IDEX Corporation

Greetings and welcome to the third quarter 2024 IDEX Corporation 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Wendy Palacios, Vice President of FP&A and Investor Relations. Thank you, Wendy. You may begin.

Good morning, everyone. This is Wendy Palacios, Vice President of FP&A and Investor Relations for IDEX Corporation. Thank you for joining us for our discussion of the IDEX third quarter 2024 financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months ending September 30th of 2024. The press release, along with the presentation to be used during today's webcast, can be accessed on our investor website at investors.idexcorp.com. Joining me today are Eric Aschelman, our Chief Executive Officer and President, and Abhi Tendulal, our Senior Vice President and Chief Financial Officer. Following our prepared remarks, we will open the call up for your questions. Turning to slide two. Please note that during today's call, we will present certain non-GAAP financial measures. We will also make forward-looking statements within the meaning of the federal securities laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future. These forward-looking statements are subject to the risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today. We do not assume any obligation to update them. Information regarding these factors that may cause actual results to differ materially from these forward-looking students is available on our website and in our SEC filings. With that, I'll now turn this call over to our CEO and President, Eric Eshelman.

Thanks, Wendy, and good morning, everyone. I'm on slide three. Our IDEXX teams drove strong Q3 results in an uncertain environment. Here are the highlights. We delivered nice organic growth supported by excellent margins in our fluid and metering technology and fire safety and diversified product segments. Our free cash flow across IDEX of $192 million was 133% of adjusted net income. Execution through operational excellence was really strong overall. We're pleased to see orders growth within our health and science technology segment, and our teams are digging into the mod acquisition with focus and energy as we align around our best long-term growth prospects across all of our recent HST acquisitions. We have some important projects to deliver in Q4 in all segments that set us up well for next year. You know, from the start of Q2 to the end of Q3, we really haven't seen a noticeable change in the macro environments. The recent interest rate drop by the Fed and China stimulus announcements has yet to create positive ripple effects through improved certainty. An extremely close U.S. November election with polarized outcomes also isn't helping in the near term. Take all of that together and we continue to see an environment where day-to-day order rates remain stable with an absence of larger long-term project commitments. This dynamic really holds true in the more fragmented industrial markets of FMT. We're encouraged by an increase in quoting activity as we move from summer to fall, and we don't see projects moving from delayed to canceled. We'll watch for signs either way, as many customers move more formally consider their capital and OPEX deployment within calendar budget cycles. We continue to see strength within our intelligent water markets, and I'll talk more about our focused efforts there on the next slide. Within the health and science technology segment, we saw a robust Q3 organic orders increase, partially driven by blanket orders, many of them landing within our IDEX health and science business. Admittedly, we're comparing to the low point of last year, but we drove year-over-year orders increases in all of our major HST reporting areas. We booked a bit of backlog overall this quarter, and we posted a nice sequential uptick to our highest order point in 2024. We are encouraged by these trends within HST, but remain cautious as we consider the trajectory of recovery within our most important markets. Our defense, aerospace, and satellite communication markets are strong. They experience double-digit growth within the quarter. However, most major semiconductor customers are pushing out the next industry inflection point into at least the midpoint of 2025. Life sciences and analytical instrumentation customers are more positive than they have been, They're innovating at a rapid clip and launching a lot of new gear, but they too are pretty non-committal to the timing of next level growth rates. Our teams continue to deploy resources toward their best long-term growth prospects with an eye towards applied material science technology synergies as we integrate Mott alongside our recent HST acquisitions. Fire safety and diversified products had a solid quarter exceeding expectations, achieving record sales performance. Our fire business continues to grow share and scale production to meet North American OEM multi-year backlogs. Bandit experienced strong growth from aerospace demand. Finally, recall our dispensing business was impacted by top-line headwinds of $40 million from the end of a large 2023 North American large retailer replenishment cycle. But our teams continue to work to offset that pressure by delivering strong growth within emerging markets. They've closed that year-over-year gap considerably, delivering over 15,000 units from our new facility in India, just opened in April of last year. As an aside, I want to thank our team members from IDEXX Fire and Safety, who chipped in to help people in North Carolina following the devastation from the remnants of Hurricane Helene. Finally, we're thrilled to formally close on the Mott acquisition this quarter. Things are really exciting there. We'll share more details on the progress of the integration activities and some of the benefits we are experiencing early on in a slide to follow. Turning to slide four. Our intelligent water platform continues to be a bright spot for us. We see significant opportunities now and in the future as municipalities and industries around the world cope with the impacts of climate change as they navigate the dynamic regulatory and funding ecosystems to support the best use and management of water. Water management is a sector that has classically been slow to change. Those days are over. Our aging and neglected infrastructure just can't handle the demands of expanding populations and increasingly severe weather events. What was once underground and out of sight is now impossible to ignore. What was once analog and manual is now increasingly digital and automated. And federal regulatory and funding support is stepping in to drive growth from above within a typically bottoms-up local and regional landscape. And our teams are ready to meet the challenge. Below ground, IDEXX Intelligent Water aims to be the collection system experts, monitoring flow of stormwater and identifying small issues before they become big ones. Above ground, our teams help protect the environment with solutions that treat water and reduce the amount being used in critical processes. You see some examples here on the slide. The EnviroSight VeriSight Ultra Camera Inspection System gives teams better capabilities for remote inspection of sewers in more challenging environments than before. The most recent addition to the platform is Subterra, which we acquired about three months ago. This rapid sewer screening solution complements our core inspection technologies with an EPEC, Envirocyte, and WinCam. Subterra's SewerScout floats untethered downstream, capturing three-dimensional data along the way. The market needs a simple condition assessment tool in their wastewater collection systems, specifically for large pipes that are rarely inspected. Subterra's technologies, performing within an integrated digital analytics suite, addresses that need and expands our overall IDEX expertise in this space. And yet another example of IDEX serving semiconductor manufacturers, the Quantum XNT ultra-pure water heater and pump from Trevor continues to save billions of liters of ultra-pure water. In this market, Trevor's innovation displaced an established heater pump manufacturer that didn't recognize or address quickly enough the semiconductor industry's needs to reduce water consumption. Now turning to slide five and an update on our acquisition of Mott Corporation. Less than two months since completing our acquisition of Mott, the partnership is off to a fast start. A few high potential IDEXX team members have formally joined the Mott leadership team in the earliest days of acquisition immigration. This gives the Mott team a living key into the rest of IDEX to drive collaborative efficiency. While it's too soon to share specifics, teams from Mott and other IDEX units within HST are already working on innovative new solutions together to leverage Mott's highly engineered filtration technologies. In one instance, a combined team has rapidly developed a customer-ready prototype in the first 90 days of Mott being part of IDEX. Frankly, it's been tremendous to see. As you can see in the photo on the right of slide five, earlier this month, Mott opened its third manufacturing facility in Connecticut. This plant quadruples Mott's production capacity for custom-designed ultra-thin porous metal sheets, which are a critical component in the generation of green hydrogen, a low-emission fuel essential for the world's energy transition. The picture on the left shows Mott's high-purity operations, where point-of-use gas filters used in the semiconductor industry are laser-marked pressure and helium leak tested, inspected, and then pulse cleaned before bagging. As a reminder, Mott is a leader in the design and manufacturing of sintered porous material structures and flow control solutions. The Mott team has deep material science knowledge and process control capabilities. Their business is complementary to our broader applied material science technology businesses within HST, including muon, STC material solutions, and optical technologies. We're excited about Mott's history of execution and the robust backlog funnel that is built to date with key project deliveries as we close out 2024. With that, I'll turn it over to Abhi to discuss our financial results.