IDEX Corporation Q2 FY2025 earnings call

• IDEX teams across segments delivered better-than-expected results in Q2 despite macro uncertainty. - Highlighted dynamic tuning at Airtech, growth in HST's Health and Science and Optical Technologies platforms. - Focused on capital deployment via M&A to accelerate growth platforms, including acquisitions like Mott and Micro-LAM. - Completed substantial cost optimization work in areas like STC and Muon Group units. - Achieved $14 million in cost savings in Q2 through platform optimization and delayering initiatives, on track for $62 million full-year savings.

In HST, second quarter organic orders increased 2% and organic sales increased 4%. Revenue growth was supported by positive price and volume increases in pharmaceutical, space, defense, and data center focused businesses, but faced headwinds in advanced semiconductor lithography and automotive. Adjusted EBITDA margin was 26%, up 40 basis points sequentially but lower than anticipated due to mix pressure. In FMT, organic orders increased 7% but organic sales declined 2%. Orders grew in downstream energy, agriculture, and municipal water, but industrial distribution businesses had pullback in June. Adjusted EBITDA margin was 35%, up 130 basis points year-over-year. In FST, organic sales grew 2% but organic orders declined 7%. Fire and Safety business benefited from strong OEM demand but had choppy order patterns. Adjusted EBITDA margin was 29.4%, up 40 basis points year-over-year.

• Adjusted organic sales growth guidance for full year to approximately 1% (previously 1%-3%) due to up-and-down day rates, slower customer decision-making on larger orders, and a key semiconductor customer lowering growth expectations. - Adjusted EPS guidance moves to $7.85 to $7.95 (previously $8.10 to $8.45). - Third quarter expected 2% to 3% organic revenue growth and adjusted EPS of $1.90 to $1.95. - Tariff impact updated to approximately $50 million with about 2/3 recognized in 2025, expecting to fully mitigate tariff-related inflation with price increases and sourcing/supply chain savings.

• Macro uncertainty, including geopolitical tensions affecting semiconductor lithography. - Unpredictable policy shifts slowing down decision-making and conviction for larger orders, particularly impacting recently acquired areas of IDEX. - Tariff-related uncertainties impacting margin and volume expectations, with potential for additional tariffs requiring mitigating actions.

Q: Nathan Jones asked about delayed orders on the semi side and confidence in orders coming through.

A: Eric Ashleman said there was oscillation in order patterns, but July saw order recovery, with confidence from the pattern settling and conversations with customers.

Q: Vladimir Bystricky asked about granularity on guidance and potential for incremental volatility.

A: Eric Ashleman said HST had more aggressive acceleration hopes with moderated expectations, and other segments are steady.

Q: Deane Dray asked about day rates and guidance cut attributed to Mott.

A: Eric Ashleman said the cut was from Mott and MSS group, with Mott having a pause in order flow.

Q: Bryan Blair asked about water performance and back half growth.

A: Eric Ashleman said water had timing issues but released nicely in July with good future prospects.

Q: Jeff Sprague asked about cost and productivity actions and price capture.

A: Akhil Mahendra discussed cost containment progress and price capture near 3% in Q2.

Q: Rob Wertheimer asked about Mott's growth expectations.

A: Akhil Mahendra said Mott was heading for volume but had a pause, expecting acceleration later.

Q: Andrew Buscaglia asked about portfolio review and divestment.

A: Eric Ashleman said they consider portfolio pieces, prune small assets, and focus on moving HST towards faster-growing markets.