IDEX Corporation

Greetings and welcome to the IDAX Corporation first quarter 2021 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, 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, Michael Yates, Vice President and Chief Accounting Officer. 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 first quarter 2021 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months ending March 31, 2021. 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 our business, an update on our M&A activity, and an overview of our order performance and outlook for our end markets. Bill will then discuss our first quarter 2021 financial results and provide an update on our outlook for the second quarter and full year 2021. Finally, Eric will conclude with an update on our sustainability, diversity, equity, and inclusion programs. 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- 6 6 0 6 8 5 3, and entering conference ID number 1 3 7 1 2 0 8 9. 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 in IDEX's filings with the Securities and Exchange Commission. With that, I'll now turn the call over to our CEO, Eric Aschelman.

Thank you, Mike. Once again, our teams across IDEX should be extremely proud of the results we've achieved together. I don't think any of us would have imagined being at this point when viewing the state of the world a year ago. Our diverse array of high performing businesses continues to serve us well. We're seeing most of our end markets either largely recovered or steadily improving at this point. We continue to build on the momentum we experienced in the fourth quarter and expect 2021 to be stronger than our expectations 90 days ago. Although tremendous progress has been made in our recovery, there are still some areas we're keeping a close eye on. Our day rates have accelerated, but we have yet to see larger projects in our industrial sector moving forward. Customers are more confident in their outlook, but are now trying to balance the surge in demand with capacity to make larger investments. As for COVID, the conditions vary widely around the world. In the UK and the United States, the vaccination rate has been remarkable of late. In China, much of life has been continuing as normal for many months now. The situation in Europe and India where lockdowns and virus variants are still a serious issue, reminds us that we are not fully past the societal and economic impact that the pandemic has had on our businesses. The quarter was not without challenges. From safety protocols and lockdowns to sporadic shortages of parts and materials to rapidly changing logistics hurdles and a variety of staffing challenges, this was far from smooth sailing. Recognizing all of that, I want to thank every IDEX employee on this call for their efforts in the past quarter. I'm proud that our team successfully navigated many tough hurdles to achieve these results. The operational excellence of our teams continues to pay off. Pivoting a moment to capital deployment. With the closure of the Apple Pumps transaction this quarter and the announcement of the Airtek acquisition last night, covered in more detail in a moment, we have started off 2021 on a strong note. And we'll build on this momentum as we further invest in M&A capabilities. We recently allocated some of our most talented resources towards focused strategy and business development roles, and we engaged external expertise to expand our ability to identify, assess, win, and successfully integrate new companies into IDEX. Our deal funnel is expanding as we look for more opportunities to acquire organizations that fit the IDEX style of competition. We seek to both widen and deepen the moats around our best businesses, as well as establish positions within new market niches where the capabilities of our teams will drive the most value for customers and shareholders. We are fortunate to have significant financial resources to deploy towards these efforts. Moving on to slide seven. Yesterday, we announced our intent to acquire Airtek Vacuum Group from Eagle Tree Capital for $470 million. Airtek engineers and manufactures high-performance regenerative blowers, pneumatic valves, air compressors, and vacuum pumps. Airtek had revenue of $85 million with EBITDA margin in the mid-30s range in 2020. It is a 16 times trailing deal and a 15 times deal, including acquired tax benefits. Within the IDEXX family of businesses, they complement and expand upon the solutions provided by gas manufacturing, which produces fractional horsepower air moving products and systems that include air compressors, vacuum pumps, air motors, and tank systems. While there are some overlaps in the solutions they provide, much of Airtek's product lines will be complementary. They will remain separate businesses within IDEXX, but we anticipate collaboration and synergies from each company with shared expertise leading to further innovation. This deal, which we expect to close in the second quarter, will then create a 200 million pneumatics platform within our health and science technology segment. Turning to our commercial results on slide eight, the positive momentum and order trends continued in the first quarter, both compared to prior year and sequentially, allowing us to build 59 million of backlog in the quarter. Most of our business units are at or approaching pre-pandemic levels. I'll go into more details in a minute. Organic orders in the quarter exceeded the first quarter of 2020 and were an all-time high for us. Q1 orders were also up 4% organically versus Q1 of 2019. As we look across our segments, health and science technologies and fire and safety diversified products delivered strong organic order growth, with fluid and metering technology slightly lagging. As growth rates in HST and FSDP begin to naturally level off, we expect FMT will drive additional growth due to the return of project-based businesses in the energy and industrial markets in the second half of the year. These commercial results and the strength of our rebound highlight the resilience of our businesses and the critical importance of the solutions we provide to our customers. On slide nine, we provide a deeper outlook for our primary end markets. To level set, we entered the year cautiously bullish about the state of our underlying markets and the velocity of the pandemic recovery. Our day rate businesses began to accelerate coming into the year, and we continue to leverage our diversified portfolio to aggressively pursue opportunities to drive organic growth coming out of the pandemic. We are now measuring our markets against their pre-pandemic levels. Many of our markets have fully recovered, and the majority of our markets are on track to have fully recovered by the end of the year. As I mentioned earlier, we're not out of the woods yet. But even with pockets of concern around supply chain disruptions and COVID in certain geographies, we are optimistic about the outlook of our end markets. In our fluid and metering technology segment, industrial day rates continue to increase throughout the quarter. As I've mentioned, we will not be at full recovery until we see large CapEx projects resume, but the underlying industrial markets are in a state of recovery trending back toward 2019 levels. Agriculture continues to drive outsized growth as crop prices and customer sentiment remain strong. Our water business is stable. We continue to assess any subsequent impact from the pandemic on municipal funding, as well as tailwinds that might come out of an infrastructure bill. Energy markets continue to lag 2019 levels, primarily due to limited capital investment in the sector. Moving to the health and science technology segment, we experienced solid growth across almost all of our markets. Semicon and food and pharma continued to outperform. driven by a strong market and winning share with our differentiated technology offerings. The overall automotive market faces many challenges, but we have won several new platforms driving our performance. Our AI and life science markets are on the rebound as the impact of the pandemic in the United States has improved. The industrial businesses within the segment are seeing a similar result to FMT. Day rates improving, but projects are lacking. One last item for HST. We do see risk with the COVID opportunities we have been talking about in this segment, specifically around testing. The end product application is yet to receive FDA approval, which will impact volumes for this year. We do believe that the strength in the rest of the segment will be able to offset most of that risk. Finally, in our fire and safety diversified product segment, dispensing continues its rebound as large retailers free up capital and work through pent-up demand for equipment. Much like our automotive exposures in HST, the auto recovery and FSD at Bandit has driven by new platform wins coupled with an improved market. In fire and rescue, we continue to assess municipal budget headwinds, especially in Europe and India, as budgets have not been released delaying tenders. The U.S. market has been better, and we are optimistic about the impact of our businesses from increased infrastructure spending. The other lagging category in FSD is primarily Bandit's energy and aerospace exposure, along with some industrial applications in fire and rescue. We continue to closely monitor market conditions and are focused on ensuring the stability of our supply chain as persistence in global supply chain issues threaten to create choppiness in the back half of the year. Despite these factors, we are confident enough in our outlook to raise our organic growth expectations for the year. With that, I would like to turn it over to Bill to discuss our financial results for the quarter and full year.