IDEX Reports Third Quarter Results and Raises Full Year Guidance

Third Quarter 2023 Highlights

(All comparisons are against the third quarter of 2022 unless otherwise noted)

• Sales of $793.4 million, down 4% overall and 6% organically
• Reported diluted EPS of $2.75, up 17%, and adjusted diluted EPS of $2.12, down 1%, included a lower effective tax rate
• Strong operating cash flow of $227 million, up 14%; record free cash flow of $207 million, up 14%
• Divested Micropump, Inc. for $110 million in cash, resulting in gain of $71 million, net of taxes
• Full year GAAP EPS guidance raised to $7.91 to $7.96 from prior guidance of $6.80 to $6.90
• Full year adjusted EPS guidance raised to $8.13 to $8.18 from prior guidance of $7.90 to $8.00

IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended September 30, 2023.

“IDEX delivered strong profitability and achieved record free cash flow in the third quarter,” said Eric D. Ashleman, IDEX Corporation Chief Executive Officer and President. “Our teams continue to execute for customers and shareholders in a dynamic environment of transition and recalibration.”

“We believe the divergent rates of destocking in our end markets have largely run their course, returning us to more typical backlog and lead time levels. Our focus is to leverage our 8020 philosophy and disproportionately allocate resources to those application niches with the highest potential.”

“We remain dedicated to our long-term focus as we continue to aggressively deploy capital to support organic growth and M&A. Our balance sheet has ample capacity to deliver on our goals, and our funnel of potential acquisitions remains strong and of high quality.”

2023 Outlook

Full year 2023 organic sales are projected to decline 1% to 2% over the prior year, with GAAP diluted EPS of $7.91 - $7.96 (adjusted diluted EPS of $8.13 - $8.18).

Fourth quarter 2023 organic sales are projected to decline 8% to 9% over the prior year period, with GAAP diluted EPS of $1.50 - $1.55 (adjusted diluted EPS of $1.74 - $1.79).

Consolidated Results

Orders

Third quarter 2023 orders of $712.3 million reflected a 9% decrease compared with the prior year period (-11% organic, -2% impact from the exit of a COVID-19 testing application in 2022 that did not reoccur in 2023, +3% acquisitions/divestitures and +1% foreign currency translation).

Net Sales

Third quarter 2023 net sales of $793.4 million reflected a 4% decrease compared with the prior year period (-6% organic, -2% impact from the exit of a COVID-19 testing application in 2022 that did not reoccur in 2023, +3% acquisitions/divestitures and +1% foreign currency translation).

Gross Margin

Third quarter 2023 gross margin of 44.1% decreased 220 basis points compared with the prior year period primarily due to the acceleration of previously deferred revenue related to the exit of a COVID-19 testing application in 2022 that did not reoccur in 2023, lower volume leverage, unfavorable mix, higher employee-related costs and the dilutive impact of acquisitions, partially offset by strong operational productivity and price/cost. Adjusted gross margin, which excludes the acceleration of previously deferred revenue and fair value inventory step-up charges, decreased 90 basis points compared with the prior year period.

Net Income and Diluted Earnings per Share Attributable to IDEX and Net Income Margin

Third quarter 2023 net income attributable to IDEX increased $30.4 million to $209.1 million, which resulted in diluted EPS attributable to IDEX of $2.75 per share, an increase of $0.39 per share, or 17%, from the prior year period. Third quarter 2023 net income margin of 26.3% increased 460 basis points compared with the prior year period. These increases were primarily driven by the gain on the sale of Micropump, Inc. ("Micropump") in 2023 as compared with the gain on the sale of Knight LLC and its related affiliates ("Knight") in 2022 as well as a lower effective tax rate of 20.2% compared to the third quarter 2022 effective tax rate of 21.8%. The decrease in the effective tax rate was driven by both the finalization of research expenditure capitalization treatment that served to increase tax benefits on foreign source income and a tax election related to the acquisition of Muon B.V. and its subsidiaries (“Muon Group”) that reduced our minimum tax on foreign earnings. These favorable rate items were partially offset by tax recorded on the gain from the Micropump divestiture. These increases were partially offset by the lower operational results discussed above as well as higher amortization on new acquisitions and higher interest expense.

Adjusted EBITDA Margin and Adjusted Diluted EPS Attributable to IDEX

Third quarter 2023 Adjusted EBITDA margin of 28.4% decreased 30 basis points compared with the prior year period driven by lower volume leverage, unfavorable mix and the dilutive impact of acquisitions, partially offset by strong price/cost and operational productivity. Adjusted diluted EPS attributable to IDEX was $2.12 per share, a decrease of $0.02 per share, or 1%, from the prior year period reflecting the operating results previously discussed. Adjusted diluted EPS attributable to IDEX reflects the 11 cent impact of a lower effective tax rate.

Cash Flow

Third quarter 2023 cash from operations of $226.6 million was up 14% primarily due to lower working capital driven by inventory reductions in 2023 as compared to 2022. Third quarter 2023 free cash flow was $206.5 million, up 14% compared with the prior year period and constituted 129% of adjusted net income attributable to IDEX.

Segment Highlights

Fluid & Metering Technologies ("FMT")

• Third quarter 2023 net sales of $301.1 million reflected a 2% decrease compared with the third quarter of 2022 (-1% organic, -2% acquisitions/divestitures and +1% foreign currency translation).
• Third quarter 2023 Adjusted EBITDA margin was 34.4%, up 50 basis points compared with the prior year period, primarily due to strong price/cost, favorable operational productivity and lower discretionary spending, partially offset by lower volume leverage and higher employee-related costs.

Health & Science Technologies ("HST")

• Third quarter 2023 net sales of $313.2 million reflected a 9% decrease compared with the third quarter of 2022 (-15% organic, -5% impact from the exit of a COVID-19 testing application in 2022 that did not reoccur in 2023, +10% acquisitions/divestitures and +1% foreign currency translation).
• Third quarter 2023 Adjusted EBITDA margin was 26.9%, down 410 basis points compared with the prior year period primarily due to lower volume leverage, unfavorable mix and the dilutive impact of acquisitions, partially offset by strong price/cost, favorable operational productivity and lower discretionary spending.

Fire & Safety/Diversified Products ("FSDP")

• Third quarter 2023 net sales of $180.6 million reflected a 5% increase compared with the third quarter of 2022 (+3% organic and +2% foreign currency translation).
• Third quarter 2023 Adjusted EBITDA margin was 29.3%, up 150 basis points compared with the prior year period primarily due to strong price/cost and favorable operational productivity, partially offset by unfavorable mix, higher discretionary spending and lower volume leverage.

Corporate Costs

Corporate costs included in consolidated Adjusted EBITDA were $15.3 million in the third quarter of 2023, a decrease of $6.9 million compared with the prior year period primarily as a result of lower variable compensation costs and lower discretionary spending.

Divestiture

On August 3, 2023, the Company completed the sale of Micropump for proceeds of $110.3 million, net of cash remitted, resulting in a pre-tax gain on the sale of $93.8 million. The results of Micropump were reported within the HST segment.

Debt Repayment

During the third quarter of 2023, the Company repaid $150.0 million of the $200.0 million previously outstanding under its term facility. The facility had a weighted average interest rate of 6.10% during the nine months ended September 30, 2023.

Conference Call to be Broadcast over the Internet

IDEX will broadcast its third quarter earnings conference call over the Internet on Thursday, October 26, 2023 at 9:30 a.m. CT. Chief Executive Officer and President Eric Ashleman and Interim Chief Financial Officer and Chief Accounting Officer Allison Lausas will discuss the Company’s recent financial performance and respond to questions from the financial analyst community. IDEX invites interested investors to listen to the call and view the accompanying slide presentation, which will be carried live on its website at www.idexcorp.com. Those who wish to participate should log on several minutes before the discussion begins. After clicking on the presentation icon, investors should follow the instructions to ensure their systems are set up to hear the event and view the presentation slides or download the correct applications at no charge. Investors will also be able to hear a replay of the call by dialing 877.660.6853 (or 201.612.7415 for international participants) using the ID #13734464.

Forward-Looking Statements

This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. These statements may relate to, among other things, the Company’s fourth quarter 2023 and full year 2023 outlook including expected organic sales projections, expected earnings per share and adjusted earnings per share, and the assumptions underlying these expectations, anticipated future acquisition behavior, expectations regarding customer destocking efforts and future order stabilization and lead time, availability of cash and financing alternatives and the anticipated benefits of the Company’s recent acquisitions, and are indicated by words or phrases such as “anticipates,” “estimates,” “plans,” “guidance,” “expects,” “projects,” “forecasts,” “should,” “could,” “will,” “management believes,” “the Company believes,” “the Company intends” and similar words or phrases. These statements are subject to inherent uncertainties and risks that could cause actual results to differ materially from those anticipated at the date of this news release.

The risks and uncertainties include, but are not limited to, the following: levels of industrial activity and economic conditions in the U.S. and other countries around the world, including uncertainties in the financial markets and adverse developments affecting the financial services industry; pricing pressures, including inflation and rising interest rates, and other competitive factors and levels of capital spending in certain industries, all of which could have a material impact on order rates and the Company’s results; the impact of health epidemics and pandemics and terrorist attacks and wars, which could have an adverse impact on the Company's business by creating disruptions in the global supply chain and by potentially having an adverse impact on the global economy; the Company’s ability to make acquisitions and to integrate and operate acquired businesses on a profitable basis; the relationship of the U.S. dollar to other currencies and its impact on pricing and cost competitiveness; political and economic conditions in foreign countries in which the Company operates; developments with respect to trade policy and tariffs; capacity utilization and the effect this has on costs; labor markets; supply chain conditions; market conditions and material costs; risks related to environmental, social and corporate governance issues, including those related to climate change and sustainability; and developments with respect to contingencies, such as litigation and environmental matters.

Additional factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, the risks discussed in the “Risk Factors” section included in the Company’s most recent annual report on Form 10-K and the Company’s subsequent quarterly reports filed with the Securities and Exchange Commission (“SEC”) and the other risks discussed in the Company’s filings with the SEC. The forward-looking statements included here are only made as of the date of this news release, and management undertakes no obligation to publicly update them to reflect subsequent events or circumstances, except as may be required by law. Investors are cautioned not to rely unduly on forward-looking statements when evaluating the information presented here.

About IDEX

IDEX (NYSE: IEX) makes thousands of products and mission-critical components that improve everyday life all around you. If you enjoy chocolate, it quite possibly passed through a Viking® internal gear pump at the candy factory. If you were ever in a car accident, emergency workers may have used the Hurst Jaws of Life® rescue tool to save your life. If your doctor ordered a DNA test to predict your risk of disease or determine a course of treatment, the lab may have used equipment containing components made by IDEX Health & Science. Founded in 1988 with three small, entrepreneurial manufacturing companies, we’re proud to say that we now call over 50 diverse businesses around the world part of the IDEX family. With more than 8,500 employees and manufacturing operations in more than 20 countries, IDEX is a high-performing, global company with over $3.1 billion in annual sales, committed to making trusted solutions that improve lives. IDEX shares are traded on the New York Stock Exchange under the symbol “IEX”.

For further information on IDEX Corporation and its business units, visit the company’s website at www.idexcorp.com.

(Financial reports follow)

Non-GAAP Measures of Financial Performance

The Company prepares its public financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP). The Company supplements certain GAAP financial performance metrics with non-GAAP financial performance metrics. Management believes these non-GAAP financial performance metrics provide investors with greater insight, transparency and a more comprehensive understanding of the financial information used by management in its financial and operational decision making because certain of these adjusted metrics exclude items not reflective of ongoing operations, as identified in the reconciliations below. Reconciliations of non-GAAP financial performance metrics to their most directly comparable GAAP financial performance metrics are defined and presented below and should not be considered a substitute for, nor superior to, the financial data prepared in accordance with GAAP. Due to rounding, numbers presented throughout this and other documents may not add up or recalculate precisely. There were no adjustments to GAAP financial performance metrics other than the items noted below.

• Organic orders and net sales are calculated excluding amounts from acquired or divested businesses during the first twelve months of ownership or prior to divestiture, the impact of foreign currency translation and the impact from the exit of a COVID-19 testing application.
• Adjusted net sales is calculated as net sales less the acceleration of previously deferred revenue related to the exit of a COVID-19 testing application.
• Adjusted gross profit is calculated as gross profit less the impact from the exit of a COVID-19 testing application plus fair value inventory step-up charges.
• Adjusted gross margin is calculated as adjusted gross profit divided by adjusted net sales.
• Adjusted net income attributable to IDEX is calculated as Net income attributable to IDEX plus fair value inventory step-up charges, plus restructuring expenses and asset impairments, less the net impact from the exit of a COVID-19 testing application, less the gain on sale of a business, less gains on sales of assets, plus the credit loss on a note receivable from a collaborative partner, plus acquisition-related intangible asset amortization, all net of the statutory tax expense or benefit.
• Adjusted diluted EPS attributable to IDEX is calculated as adjusted net income attributable to IDEX divided by the diluted weighted average shares outstanding.
• Consolidated Adjusted EBITDA is calculated as consolidated earnings before interest, taxes, depreciation and amortization, or consolidated EBITDA, plus fair value inventory step-up charges, plus restructuring expenses and asset impairments, less the net impact from the exit of a COVID-19 testing application, less the gain on sale of a business, less gains on sales of assets, plus the credit loss on a note receivable from a collaborative partner.
• Consolidated Adjusted EBITDA margin is calculated as Consolidated Adjusted EBITDA divided by adjusted net sales.
• Free cash flow is calculated as cash flows from operating activities less capital expenditures.

Table 1: Reconciliations of the Change in Net Sales to Organic Net Sales

Table 2: Reconciliations of Reported-to-Adjusted Gross Profit, Net Sales and Gross Margin (dollars in millions)

Table 3: Reconciliations of Reported-to-Adjusted Net Income Attributable to IDEX and Diluted EPS Attributable to IDEX (in millions, other than per share amounts)

Table 3: Reconciliations of Reported-to-Adjusted Net Income Attributable to IDEX and Diluted EPS Attributable to IDEX (in millions, other than per share amounts) (continued)

Table 4: Reconciliations of Net Income to Adjusted EBITDA and Net Sales to Adjusted Net Sales (dollars in millions)