Executive Summary / Key Takeaways

• IDEX Corporation is a diversified applied solutions provider strategically shifting towards higher-growth, advantaged markets by leveraging its precision engineering expertise and consolidating businesses into collaborative platforms.
• Despite a mixed organic sales performance in Q1 2025 (-1% organic) influenced by market softness and project delays, the company demonstrated margin resilience through operational productivity and cost controls, including platform optimization savings.
• Recent orders performance, particularly a 3% organic increase in HST in Q1 2025 and overall sequential order growth, provides a stable foundation and signals potential improvement, notably in areas like space, defense, energy transition, and specific semiconductor MRO applications.
• Management maintains its full-year 2025 guidance for 1% to 3% organic growth and adjusted EPS of $8.10 to $8.45, anticipating a second-half weighting driven by market recovery timing, project deliveries, and the full realization of significant cost savings initiatives ($80 million cumulative for 2025).
• The company is proactively addressing potential tariff impacts through price increases and identified incremental cost savings, while its strong balance sheet and cash flow generation support continued strategic M&A, like the Mott acquisition, which is integrating ahead of schedule and contributing to future growth and margin expansion targets.

IDEX Corporation operates at the intersection of critical industrial, health, and safety applications, providing highly engineered solutions in niche markets globally. Incorporated in 1987, the company has built its foundation on a decentralized operating model powered by the 80/20 philosophy, deeply embedded over decades to drive agility and focused resource allocation. This history of operational excellence and intentional culture-building has prepared IDEX for its current strategic evolution: consolidating its diverse portfolio into thematic growth platforms aimed at capturing opportunities in faster-growing, advantaged markets.

The company's business is structured around three core segments: Fluid & Metering Technologies (FMT), Health & Science Technologies (HST), and Fire & Safety/Diversified Products (FSDP). Each segment houses businesses with differentiated technologies serving a wide array of industries, from municipal water and energy to life sciences, semiconductors, and fire suppression. This diversification provides a degree of resilience, though performance remains sensitive to global industrial activity, economic conditions, and capital spending trends.

A cornerstone of IDEX's strategy and competitive positioning is its differentiated technology. Across its segments, IDEX provides precision fluidics, advanced materials, and specialized equipment designed for critical, often demanding, applications. In the semiconductor space, for instance, Trevor's Quantum XT ultrapure water heater and pumps offer significant water savings, displacing established competitors by addressing the industry's need to reduce consumption. Within the Intelligent Water platform, technologies like Envirosight's Verisight Ultra camera inspection system and Subterra's SewerScout provide advanced digital analytics and remote inspection capabilities for aging wastewater infrastructure, a market driven by increasing severe weather events and stricter regulations. The recent acquisition of Mott Corporation significantly enhances IDEX's capabilities in sintered porous material structures and flow control, critical for high-purity applications in semiconductors and essential for emerging areas like green hydrogen generation, where Mott's new facility quadruples production capacity for key components. This technological edge, often enabling higher efficiency, precision, or unique functionality, contributes directly to IDEX's competitive moat, allowing it to command strong price capture and maintain robust margins relative to peers.

In the competitive landscape, IDEX operates alongside larger, more broadly diversified industrial companies and specialized players in its niche markets. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, IDEX's strategic focus on specific, high-value applications allows it to differentiate itself. Compared to larger industrial conglomerates like Cummins Inc. (CMI), which focuses on broader power systems, or energy services giants like Baker Hughes Co. (BKR), IDEX's strength lies in its precision-engineered components and systems. While Cummins and Baker Hughes may offer greater scale and durability in certain heavy-duty applications, IDEX's solutions often provide superior efficiency and precision, translating to lower operating costs for customers over time. Against advanced materials companies like Corning Inc. (GLW), IDEX competes in specific health and science niches, leveraging its integrated system approach rather than just material science, which can reduce customer downtime. Compared to diversified industrial players like Lincoln Electric Holdings Inc. (LECO), IDEX's technological differentiation often allows for higher profitability margins, although it may lag in cost competitiveness in certain standardized product areas. IDEX's strategic shift to thematic platforms, like Intelligent Water and Applied Materials Science Technology, aims to build scale and leverage capabilities across previously distinct businesses, enhancing its competitive stance by offering more integrated solutions and improving operational efficiency, including sourcing productivity.

Financially, IDEX has demonstrated resilience despite a challenging macro backdrop. In the first quarter of 2025, net sales increased 2.0% to $814.3 million, though organic sales saw a 1.0% decline, primarily due to lower volumes in certain FMT and HST businesses. This volume pressure was notably offset by strong price capture and favorable operational productivity, leading to an increase in gross profit to $368.9 million and an expansion in gross margin to 45.3% compared to 44.6% in Q1 2024. Adjusted EBITDA margin for Q1 2025 was 25.5%, a 50 basis point decrease year-over-year, influenced by volume deleverage and the near-term dilutive impact of the Mott acquisition, but partly mitigated by price/cost benefits and platform optimization savings. Diluted EPS attributable to IDEX was $1.26, down 21% year-over-year, while adjusted diluted EPS was $1.75, a 7% decrease, reflecting higher interest expense from the Mott acquisition financing and the absence of discrete tax benefits present in the prior year.

Looking back at 2024, the company navigated choppy conditions, ending the year with full-year sales flat overall and down 2% organically to $3.27 billion. Adjusted EBITDA margin for the full year was 26.7%. Despite the top-line pressure, particularly a 7% organic decline in HST for the full year, IDEX maintained strong profitability and cash flow generation. Full-year 2024 free cash flow was $603.0 million, representing a robust 101% conversion of adjusted net income.

This strong cash generation and a solid balance sheet, with a gross leverage ratio of 2.22x at March 31, 2025, provide significant flexibility for capital deployment. The company actively manages its capital, funding the $982.0 million Mott acquisition in Q3 2024 through a mix of cash and debt, repurchasing $50.0 million of shares in Q1 2025, and consistently increasing its dividend, with payments totaling $52.4 million in Q1 2025.

The outlook for 2025 reflects a cautious but optimistic stance. Management is maintaining its full-year guidance for organic revenue growth of 1% to 3% and adjusted EPS of $8.10 to $8.45. This guidance incorporates the expectation that the impact of recently introduced tariffs, estimated at $100 million annualized with two-thirds recognized in 2025, can be fully absorbed through incremental pricing actions. Furthermore, the company has proactively identified an additional $20 million in cost savings targets for 2025, contributing to a cumulative $80 million in support from productivity and optimization initiatives, providing a buffer against potential volume pressure, particularly in short-cycle businesses.

The guidance anticipates a weighting towards the second half of 2025, driven by expected sequential recovery in capital equipment-related semiconductor markets, the timing of specific water project deliveries (including the large Mott wastewater filtration project), and the full realization of benefits from platform optimization and organizational delayering efforts. HST is expected to be the highest growth segment in 2025, benefiting from tailwinds in pharma, space, defense, energy transition (supported by Mott), and a projected second-half recovery in semiconductor capital equipment. FMT is expected to see growth closer to the lower end of the range due to cyclicality in agriculture and energy, while FSDP is projected towards the midpoint, driven by strength in Fire & Safety and modest growth in Dispensing and BAND-IT.

Key assumptions for the adjusted EPS outlook include $0.15 to $0.40 from organic growth, $0.15 to $0.25 from operational productivity, and $0.43 from platform optimization and delayering savings. These benefits are partially offset by headwinds from variable compensation reset and higher share-based compensation ($0.29), higher interest expense from the Mott acquisition debt ($0.22), FX ($0.11), and an increased effective tax rate ($0.14) due to discrete benefits in 2024 not repeating and a heavier mix of income from higher tax jurisdictions. The company plans $21 million to $25 million in restructuring charges in 2025, primarily severance, with $8 million to $10 million expected in Q1, to achieve these savings.

Despite the positive outlook and strategic momentum, risks remain. The fluid trade and geopolitical situation could impact global demand beyond current assumptions. Continued uncertainty could lead to further pushouts of larger projects. Specific market headwinds in agriculture, energy, and the inventory adjustment with a large semiconductor customer could persist longer than anticipated. Successful integration of acquisitions, particularly Mott, is crucial to realizing expected synergies and accretion targets. However, IDEX's local-for-local operating model, deep customer relationships, and proven ability to leverage its 80/20 principles for agility and cost control provide significant mitigation capabilities against these risks.

Conclusion

IDEX Corporation is a company in strategic transition, actively shaping its portfolio and operating model to enhance its long-term growth trajectory in attractive, technology-driven markets. While the near-term environment presents challenges, marked by macro uncertainty and varied end-market conditions, the company's core strengths in precision engineering, its disciplined 80/20 operating philosophy, and its robust financial health provide a foundation of resilience. The strategic focus on building scale within thematic platforms and leveraging differentiated technology, exemplified by the Mott acquisition and ongoing innovation initiatives, positions IDEX to capitalize on secular tailwinds in areas like intelligent water, energy transition, and advanced semiconductors. The maintenance of full-year guidance, supported by proactive cost management and expected second-half market improvements, underscores management's confidence in navigating current headwinds and delivering value. For investors, the story is one of a high-quality niche player executing a deliberate strategy to drive above-market growth and earnings expansion, making it a compelling consideration despite the prevailing market uncertainties.