IDEX Corporation

Greetings and welcome to IDEX Corporation's third quarter 2023 earnings conference call. At this time, all participants are on 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. I would now like to turn the conference over to your host, Allison Lawson. Thank you. You may begin.

Good morning, everyone. This is Allison Lawsus, Interim Chief Financial Officer and Chief Accounting Officer for IDEX Corporation. Thank you for joining us for our discussion of the IDEX third quarter 2023 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months ending September 30th, 2023. 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. Today we will begin with Eric providing an overview of the state of IDEX's business. I will then discuss IDEX's third quarter financial results, an update on segment performance in the markets they serve, and our outlook for the fourth quarter and full year 2023. 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 137-34464 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 and President, Eric Ashelman.

Thanks, Allison, and good morning, everyone. I have some important news on slide five. Before turning to our results and outlook, I'd like to introduce Allison Lawson, who is serving as our interim CFO. Allison has been with us for over two years, serving as our Vice President and Chief Accounting Officer. She also leads our investor relations and financial planning and analysis functions. During her tenure at IDEX, Allison has done an outstanding job serving as a strong partner to our former CFO, Bill Grogan, and myself. Thank you, Allison, for all you're doing in your expanded interim role, and I'd also like to thank Bill for his many years of service at IDEX. Also, as you saw in our release yesterday, we are pleased to announce that Abhi Kandilwal is joining IDEXX in November as our next CFO. Abhi joins us from Multicolor Corporation, a global packaging services and label solutions provider, where he served as CFO. Prior to that, he served as Senior Vice President and CFO of CIRCOR International. He previously worked at IDEXX for over 10 years, serving as my financial partner during most of my term as COO. We're thrilled to have him back with us, and I consider us very fortunate to have leaders like Abi and Allison at the top of our finance organization. With that, I'll turn to our Q3 performance. I'm on slide seven. IDEX delivered strong results in the third quarter, delivering robust profitability in an environment where volumes are stabilizing at lower levels. We also generated excellent cash flows as we continued to execute on our cost containment and inventory reduction plans. I'd like to thank our IDEXX teams around the globe for their contributions in driving these outstanding results. This was very solid execution in a difficult environment. Recall that we expected our industrial and municipal markets within FMT and FSDP to reach the end of an elongated and moderate destocking cycle within the third quarter. That played out as expected. Our analytical instrumentation, life sciences, pharma, and semi-con markets with an HST largely held at equilibrium in Q3 and bounced along the bottom after an unprecedented rapid destocking cycle in the first half of the year. Taken together, this moves IDEX into a very natural position where lead times, backlogs, and next quarter visibility all align with typical pre-pandemic profiles. Looking forward, we continue to see divergence between end market prospects. There are discrete attractive opportunities within each of our segments, many of which are tied to transformational catalysts within environmental sustainability or critical infrastructure. Examples include water analytics, space broadband, and battery production. These sit within a broader framework of uncertainty driven by macro concerns that include higher interest rates and expanding geopolitical risk. Most specifically, demand rebounds for our most pressured HST businesses appear to have moved out a bit into 2024. We continue to believe that organizational agility, speed of decision-making, outstanding business quality, and a strong culture serve us well to navigate the twists and turns ahead. We can both dynamically assign capital and resources to our best near-term opportunities while we stay focused on our long-term strategy of profitable growth of performance. In terms of capital deployment, M&A continues to be a top focus. Within our funnel builds, we are aggressively following complementary threads between our most growth advantage businesses and technologies as we seek to build out breakthrough competitive advantage. We did this recently with our next site acquisition, expanding our reach within water analytics through enhanced hardware and software capabilities. Our Iridian acquisition earlier this year boosted integrative capabilities within thin film optics. Our inorganic pipeline is robust and of high quality, allowing us to engage in M&A with discipline and strong strategic intent. And our balance sheet has ample capacity to continue to execute on our best opportunities. Finally, we divested our micropump business during the quarter and repaid $150 million on our term note facility. As we continue to focus on long-term growth, occasional portfolio realignment will occur. We expect this transfer of ownership will better position Micropump as it joins a collection of like-minded businesses focused on similar technologies and customers. I would like to express my appreciation for all the Micropump team has done since joining IDEX in 1995. With that, I'll turn it over to Allison to discuss our financial results.