IDEX Corporation

Greetings and welcome to the IDEX fourth quarter and full year 2020 financial highlights. 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mike Yates, Vice President and Chief Accounting Officer for IDEX Corporations. Thank you.

You may begin. Thank you. 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 our discussion of the IDEX fourth quarter and full year 2020 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months and the year ending December 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 Eric Ashleman, our Chief Executive Officer, and Bill Grogan, our Chief Financial Officer. The format for our call today is as follows. We will begin with Eric providing an overview of the state of IDEX's businesses, including a recap of our recent performance and how we are viewing 2021. Eric will then provide an update on a few initiatives that we believe are key to IDEX's culture before moving into a review of our order performance and providing our 2021 outlook for our end markets. Bill will then discuss our fourth quarter and full year 2020 financial results, and we'll conclude with an outlook for the first quarter and full year 2021. 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 877-660-6853 and entering conference ID 13712088. 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 Safe Harbor language in last night's press release and IDEXX's filings with the Securities and Exchange Commission. With that, I'll turn the call over to our CEO. Eric?

Thank you, Mike. I'd like to start by thanking our people all around the world who have risen to the occasion during such a challenging year. It's been a year full of challenge and change with the numerous safety protocols and disruptions in the marketplace. In that environment, our people continue to shine. So to all the IDEXX team members listening in on this call, thank you. Because of the protocols we have in place, the disruptions in our operations have been limited. The COVID trends across Europe, North America, and India have been troubling, but we continue to follow those developments closely and remain steadfast in providing a safe place for our employees to work. We continue to deliver solutions for our customers during a challenging year, focusing on the critical innovation we need to support our long-term strategy as well as producing new products to help to fight against the pandemic. Bill will walk through the details shortly, but customer focus, strong execution, and our ability to react quickly to unpredictable events helped us deliver relatively strong performance in 2020, a true testament to our resiliency. Liquidity was a primary focus of our management strategy as the pandemic hit, and I'm happy to say that we were able to drive record-free cash flow this year. As we address the challenges in front of us, we see a path to bullishness for 2021. We have seen a steady recovery in our end markets, which we will detail in a few slides. The diversity and quality of our businesses continues to serve us well, ensuring that we can weather any storm and quickly capitalize when market conditions improve. While the pandemic still presents many challenges to solve, we are starting to see a focus pivot back to core commercial endeavors as we and our customers prepare for a world healed from the ravages of COVID-19. Our businesses remain focused on operating safely, and we are prepared to leverage our supply chains and react to increased demands. A year like 2020 truly tests the culture of a company. Are you rooted in strong values that people really live and believe? If so, you'll be better prepared to survive and even thrive. IDEX is that kind of company, and it served us well in a year none of us could have ever predicted. I'm proud of the culture we have built at IDEX. It is admired by many, but we can strengthen it still. We leverage our culture and mission to bind together a uniquely decentralized and diverse company, and our commitment to work even harder to support diversity, equity, and inclusion is tied directly to this important aspect of IDEX differentiation. Our resiliency, agility, and fundamental ability to execute have IDEX exceptionally well positioned to play offense aggressively as we move forward. We are actively investing to support our best organic growth bets, and we have ramped up our capital spending to support very exciting initiatives. The M&A markets are moving again, and we are expanding our capabilities to execute on strategic acquisitions. In January, we announced an agreement to acquire AboPumps and expect that deal to close in the first quarter. We actively seek to deploy additional capital to acquire IDEX-like businesses, as well as make some calculated bets in new technologies to bolster our growth potential to further strengthen our portfolio and enhance our return to shareholders. Moving to slide seven. As I just mentioned, the strength of IDEX comes from the IDEX difference, a teachable methodology where great teams working together in a superior culture focus on the critical things that matter with a natural orientation towards the most important needs of their customers. Our culture is a significant focus and one of my key leadership priorities. To that end, we are making ongoing improvements based on feedback we receive from our employees every day. Last month, the IDEX Foundation, which was created to positively impact the communities in which we live and work, took a significant step forward as part of these efforts. IDEX committed $6 million to boost sponsored activities across the company. The foundation formally added equity and opportunity as a lasting and fully funded part of its mission, creating opportunities for underserved, disadvantaged people of color in our communities. This donation allows the foundation to more than double its annual giving. In addition to initiatives focused on equity and opportunity, we will continue the great work our people have been doing in our communities, like building homes for the homeless, renovating community centers, and supporting schools and learning opportunities for young people. This month, we will host more than a dozen facilitated employee focus groups around the world. The feedback from our employees will help shape our path forward in diversity, equity, and inclusion. Developing a formal framework and goals for our DE&I programs is something we have all deployed at the senior leadership level, making it a top priority. As part of that commitment, I intend to have a senior DE&I leader in place reporting directly to me later this year. We will continue to grow and advance our culture as a key element of differentiation. You have my commitment on that. Turning now to our commercial results on slide eight. The broad rebound in order rates we discussed in the third quarter continued, as our fourth quarter organic orders were up 7% compared to the prior year. We entered the quarter with optimism based on the strength of the third quarter improvement, and that continued into the fourth quarter, excluding timing on large OEM blanket orders year over year, Our monthly order rates improved throughout the quarter. FMT organic orders for the fourth quarter were up 3%, driven by project orders in our water businesses, continued strength in agriculture, and recovery in industrial day rate businesses. HST organic orders were up 6% in the fourth quarter, driven by new product initiatives in life sciences and the recovery in auto and semi-com, continuing to boost our ceiling solutions businesses. Finally, fire safety and diversified organic orders were up 15% on the quarter. Suspensing saw significant improvement as retailers began to release pent-up demand for equipment refreshes. Bandit, after a strong bounce back in the third quarter, continued to improve based on auto market strength, and fire and safety saw growth in several product lines. A year ago, as we entered 2020, we talked about the general industrial slowdown that we were seeing and what a flat to down 2% to 5% world looked like for IDEXX. We had proactively taken strategic actions to address these factors. We then faced the onset of the pandemic and we responded to it with purpose. As we close out 2020 and look forward, we are optimistic that our units and markets are quickly on a path to pre-COVID levels. The actions that we took in 2019 and 2020 have left us well positioned as we move into 2021. Turning to slide nine, we provide our current outlet for primary end markets. In our fluid and metering technology segment, industrial day rates continue to tick up in the fourth quarter, further solidifying the optimism that we discussed last quarter. We see this increase driven largely by OPEX needs of our customers. We continue to see large capital projects remain on hold. We anticipate that broader signs of economic stability and higher degrees of certainty on COVID recovery timing is required before capital projects begin to move again. But the investment discussions are happening. Our water business has continued to show resiliency, and we are closely monitoring the toll that 2020 will take on municipal budgets in 2021 and beyond. The strength in agriculture that we've called out for the previous two quarters has continued, and we expect it to grow in 2021. Energy markets continue to remain challenged, with markets still down compared to 2019 levels. Stabilization of these businesses is largely dependent on increases in fuel prices, driving new capital investments in oil and gas. Turning to the health and science technology segment, as we discussed last quarter, we have identified opportunities and applications to help fight COVID across each of our segments, but particularly in HST. We were able to drive approximately $30 million of revenue in 2020 and expect to generate about the same amount in 2021 related to these initiatives. While some of this revenue is one time in nature, we believe the technologies and applications we have developed here will generate recurring opportunities in 2022 and beyond. So relative to our 25 to 100 million of opportunities we highlighted, we will achieve about 60 million. AI improved during the fourth quarter and looks to be on the rebound in 2021. In life sciences, we saw an offset by continued weakness in IVD bio. His lab capacity is still largely focused on COVID response, putting on hold other projects and initiatives. The strength in Semicon that we mentioned last quarter has continued. In addition, our ceilings business has benefited from a rebound in automotive. We see continued recovery in 2021 for the auto market, particularly driven by strength in European car sales in China and India. Food and pharma has also remained a bright spot as our businesses continue to benefit from growth in MPT projects and microfluidics business. Moving to the fire safety and diversified segment, we saw continued improvement in most of our markets. The largest driver was the significant improvement in the dispensing market as large retailers increased demand for equipment refreshes combined with order strength in the Asia dispensing markets. As mentioned previously, the pace of the auto recovery continues to exceed expectation, spring on our bandit business. Fire and rescue businesses continue to see strong order performance, and we believe that we are seeing a recovery in the OEM businesses driving through some of the delays and backlog concerns we referenced last quarter. As with all our municipal businesses, we continue to closely monitor the impact on budgets to see if there are any lagging effects from COVID response spending. As I highlighted in my previous remarks, we are optimistic about the market recovery we are seeing across most of our markets, and we need to be prepared for potential disruptions, particularly in the first half of 2021. Our teams have shown the ability to address these short-term shocks proactively, and the strategic actions we have taken across our businesses has us well positioned to be able to ride the positive momentum we are seeing as we exit the issue of the pandemic. With that, I'll turn it over to Bill to discuss our financial results for the quarter and full year.