IDEXX Laboratories, Inc. (IDXX, Financial), the leading company in veterinary diagnostics, rallied in the second quarter after reporting strong financial results. Organic revenue growth was up 11%, driven by instrument revenue gains of 16% (and new placements up 25%), consumables’ sales up 12%, and reference labs sales up 15%. The company’s efforts to build a direct sales force and introduce new innovative products are showing terrific results. We expect revenue growth to accelerate as additional tests gain traction and the productivity of the new salesforce continues to improve. The company remained aggressive with its share repurchase program. We applaud the company’s plan to take on some leverage to buy in shares, especially as they bought at the lows, and since we believe the business is so stable and annuity-like that the balance sheet should have a reasonable amount of debt to optimize equity returns for the shareholders.
From Baron Funds' Small Cap Fund second quarter 2016 shareholder letter.
