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
Three Months Ended September
30,
(Dollars in millions, except per share
amounts)
2023
2022
Increase (Decrease)
Net sales
$
793.4
$
824.0
$
(30.6
)
Adjusted net sales*
793.4
806.1
(12.7
)
Organic net sales growth*
(6
%)
Gross profit
349.6
381.8
(32.2
)
Adjusted gross profit*
350.8
363.9
(13.1
)
Net income attributable to IDEX
209.1
178.7
30.4
Adjusted net income attributable to
IDEX*
160.6
161.9
(1.3
)
Adjusted EBITDA*
225.5
231.4
(5.9
)
Diluted EPS attributable to
IDEX
2.75
2.36
0.39
Adjusted diluted EPS attributable to
IDEX*
2.12
2.14
(0.02
)
Cash flows from operating
activities
226.6
198.1
28.5
Free cash flow*
206.5
181.8
24.7
Gross margin
44.1
%
46.3
%
(220) bps
Adjusted gross margin*
44.2
%
45.1
%
(90) bps
Net income margin
26.3
%
21.7
%
460 bps
Adjusted EBITDA margin*
28.4
%
28.7
%
(30) bps
*These are non-GAAP measures. See the
definitions of these non-GAAP measures in the section in this
release titled “Non-GAAP Measures of Financial Performance” and
reconciliations to their most directly comparable GAAP financial
measures in the reconciliation tables at the end of this
release.
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")
Three Months Ended September
30,
(Dollars in millions)
2023
2022
Increase (Decrease)
Net sales
$
301.1
$
307.6
$
(6.5
)
Adjusted EBITDA
103.6
104.4
(0.8
)
Adjusted EBITDA margin
34.4
%
33.9
%
50 bps
- 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")
Three Months Ended September
30,
(Dollars in millions)
2023
2022
Increase (Decrease)
Net sales
$
313.2
$
345.0
$
(31.8
)
Adjusted net sales*
313.2
327.1
(13.9
)
Adjusted EBITDA
84.4
101.4
(17.0
)
Adjusted EBITDA margin
26.9
%
31.0
%
(410) bps
*This is a non-GAAP measure. See the
definition of this non-GAAP measure in the section in this release
titled “Non-GAAP Measures of Financial Performance” and
reconciliation to its most directly comparable GAAP financial
measure in the reconciliation tables at the end of this
release.
- 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")
Three Months Ended September
30,
(Dollars in millions)
2023
2022
Increase (Decrease)
Net sales
$
180.6
$
172.4
$
8.2
Adjusted EBITDA
52.8
47.8
5.0
Adjusted EBITDA margin
29.3
%
27.8
%
150 bps
- 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)
IDEX CORPORATION
Condensed Consolidated Statements
of Income
(in millions, except per share
amounts)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net sales
$
793.4
$
824.0
$
2,485.0
$
2,371.2
Cost of sales
443.8
442.2
1,374.9
1,290.0
Gross profit
349.6
381.8
1,110.1
1,081.2
Selling, general and administrative
expenses
165.9
161.9
529.9
483.7
Restructuring expenses and asset
impairments
4.1
17.7
8.2
21.1
Operating income
179.6
202.2
572.0
576.4
Gain on sale of business
(93.8
)
(34.8
)
(93.8
)
(34.8
)
Other (income) expense - net
(2.1
)
(1.0
)
5.6
(3.3
)
Interest expense
13.7
9.6
40.1
28.6
Income before income taxes
261.8
228.4
620.1
585.9
Provision for income taxes
52.8
49.7
132.8
129.2
Net income
209.0
178.7
487.3
456.7
Net loss attributable to noncontrolling
interest
0.1
—
0.2
0.2
Net income attributable to IDEX
$
209.1
$
178.7
$
487.5
$
456.9
Earnings per Common Share:
Basic earnings per common share
attributable to IDEX
$
2.76
$
2.37
$
6.44
$
6.02
Diluted earnings per common share
attributable to IDEX
$
2.75
$
2.36
$
6.42
$
6.00
Share Data:
Basic weighted average common shares
outstanding
75.6
75.4
75.6
75.8
Diluted weighted average common shares
outstanding
75.9
75.8
75.9
76.1
IDEX CORPORATION
Condensed Consolidated Balance
Sheets
(in millions)
(unaudited)
September 30, 2023
December 31, 2022
Assets
Current assets
Cash and cash equivalents
$
562.7
$
430.2
Receivables - net
430.6
442.8
Inventories - net
446.6
470.9
Other current assets
78.3
55.4
Total current assets
1,518.2
1,399.3
Property, plant and equipment -
net
421.5
382.1
Goodwill and intangible assets -
net
3,596.9
3,585.9
Other noncurrent assets
133.0
144.6
Total assets
$
5,669.6
$
5,511.9
Liabilities and equity
Current liabilities
Trade accounts payable
$
176.3
$
208.9
Accrued expenses
262.0
289.1
Current portion of long-term borrowings
- net
0.7
—
Dividends payable
48.5
45.6
Total current liabilities
487.5
543.6
Long-term borrowings - net
1,320.8
1,468.7
Other noncurrent liabilities
474.1
460.0
Total liabilities
2,282.4
2,472.3
Shareholders' equity
3,387.1
3,039.3
Noncontrolling interest
0.1
0.3
Total equity
3,387.2
3,039.6
Total liabilities and equity
$
5,669.6
$
5,511.9
IDEX CORPORATION
Condensed Consolidated Statements
of Cash Flows
(in millions)
(unaudited)
Nine Months Ended September
30,
2023
2022
Cash flows from operating
activities
Net income
$
487.3
$
456.7
Adjustments to reconcile net income to
net cash flows provided by operating activities:
Gain on sale of business
(93.8
)
(34.8
)
Asset impairments
0.8
17.0
Credit loss on note receivable from
collaborative partner
7.7
—
Depreciation
41.9
37.0
Amortization of intangible
assets
70.6
49.2
Share-based compensation
expense
18.9
16.4
Deferred income taxes
(1.8
)
0.2
Changes in (net of the effect from
acquisitions/divestitures and foreign currency
translation):
Receivables
11.6
(62.5
)
Inventories
24.5
(99.6
)
Other current assets
0.3
(4.8
)
Trade accounts payable
(30.2
)
25.6
Deferred revenue
5.6
(24.7
)
Accrued expenses
(34.0
)
13.1
Other - net
6.3
1.3
Net cash flows provided by operating
activities
515.7
390.1
Cash flows from investing
activities
Capital expenditures
(68.3
)
(48.0
)
Acquisition of businesses, net of cash
acquired
(110.3
)
(232.6
)
Proceeds from sale of business, net of
cash remitted
110.3
49.4
Purchases of marketable
securities
(24.6
)
—
Other - net
2.9
6.8
Net cash flows used in investing
activities
(90.0
)
(224.4
)
Cash flows from financing
activities
Borrowings under revolving credit
facilities
—
40.0
Payments under revolving credit
facilities
—
(40.0
)
Proceeds from issuance of long-term
borrowings
100.0
—
Payment of long-term borrowings
(251.0
)
—
Dividends paid
(142.3
)
(132.2
)
Proceeds from stock option
exercises
7.7
3.9
Repurchases of common stock
(1.1
)
(146.3
)
Net cash flows used in financing
activities
(286.7
)
(274.6
)
Effect of exchange rate changes on cash
and cash equivalents
(6.5
)
(65.8
)
Net increase (decrease) in cash and
cash equivalents
132.5
(174.7
)
Cash and cash equivalents at beginning
of year
430.2
855.4
Cash and cash equivalents at end of
period
$
562.7
$
680.7
IDEX CORPORATION
Company and Segment Financial
Information
(dollars in millions)
(unaudited)
Three Months Ended September
30, (a)
Nine Months Ended September
30, (a)
2023
2022
2023
2022
Fluid & Metering
Technologies
Net sales
$
301.1
$
307.6
$
948.0
$
879.5
Adjusted net sales (b)
301.1
307.6
948.0
879.5
Adjusted EBITDA(c)
103.6
104.4
323.9
287.8
Adjusted EBITDA margin
34.4
%
33.9
%
34.2
%
32.7
%
Depreciation
3.1
3.9
10.3
12.0
Amortization of intangible
assets
5.6
5.8
17.3
15.1
Capital expenditures
6.4
7.7
19.4
17.4
Health & Science
Technologies
Net sales
$
313.2
$
345.0
$
1,003.7
$
986.2
Adjusted net sales(b)
313.2
327.1
1,003.7
968.3
Adjusted EBITDA(c)
84.4
101.4
278.8
304.8
Adjusted EBITDA margin
26.9
%
31.0
%
27.8
%
31.5
%
Depreciation
9.0
6.2
24.1
18.4
Amortization of intangible
assets
16.7
9.6
48.5
29.2
Capital expenditures
12.2
6.4
40.9
22.9
Fire & Safety/Diversified
Products
Net sales
$
180.6
$
172.4
$
539.8
$
508.3
Adjusted net sales(b)
180.6
172.4
539.8
508.3
Adjusted EBITDA(c)
52.8
47.8
157.0
137.3
Adjusted EBITDA margin
29.3
%
27.8
%
29.1
%
27.0
%
Depreciation
2.3
2.1
6.7
6.3
Amortization of intangible
assets
1.5
1.6
4.8
4.9
Capital expenditures
1.5
2.2
7.4
7.5
Corporate Office and
Eliminations
Intersegment sales eliminations
$
(1.5
)
$
(1.0
)
$
(6.5
)
$
(2.8
)
Adjusted EBITDA(c)
(15.3
)
(22.2
)
(63.7
)
(64.6
)
Depreciation
0.3
0.1
0.8
0.3
Capital expenditures
—
—
0.6
0.2
Company
Net sales
$
793.4
$
824.0
$
2,485.0
$
2,371.2
Adjusted net sales(b)
793.4
806.1
2,485.0
2,353.3
Adjusted EBITDA(b)
225.5
231.4
696.0
665.3
Adjusted EBITDA margin(b)
28.4
%
28.7
%
28.0
%
28.3
%
Depreciation
14.7
12.3
41.9
37.0
Amortization of intangible
assets
23.8
17.0
70.6
49.2
Capital expenditures
20.1
16.3
68.3
48.0
(a)
Three and nine month data includes the
results of the acquisition of Iridian Spectral Technologies (May
2023) and the Muon Group acquisition (November 2022) in the HST
segment from the dates of acquisition and nine month data includes
the results of the acquisition of KZ CO. (May 2022) and the
acquisition of Nexsight, LLC and its businesses Envirosight,
WinCan, MyTana and Pipeline Renewal Technologies (February 2022) in
the FMT segment from the dates of acquisition. Three and nine month
data also includes the results of Micropump (August 2023) in the
HST segment and Knight (September 2022) in the FMT segment through
the dates of disposition.
(b)
These are non-GAAP financial measures. For
a reconciliation of these non-GAAP financial measures to their most
directly comparable measure calculated and presented in accordance
with GAAP, see the reconciliation tables below.
(c)
Segment Adjusted EBITDA excludes
unallocated corporate costs which are included in Corporate Office
and Eliminations.
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
Three Months Ended September
30, 2023
Nine Months Ended September
30, 2023
FMT
HST
FSDP
IDEX
FMT
HST
FSDP
IDEX
Change in net sales
(2
%)
(9
%)
5
%
(4
%)
8
%
2
%
6
%
5
%
Net impact from
acquisitions/divestitures
2
%
(10
%)
—
%
(3
%)
(2
%)
(10
%)
—
%
(5
%)
Impact from foreign currency
(1
%)
(1
%)
(2
%)
(1
%)
—
%
—
%
1
%
—
%
Impact from the exit of a COVID-19
testing application(1)
—
%
5
%
—
%
2
%
—
%
2
%
—
%
1
%
Change in organic net sales
(1
%)
(15
%)
3
%
(6
%)
6
%
(6
%)
7
%
1
%
(1) Represents the acceleration of
previously deferred revenue of $17.9 million as a result of a
customer’s decision to discontinue further investment in
commercializing its COVID-19 testing application in 2022 that did
not reoccur in 2023.
Table 2: Reconciliations of Reported-to-Adjusted Gross
Profit, Net Sales and Gross Margin (dollars in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Gross profit
$
349.6
$
381.8
$
1,110.1
$
1,081.2
Impact from the exit of a COVID-19
testing application(1)
—
(17.9
)
—
(17.9
)
Fair value inventory step-up
charges
1.2
—
1.2
0.4
Adjusted gross profit
$
350.8
$
363.9
$
1,111.3
$
1,063.7
Net sales
$
793.4
$
824.0
$
2,485.0
$
2,371.2
Impact from the exit of a COVID-19
testing application(1)
—
(17.9
)
—
(17.9
)
Adjusted net sales
$
793.4
$
806.1
$
2,485.0
$
2,353.3
Gross margin
44.1
%
46.3
%
44.7
%
45.6
%
Adjusted gross margin
44.2
%
45.1
%
44.7
%
45.2
%
(1) Represents the acceleration of
previously deferred revenue of $17.9 million as a result of a
customer’s decision to discontinue further investment in
commercializing its COVID-19 testing application in 2022 that did
not reoccur in 2023.
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)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Reported net income attributable to
IDEX
$
209.1
$
178.7
$
487.5
$
456.9
Fair value inventory step-up
charges
1.2
—
1.2
0.4
Tax impact on fair value inventory
step-up charges
(0.3
)
—
(0.3
)
(0.1
)
Restructuring expenses and asset
impairments
4.1
—
8.2
2.8
Tax impact on restructuring expenses
and asset impairments
(0.9
)
—
(1.8
)
(0.7
)
Net impact from the exit of a COVID-19
testing application(1)
—
(1.1
)
—
(1.1
)
Tax impact on the exit of a COVID-19
testing application
—
0.3
—
0.3
Gain on sale of business
(93.8
)
(34.8
)
(93.8
)
(34.8
)
Tax impact on gain on sale of
business
22.7
5.5
22.7
5.5
Gains on sales of assets
—
—
—
(2.7
)
Tax impact on gains on sales of
assets
—
—
—
0.6
Credit loss on note receivable from
collaborative partner(2)
—
—
7.7
—
Tax impact on credit loss on note
receivable from collaborative partner
—
—
(1.6
)
—
Acquisition-related intangible asset
amortization
23.8
17.0
70.6
49.2
Tax impact on acquisition-related
intangible asset amortization
(5.3
)
(3.7
)
(15.8
)
(11.0
)
Adjusted net income attributable to
IDEX
$
160.6
$
161.9
$
484.6
$
465.3
(1) Represents the net impact of the
acceleration of previously deferred revenue of $17.9 million and an
impairment charge of $16.8 million as a result of a customer's
decision to discontinue further investment in commercializing its
COVID-19 testing application in 2022 that did not reoccur in
2023.
(2) Represents a reserve recorded on an
investment with a collaborative partner that may no longer be
recoverable.
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)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Reported diluted EPS attributable to
IDEX
$
2.75
$
2.36
$
6.42
$
6.00
Fair value inventory step-up
charges
0.02
—
0.02
—
Tax impact on fair value inventory
step-up charges
—
—
—
—
Restructuring expenses and asset
impairments
0.06
—
0.11
0.04
Tax impact on restructuring expenses
and asset impairments
(0.01
)
—
(0.03
)
(0.01
)
Net impact from the exit of a COVID-19
testing application(1)
—
(0.01
)
—
(0.01
)
Tax impact on the exit of a COVID-19
testing application
—
—
—
—
Gain on sale of business
(1.24
)
(0.46
)
(1.24
)
(0.46
)
Tax impact on gain on sale of
business
0.30
0.07
0.30
0.07
Gains on sales of assets
—
—
—
(0.03
)
Tax impact on gains on sales of
assets
—
—
—
0.01
Credit loss on note receivable from
collaborative partner(2)
—
—
0.10
—
Tax impact on credit loss on note
receivable from collaborative partner
—
—
(0.02
)
—
Acquisition-related intangible asset
amortization
0.31
0.23
0.93
0.65
Tax impact on acquisition-related
intangible asset amortization
(0.07
)
(0.05
)
(0.21
)
(0.14
)
Adjusted diluted EPS attributable to
IDEX
$
2.12
$
2.14
$
6.38
$
6.12
Diluted weighted average shares
outstanding
75.9
75.8
75.9
76.1
(1) Represents the net impact of the
acceleration of previously deferred revenue of $17.9 million and an
impairment charge of $16.8 million as a result of a customer's
decision to discontinue further investment in commercializing its
COVID-19 testing application in 2022 that did not reoccur in
2023.
(2) Represents a reserve recorded on an
investment with a collaborative partner that may no longer be
recoverable.
Table 4: Reconciliations of Net Income to Adjusted EBITDA and
Net Sales to Adjusted Net Sales (dollars in millions)
Three Months Ended September
30,
2023
2022
FMT
HST
FSDP
Corporate
IDEX
FMT
HST
FSDP
Corporate
IDEX
Reported net income
$
—
$
—
$
—
$
—
$
209.0
$
—
$
—
$
—
$
—
$
178.7
Provision for income taxes
—
—
—
—
52.8
—
—
—
—
49.7
Interest expense
—
—
—
—
13.7
—
—
—
—
9.6
Other (income) expense - net
—
—
—
—
(2.1
)
—
—
—
—
(1.0
)
(Gain) on sale of business
—
—
—
—
(93.8
)
—
—
—
—
(34.8
)
Operating income (loss)
92.1
54.7
48.4
(15.6
)
179.6
94.5
85.6
43.6
(21.5
)
202.2
Other income (expense) - net
1.1
1.3
0.2
(0.5
)
2.1
0.2
1.1
0.5
(0.8
)
1.0
Depreciation
3.1
9.0
2.3
0.3
14.7
3.9
6.2
2.1
0.1
12.3
Amortization
5.6
16.7
1.5
—
23.8
5.8
9.6
1.6
—
17.0
Fair value inventory step-up
charges
—
1.2
—
—
1.2
—
—
—
—
—
Restructuring expenses and asset
impairments
1.7
1.5
0.4
0.5
4.1
—
—
—
—
—
Net impact from the exit of a COVID-19
testing application(1)
—
—
—
—
—
—
(1.1
)
—
—
(1.1
)
Adjusted EBITDA
$
103.6
$
84.4
$
52.8
$
(15.3
)
$
225.5
$
104.4
$
101.4
$
47.8
$
(22.2
)
$
231.4
Net sales (eliminations)
$
301.1
$
313.2
$
180.6
$
(1.5
)
$
793.4
$
307.6
$
345.0
$
172.4
$
(1.0
)
$
824.0
Impact from the exit of a COVID-19
testing application(1)
—
—
—
—
—
—
(17.9
)
—
—
(17.9
)
Adjusted net sales
(eliminations)
$
301.1
$
313.2
$
180.6
$
(1.5
)
$
793.4
$
307.6
$
327.1
$
172.4
$
(1.0
)
$
806.1
Net income margin
26.3
%
21.7
%
Adjusted EBITDA margin
34.4
%
26.9
%
29.3
%
n/m
28.4
%
33.9
%
31.0
%
27.8
%
n/m
28.7
%
(1) The net impact in the Adjusted EBITDA
reconciliation represents the acceleration of previously deferred
revenue of $17.9 million less the impairment charge of $16.8
million related to a customer's decision to discontinue further
investment in commercializing its COVID-19 testing application in
2022 that did not reoccur in 2023, while the impact in the Adjusted
net sales reconciliation represents only the acceleration of
previously deferred revenue of $17.9 million discussed above.
Table 4: Reconciliations of Net Income to Adjusted EBITDA and
Net Sales to Adjusted Net Sales (dollars in millions)
(continued)
Nine Months Ended September
30,
2023
2022
FMT
HST
FSDP
Corporate
IDEX
FMT
HST
FSDP
Corporate
IDEX
Reported net income
$
—
$
—
$
—
$
—
$
487.3
$
—
$
—
$
—
$
—
$
456.7
Provision for income taxes
—
—
—
—
132.8
—
—
—
—
129.2
Interest expense
—
—
—
—
40.1
—
—
—
—
28.6
Other (income) expense - net
—
—
—
—
5.6
—
—
—
—
(3.3
)
(Gain) on sale of business
—
—
—
—
(93.8
)
—
—
—
—
(34.8
)
Operating income (loss)
291.9
199.7
145.0
(64.6
)
572.0
257.8
255.7
124.0
(61.1
)
576.4
Other income (expense) - net
2.0
0.8
(0.3
)
(8.1
)
(5.6
)
2.0
2.5
2.6
(3.8
)
3.3
Depreciation
10.3
24.1
6.7
0.8
41.9
12.0
18.4
6.3
0.3
37.0
Amortization
17.3
48.5
4.8
—
70.6
15.1
29.2
4.9
—
49.2
Fair value inventory step-up
charges
—
1.2
—
—
1.2
0.4
—
—
—
0.4
Restructuring expenses and asset
impairments
2.4
4.5
0.8
0.5
8.2
1.7
0.1
1.0
—
2.8
Net impact from the exit of a COVID-19
testing application(1)
—
—
—
—
—
—
(1.1
)
—
—
(1.1
)
Gains on sales of assets
—
—
—
—
—
(1.2
)
—
(1.5
)
—
(2.7
)
Credit loss on note receivable from
collaborative partner(2)
—
—
—
7.7
7.7
—
—
—
—
—
Adjusted EBITDA
$
323.9
$
278.8
$
157.0
$
(63.7
)
$
696.0
$
287.8
$
304.8
$
137.3
$
(64.6
)
$
665.3
Net sales (eliminations)
$
948.0
$
1,003.7
$
539.8
$
(6.5
)
$
2,485.0
$
879.5
$
986.2
$
508.3
$
(2.8
)
$
2,371.2
Impact from the exit of a COVID-19
testing application(1)
—
—
—
—
—
—
(17.9
)
—
—
(17.9
)
Adjusted net sales
(eliminations)
$
948.0
$
1,003.7
$
539.8
$
(6.5
)
$
2,485.0
$
879.5
$
968.3
$
508.3
$
(2.8
)
$
2,353.3
Net income margin
19.6
%
19.3
%
Adjusted EBITDA margin
34.2
%
27.8
%
29.1
%
n/m
28.0
%
32.7
%
31.5
%
27.0
%
n/m
28.3
%
(1) The net impact in the Adjusted EBITDA
reconciliation represents the acceleration of previously deferred
revenue of $17.9 million less the impairment charge of $16.8
million related to a customer's decision to discontinue further
investment in commercializing its COVID-19 testing application in
2022 that did not reoccur in 2023, while the impact in the Adjusted
net sales reconciliation represents only the acceleration of
previously deferred revenue of $17.9 million discussed above.
(2) Represents a reserve recorded on an
investment with a collaborative partner that may no longer be
recoverable.
Table 5: Reconciliations of Cash Flows from Operating
Activities to Free Cash Flow (dollars in millions)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Cash flows from operating
activities
$
226.6
$
198.1
$
515.7
$
390.1
Less: Capital expenditures
20.1
16.3
68.3
48.0
Free cash flow
$
206.5
$
181.8
$
447.4
$
342.1
Table 6: Reconciliation of Estimated 2023 Change in Net Sales
to Change in Organic Net Sales
Guidance
Fourth Quarter 2023
Full Year 2023
Low End
High End
Low End
High End
Change in net sales
(6
%)
(5
%)
1
%
2
%
Net impact from
acquisitions/divestitures
(2
%)
(2
%)
(4
%)
(4
%)
Impact from foreign currency
(1
%)
(1
%)
—
%
—
%
Impact from the exit of a COVID-19
testing application(1)
—
%
—
%
1
%
1
%
Change in organic net sales
(9
%)
(8
%)
(2
%)
(1
%)
(1) Represents the acceleration of
previously deferred revenue of $17.9 million as a result of a
customer’s decision to discontinue further investment in
commercializing its COVID-19 testing application in 2022 that did
not reoccur in 2023.
Table 7: Reconciliation of Estimated 2023 Diluted EPS
Attributable to IDEX to Adjusted Diluted EPS Attributable to
IDEX
Guidance
Fourth Quarter 2023
Full Year 2023
Estimated diluted EPS attributable to
IDEX
$1.50 - $1.55
$7.91 - $7.96
Fair value inventory step-up
charges
—
0.02
Tax impact on fair value inventory
step-up charges
—
—
Restructuring expenses and asset
impairments
—
0.12
Tax impact on restructuring expenses
and asset impairments
—
(0.02)
Gain on sale of business
—
(1.24)
Tax impact on gain on sale of
business
—
0.30
Credit loss on note receivable from
collaborative partner(1)
—
0.10
Tax impact on credit loss on note
receivable from collaborative partner
—
(0.02)
Acquisition-related intangible asset
amortization
0.32
1.25
Tax impact on acquisition-related
intangible asset amortization
(0.08)
(0.29)
Estimated adjusted diluted EPS
attributable to IDEX
$1.74 - $1.79
$8.13 - $8.18
(1) Represents a reserve recorded on an
investment with a collaborative partner that may no longer be
recoverable.
Table 8: Reconciliation of Estimated 2023 Net Income to
Adjusted EBITDA (dollars in millions)
Guidance
Fourth Quarter 2023
Full Year 2023
Low End
High End
Low End
High End
Reported net income
$
113.4
$
117.1
$
600.7
$
604.3
Provision for income taxes
32.7
33.6
165.3
166.2
Interest expense
11.6
11.6
51.7
51.7
Gain on sale of business
—
—
(93.8
)
(93.8
)
Depreciation
16.1
16.1
58.1
58.1
Amortization of intangible
assets
24.1
24.1
94.7
94.7
Fair value inventory step-up
charges
—
—
1.2
1.2
Restructuring expenses and asset
impairments
—
—
8.2
8.2
Credit loss on note receivable from
collaborative partner(1)
—
—
7.7
7.7
Adjusted EBITDA
$
197.9
$
202.5
$
893.8
$
898.3
Net sales
$
765.1
$
770.8
$
3,250.1
$
3,255.8
Net income margin
15
%
15
%
19
%
19
%
Adjusted EBITDA margin
26
%
26
%
27.5
%
27.5
%
(1) Represents a reserve recorded on an
investment with a collaborative partner that may no longer be
recoverable.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231025746108/en/
Investor Contact: Allison S. Lausas Interim Chief
Financial Officer and Chief Accounting Officer (847) 498-7070
IDEX (NYSE:IEX)
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