We provide for various forms of share-based compensation awards to our employees and non-employee directors. Our share-based compensation plans allow for the issuance of a mix of stock options, restricted stock, stock appreciation rights, employee stock purchase rights, and other stock unit awards. With the exception of stock options, the fair value of our awards is equal to the closing stock price of IDEXX common stock on the date of grant. We calculate the fair value of our stock option awards using the Black-Scholes-Merton option-pricing model. For stock options, restricted stock units (“RSUs”), and deferred stock units (“DSUs”), share-based compensation expense is estimated based on awards ultimately expected to vest, reduced for estimated forfeitures, on a straight-line basis over the requisite service period of the award. For performance-based restricted stock units (“PBRSUs”), share-based compensation expense is estimated based on awards ultimately expected to vest, reduced for estimated forfeitures. PBRSUs and certain other awards are expensed on a straight-line basis over the three-year performance and service period as the awards cliff vest at the end of the three-year period.

Stock options permit a holder to buy IDEXX stock upon vesting at the stock option exercise price set on the day of grant. An RSU is an agreement to issue shares of IDEXX stock at the time of vesting. A PBRSU is an agreement to issue shares of IDEXX stock at the time of vesting upon achievement of certain performance goals. DSUs are granted under our Executive Deferred Compensation Plan, which was suspended in February 2013 (the “Suspended Executive Plan”), and non-employee Director Deferred Compensation Plan (the “Director Plan”), and DSUs may be granted under our Deferred Compensation Plan adopted in December 2024 (the “Executive Plan”). DSUs may or may not have vesting conditions depending on the plan under which they are issued. We did not issue any restricted stock or stock appreciation rights during the years ended December 31, 2024, 2023, and 2022, nor were any restricted stock or stock appreciation rights outstanding as of those years then ended.

We primarily issue shares of common stock to satisfy stock option exercises and employee stock purchase rights and to settle RSUs, PBRSUs, and DSUs. We issue shares of treasury stock to settle certain RSUs and upon the exercise of certain stock options, which were not material for the years ended December 31, 2024, 2023, and 2022. The number of shares of common stock and treasury stock issued are equivalent to the number of awards exercised or settled.

With the exception of employee stock purchase rights, equity awards are issued to employees and non-employee directors under the 2018 Stock Incentive Plan (the “2018 Stock Plan”). Our Board of Directors has authorized the issuance of 7.5 million shares of our common stock under the 2018 Stock Plan. Any shares that are subject to awards of stock options or stock appreciation rights will be counted against the share limit as one share for every share granted. Any shares that are issued other than stock options and stock appreciation rights will be counted against the share limit as 2.4 shares for every share granted. If any shares issued under our prior plans are forfeited, settled for cash, or expire, these shares, to the extent of such forfeiture, cash settlement, or expiration, will again be available for issuance under the 2018 Stock Plan. As of December 31, 2024, there were approximately 5.9 million remaining shares available for issuance under the 2018 Stock Plan.

Share-based compensation costs are classified in the consolidated financial statements consistent with the classification of cash compensation paid to the employees receiving such share-based compensation. The following is a summary of share-based compensation costs and related tax benefits recorded in our consolidated statements of income:


(in thousands)	For the Years Ended December 31,
	2024		2023		2022

Share-based compensation expense included in cost of revenue	$	6,014	$	5,643	$	4,638
Share-based compensation expense included in operating expenses	54,281		54,096		45,132
Total share-based compensation expense included in consolidated statements of income	60,295		59,739		49,770
Deferred tax benefit resulting from share-based compensation expense	(6,650)		(5,487)		(4,658)
Net share-based compensation expense included in consolidated statements of income, excluding tax benefit from settlement of share-based awards	53,645		54,252		45,112
Income tax benefit resulting from settlement of share-based awards	(19,625)		(13,703)		(12,522)
Net expense related to share-based compensation arrangements included in consolidated statements of income	$	34,020	$	40,549	$	32,590

Share-based compensation expense is reduced for an estimate of the number of awards that are expected to be forfeited. We use historical data and other factors to estimate expected employee terminations and to evaluate whether particular groups of employees have significantly different forfeiture expectations. Our share-based awards granted to employees in certain years include a retirement provision based on age and length of service. These grants are subject to accelerated expensing if the grantee meets the retirement definition set forth in the applicable equity and incentive plan documents.

The total unrecognized compensation expense, net of estimated forfeitures, for unvested share-based compensation awards as of December 31, 2024, was $63.8 million, which will be recognized over a weighted average period of approximately 1.3 years.

Prior to December 4, 2019, all options granted to employees primarily vested ratably over five years on each anniversary of the date of grant. Options granted to non-employee directors vested fully on the earlier of the first anniversary of grant or the date of the following annual meeting. Employee grants after December 4, 2019, vest ratably over four years. Vesting of option awards issued is conditional upon continuous service, unless the employee retires under the retirement provision, for grants issued in 2018, 2019, 2022, 2023, and 2024, for which retirees’ grants will vest two additional years following the retirement date. Options granted after May 8, 2013, have a contractual term of ten years. Upon any change in control of the company, 25% of the unvested stock options then outstanding will vest and become exercisable. However, if the acquiring entity does not assume outstanding options, then all options will vest immediately prior to the change in control.

We use the Black-Scholes-Merton option-pricing model to determine the fair value of options granted. Option-pricing models require the input of highly subjective assumptions, particularly for the expected stock price volatility and the expected term of options. Changes in the subjective input assumptions can affect the fair value estimate. Our expected stock price volatility assumptions are based on the historical volatility of our stock over periods that are similar to the expected terms of grants and other relevant factors. We derive the expected term based on historical experience and other relevant factors concerning expected employee behavior with regard to option exercise. The risk-free interest rate is based on U.S. Treasury yields for a maturity approximating the expected term calculated at the date of grant. We have never paid cash dividends on our common stock, and we have no intention to pay a dividend at this time; therefore, we assume that no dividends will be paid over the expected terms of option awards.

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 those grant dates. As such, we may use different assumptions for options granted throughout the year. 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 Years Ended December 31,
	2024			2023			2022

Expected stock price volatility	32		%	32		%	30		%
Expected term, in years	7.0			6.7			6.4
Risk-free interest rate	4.3		%	3.7		%	2.1		%
Weighted average fair value of options granted	$	239.49		$	201.48		$	166.30


	Number of Options (000)	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value ($000)

Outstanding as of December 31, 2023	1,596	$	250.14
Granted	111	$	555.48
Exercised	(234)	$	123.81
Forfeited	(11)	$	525.30
Expired	(1)	$	529.31
Outstanding as of December 31, 2024	1,461	$	291.25	4.5	$	232,648

Fully vested as of December 31, 2024	1,169	$	232.12	3.6	$	232,615

Fully vested and expected to vest as of December 31, 2024 (1)	1,449	$	289.38	4.4	$	232,647

(1) Includes options that are vested as of December 31, 2024, and outstanding options that are expected to vest in the future, net of estimated forfeitures.

The intrinsic value of stock options exercised represents the amount by which the market price of the common stock exceeded the exercise price before applicable income taxes. The total intrinsic values of stock options exercised were $85.7 million, $75.5 million, and $54.6 million during the years ended December 31, 2024, 2023, and 2022, respectively.

Prior to December 4, 2019, the majority of RSUs granted to employees vested ratably over five years on each anniversary of the date of grant. The majority of employee grants after December 4, 2019, vest ratably over four years. A minority of certain employee grants cliff vest three years from the date of grant. Vesting as it relates to RSUs issued is conditional upon continuous service, unless the employee retires under the retirement provision, for grants issued in 2018, 2019, 2022, 2023, and 2024, for which they will vest for two additional years following the retirement date. Upon any change in control of the company, 25% of the unvested RSUs then outstanding will vest, provided, however, that if the acquiring entity does not assume the RSUs then all such units will vest immediately prior to the change in control. RSUs granted to non-employee directors vest fully on the first anniversary of the date of grant.


	Number of Units (000)	Weighted Average Grant-Date Fair Value

Nonvested as of December 31, 2023	141	$	459.11
Granted	57	$	550.64
Vested	(60)	$	406.32
Forfeited	(8)	$	522.53
Nonvested as of December 31, 2024	130	$	519.38

Expected to vest as of December 31, 2024 (1)	123	$	518.59

(1) Outstanding units that are expected to vest in the future, net of estimated forfeitures.

The total fair values of RSUs vested were $32.9 million, $31.1 million, and $32.0 million during the years ended December 31, 2024, 2023, and 2022, respectively. The aggregate intrinsic value of nonvested RSUs was $50.8 million, which is equal to the fair value of IDEXX’s common stock as of December 31, 2024, multiplied by the number of nonvested units expected to vest.

On February 14, 2024, certain executives were granted performance-based restricted stock units (PBRSUs) that will cliff vest three years from the date of grant. Vesting as it relates to PBRSUs issued is conditional upon continuous service, unless the employee retires under the retirement provision. Upon any change in control of the company, 25% of the unvested PBRSUs then outstanding will vest, provided, however, that if the acquiring entity does not assume the PBRSUs, then all such units will vest immediately prior to the change in control. At the time of grant, we assume the PBRSUs will meet performance goals to vest at 100% of target.


	Number of Units (000)	Weighted Average Grant-Date Fair Value

Nonvested as of December 31, 2023	—	—
Granted	20	$	560.56
Vested	—	—
Forfeited	—	$	560.56
Performance adjustment (1)	(4)	$	560.56
Nonvested as of December 31, 2024	16	$	560.56

Expected to vest as of December 31, 2024	16	$	560.56

The aggregate intrinsic value of nonvested PBRSUs as of December 31, 2024, is equal to the fair value of IDEXX’s common stock as of December 31, 2024, multiplied by the number of nonvested units expected to vest as of December 31, 2024, was $6.6 million. No PBRSUs vested during 2023 and 2024. The total fair value of PBRSUs vested was $0.9 million during the year ended December 31, 2022.

Under our Director Plan, non-employee directors may defer a portion of their director cash compensation in the form of vested DSUs. Prior to 2014, certain members of our management could elect to defer a portion of their cash compensation in the form of vested DSUs under our Suspended Executive Plan. Under our Executive Plan, certain members of our management may elect to defer a portion of his or her RSUs or PBRSUs in the form of DSUs subject to the vesting conditions set forth in the applicable equity award agreement. Each DSU represents the right to receive one unissued share of our common stock. These recipients receive a number of DSUs equal to the amount of deferred compensation divided by the closing sale price of the common stock on the date of deferral or the number of RSUs or PBRSUs deferred, as applicable.

Also under the Director Plan, non-employee directors are awarded annual grants of either RSUs or DSUs that vest fully on the earlier of the first anniversary of grant or the date of the following annual meeting. Vesting for these annual RSU and DSU grants is conditional upon continuous service.

There were approximately 60,000 and 59,000 vested DSUs outstanding under our share-based compensation plans as of December 31, 2024, and 2023, respectively. During 2024, approximately 200 DSUs were distributed as shares of common stock. Unvested DSUs as of December 31, 2024, and 2023, were not material.

Employee stock purchase rights are issued under the 1997 Employee Stock Purchase Plan, under which we reserved and may issue up to an aggregate of 4.7 million shares of common stock in periodic offerings. Under this plan, stock is sold to employees at a 15% discount off the closing price of the stock on the last day of each quarter. The dollar value of this discount

is equal to the fair value of purchase rights recognized as share-based compensation. We issued approximately 37,700, 36,300, and 44,600 shares of common stock in connection with the Employee Stock Purchase Plan during the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, there were approximately 1.0 million remaining shares available for issuance under the 1997 Employee Stock Purchase Plan.