IDEX Reports First Quarter Results; Raises Full Year Guidance; Q1 Orders and Sales up 10 Percent Overall and 6 Percent Organically; Q1 Reported EPS Was $1.48 With Adjusted EPS Of $1.51

Rhea-AI Summary

IDEX Corporation (NYSE: IEX) reported strong financial results for Q1 2021, with record orders of $710.7 million and sales rising 10% year-over-year to $652 million. The adjusted EPS increased by 14% to $1.51. Operating margin improved to 24.3%, despite a slight decline in gross margin due to COVID-related inventory reserves. Cash from operations reached $109.3 million, supporting record free cash flow of $94.7 million. The company raised its full-year adjusted EPS guidance to $6.05-$6.20 and plans further acquisitions, including Airtech Group.

Positive

• Record orders of $710.7 million, up 10% YoY.
• Sales increased to $652 million, a 10% rise YoY.
• Adjusted EPS up 14% YoY to $1.51.
• Operating margin improved to 24.3%.
• Record free cash flow of $94.7 million, up 32% YoY.
• Raised full-year adjusted EPS guidance to $6.05-$6.20.

Negative

• Gross margin decreased by 80 basis points to 44.9%.
• Increased inventory reserves related to COVID-19 new product development challenges.

IDEX Corporation (NYSE: IEX) today announced its financial results for the three month period ended March 31, 2021.

First Quarter 2021 Highlights

• Record orders and sales were up 10 percent overall and 6 percent organically compared to Q1 2020
• Reported operating margin was 23.9 percent with adjusted operating margin of 24.3 percent
• Reported EPS was $1.48 with adjusted EPS of $1.51
• Record Q1 cash from operations of $109.3 million led to record Q1 free cash flow of $94.7 million
• Full year adjusted EPS guidance raised to $6.05 to $6.20
• Completed the acquisition of ABEL Pumps, L.P. on March 10, 2021
• Reached an agreement in April 2021 to acquire Airtech Group, Inc., US Valve Corporation and related entities (Airtech)

First Quarter 2021

Orders of $710.7 million were up 10 percent compared with the prior year period (+6 percent organic, +1 percent acquisitions and +3 percent foreign currency translation).

Sales of $652.0 million were up 10 percent compared with the prior year period (+6 percent organic, +1 percent acquisitions and +3 percent foreign currency translation).

Gross margin of 44.9 percent was down 80 basis points compared with the prior year period primarily as a result of increases to inventory reserves associated with COVID-19 new product development (NPD) opportunities not materializing, lower margins from the ABEL and Flow MD acquisitions and a fair value inventory step-up charge, partially offset by higher volume and price. Excluding the $0.7 million pre-tax fair value inventory step-up charge related to the ABEL acquisition, adjusted gross margin of 45.0 percent was down 70 basis points compared with the prior year period.

Operating income of $155.5 million resulted in an operating margin of 23.9 percent which was up 40 basis points compared with the prior year period primarily as a result of higher volume, price and cost savings, partially offset by restructuring expenses and asset impairments and lower gross margin. Excluding the $0.7 million pre-tax fair value inventory step-up charge and $2.2 million of restructuring expenses and asset impairments, adjusted operating income was $158.4 million with an adjusted operating margin of 24.3 percent, up 80 basis points compared with the prior year period.

Provision for income taxes of $32.9 million in the first quarter of 2021 resulted in an effective tax rate (ETR) of 22.6 percent, which was higher than the prior year period ETR of 20.0 percent primarily due to a decrease in the excess tax benefits related to share-based compensation.

Net income attributable to IDEX was $112.7 million which resulted in EPS attributable to IDEX of $1.48. Excluding the fair value inventory step-up charge and restructuring expenses and asset impairments, adjusted EPS attributable to IDEX was $1.51, an increase of 18 cents, or 14 percent, from the prior year period. EBITDA of $177.9 million was 27.3 percent of sales and covered interest expense by almost 17 times. Adjusted EBITDA of $180.8 million was 27.7 percent of sales and covered interest expense by almost 17 times.

Cash from operations of $109.3 million was up 29.0 percent from the prior year period primarily due to higher earnings and a favorable impact from the timing of accrued expenses. Cash from operations led to free cash flow of $94.7 million, which was up 32 percent from the prior year period and was 82 percent of adjusted net income attributable to IDEX.

“Our first quarter results were strong, with demand improving both sequentially and year over year as an uneven global recovery continues. We booked record first quarter orders of $711 million and built $59 million of additional backlog. Organic orders and sales were solid in the first quarter, both up 6 percent. Our teams have performed well amid a variety of obstacles, meeting the challenges as market conditions improved. Strong execution by our teams continues to be central to maintaining our critical supply chains, staying ahead of inflation and converting orders to cash. This execution delivered robust operating margin, EPS and free cash flow that exceeded our expectations. First quarter adjusted operating margin of 24.3 percent drove adjusted EPS of $1.51, up 14% versus prior year. Cash conversion continued to be outstanding, with record free cash flow of $95 million in the first quarter, which was 32 percent higher compared to the prior year period.
In addition to delivering strong financial results, we have been able to make significant progress in our capital deployment efforts. Earlier today, we announced our second acquisition for 2021. We have entered into a definitive agreement to acquire Airtech. Airtech is a leading global manufacturer of highly engineered specialty blowers, vacuum pumps and valves. It will be an excellent complement to our existing GAST business in the Health & Science Technologies (HST) segment. The M&A funnel remains robust and we are fully committed to pursuing additional opportunities in 2021 that will create value for our shareholders, customers and employees.
With the strong start to 2021, combined with improved market conditions, we are raising our full year adjusted EPS guidance to $6.05 to $6.20 with second quarter adjusted EPS of $1.60 to $1.63. We are also increasing our full year organic revenue growth expectations to 9 to 10 percent with 18 to 20 percent growth in the second quarter.”
	Eric D. Ashleman
	Chief Executive Officer and President

First Quarter 2021 Segment Highlights

Fluid & Metering Technologies

• Sales of $243.4 million reflected a 7 percent increase compared to the first quarter of 2020 (+2 percent organic, +3 percent acquisition and +2 percent foreign currency translation).
• Operating income of $62.9 million resulted in an operating margin of 25.8 percent which was down 360 basis points compared with the prior year period primarily due to increases to inventory reserves associated with COVID-19 NPD opportunities not materializing, lower margins from the ABEL and Flow MD acquisitions, restructuring expenses and asset impairments and the fair value inventory step-up charge, partially offset by higher volume and cost savings. Excluding the $0.7 million pre-tax fair value inventory step-up charge and $0.9 million of restructuring expenses and asset impairments, adjusted operating income was $64.5 million with an adjusted operating margin of 26.5 percent, a 290 basis point decrease compared to the prior year period.
• EBITDA of $69.9 million resulted in an EBITDA margin of 28.7 percent. Excluding the $0.7 million pre-tax fair value inventory step-up charge and $0.9 million of restructuring expenses and asset impairments, adjusted EBITDA of $71.5 million resulted in an adjusted EBITDA margin of 29.4 percent, a 210 basis point decrease compared to the prior year period.

Health & Science Technologies

• Sales of $250.4 million reflected a 12 percent increase compared to the first quarter of 2020 (+9 percent organic and +3 percent foreign currency translation).
• Operating income of $66.7 million resulted in an operating margin of 26.6 percent which was up 310 basis points compared with the prior year period primarily due to higher volume and cost savings, partially offset by restructuring expenses and asset impairments. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted operating income was $67.3 million with an adjusted operating margin of 26.9 percent, a 340 basis point increase compared to the prior year period.
• EBITDA of $77.5 million resulted in an EBITDA margin of 31.0 percent. Excluding $0.6 million of restructuring expenses and asset impairments, adjusted EBITDA of $78.1 million resulted in an adjusted EBITDA margin of 31.2 percent, a 270 basis point increase compared to the prior year period.

Fire & Safety/Diversified Products

• Sales of $159.5 million reflected an 11 percent increase compared to the first quarter of 2020 (+7 percent organic and +4 percent foreign currency translation).
• Operating income of $44.6 million resulted in an operating margin of 27.9 percent which was up 150 basis points compared with the prior year period primarily as a result of higher volume and cost savings. Excluding $0.1 million of restructuring expenses and asset impairments, adjusted operating income was $44.7 million with an adjusted operating margin of 28.0 percent, a 160 basis point increase compared to the prior year period.
• EBITDA of $48.7 million resulted in an EBITDA margin of 30.5 percent. Excluding $0.1 million of restructuring expenses and asset impairments, adjusted EBITDA of $48.8 million resulted in an adjusted EBITDA margin of 30.6 percent, a 140 basis point increase compared to the prior year period.

Corporate Costs

Corporate costs increased to $18.6 million in the first quarter of 2021 from $17.5 million in the first quarter of 2020 primarily as a result of higher acquisition, restructuring and variable compensation expenses.

Acquisition

On March 10, 2021, the Company acquired ABEL Pumps, L.P. and certain of its affiliates (ABEL). ABEL designs and manufactures highly engineered reciprocating positive displacement pumps for a variety of end markets, including mining, marine, power, water, wastewater and other general industries. Headquartered in Büchen, Germany, with sales and service locations in Madrid, Spain and Pittsburgh, Pennsylvania, ABEL operates in our Pumps reporting unit within the Fluid & Metering Technologies segment. ABEL was acquired for cash consideration of $106.2 million. The entire purchase price was funded with cash on hand.

Non-U.S. GAAP Measures of Financial Performance

The Company supplements certain U.S. GAAP financial performance metrics with non-U.S. GAAP financial performance metrics. Management believes these non-U.S. 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, such as restructuring expenses and asset impairments and a fair value inventory step-up charge. Reconciliations of non-U.S. GAAP financial performance metrics to their most comparable U.S. 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 U.S. GAAP. There were no adjustments to U.S. GAAP financial performance metrics other than the items noted below.

• Organic orders and sales are calculated excluding amounts from acquired or divested businesses during the first twelve months of ownership or prior to divestiture and the impact of foreign currency translation.
• Adjusted gross profit is calculated as gross profit plus fair value inventory step-up charges.
• Adjusted gross margin is calculated as adjusted gross profit divided by net sales.
• Adjusted operating income is calculated as operating income plus fair value inventory step-up charges plus restructuring expenses and asset impairments.
• Adjusted operating margin is calculated as adjusted operating income divided by net sales.
• Adjusted net income is calculated as net income plus fair value inventory step-up charges plus restructuring expenses and asset impairments, net of the statutory tax expense or benefit.
• Adjusted EPS is calculated as adjusted net income divided by the diluted weighted average shares outstanding.
• EBITDA is calculated as net income plus interest expense plus provision for income taxes plus depreciation and amortization. We reconcile EBITDA to net income on a consolidated basis as we do not allocate consolidated interest expense or consolidated provision for income taxes to our segments.
• EBITDA interest coverage is calculated as EBITDA divided by consolidated interest expense.
• Adjusted EBITDA is calculated as EBITDA plus fair value inventory step-up charges plus restructuring expenses and asset impairments.
• Adjusted EBITDA margin is calculated as adjusted EBITDA divided by net sales.
• Adjusted EBITDA interest coverage is calculated as Adjusted EBITDA divided by consolidated interest expense.
• Free cash flow is calculated as cash flow from operating activities less capital expenditures.

Table 1: Reconciliations of the Change in Net Sales to Organic Net Sales
	Three Months Ended March 31, 2021
	FMT			HST			FSDP			IDEX
Change in net sales	7	%		12	%		11	%		10	%
- Net impact from acquisitions	3	%		—	%		—	%		1	%
- Impact from FX	2	%		3	%		4	%		3	%
Change in organic net sales	2	%		9	%		7	%		6	%

Table 2: Reconciliations of Reported-to-Adjusted Gross Profit and Margin (dollars in thousands)
	Three Months Ended March 31,
	2021				2020
Gross profit	$	292,623			$	271,956
+ Fair value inventory step-up charge	664				—
Adjusted gross profit	$	293,287			$	271,956
Net sales	$	652,036			$	594,462
Gross margin	44.9		%		45.7		%
Adjusted gross margin	45.0		%		45.7		%

Table 3: Reconciliations of Reported-to-Adjusted Operating Income and Margin (dollars in thousands)
	Three Months Ended March 31,
	2021																					2020
	FMT				HST				FSDP				Corporate					IDEX				FMT				HST				FSDP				Corporate					IDEX
Reported operating income (loss)	$	62,897			$	66,650			$	44,560			$	(18,560	)			$	155,547			$	66,771			$	52,643			$	38,037			$	(17,510	)			$	139,941
+ Restructuring expenses and asset impairments	943				625				97				563					2,228				—				—				—				—					—
+ Fair value inventory step-up charge	664				—				—				—					664				—				—				—				—					—
Adjusted operating income (loss)	$	64,504			$	67,275			$	44,657			$	(17,997	)			$	158,439			$	66,771			$	52,643			$	38,037			$	(17,510	)			$	139,941
Net sales (eliminations)	$	243,365			$	250,369			$	159,484			$	(1,182	)			$	652,036			$	226,861			$	224,059			$	144,324			$	(782	)			$	594,462
Reported operating margin	25.8		%		26.6		%		27.9		%		n/m					23.9		%		29.4		%		23.5		%		26.4		%		n/m					23.5		%
Adjusted operating margin	26.5		%		26.9		%		28.0		%		n/m					24.3		%		29.4		%		23.5		%		26.4		%		n/m					23.5		%

Table 4: Reconciliations of Reported-to-Adjusted Net Income and EPS (in thousands, except EPS)
	Three Months Ended March 31,
	2021					2020
Reported net income attributable to IDEX	$	112,708				$	101,998
+ Restructuring expenses and asset impairments	2,228					—
+ Tax impact on restructuring expenses and asset impairments	(533		)			—
+ Fair value inventory step-up charge	664					—
+ Tax impact on fair value inventory step-up charge	(199		)			—
Adjusted net income attributable to IDEX	$	114,868				$	101,998

FAQ

What are the key financial results for IDEX (IEX) in Q1 2021?

IDEX reported record orders of $710.7 million, sales of $652 million, and adjusted EPS of $1.51 for Q1 2021.

How did IDEX (IEX) perform compared to Q1 2020?

IDEX saw a 10% increase in both orders and sales compared to Q1 2020.

What is the new adjusted EPS guidance from IDEX (IEX) for 2021?

IDEX raised its full-year adjusted EPS guidance to $6.05 to $6.20.

What major acquisitions did IDEX (IEX) announce recently?

IDEX announced the acquisition of ABEL Pumps and plans to acquire Airtech Group.

What was the cash flow performance for IDEX (IEX) in Q1 2021?

IDEX achieved record free cash flow of $94.7 million, up 32% from the prior year.