IDEX Corporation

Greetings and welcome to the second quarter of 2025 IDEXX Corporation Urgence 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. Please note this conference call is being recorded. It is now my pleasure to introduce your host, Jim Giannacoris, Vice President, Investing Relations. Thank you. You may begin.

Thank you. Good morning, everyone, and welcome to IDEX's second quarter 2025 earnings conference call. We released our second quarter financial results earlier this morning, and you can find both our press release and earnings call slide presentation in the investor relations section of our website, IDEXcorp.com. On the call with me today are Eric Ashleman, President and Chief Executive Officer of IDEX, and Akhil Mahendra, our Interim Chief Financial Officer and Vice President of Corporate Development. Today's call will begin with Eric providing highlights of our second quarter results and a discussion of our current business outlook and strategies. And Akhil will discuss additional financial details and our updated outlook for 2025. Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to slide two of our presentation, where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. As IDEXX provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Eric.

Thanks, Jim. Good morning, everyone, and thank you for joining us today. I'm on slide three. The IDEXX teams across all three segments delivered better than expected results in Q2, despite continued macro uncertainty. I'd like to thank our teams around the world for their hard work and strong execution as they navigated a very fluid environment. Our teams are bound together with a simple value creation equation that adapts quickly to address challenges and deliver on opportunities. We deliver differentiated critical impact from low points in our customer's bill of materials, typically at the component level, allowing us to quickly shift towards advantage applications, and increasingly so with integrated growth opportunities, most often driven by changes in customer demands. I'd like to walk through a real-time growth example of this dynamic tuning at Airtek, a business acquired in 2021 with NHST, to illustrate our team's agility in action. Airtek delivers customer value through pneumatic solutions, most often in the form of specialty blowers or valves. It sits next to our outstanding gas business with some light integration within channels to market and functional leadership. Four years ago, at the time of acquisition, their product lines were growing within mutually exclusive application sets supported by good operational performance with room for targeted improvements. Today, they are growing much faster as they've helped their customers shift their core businesses towards solutions within data center applications, specifically fuel cell power support and thermal management via liquid cooling. AirTag's two product lines benefit from joint exposure to this fast-growing space, and the leadership team at GAST is leaning in to help them drive process efficiency to fully leverage profitability to support group performance. Finally, applying 80-20 has helped them focus and fully resource these applications in a powerful way, which in turn is multiplying their impact. As data center solutions scale, our customers have experienced additional pain points outside the scope of pneumatics. This is where other IDEX capabilities come in, and in this case, Airtek is looking to Mott to address a key technical problem to drive significant system efficiencies. Their solution is currently under review by a key customer. Finally, they are also exploring operational opportunities that leverage IDEX's infrastructure and world-class capabilities in India. This is a great story that advanced in the second quarter. It demonstrates the power of our dynamic business model, our commitment to 80-20, and the leverage of IDEX's global capabilities with proprietary capital deployment via M&A as the key catalyst. We're confident in the pneumatics team's plans to drive even more growth and value creation in the quarters and years to come. Turning to an overview of business conditions, we saw some impactful patterns play out in Q2 and July that help us think about our likely path to close out the year. First, we have some areas of healthy demand, including food and pharma applications within IHNS and MPT, space and defense applications in MOT and optical technologies, North American fire, downstream energy custody transfer, intelligent water, and data center thermal management within pneumatics. Weaker areas include chemicals, auto, semiconductor lithography, and ag. The rest of the portfolio was pretty steady. Within Q2, there were some strong demand inputs in the form of trade policy positioning statements that were unpredictable, shocking the system and setting up sine waves of up and down order patterns. Daily demand levels moved dynamically between policy announcements and negotiation deadlines as customers attempted to de-risk tariff and pricing exposure. In the end, we see two implications. First, the patterns are moving around a relatively stable baseline that didn't line up well with the quarter endpoint. However, in July, we saw a modest order recovery build through the month. Second, and most important for us, The sudden and unpredictable shifts in policy are slowing down decision-making and conviction for larger orders. This has the highest go-forward impact for us in some more recently acquired areas of IDEX where strong growth funnels supported earlier expectations of accelerating back half revenue and margins. As a result, we are lowering our back half financial projections to better reflect this dynamic. We're very confident in the quality of our businesses. They are set up to solve some of the most complex challenges and advantage markets. Coupling this with our long-established operational capabilities, we believe we are very well positioned to drive attractive growth and value for all of our stakeholders. I'm now on slide four. Before Akhil covers the financial details of both our Q2 performance and our updated guidance, I'd like to step back and help you understand our journey and the progress we are making towards long-term revenue and margin acceleration through growth platforms. Our goal is simple. Extend IDEXX's growth potential through variable levels of integration to win in advantage markets where customers are demanding more solutions impact than any one single business unit can provide alone. Here are two examples. First is HST's IDEXX health and science platform that we built through thoughtful capital deployment over the last 20 years. Today, IHNS is an integrated global platform of world-class technologies that has added thin-film optics, system integration, and microfluidic capabilities to its core fluidics portfolio. We've divested some small non-core businesses along the way, consolidated like businesses together in a state-of-the-art greenfield site in Rochester, New York, and integrated commercial and technical teams across the platform. This work has driven strong value for customers and shareholders over the years and is well-positioned to meaningfully do so in the years to come. An example of this work in action today involves a key win for integrated sample prep within a cutting-edge protein analysis instrument. Our team designed a metal-free ceramic valve for cutting-edge core performance. Then, a cross-business development team enhanced overall systems performance by incorporating a suite of our platform's fluidic connection technologies. They even pulled on nanofiltration technologies from Mott to take everything one step further. Finally, they collaborated with a customer to integrate all the technology deeply within the front end of their instrument. The initial response to the customer's product line has been outstanding. Our second example is the strong value created over time through the build out of optical technologies, a cornerstone within HST's materials science solutions platform. We built the Optical Technologies Group over the last 14 years, both organically and through multiple transactions, broadening its capabilities. We're taking another step forward today with our news of the acquisition of MicroLAM, a high-quality bolt-on that brings proprietary difficult-to-machine forming capabilities into our already-advantaged technical toolbox. Over the years, we helped drive a culture of 80-20 to each individual company entering IDECs. to drive focus around core capabilities while rapidly improving profitability. In later stages, we increasingly encourage joint commercial and technical collaboration between units to attack emerging applications within semiconductor lithography and metrology. Most recently, the group is accelerating its growth by working together to support advanced space and defense applications. MicroLAM is very complimentary here, given their customer access points and technical capabilities. Moving to slide five. Since 2020, we have focused a greater portion of capital deployment towards M&A to accelerate building and expanding our growth platforms. In the last three years, through several acquisitions, we created HST's material science solutions platform. And last year, we added Mott, which is highly complementary to many HST businesses, adding nanofiltration technologies at scale, a meaningful and very attractive capability for us. I'd like to dive a bit deeper into both of these areas to illustrate the strong links to our past success and frame the potential for even faster growth. I'll first discuss our value creation journey building MSS. We started with a highly optimized optical technologies business, which we just discussed. Next, we applied 80-20 and operational improvement tools to our acquisitions of STC and all businesses within the muon group. As a reminder, a large piece of our cost optimization work this year is substantially complete within these areas. Today, our teams are focusing resources on the best customers and solutions as we align teams commercially and technically to win in advanced markets. While our growth and margin expansion acceleration has hit a near-term air pocket as our strong positioning with advanced semiconductor lithography has caught up in geopolitical tensions, we continue to be excited about our funnel of growth opportunities overall, and in particular, attractive markets like data center optical switching. Here, the Muon team recently secured a multi-year win through collaboration between two of its units, a great example of our integrated growth strategy at work. And teams are attacking other attractive opportunities within a variety of advanced semiconductor applications, space and defense, sustainable energy, and precision forming. The businesses within the MSS group are truly outstanding. They are highly differentiated and complement each other well as they provide trusted solutions to advantage markets. Turning to Mott, we are aggressively deploying 80-20 as we help the business grow and optimize profitability. Mott has an outstanding track record of deploying its core specialty filtration capabilities in a variety of end markets to build important scale advantages. The solutions have ranged from differentiated components, like high purity gas filtration elements that serve as critical consumables within semiconductor lithography, to large-scale filtration solutions that embed MOTS core technology within engineered SCID-based solutions. Both lines of businesses are strong within their own relative merits, but our collective teams are leveraging 80-20 and product line strategy to tune towards more IDEX-like highest differentiation, highest margin, component-level solutions. This should even out the growth path over time and best fuel MOTS development resources towards growth with the highest return profiles. Mott's acceleration has slowed a bit this year as the larger, more complex opportunities within their funnel were impacted by the policy-driven demand uncertainties described earlier. We expect Mott's growth will continue to accelerate this year, but we've recalibrated its growth potential for the back half of the year given the pause we are seeing in customer decision-making. As the team works through these headwinds, they are attacking a rapidly growing set of opportunities within space and defense and high-purity semiconductor applications that match all screening elements for the best IDEX-like businesses. The core differentiation of Mott's nanofiltration technology deployed at scale is powerful. We continue to love the business and the team and confirm that the acquisition will be accretive exiting the year. Putting our past and present together, you can see that we're following a simple and powerful growth formula that's long-driven value for IDEX. But we're more intentional today as we deploy capital and integrate more rapidly to support the emerging needs of today's fastest-growing markets. And while we didn't dive into them today, I'd like to mention that our intelligent water and fire and safety platforms are very well positioned in this regard with very similar stories of focused cross-business collaboration. I'll pass it over to Akhil to discuss our financials and our updated outlook in greater detail.