GOODWILL AND INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2024

Goodwill and Intangible Assets Disclosure [Abstract]

A significant portion of the purchase price for acquired businesses is generally assigned to intangible assets. Intangible assets other than goodwill are initially valued at fair value. If a quoted price in an active market for the asset is not readily available at the measurement date, the fair value of the intangible asset is estimated based on discounted cash flows using market participant assumptions, which are assumptions that are not specific to IDEXX. The selection of appropriate valuation methodologies and the estimation of discounted cash flows require significant assumptions about the timing and amounts of future cash flows, risks, appropriate discount rates, and the useful lives of intangible assets. When significant, we typically utilize independent valuation experts to advise and assist us in determining the fair values of the identified intangible assets acquired in connection with a business acquisition and in determining appropriate amortization methods and periods for those intangible assets. Goodwill is initially valued based on the excess of the purchase price of a business combination over the fair value of acquired net assets recognized and represents the future economic benefits arising from other assets acquired that could not be separately identified and recognized.

Our business combinations regularly include contingent consideration arrangements that require additional consideration to be paid based on the achievement of established objectives, most commonly related to customer retention or revenue growth of the customer base during the post-combination period. We assess contingent consideration on the acquisition date to determine whether it is part of the purchase consideration or should be accounted for separately from the business combination. A liability resulting from contingent consideration is remeasured to fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings if changes in estimates are made after the measurement period. Refer to “Note 18. Fair Value Measurements” for the fair value of contingent consideration.

We assess goodwill for impairment annually, at the reporting unit level in the fourth quarter, and whenever events or circumstances indicate impairment may exist. In evaluating goodwill for impairment, we have the option to first assess the qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative goodwill impairment test. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we assess the fair value of the reporting unit and compare its fair value to its carrying value to determine if the carrying value exceeds its fair value. Any excess of the carrying value of the goodwill above its fair value would be recognized as an impairment loss. In contrast, we can opt to bypass the qualitative assessment for any reporting unit and proceed directly to assessing the fair value of a reporting unit, and compare the fair value of the reporting unit to its carrying value to determine if any impairment exists. Doing so does not preclude us from performing the qualitative assessment in any subsequent period.

A prolonged economic downturn that results in lower long-term growth rates and reduced long-term profitability may reduce the fair value of our reporting units. Industry-specific events or circumstances could have a negative impact on our reporting units and may also reduce the fair value of our reporting units. Should such events occur, and it becomes more likely than not that a reporting unit’s fair value has fallen below its carrying value, we will perform an interim goodwill impairment test, in addition to the annual impairment test. Future impairment tests may result in an impairment of goodwill. An impairment of goodwill would be reported as a non-cash charge to earnings.

In the fourth quarter of 2024, we elected to bypass the qualitative assessment and performed a quantitative assessment of the fair value of all our reporting units and compared the fair value of each reporting unit to the carrying value to determine if

any impairment exists. We estimated the fair values of applicable reporting units using an income approach based on discounted forecasted cash flows. We applied assumptions about the extent and timing of future cash flows, growth rates and discount rates. Model assumptions are based on our projections and best estimates, using appropriate and customary market participant assumptions. In addition, we made certain assumptions in allocating shared assets and liabilities to individual reporting units in determining the carrying value of each reporting unit. We had no goodwill impairments during the years ended December 31, 2024, 2023, or 2022.

Of our total goodwill of $405.1 million, approximately $6.5 million is associated with our remaining pharmaceutical intellectual property out-licensing arrangements within our Other segment. Our sole source of value for this goodwill is royalty revenue associated with the commercialization of certain patented intellectual property, for which the primary royalty obligations expire in 2029. There is no guarantee that we will be able to maintain or increase revenues. A decrease in estimated future revenues could result in an impairment of this goodwill.

The changes in the carrying amount of goodwill for the years ended December 31, 2024, 2023, and 2022, were as follows:


(in thousands)	CAG		Water		LPD		Other		Consolidated Total
Balance as of December 31, 2021	$	327,171	$	11,939	$	13,704	$	6,531	$	359,345
Business combinations	1,641		6,857		—		—		8,498
Impact of changes in foreign currency exchange rates	(5,330)		(897)		179		—		(6,048)
Balance as of December 31, 2022	$	323,482	$	17,899	$	13,883	$	6,531	$	361,795
Business combinations	—		—		—		—		—
Impact of changes in foreign currency exchange rates	2,740		321		1,105		—		4,166
Balance as of December 31, 2023	$	326,222	$	18,220	$	14,988	$	6,531	$	365,961
Business combinations	45,782		—		—		—		45,782
Impact of changes in foreign currency exchange rates	(5,029)		(109)		(1,505)		—		(6,643)
Balance as of December 31, 2024	$	366,975	$	18,111	$	13,483	$	6,531	$	405,100

Refer to “Note 4. Acquisitions, Asset Purchases and Investments” for information regarding goodwill and other intangible assets recognized in connection with the acquisition of businesses and other assets during the years ended December 31, 2024, 2023, and 2022.

We assess the realizability of intangible assets other than goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If an impairment review is triggered, we evaluate the carrying value of intangible assets, other than goodwill, based on estimated undiscounted future cash flows over the remaining useful life of the primary asset of the asset group and compare that value to the carrying value of the asset group. The asset group is the lowest level for which identifiable cash flows associated with the intangible asset are largely independent. The cash flows that are used contain our best estimates, using appropriate and customary assumptions and projections at the time. If the net carrying value of the asset group exceeds the related estimated undiscounted future cash flows, an impairment loss to adjust the intangible asset to its fair value would be reported as a non-cash charge to earnings. If necessary, we would calculate the fair value of an intangible asset using the present value of the estimated future cash flows to be generated by the intangible asset and apply a risk-adjusted discount rate. We had no impairments of our intangible assets during the years ended December 31, 2024, 2023, and 2022.

We provide for amortization primarily using the straight-line method by charges to income in amounts that allocate the intangible assets over their estimated useful lives as follows:


Asset Classification						Estimated Useful Life

Customer-related intangible assets (1)						3 to 17 years
Product rights (2)						5 to 15 years
Noncompete agreements						3 to 5 years

Intangible assets other than goodwill consisted of the following:


(in thousands)	December 31, 2024						December 31, 2023
	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net

Customer-related intangible assets (1)	$	110,860	$	44,617	$	66,243	$	102,217	$	37,782	$	64,435
Product rights (2)	55,117		14,161		40,956		27,317		8,606		18,711
Noncompete agreements	6,570		2,093		4,477		4,012		2,658		1,354
Total	$	172,547	$	60,871	$	111,676	$	133,546	$	49,046	$	84,500

The table above reflect the effects of foreign currency exchange rates, and excludes fully amortized intangible assets.

(1)Customer-related intangible assets are comprised of customer lists and customer relationships acquired from third parties.

(2)Product rights comprise certain technologies, intellectual property, licenses, and trade names acquired from third parties.

Amortization expense of intangible assets other than goodwill was $17.1 million, $13.8 million, and $15.0 million for the years ended December 31, 2024, 2023, and 2022, respectively.

As of December 31, 2024, the aggregate amortization expense associated with intangible assets is estimated to be as follows for each of the next five years and thereafter:


(in thousands)	Amortization Expense

2025	$	19,040
2026	18,779
2027	17,438
2028	15,245
2029	12,013
Thereafter	29,161
Total amortization	$	111,676

Future actual amortization expense may differ from estimated amounts due to future intangible asset acquisitions, changes in foreign currency exchange rates, impairments of intangible assets, and other events.