IDEX Corporation

Greetings and welcome to the IDEX Corporation First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to our host, Mike Yates, Vice President and Chief Accounting Officer. Thank you. You may begin.

Thank you, Diego. Good morning, everyone. This is Mike Yates, Vice President and Chief Accounting Officer for IDEX Corporation. Let me start by saying thank you for joining us for a discussion of the IDEX first quarter 2020 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months ending March 31st, 2020. The press release, along with the presentation slides to be used during today's webcast, can be accessed on our company's website at www.idexcorp.com. Joining me today is Andy Silvernail, our chairman and CEO, and Bill Grogan, our chief financial officer. The format for our call today is as follows. We'll begin with Andy providing an overview of IDEX performance drivers and addressing the impact of the COVID-19 pandemic on our operations, as well as the company's response to date. Bill will then discuss our first quarter 2020 financial results, and walk you through an assessment of the company's liquidity and financial durability through several scenarios. And finally, Andy will conclude with our current framework for second quarter and closing remarks. Following our prepared remarks, we will open the call for your questions. If you should need to exit the call for any reason, you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll-free number 877- and entering conference ID number 13694804. Or you may simply log onto our company's homepage for the webcast replay. Before we begin, a brief reminder. This call may contain certain forward-looking statements that are subject to the State of Harvard language in last night's press release and in IDEXX's filings with the Securities and Exchange Commission. With that, I'll turn the call over to our chairman and Chief Executive Officer, Andy Salerno.

Thank you, Mike. I appreciate everyone joining the IDEXX Q1 earnings call today. I'm starting off on slide six. The world's spinning with great uncertainty, but as you leave this call today, I want you to feel certain about one thing. IDEXX is well positioned to survive and thrive through this COVID-19 crisis. We have the quality of businesses, we have the people, and we have the financial wherewithal. We've invested our company aggressively over the years, to build a very special organization. Most important, we built a culture. We built a culture with incredibly talented teams who run great businesses that matter to the world. Our culture has helped us react very early to this crisis. We've made swift and smart decisions to keep our people safe, to keep our businesses moving, and ensure liquidity, making sure that we do everything we can to help win this COVID-19 fight. IDIX has an important mission that we capture in four words. trusted solutions, improving lives. Our mission has never been more important. In a world consumed with physical, emotional, and the financial impact of COVID-19, IDEX plays a critical role in keeping people safe and healthy while helping directly with the fight to defeat it. I'm going to move now to slide seven. There are so many ways that IDEX is in this fight. In our fluid metering segment, we enable food, energy, and industrial supply chains. In fire safety and diversified, we've acted swiftly to quadruple the production of our mobile medical tents used by hospitals as they struggle to handle the surging COVID-19 cases. And in health and science technologies, we're making compressors used in ventilators, mobile carts that produce hospital-grade air where it's not available, and compressors for mobile disinfecting sprayers. And of course, we're also a critical supplier, enabling the genetic sequencing that decoded the RNA of the coronavirus enabling the development of tests for COVID-19 and its antibodies, as well as finding therapies and hopefully an eventual vaccine. There are dozens more examples across the company where we bring essential products to a market in need. I'm turning now to slide eight. I want to pause here for a moment and thank all of our people across IDEX, especially those in manufacturing, shipping, and other roles that require presence in our facilities. We have robust safety protocols at our sites worldwide, to protect our people performing essential jobs. The safety of our people will always be the most important consideration as we continue in this new environment. In a crisis, especially one as devastating as this, your true values are exposed. I've never been prouder of the people of IDEX. From the first sign of the COVID-19 crisis in China, our teams have been collaborating, problem-solving, and acting. While great strategy is a product of this crisis, we're also seeing the best in who we are. I'm now moving on to slide nine. On March 20, I held a conference call with investors where I laid out our operating context and our priorities to steer IDEC successfully through this crisis. Much has changed in five weeks, but our point of view and our priorities remain the same. We've built our strategy and our operating plans based on four phases of this evolving crisis. I believe we're now moving out of phase one, the acute phase, and into phase two, which will be a period of ongoing uncertainty and significant challenge for the next three to six months. There will be little visibility as quarantines are lifted, and we all work to gradually restart the economy safely. During this phase, we expect to see a significant drop in demand and production capability as customers, suppliers, and our own teams are regularly impacted by shutdowns and shortages. The third phase will be learning to live and work with COVID-19. This will require significant changes to much of what we do, and this period will extend until there is a solution that gives people confidence to engage socially and professionally without fear. While this phase will not be easy, we've seen from our businesses in China, which have rebounded quickly, that we can successfully pivot our approach. The final phase will be the post-virus world. I know we all look forward to this day when normal returns. I'm convinced, however, that normal will be redefined just as it has been in other severe crises. Like the Great Depression, the Second World War, 9-11, and the financial crisis, there will be significant and permanent societal and economic changes. The coronavirus will shape our lives and our economy in countless ways, some easily predictable and others yet unknown. Over the next 12 to 18 months, as we move through these phases, it is our job as leaders to successfully traverse Phases 1 through 3 and enter Phase 4 with a company that is financially strong and an organization that is positioned to thrive. I'm now turning to slide 10. We've outlined four strategies that guide our way to a better future. Our top priority is safety, protecting our teams as we try to remain open to serve customers that are essential to our society. While we are normally highly decentralized, this is a time when we have carefully weighed safety protocols and mandated certain standards worldwide. These have included temperature checks at the beginning of all shifts, guidelines for face coverings, cleaning and sanitizing practices, and processes for addressing a variety of scenarios, from COVID-19 cases to possible exposures. Our COVID-19 issues and response team has led the way and regularly provides guidance to our local sites as issues arise. And because of the strong procedures we have in place, in the handful of instances where employees have contracted the virus, few, if any, coworkers have been quarantined. Not only is this good for business, but it's great for the health, well-being, and morale of our employees. I'm glad to report that every IDEX employee who has contracted COVID-19 has so far recovered. To ensure business continuity, which is our second priority, we have developed plans for each site to use in the event of a ramp down of operations. We want to ensure these are handled smoothly and in a way that prepares the business to return quickly to operations. We are also regularly addressing supply chain concerns. While our supply chains are generally shorter than many of our other global manufacturers, we have quickly addressed issues from lockdowns and travel restrictions. So far, our business continuity planning, like our security plans, have helped us avoid more significant business disruptions. In the months ahead, we expect we'll be choppier. This extensive planning and support structure we've built should serve our businesses well. Our third area of focus is liquidity. IDEX entered this time with a strong cash position, and we have remained cash flow positive since the beginning of the crisis. Our goal is to remain so throughout, protecting our liquidity and our balance sheet. We're working with our businesses and finance leaders to help them manage their period unlike anything they've seen in their careers. Bill Grogan, our CFO, has instituted daily cash management practices that he's working with all of our leaders across the globe. Finally, we're playing offense. That means different things in different areas of our business. In some instances, it means pivoting to focus on the needs of customers who are now booming as they're selling essential products. In other instances, it's meant helping businesses in need, like we did in Novotima that's just outside Bergamo in Italy that was closed. Our sister company, PPE in England, stepped in and produced seals for a medical ventilator manufacturer as Novotima was struggling. Playing offense also means being prepared to accelerate acquisitions when the market unfreezes and a thoughtful approach to share repurchases. With that, I'm going to pause here. I'm going to turn things over to Bill, and he's going to walk you through an overview of our financials and liquidity.