IDEX Corporation

Greetings and welcome to IDEX Corporation fourth quarter 2022 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, Allison Lawson, Vice President and Chief Accounting Officer. Thank you. You may begin.

Good morning, everyone. This is Allison Lawsus, Vice President and Chief Accounting Officer for IDEX Corporation. Thank you for joining us for our discussion of the IDEX fourth quarter and full year 2021 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months and year ending December 31st, 2021. The press release, along with the presentation slides to be used during today's webcast, can be accessed on our company website at idexcorp.com. Joining me today is Eric Ashleman, our Chief Executive Officer and President, 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 business, including a recap of our recent performance and our 2022 outlook. Bill will then discuss our fourth quarter and full year 2021 financial results, and we'll conclude with our outlook for the first quarter and full year 2022. Lastly, Eric will close with comments around our focus areas for 2022. 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 13724802 or simply log on to our company 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 this call over to our CEO, Eric Ashleman.

Thank you, Ellison. I'm on slide six. 2021 was another record year for IDEX. We hit all-time highs on most of our key metrics. Demand for our differentiated technology remains strong, This underlying momentum combined with our targeted growth initiatives and ability to capture price drove a strong rebound from 2020. Across most of our portfolio, we saw an expansion beyond pre-pandemic revenue levels. In the fourth quarter, we achieved a record for orders and sales, and our backlog position is very strong as we enter 2022. We expanded our margins in a highly inflationary environment. We levered well on the previous investments we made to optimize our cost position and execute it on our productivity funnel. We maintained positive price costs, albeit at a compressed level versus historic performance. We remained diligent in controlling our discretionary spend and used our 80-20 principles to allocate resources to our most promising opportunities. Our strategic focus, purposeful resourcing, and strong operating cash flow enabled us to deploy record capital. We acquired Abel Pumps and Airtek and made a collaborative investment in a technology company driving advancements in connected products. We also invested across the portfolio to support growth and productivity. We optimized our cost position within our fluid and metering technology segment through a consolidation of our Italy facilities and our energy businesses and delivered on operational productivity projects across the segment. All of this drove a record year in order, sales, margins, earnings, and capital deployment. We've said in the past that we built IDEX to outperform through a cycle, and we continue to find ourselves in a very challenging one, characterized by supply chain disruptions and labor scarcity exacerbated throughout the year by the emergence of new COVID-19 variants. Our view continues to be that we don't see gradients of bad. Rather, the supply chain environment is very tough, and numerous challenges persist. As pockets of issues improve, they tend to be replaced by new obstacles. Our teams have done an excellent job navigating these day-to-day operational issues, and I'd like to take a moment to thank our IDEXX employees around the globe for their dedication and perseverance throughout this prolonged period of disruption. The agility of our teams adjusting to new issues almost every day has been and continues to be outstanding. As we look forward to 2022, we do not see any near-term signs of diminishing supply chain-related headwinds, and the impact of COVID-19 remains highly variable. In the short term, these conditions have and will impact our ability to efficiently ramp production and have created significant pockets of disruption for our customers and suppliers as well. We expect that these challenges will remain at a high level at least through the first half of 2022. Regardless of the near-term challenges, our overall IDEX strategy remains focused on the horizon. The core of what makes IDEX strong, highly engineered, specialized products used in mission-critical applications, remains a solid driver for long-term success. We'll continue to deploy capital and invest in the resources necessary to drive organic growth in order to capitalize on a robust demand environment. Our balance sheet has ample capacity and we will leverage its strength to continue to play offense in M&A. To that end, we expect to close on the acquisition of Nexite later this quarter. The technologies and capabilities within their business segments will nicely complement our water platform within FMT. With that, I'll turn to our outlook for our segments on page seven. In our fluid and metering technology segment, we anticipate growth in our industrial day rate businesses in 2022 with a return of larger projects towards the latter half of the year. In the short term, large projects continue to lag as our customers have limited capacity to execute larger upgrades or expansions. Agriculture is expected to perform well due to high crop prices, strong farmer sentiment, and limited availability of new equipment driving aftermarket demand. Our municipal water business is stable, We see improved optimism in the market and project planning activities increasing. We are expecting an uptick in the energy and chemical markets. The North American mobile truck market is improving due to a strong construction market and home heating oil prices, and North American pipelines are reporting modest increased capital budgets for 2022. We see international oil and gas quote activity outpacing domestic demand, an opportunity we are well positioned to capitalize on. FMT continues to be in a strong position to realize price, and we expect this to drive improved margins in 2022. Likewise, the projects we completed last year to optimize our cost position as well as new operational productivity projects will yield strong flow through in 2022, tempered by a discretionary spending rebound and continued resource investment in this segment. Moving to the health and science technology segment. We expect the strongest growth in HST of all our three segments, and we plan to make the largest resource investments in HST to support that growth. We anticipate margin improvement driven by volume leverage, partly offset by these resource additions. HST continues to have robust demand across all their major end markets. Semiconductor, food and pharma, analytical instrumentation, and life sciences are all expected to perform well. Next-gen sequencing instrument demand is growing with research and clinical applications, outpacing COVID detection and surveillance. Our ability to execute in the current environment continues to distinguish us from our competition and improve our share position. On the semiconductor side, we continue to capitalize on tailwinds generated from global broadband and satellite communication trends. In auto, supply chain issues at our customers, especially around semiconductors, mute our growth. Underlying market demand remains favorable, and we expect our results to improve as supply chain issues ease. The industrial businesses within the segment face similar trends to FMT. Finally, we expect that our fire and safety diversified product segment will be our most challenged next year. In fire and safety, North American OEMs are experiencing significant supply chain constraints around chassis and component availability, which limit their production. On the rescue side, we anticipate that larger tenders will lag, compounded by China localization policies that are driving delays. We do not anticipate near-term easing of these conditions and see the potential for recovery towards the latter part of 2022. In our bandit business, like in HST, we see auto supply chain issues dampening current demand. Despite this pressure, our business continues to outperform the broader market due to our content on key vehicle models. Lastly, in the near term, we expect continued momentum within our dispensing business as customer capital investments are deployed in early 2022. However, for the year, we will see a non-repeat of North America projects as we reach the end of the replenishment cycle this year as composed to last year. We anticipate that the unfavorable price-cost position we experienced last year will rebound this year as annual contracts are renewed at current pricing. We see this improvement tempered a bit by some mixed pressure as dispensing volumes reduce and we make some targeted investments. To summarize, we see favorable conditions across the majority of our end markets. However, the degree to which our customers and our facilities will be impacted by rolling supply chain and COVID-related disruptions remains highly variable. We'll continue to monitor conditions and be as prepared as we can be for potential interruptions. Despite these short-term headwinds, we are optimistic about our growth potential and the trajectory of our end markets. With that, I'd like to turn over to Bill to discuss our financial results.