rate as administered by the Federal Reserve Board of New York (or a successor administrator of the secured overnight financing rate)
U.S. GAAPAccounting principles generally accepted in the United States of America
WaterWater, a reporting segment that provides water microbiology testing products




IDEXX LABORATORIES, INC. 
Quarterly Report on Form 10-Q 
Table of Contents 

  
Item No. Page
  
PART I—FINANCIAL INFORMATION 
 
PART II—OTHER INFORMATION
 






PART I— FINANCIAL INFORMATION 
Item 1.  Financial Statements  
IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(in thousands, except per share amounts) 
(Unaudited)

September 30, 2022December 31, 2021
ASSETS  
Current Assets:  
Cash and cash equivalents$99,176 $144,454 
Accounts receivable, net388,072 368,348 
Inventories354,975 269,030 
Other current assets216,636 173,823 
Total current assets1,058,859 955,655 
Long-Term Assets:
Property and equipment, net612,405 587,667 
Operating lease right-of-use assets110,103 105,101 
Goodwill355,292 359,345 
Intangible assets, net99,968 99,035 
Other long-term assets403,440 330,400 
Total long-term assets1,581,208 1,481,548 
TOTAL ASSETS$2,640,067 $2,437,203 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable$110,144 $116,140 
Accrued liabilities405,992 458,909 
Line of credit633,000 73,500 
Current portion of long-term debt 74,996 
Current portion of deferred revenue40,809 40,034 
Total current liabilities1,189,945 763,579 
Long-Term Liabilities:
Deferred income tax liabilities14,486 8,935 
Long-term debt, net of current portion760,814 775,205 
Long-term deferred revenue, net of current portion34,742 41,174 
Long-term operating lease liabilities 93,128 87,377 
Other long-term liabilities70,953 70,941 
Total long-term liabilities974,123 983,632 
Total liabilities2,164,068 1,747,211 
Commitments and Contingencies (Note 16)
Stockholders’ Equity:
Common stock, $0.10 par value: Authorized: 120,000 shares; Issued: 107,095 shares in 2022 and 106,878 shares in 2021; Outstanding: 82,995 shares in 2022 and 84,562 shares in 2021
10,709 10,688 
Additional paid-in capital1,437,528 1,377,320 
Deferred stock units: Outstanding: 58 units in 2022 and 90 units in 2021
5,176 5,719 
Retained earnings3,427,322 2,920,440 
Accumulated other comprehensive loss(80,894)(53,484)
Treasury stock, at cost: 24,101 shares in 2022 and 22,317 shares in 2021
(4,323,842)(3,570,691)
Total stockholders’ equity475,999 689,992 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$2,640,067 $2,437,203 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(in thousands, except per share amounts) 
(Unaudited)  

For the Three Months Ended September 30,For the Nine Months Ended September 30,
2022202120222021
Revenue:
Product revenue$481,004 $471,787 $1,451,899 $1,406,850 
Service revenue360,657 338,634 1,086,857 1,007,420 
Total revenue841,661 810,421 2,538,756 2,414,270 
Cost of Revenue:
Cost of product revenue158,554 166,748 487,948 483,850 
Cost of service revenue176,481 170,752 531,397 497,409 
Total cost of revenue335,035 337,500 1,019,345 981,259 
Gross profit506,626 472,921 1,519,411 1,433,011 
Expenses:
Sales and marketing130,021 124,434 392,570 358,277 
General and administrative83,764 82,098 243,201 226,194 
Research and development48,013 40,427 211,402 115,703 
Income from operations244,828 225,962 672,238 732,837 
Interest expense(10,998)(7,134)(26,311)(22,331)
Interest income353 122 830 265 
Income before provision for income taxes234,183 218,950 646,757 710,771 
Provision for income taxes53,245 43,772 139,875 128,698 
Net income180,938 175,178 506,882 582,073 
Less: Net loss attributable to noncontrolling interest (57) (1)
Net income attributable to IDEXX Laboratories, Inc. stockholders$180,938 $175,235 $506,882 $582,074 
Earnings per Share:
Basic$2.17 $2.06 $6.04 $6.82 
Diluted$2.15 $2.03 $5.97 $6.71 
Weighted Average Shares Outstanding:
Basic83,247 85,123 83,855 85,325 
Diluted84,113 86,511 84,858 86,712 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


IDEXX LABORATORIES, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 
(in thousands) 
(Unaudited) 
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2022202120222021
Net income$180,938 $175,178 $506,882 $582,073 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(31,220)(12,967)(59,024)(20,213)
Benefit plans, net of tax expense of $0 and $(991) in 2022 and $0 and $0 in 2021
  (5,056) 
Reclassification adjustment for benefit plans included in net income, net of tax of $23 and $74 in 2022 and $0 and $0 in 2021
118  378  
Unrealized gain on Euro-denominated notes, net of tax expense (benefit) of $1,713 and $3,438 in 2022 and $498 and $1,335 in 2021
5,495 1,581 11,028 4,235 
Unrealized (loss) on investments, net of tax expense (benefit) of $(3) and $(15) in 2022 and $0 and $48 in 2021
(10)(1)(52)153 
Unrealized gain (loss) on derivative instruments:
Unrealized gain on foreign currency exchange contracts, net of tax expense (benefit) of $4,634 and $10,368 in 2022 and $940 and $1,595 in 2021
13,490 4,109 26,930 7,300 
Unrealized gain on cross currency swaps, net of tax expense (benefit) of $1,657 and $3,303 in 2022 and $744 and $1,438 in 2021
5,319 2,359 10,597 4,561 
Reclassification adjustment for (gain) included in net income, net of tax benefit (expense) of $(2,254) and $(4,441) in 2022 and $330 and $1,206 in 2021
(6,381)1,253 (12,211)5,522 
Unrealized gain on derivative instruments12,428 7,721 25,316 17,383 
Other comprehensive (gain) loss, net of tax(13,189)(3,666)(27,410)1,558 
Comprehensive income167,749 171,512 479,472 583,631 
Less: Comprehensive loss attributable to noncontrolling interest (57) (1)
Comprehensive income attributable to IDEXX Laboratories, Inc.$167,749 $171,569 $479,472 $583,632 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


IDEXX LABORATORIES, INC.  AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except per share amounts) 
(Unaudited)  
Common Stock
Number of Shares
$0.10 Par Value
Additional Paid-in CapitalDeferred Stock UnitsRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity
Balance December 31, 2021106,878 $10,688 $1,377,320 $5,719 $2,920,440 $(53,484)$(3,570,691)$ $689,992 
Net income— — — — 193,965 — — — 193,965 
Other comprehensive income, net— — — — — 6,136 — — 6,136 
Repurchases of common stock, net— — — — — — (273,058)— (273,058)
Common stock issued under stock plans, including excess tax benefit125 12 11,583 (5)— — — — 11,590 
Share-based compensation cost— — 11,122 51 — — — — 11,173 
Balance March 31, 2022107,003 $10,700 $1,400,025 $5,765 $3,114,405 $(47,348)$(3,843,749)$ $639,798 
Net income— — — — 131,979 — — — 131,979 
Other comprehensive loss, net— — — — — (20,357)— — (20,357)
Repurchases of common stock, net— — — — — — (313,508)— (313,508)
Common stock issued under stock plans, including excess tax benefit72 7 7,779 (1,060)— — — — 6,726 
Deferred stock units activity— — (459)459 — — — —  
Share-based compensation cost— — 12,364 6 — — — — 12,370 
Balance June 30, 2022107,075 $10,707 $1,419,709 $5,170 $3,246,384 $(67,705)$(4,157,257)$ $457,008 
Net income— — — — 180,938 — — — 180,938 
Other comprehensive loss, net— — — — — (13,189)— — (13,189)
Repurchases of common stock, net— — — — — — (166,585)— (166,585)
Common stock issued under stock plans, including excess tax benefit20 2 4,877 — — — — — 4,879 
Share-based compensation cost— — 12,942 6 — — — — 12,948 
Balance September 30, 2022107,095 $10,709 $1,437,528 $5,176 $3,427,322 $(80,894)$(4,323,842)$ $475,999 
6


Common Stock
Number of Shares
$0.10 Par Value
Additional Paid-in CapitalDeferred Stock UnitsRetained EarningsAccumulated Other Comprehensive (Loss) IncomeTreasury StockNon-controlling InterestTotal Stockholders’ Equity
Balance December 31, 2020106,457 $10,646 $1,294,849 $4,503 $2,175,595 $(53,615)$(2,799,890)$707 $632,795 
Net income— — — — 204,257 — — 32 204,289 
Other comprehensive loss, net— — — — — (5,921)— — (5,921)
Repurchases of common stock, net— — — — — — (154,033)— (154,033)
Common stock issued under stock plans, including excess tax benefit219 22 17,408 — — — — — 17,430 
Share-based compensation cost— — 8,829 46 — — — — 8,875 
Balance March 31, 2021106,676 $10,668 $1,321,086 $4,549 $2,379,852 $(59,536)$(2,953,923)$739 $703,435 
Net income— — — — 202,582 — — 24 202,606 
Other comprehensive loss, net— — — — — 11,145 — — 11,145 
Repurchases of common stock, net— — — — — — (188,378)— (188,378)
Common stock issued under stock plans, including excess tax benefit72 7 9,771 — — — — — 9,778 
Deferred stock units activity— — (1,035)1,035 — — — —  
Share-based compensation cost— — 9,591 46 — — — — 9,637 
Balance June 30, 2021106,748 $10,675 $1,339,413 $5,630 $2,582,434 $(48,391)$(3,142,301)$763 $748,223 
Net income (loss)— — — — 175,235 — — (57)175,178 
Other comprehensive loss, net— — — — — (3,666)— — (3,666)
Repurchases of common stock, net— — — — — — (183,720)— (183,720)
Common stock issued under stock plans, including excess tax benefit58 6 9,921 (12)— — — — 9,915 
Share-based compensation cost— — 9,479 51 — — — — 9,530 
Balance September 30, 2021106,806 $10,681 $1,358,813 $5,669 $2,757,669 $(52,057)$(3,326,021)$706 $755,460 
The accompanying notes are an integral part of these condensed consolidated financial statements.
7


IDEXX LABORATORIES, INC.  AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) 
(Unaudited) 

For the Nine Months Ended
September 30,
20222021
  
Cash Flows from Operating Activities:  
Net income$506,882 $582,073 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization83,180 76,901 
Impairment charges2,346 5,148 
Provision for credit losses5,112 1,719 
Deferred income taxes(36,890)4,049 
Share-based compensation expense36,491 28,042 
Other2,032 2,402 
Changes in assets and liabilities:
Accounts receivable(35,061)(49,050)
Inventories(99,621)(46,891)
Other assets and liabilities(87,566)(51,961)
Accounts payable(3,930)637 
Deferred revenue(3,419)(7,487)
Net cash provided by operating activities369,556 545,582 
Cash Flows from Investing Activities:
Purchases of property and equipment(99,609)(87,761)
Acquisition of intangible assets(10,000) 
Equity investment(25,000) 
Acquisitions of a business, net of cash acquired(11,512)(161,166)
Net cash used by investing activities(146,121)(248,927)
Cash Flows from Financing Activities:
Borrowings under revolving credit facility, net559,500  
Payment of senior debt(75,000)(50,000)
Payments of acquisition-related contingent consideration and holdbacks(5,730)(1,500)
Repurchases of common stock, net(745,691)(502,021)
Proceeds from exercises of stock options and employee stock purchase plans23,257 37,428 
Shares withheld for statutory tax withholding payments on restricted stock(10,552)(15,501)
Net cash used by financing activities(254,216)(531,594)
Net effect of changes in exchange rates on cash(14,497)(3,786)
Net decrease in cash and cash equivalents(45,278)(238,725)
Cash and cash equivalents at beginning of period144,454 383,928 
Cash and cash equivalents at end of period$99,176 $145,203 
  
Supplemental Cash Flow Information:
Cash paid for income taxes$179,720 $96,103 
Unpaid property and equipment, reflected in accounts payable and accrued liabilities$19,661 $14,734 
The accompanying notes are an integral part of these condensed consolidated financial statements.

8


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, 2021, 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, 2022, 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 this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, and our Annual Report on Form 10-K for the year ended December 31, 2021, (the “2021 Annual Report”) filed with the SEC.

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, 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.

We have included certain terms and abbreviations used throughout this Quarterly Report on Form 10-Q in the “Glossary of Terms and Selected Abbreviations.”

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, 2022, are consistent with those discussed in “Note 2. Summary of Significant Accounting Policies” to the consolidated financial statements in our 2021 Annual Report, and as updated below.

Investments in Companies Accounted for Using the Equity or Cost Method of Accounting

Investments where we have the ability to exercise significant influence, but do not control the entity, are accounted for under the equity method of accounting. Significant influence generally exists if we have a 20% to 50% ownership interest in the investee. Equity investments in entities for which we do not have the ability to exercise significant influence and whose securities do not have a readily determinable fair value are carried at cost less impairment, if any, adjusted for changes resulting from qualifying observable price changes for the identical investment of the same issuer should they occur.

We evaluate our investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may be impaired. If a decline in the value of an investment is determined to be other than temporary, a loss is recorded in earnings in the current period.

As of September 30, 2022 and December 31, 2021, our equity investments of $30.3 million and $5.3 million, respectively, are recorded at cost in other long-term assets.
9




New Accounting Pronouncements Adopted

None.

New Accounting Pronouncements Not Yet Adopted

In September 2022, the FASB issued ASU 2022-04, “Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations,” which adds certain disclosure requirements for a buyer in a supplier finance program. The amendments require a buyer that uses supplier finance programs to make annual disclosures about the program’s key terms, the balance sheet presentation of related amounts, the confirmed amount outstanding at the end of the period, and associated roll-forward information. In interim reporting periods, the amount outstanding at the end of the period is required to be disclosed. The amendments are effective for all entities for fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods within those fiscal years, except for the requirement to disclose roll-forward information, which is effective prospectively for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are currently evaluating the impact of the new pronouncement, but do not expect this guidance will have a material impact on our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Acquired Contract Assets and Contract Liabilities.” ASU 2021-08 is intended to improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination by providing consistent recognition guidance. This standard is effective for fiscal years beginning after December 15, 2022. Adoption of the ASU 2021-08 should be applied prospectively. Early adoption is permitted, including in an interim period, for any period for which financial statements have not yet been issued. We are currently evaluating the impact, if any, of ASU 2021-08 on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 is intended to provide optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the discontinuation of the LIBOR or by another reference rate expected to be discontinued. The FASB also issued ASU 2021-01, "Reference Rate Reform (Topic 848): Scope," in January 2021. It clarifies that certain optional expedients and exceptions apply to derivatives that are affected by the discounting transition. The amendments in this ASU affect the guidance in ASU No. 2020-04 and are effective in the same timeframe as ASU 2020-04. The relief offered by this guidance, if adopted, is available to companies for the period March 12, 2020 through December 31, 2022. In October 2022 the Credit Facility was amended to include SOFR as the replacement to LIBOR, therefore, the discontinuation of LIBOR is not expected to have an impact on our consolidated financial statements. For more information regarding the amendment to our Credit Facility, refer to “Note 11. Debt”
NOTE 3. REVENUE RECOGNITION

Our revenue is recognized when, or as, performance obligations under the terms of a contract are satisfied, which occurs when control of the promised products or services is transferred to a customer. We exclude sales, use, value-added, and other taxes we collect on behalf of third parties from revenue. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring products or services to a customer. To accurately present the consideration received in exchange for promised products or services, we apply the five-step model outlined below:

1.Identification of a contract or agreement with a customer
2.Identification of our performance obligations in the contract or agreement
3.Determination of the transaction price
4.Allocation of the transaction price to the performance obligations
5.Recognition of revenue when, or as, we satisfy a performance obligation        

We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The timing of revenue recognition, billings, and cash collections results in accounts receivable, lease receivables, and contract assets as a result of revenue recognized in advance of billings (included within other assets), and contract liabilities or deferred revenue as a result of receiving consideration in advance of revenue recognition within our unaudited condensed consolidated balance sheet. Our payment terms generally range
10


from 30 to 60 days, with exceptions for certain individual customers and geographies. Below is a listing of our major categories of revenue for our products and services:

Diagnostic Products and Accessories. Diagnostic products and accessories revenues, including IDEXX VetLab® consumables and accessories, rapid assay, LPD, Water, and OPTI testing products, are predominantly recognized and invoiced at the time of shipment, which is when the customer obtains control of the product based on legal title transfer and we have the right to payment. We also provide customers with certain consumables that are recognized upon utilization by the customer, which is when we have the right to payment and the risks and rewards of ownership transfer. Shipping costs reimbursed by the customer are included in revenue and cost of sales. As a practical expedient, we do not account for shipping activities as a separate performance obligation.

Laboratory Diagnostic and Consulting Services. Laboratory diagnostic and consulting services revenues are recognized and invoiced when performed.

Instruments, Software and Systems. CAG Diagnostics capital instruments, veterinary software, and diagnostic imaging systems revenues are recognized and invoiced when the customer obtains control of the products based on legal title transfer and we have the right to payment, which generally occurs at the time of installation and customer acceptance. Our instruments, software, and systems are often included in one of our significant customer programs, as further described below. For veterinary software systems that include multiple performance obligations, such as perpetual software licenses and computer hardware, we allocate revenue to each performance obligation based on estimates of the price that we would charge the customer for each promised product or service if it were sold on a standalone basis.

Lease Revenue. Revenues from instrument rental agreements and reagent rental programs are recognized either as operating leases on a ratable basis over the term of the agreement or as sales-type leases at the time of installation and customer acceptance. Customers typically pay for the right to use instruments under rental agreements in equal monthly amounts over the term of the rental agreement. Our reagent rental programs provide our customers the right to use our instruments upon entering into agreements to purchase specified amounts of consumables, which are considered embedded leases. For some agreements, the customers are provided with the right to purchase the instrument at the end of the lease term. Lease revenues from these agreements are presented in product revenue on our unaudited condensed consolidated income statement. Lease revenues were approximately $5.6 million and $15.5 million for the three and nine months ended September 30, 2022, as compared to $6.3 million and $15.8 million for the three and nine months ended September 30, 2021, respectively, including both operating leases and sales-type leases under ASC 842, Leases, for leases entered into after January 1, 2019, and ASC 840, “Leases,” for leases entered into prior to 2019. Refer to below for revenue recognition under our reagent rental programs.

Extended Warranties and Post-Contract Support. CAG Diagnostics capital instruments and diagnostic imaging systems extended warranties typically provide customers with continued coverage for a period of one to five years beyond the first-year standard warranty. Customers can either pay in full for the extended warranty at the time of instrument or system purchase or can be billed on a quarterly basis over the term of the contract. We recognize revenue associated with extended warranties over time on a ratable basis using a time elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

Veterinary software post-contract support provides customers with access to technical support when and as needed through access to call centers and online customer assistance. Post-contract support contracts typically have a term of 12 months and customers are billed for post-contract support in equal quarterly amounts over the term. We recognize revenue for post-contract support services over time on a ratable basis using a time elapsed measure of performance over the contract term, which approximates the expected timing in which applicable services are performed.

On December 31, 2021, our deferred revenue related to extended warranties and post-contract support was $30.0 million, of which approximately