Morning, everyone. Welcome to day four of the 21st Annual Oppenheimer Industrial Growth Conference. Next up, we have outperform rated and top pick IDEX, represented by CFO Sean Gillen and VP of IR, Jim Gianacoros. Thanks for joining us today, guys.

Thanks for having us. Appreciate you hosting.

Sean, I guess to kick things off, you're obviously a newer member of the IDEX team. perhaps start with what attracted you most to the opportunity and also why you thought or knew you

were the right guy for the role? Yeah, I appreciate the question. So I'd say a couple of things. I think what first attracted me to the opportunity is you look at IDEX and it's an incredibly strong business. And what I mean by that is you got leading market positions, you got an EBITDA margin that I think is the proof point of that, that you have leading market positions, you have IP, and it's a very well-ran business. And then the other piece of that is the cash flow profile of the business, not only because of the margins, but because of the low capital intensity, affords you a lot of flexibility. You have a lot of capital to allocate. So that was kind of the, this is a good business to join. And then part two was, frankly, just where the company was and is on the life cycle of phase three, kind of everything it's done over the past few years via acquisition and what the setup was for the future. And the more, after I kind of did my outside in and started to do some more homework, I just thought this was a really exciting time to join IDX as well. It's navigated the past few years, a few bumps along the way, but the setup was really strong with kind of this HST advantage market exposure with then an FMT industrial exposure, which has been depressed for a few years, but for a lot of reasons is inflecting. So that was kind of my, you know, hey, this seems like an exciting opportunity. I'm interested to join. And then I think kind of what I can bring is a bit on the capital allocation piece. You know, that's kind of my background. I mean, I started my career as a banker. So that's the hat you wear as an advisor for a number of years, and then as a CFO of a company for seven years before joining IDEX, and I think one of the things that we did successfully was allocate capital to drive growth, organic growth, and then a bit of allocation of capital to drive returns via M&A. So I think my skill set was well-suited for what IDEX was looking for as well, and thought that I could bring some value that way.

Okay. Makes perfect sense. And IDEX is obviously a portfolio of rather diverse, high-quality assets. A lot of moving parts therein. By my count, 50 or so businesses, maybe a little bit more. When you introduce the company to someone, how do you encapsulate all of that? How do you describe an IDEX-type business?

Yeah. So I'd say maybe two pieces. I mean, the one is we move, you know, liquid gases or light is what we do, right? So the movement of those three things, whether it's a pump, whether it's optics, whether it's a valve, those are the things that we do. And that's kind of almost across everything in the portfolio. So maybe that's at its simplest. And then it gets more complicated from there, but I think the unifying thing of what makes an IDEX business is one, it's mission critical and it's technically tough to do, right, to produce. So there's intellectual property to what we do and the criticality and the mission critical is a piece of it. And then it's relatively low on the food chain in terms of the bill of material, right? So these are mission critical applications that are relatively low price points for the overall solution that the customer is using. And therefore, what it allows us to do is have a really nice market position in terms of pricing, getting price for the value add. And then it allows us to be very efficient and highly productive on the product that we sell. So that's kind of at the heart of it, what an IDEX business looks like. When we think about M&A, that's what we're looking for. When you think about the acquisitions that have been done over the past few years, even though they may serve very different markets than kind of, you know, traditional IDEX, they end up looking pretty similar across

those metrics. I understand. That's a good walkthrough. And you alluded to phase three before. You know, over recent years, there has been at least a selective shift, you know, away from what was a decentralized operating model of IDEX to integrated growth platforms. walk us through the you know the impetus for that transition yeah you know what it means now what

it means for the future of IDEX yep good question so kind of the you know the traditional IDEX highly decentralized and the whether it's a GM a president a you know site leader whatever the term was you know that person really had I mean autonomy over running their business everything that it included, growth, operations, capital allocation within their business. They were the leader of that. And that's still the case, but the overlay is because we have more businesses now that are connected in terms of the markets that they serve, we need this layer of coordination across them. So I think it's kind of bringing the best of a couple of things, that traditional IDEX where decision-making is at the point of impact, right? So operational, engineering, most of the customer still at the site level. But because we now have businesses that sell into different parts of semiconductor, space and defense, of course, data centers, having a level of coordination amongst those teams to the customer was something that we needed. And we're seeing some nice traction, you can see it in the growth, of that shift in kind of policy and management. So it's not, and I think of it kind of as a tweak, right? This isn't a wholesale change. You're keeping a lot of the good that drives value around here, but bringing a new layer of coordination to better serve our customers, right? And at the core is what it's about. The customers is asking for it. We need to adapt and move with them. and the nature of the businesses enables us to do it in a way that it probably wouldn't have five-plus years ago.

Okay, understood. The proof points seem to be accumulating. In terms of the platform strategy, material science solutions, or MSS, along with MOT-related asset, has we received a lot of attention over the last few years, initially not the most positive of attention. That seems to be turning now, thankfully. uh maybe speak to the underlying technologies of mss and mott and you know how how synergistic

they are what we can expect going forward yeah so i mean i think from from an underlying technology standpoint you know in in in mott um you have you have a lot of like i mean they're filters but they're highly engineered filters right it's not a paper filter it's a kind of sintered metal application that can go into different end markets. And then in material science solutions, you have ceramics in there, you have optical ceiling and things like that that serve different end markets. And I think part of what we've seen in these is the ability to serve a couple different end markets. If it's applicable to semiconductor, it can also be applicable to space and defense. So the ability to kind of, you know, tune or move right and left on the product that we have and how it serves its end markets is another thing that's made us, allowed us to be nimble. And as you point out, I think, you know, now you're seeing, you know, Kenny said, you know, right, not great attention maybe at the outset on MSS, you know, Mulan being a big acquisition in that space. You know, you ran into a bit of a semiconductor cycle the wrong way shortly after acquisition. Now that's moving for a variety of reasons in the right direction. And then same thing for Mott. You know, the initial kind of growth profile didn't come out of the gate as strong as we expected. But now as we stand here, you know, a year and a half into the acquisition and the end markets are all firing and we're seeing really good traction of our product. And it's kind of, you know, one of the things that makes these businesses attractive and now will be very attractive going forward is it's hard to break in. So I think what we learned is the ability to break into some of these newer markets with the technologies that we have, these sell cycles a touch longer than we anticipated, but now you're specced in and you have a seat at the table and you're working with the variety of customers on these applications and that's going to make it really sticky going forward. So some of the things that made it tough early on, I think are going to play to our advantage from here on out. Okay, that's a great

point uh let's circle back to idex's diversification and uh you know if you don't mind i guess walk through the um you know trends by key end market or segments however you prefer to frame uh you know run rate trends and outlook where are you seeing you know the areas of greatest strength uh obviously hst you know the optics they are there um versus relative weakness where

where there's still some launch items okay so yeah good question so in hst um the good thing is you know the strength is across more than just kind of one you know trend or end market uh notable strength in data center right so in our performance pneumatics uh business is where we we we uh sell into the data center in two ways. The biggest way is in the power applications, so the fuel cells that go behind the meter to help deliver power to data centers. We have product there growing significantly. We also have in our valves business, still within that performance pneumatics business, we sell into the kind of liquid cooling applications that are used in the data center. So we got two exposures to data center, both performing exceptionally well, as you would expect. And then we touched on MOT and MSS, a lot of semiconductor exposure, a lot of space and defense exposure, performing quite strong. And then pharma in MPT, strong. So kind of you have multiple end markets that are performing well in HST. the one that for now is more kind of flat is life sciences. And so that, you know, obviously you got kind of the COVID hangover. That was a story for a couple of years. You know, now it's kind of in that, you know, flattish, low single digit growth. In Q1, it was down slightly year over year, mostly a tough comp from the year ago period, as well as a little bit of kind of government funding hangover going into the year for some of our customers. So I would expect that to get back to kind of flat to slight growth in the balance of the year. So HST is kind of like, you know, everything's firing with life sciences being, you know, about flat. And, of course, I think the, you know, dynamics in the life sciences world over time will see growth there. But the near term is that flat piece. And then at FMT, you know, you've got a few different pockets, right? On the really strong, the water platform, selling to municipalities, as well as a little semiconductor exposure, really good strength out of that. In the mining applications for our pumps, saw good growth. On the flip side, you know, seeing that ag headwind, we have ag exposure there. There's been some headwind. And then in the chemical side, particularly in Europe, continued headwind, that's where we sell valves into, you know, chemical manufacturing. So you got positive on water and mining, a bit negative on ag and chemicals, and then kind of that general industrial piece, which is the biggest slice, has been flat to some kind of low single-digit growth. And so that's the dynamic in FMT. And then an FSD, fire and safety, performing nicely, dispensing, known headwinds because it's cyclical and we're kind of on the down cycle of the project refresh or the store refresh, particularly here in North America, and then Bandit performing well. So kind of a lot of different moving pieces, HST uniformly strong, FMT kind of got some net impacts that get you to kind of flat to some low growth, and then same thing at FSD. And I think the areas where that will improve is, one, as you move through the year, you'll start to get out of some of the year-over-year comps on chemical headwinds, ag headwinds, and dispensing. And then I think we'll continue to see some nice improvements in the just general industrial end market, right? You know, I know that the third-party metrics have been watched closely, PMI and what's happening there. You know, I think we did see that in our Q1. You know, what's going on in the Middle East might be putting a little bit of question mark around it, but I think overall the setup is pretty good.

Appreciate all the color there. You just walked through F&T dynamics in general. There's been a bit of a disconnect with the organic sales rate versus orders, you know, for the last three, four quarters. more high single-digit kind of range with orders lower, maybe 1% kind of average revenue growth. Can you explain that, Delta, and is it fair to assume that, you know, given improving short-cycle metrics and the momentum that you have on the order side, that you're leaning at least a bit conservative with the new flattish kind of FMT organic sales outlook for the year?

Yeah, I mean, I think generally that's probably a fair statement. You probably did see a little bit more, I would say, non-traditional order strength, meaning two things. You know, one, in the short cycle business, right, you're generally consuming the orders as you get them in pretty quick succession. Some of the water orders have been a little bit longer in duration, so that kind of inflates the kind of order versus sales, the book to build. And then in Q1, you know, we saw some orders come into Q1 the very end of March that we probably would have expected into April. That's kind of another little piece, a little bit of timing on the most recent quarter. But overall, as you mentioned, I think that the setup is good. You know, the backlog is in a nice position. You know, we generally go into any quarter in FMT about 50 percent, you know, booked. And then the rest, you got to book in the quarter. And I think that dynamic has been holding, but visibility has improved a bit in that segment, as you mentioned.

Got it. And in terms of visibility, I would think that for HST, given some of the project orientation of those businesses, that the outlook for 2027 is increasingly robust. Is there anything you'd push back on there? I realize that you don't have 2027 guidance out, so I'm not looking for it.

Yeah, exactly. No, but I think you're right, and we mentioned it on the last call. A lot of the trends that are driving the strength in HSD today look to persist over a multi-year period, right? I think data center, extremely well understood, right? And then the AI theme, which then hits the semiconductor part of our business, the space and defense dynamics in terms of what the customers there are looking to do over a multi-year period. portends to growth. And then in life sciences, over time, testing and instrumentation and drug development is not going anywhere. So I think as you look over not only 27, but into the future, and obviously, one, it portends to some pretty good growth. And just what I was going to say is that's the whole thesis behind a lot of the acquisitions that have been made, right, is to get greater exposure to markets that have more durable growth trends over time. And I think you're seeing that as you mentioned, not only in a quarter or two in this year, but I think it should be durable over a multi-year period.

Excellent. To level sit a little bit, how should we think about the size of your revenue exposures currently to AI ecosystem overall? You've called out some of these, you know, spaces and verticals, the aggregate, how much are we talking about?

Yeah. So, I mean, I'll give you the, so in HST, it's about 12% is semiconductor. So the HST segment, about 12% of that is semiconductor. That doesn't include the data centerpiece. So then the data centerpiece would be in performance pneumatics. You know, that business last year was about $2.60 in revenue, roughly evenly split between the gas business, which does not have a data center exposure, and the air tech business, which has the data center exposure. Air tech's not all data center, right? So within the air tech half, you probably have on a trailing basis, about half of that business is data center exposure. So that can kind of give you a little dimensionalization of how much is semiconductor and then how much is is data center okay and how about space and defense that's also a good yep about eight percent of the hst revenue is uh is

space and defense got it okay and i have to quickly ask about tariffs uh remind us how how your team has navigated the tariff environment to date and given the revised framework is there any any material change at least on a net basis as we look forward good question um so i think kind

of good news on two fronts you know good news on the maybe historical front is i think the pricing power of the company and the nature of our business model uh i think was nicely displayed with tariffs, meaning our ability to price in accordance with what we see from cost and be ahead of the cost showed up nicely, right? I mean, it wasn't a massive needle mover in terms of the profitability, but we were on the plus side of price being greater than tariffs. So the ability to navigate, and it's just the nature of our business. We don't have super long-term contracts. We have the ability to price kind of dynamically. So for the whole company from a year ago to today, you know, net positive on price-first tariffs. And with the IEPA tariffs being struck down, for us, essentially, the tariffs that the administration kind of put in place that at least for now are temporary, but expect they'll find a way to make them permanent, puts us in kind of the same net position. So we don't see a big change in terms of what we need to do on price or what we're seeing on the cost side. So that's kind of the historical, and then the IEPA being struck down in the new normal. So all that's kind of net positive or neutral. I think the historical has been net positive. The kind of forecast is net neutral. And then the question mark is just the refunds on the IEPA tariffs, as we mentioned on our earnings call. You know, we put ourselves in line for the refunds that we were owed or due, like anyone. And we'll see kind of what the timing is and how that how that plays out so um tbd on on on the refund side but kind of on just the business as usual you know i think it's uh it's net neutral okay understood something will change on that front anyway exactly right yeah we'll we'll see well like i i mean but i do use the example i mean the fact that we were able to uh nimbly price accordingly with tariffs which were an exogenous shock to obviously everyone, I think is the proof point. And it's also kind of, you know, the answer to what about what's going on in Iran? Is that impacting you? You know, one, no directly, because we don't have a lot of exposure there. But then to the extent we see derivative impact on inflation. Again, I think the business that the businesses that we operate are well suited towards, if not totally getting ahead of them, being able to price accordingly to keep yourself net even.

Okay, great color. Last topic for me, capital deployment. You mentioned your background, your fit for the role on that front. Over recent past, the team's been focused more so, and I think appropriately so, on sherry purchases. But messaging seems to have shifted at least a little bit, that tuck-in, bolt-on, M&A, you know with the proverbial proof points being there for mss and mod uh you know tucking bolt on range mna you know could be in play over over the near term yeah one correct in that uh two you know what kinds of assets would be of greatest interest to the team and three how should we think about you know the quote-unquote sweet spot in terms of deal size uh good question so one yes

that's still the status quo that the near term will be pretty heavy on repo. In the back part of last year, the company stepped up repo to about 75 million a quarter. That's what we've articulated people should expect for this year. And we did the same. We did 76 in Q1 and said should expect the same balance of repo over the balance of this year with bolt-on M&A at play as well. And I think, you know, Bolt-On, the way I define that is, you know, we did the micro-LAM acquisition in August of last year. That was about $100 million in size. I think that's the right zip code for Bolt-On, plus or minus a little bit. And then the nature of what we would be, you know, looking at, I think fits pretty nicely with the platforms we've created via M&A over the past, you know, five years, right? So, if it fits kind of the, you know, material science solutions world, if it fits AirTec, if it fits MOTS, base and defense exposure, if it had, we don't want to get too much semiconductor exposure, you know, Eric's been pretty open about that, you know, as per company, we don't want to go over 15%. You're just given the cyclical nature of that. And then anything that could augment our water platform in FMT. Those would be kind of the areas that I think are the most logical for us to acquire. I'll probably say I don't see us chasing data center AI growth with some kind of big multiple on a big EBITDA. I don't see us kind of putting money to work there. It could go against you too quickly. We like the exposure we have. But if it comes with something broader, you know, we'd look at it. But generally in the advantage markets and platforms we've created is where we would look to spend incremental M&A dollars. Okay, that all makes sense. I guess

I kind of lied because you've mentioned water a couple of times. The Intelligent Water Solutions platform, we're quite intrigued by that. Got a closer look at it last year at WEFTEC. For those less familiar, maybe, you know, discuss the, you know, the technologies of that platform the synergistic nature of the build-out of the platform? Because, again, we think it's quite intriguing and have faith in the high single-digit kind of growth rates that you're talking about.

Maybe, Jim, if I could ask you to give a little color on the nature of the water portfolio and the assets we have there, the products we provide.

Yeah, well, in a nutshell, I mean, what we do, right, is front-end intelligence, right? You know, we have stuff that goes underground and does detection to inform capital decisions and operating budget decisions by municipalities, wastewater management systems, et cetera, right? So for us, that's a good play. There is a technology overlay that obviously is good from a margin perspective and from a secular growth perspective, but also from a funding perspective. We think that the municipal funding environment is strong. it's stable, but we're less susceptible to volatility there because, again, core to what we offer the decision makers is that information so that they can appropriate their dollars meaningfully and with less risk.

All right. So we've covered quite a bit here, guys. Anything you'd like to leave the audience with today?

Yeah, I mean, I would just say, you know, very pleased, of course, with the strong start to the year for us. And I think it's showing some of the proof points of the strategy over the last few years, right? We're seeing growth in the advantage markets and the platforms that we created. A lot of it came via M&A, mostly residing within the HST segments. I think the trends there are durable, as we mentioned, over a multi-year period. And then I think the franchise that we have in FMT and FSDP and the margins of those businesses and the flow-through that they will see as we see volume and call it just the kind of general industrial part of the portfolio, I think the setup's really good, right, for just kind of continued growth in the advantage markets and the nice performance in general industrial, both with a strong flow-through. and therefore, you know, getting the margins even higher than they already are and the cash flow profile that comes with that. I think the setup is pretty exciting for this year and into the future.

Well, very encouraging. And, again, IDEX is our top pick, so we're on board.

All right. Well, really appreciate the questions and appreciate the time as well.

Thank you very much, Sean.