Vladimir Bystricky

Vlad Bystricky from Citigroup asked for clarification on IDEX's price versus volume dynamics, specifically the price contribution in Q3 and the outlook for pricing heading into 2026, especially if sluggish demand persists. He also inquired about the cadence between Q3 and Q4, and what changed to cause a shift in demand given Q3's upside and largely reiterated full-year guidance.

Answer

Eric Ashleman, President and CEO of IDEX Corporation, stated that price capture in Q3 was about 3.5%, the highest for the year, driven by differentiation and tariff responses, but noted increasing pricing fatigue. Akhil Mahendra, Interim CFO, clarified that 2% of this was tariff pricing, expected to continue into Q4. Mahendra explained that Q3's upside was due to earlier-than-anticipated order timing and operational improvements, leading to a more balanced Q3-Q4 cadence reflective of historical patterns, with Q4's HST ramp supported by backlog.

Vlad Bystricky, Stock Analyst at Citigroup, asked about IDEX's price versus volume dynamics, the specific price contribution in Q3 2025, and the pricing outlook for 2026, especially if sluggish demand persists. He also sought clarification on the cadence between Q3 and Q4 2025 and any demand shifts that led to the full-year guidance reiteration.

Answer

Eric Ashleman, President and CEO, noted that price capture increased to 3.5% in Q3, the highest for the year, driven by technology differentiation and team efforts despite growing pricing fatigue. He indicated that 2026 pricing would depend on policy and base inflation. Akhil Mahendra, Interim CFO, specified that Q3's 3.5% price included traditional pricing (1.5%) and tariff pricing (2% run rate), expected to continue. Mahendra explained that Q3's upside was due to strong execution, earlier order timing, and Mott's operational improvements, leading to a more balanced Q3/Q4 cadence reflective of historical patterns, with Q4's HST ramp already in backlog.

Requested more specific details on the assumptions embedded in the new guidance and asked for clarification on the agriculture market trends within the FMT segment, given it was marked as a weak area.

Answer

The company stated that guidance assumes steady performance in FMT and FST, with moderated but still present acceleration in HST, driven by a strong Q4 expected from Mott. Regarding agriculture, they explained that while the overall cycle is weak, their components business is outperforming low expectations due to a good growing season and strong commercial execution.

Vladimir Bystricky of Citigroup inquired about a large project win for the recently acquired Mott business, asking if the opportunity is repeatable. He also asked if there was evidence of customers pulling forward orders ahead of tariffs.

Answer

CEO Eric Ashleman described the Mott project, a wastewater filtration solution for a dairy farm, as an 'outstanding reference case' that is 'right down the fairway' of the acquired technology's core strategy, suggesting it is repeatable. Regarding customer behavior, he noted that while they looked for it, any pre-buying ahead of tariffs was modest, estimated by CFO Abhi Khandelwal to be around $6 million to $8 million.

Asked about the macroeconomic assumptions in the guidance, specifically regarding potential tariff impacts, and inquired about the M&A funnel, including the mix of proprietary versus competitive deals and target areas for larger acquisitions.

Answer

The company has not assumed any specific material tariff impacts, citing its localized manufacturing model and pricing power as mitigants. The M&A strategy remains focused on proprietary transactions, aiming for an 80% rate, particularly in strategic areas like HST and material science. The company confirmed it has the balance sheet capacity to support its M&A ambitions while maintaining its investment-grade rating.

Vladimir Bystricky of Citigroup Inc. questioned what assumptions were made in the 2025 guidance regarding potential tariff impacts and what customer feedback indicates about this uncertainty. He also asked about the M&A funnel, specifically the mix of proprietary versus competitive targets and which business areas might see larger deals.

Answer

CEO Eric Ashleman stated that no material tariff impacts are factored into the guidance due to policy uncertainty. He emphasized that IDEX's localized 'in-region, for-region' manufacturing model, supply chain diversification, and pricing power on differentiated products provide significant mitigation. Regarding M&A, Ashleman confirmed a strong focus on proprietary deals, which have comprised about 80% of recent transactions, with a continued interest in areas complementary to the HST and material science platforms. CFO Abhishek Khandelwal added that the company's balance sheet has the capacity to support this M&A strategy while maintaining its investment-grade rating.

Vladimir Bystricky of Citigroup Inc. questioned what assumptions were made in the 2025 guidance regarding potential tariff impacts and customer sentiment in the current uncertain environment. He also asked for an update on capital deployment, specifically the M&A funnel's mix of proprietary versus competitive targets and where larger deal opportunities might exist.

Answer

CEO Eric Ashleman responded that no material tariff impacts are included in the guidance due to policy uncertainty, but emphasized that IDEX's localized production model provides a natural hedge. He noted the company has also diversified its supply chain and relies on product differentiation for pricing power. On M&A, Ashleman stated the focus remains on proprietary deals, targeting an 80% rate, particularly in spaces complementary to HST and material science. CFO Abhi Khandelwal affirmed that the company has the balance sheet capacity to support M&A while maintaining its investment-grade rating.

Vladimir Bystricky from Citigroup asked for more detail on the dynamics in the FMT segment's energy business, which softened during the quarter. He also requested color on geographic trends for FMT's day-rate orders, particularly the differences between domestic and international markets.

Answer

CEO Eric Ashleman explained the energy softness was due to a combination of market pressures, such as a warm winter impacting downstream demand, and a difficult year-over-year comparison as the company was processing significant backlog a year ago. Regarding geography, he stated that North America is leading growth, Europe is stable but lagging, India is very strong, and China is trailing but still positive for IDEX.

Vladimir Bystricky from Citigroup asked for details on the softening energy market within the FMT segment and for a geographic breakdown of the stability observed in day-rate orders.

Answer

CEO Eric Ashleman explained that the energy softness was partly due to tough year-over-year comparisons from clearing a large backlog and partly due to market pressures like a warm winter. Regarding geography, he noted that North America is leading growth, Europe is stable but lagging, India is strong but small, and China is trailing but still positive for IDEX due to its targeted market approach.

Vlad Bystricky inquired about the regional and end-market drivers behind the encouraging 5% growth in Industrial Process (IP) short-cycle orders and the sustainability of this momentum. He also asked for an update on underlying market demand trends and opportunities in Saudi Arabia and the broader Middle East for IP, including any changes in demand patterns.

Answer

CFO Emmanuel Caprais and CEO Luca Savi attributed strong short-cycle activity to parts and valves, particularly medical valves for weight loss drugs, noting 7% legacy short-cycle growth with 4% volume. For Saudi Arabia and the Middle East, Mr. Savi and Mr. Caprais expressed excitement, citing a 21% sequential increase in the Middle East funnel, ongoing investments in downstream and other areas, and strong project management performance driving a 95% win rate for Goulds Pumps.

Vlad Bystricky inquired about the margins on new project wins being booked into the Industrial Process backlog, especially given price competition. He also asked about the visibility and durability of growth momentum in the shorter-cycle businesses within the CCT segment.

Answer

CEO Luca Savi and CFO Emmanuel Caprais explained that despite a mix headwind from more projects, IP margins are improving due to booking projects at better margins and, crucially, enhancing those margins during execution, with shipped project margins up 400 bps YoY. For CCT, Savi highlighted that connector orders (ex-Kesaria) grew 12% in Q2, marking the second-highest quarter ever and signaling durable momentum driven by aerospace and defense.

Vladimir Bystricky of Citigroup Inc. questioned the potential risk to Saudi Arabian investments and the basis for confidence in Motion Technologies' (MT) outperformance.

Answer

CEO Luca Savi stated there is no change in customer tone from Saudi Arabia, with energy-related orders continuing to grow, bolstered by market share gains from strong local execution. Regarding MT, he affirmed confidence in achieving 400-500 basis points of market outperformance for the year, citing secured platform wins and a strong near-term order book.

Vladimir Bystricky asked about the expected conversion rate of the $1.6 billion backlog within 2025 and questioned the materiality of the Boeing production ramp-up to the CCT segment's growth outlook.

Answer

CEO Luca Savi explained that the backlog is more long-term, with projects in the IP segment having a 2-3 year execution timeline; he estimated IP's sales coverage for 2025 is over 40%. CFO Emmanuel Caprais noted that while the Boeing business is meaningful (~$10M revenue/quarter), the overall aerospace business is still expected to be down low-single-digits in 2025. Strength in defense and industrial connectors is expected to drive CCT's 4-5% growth.

Vladimir Bystricky asked about the future path for margins, given that legacy businesses are already at or above long-term targets, and inquired about the timing and profitability of the recent $50 million project win in Saudi Arabia.

Answer

CFO Emmanuel Caprais indicated that new margin targets will likely be released in the first half of 2025 and expects legacy margins to continue improving next year. CEO Luca Savi confirmed the $50 million project win is profitable due to strong local execution and localization, with revenue to be recognized over the next 2-3 years. Caprais added that this timeline is typical for large projects.

Vlad Bystricky from Citigroup questioned the drivers of strong organic growth in Europe and Asia Pacific, given sluggish macroeconomic conditions in those regions. He also asked how nVent protects margins on its growing long-cycle backlog from uncertainties like tariffs and commodity inflation.

Answer

CEO Beth Wozniak attributed the international outperformance to the company's strategy of focusing on high-growth verticals, new products, and strong commercial execution with distribution partners. On long-term contracts, she explained that nVent typically includes clauses allowing for price adjustments based on material changes from tariffs or other factors, and customers are generally understanding of these dynamics.

Vladimir Bystricky asked for a breakdown of the increased CapEx guidance between the Avail acquisition and core business investments. He also inquired about the reason for the sales growth divergence between the Americas segments of System Protection and Electrical Connections.

Answer

CFO Gary Corona explained that the majority of the increased CapEx is for the core business to support growth, particularly in data solutions, though it also includes CapEx for the Avail acquisition. CEO Beth Wozniak attributed the segment sales divergence primarily to differing year-over-year comparisons, as Systems Protection had very strong growth in the prior-year quarter while Electrical Connections was weaker.

Vladimir Bystricky asked if specific core technology platforms were being prioritized for M&A. He also inquired about visibility into the timing of liquid cooling deliveries and whether customer design changes were causing material shifts in demand.

Answer

Chair and CEO Beth Wozniak explained that the M&A strategy overlays its technology platforms with high-growth verticals, seeking a flywheel effect from acquiring differentiated products that can be scaled. Regarding liquid cooling, she stated there are no material shifts in timing, noting that general awareness and interest are increasing. Activity is high with both existing customers scaling up and new customers testing solutions, which is reflected in the growing backlog.

Vladimir Bystricky asked about the timing of converting mid-single-digit order growth into revenue, given the more modest Q4 guidance. He also requested details on the backlog visibility for the newly acquired Trachte business.

Answer

CEO Beth Wozniak explained that the order book contains a mix of short-cycle business and longer-term backlog, with Q4 caution reflecting distributor inventory management amid macro uncertainty. For Trachte, she noted a strong backlog provides good visibility into 2025, with some orders extending out a full year. CFO Sara Zawoyski added that the Enclosures segment is on track for strong mid-single-digit growth for the full year.

Vladimir Bystricky inquired about ITW's pricing strategy to offset tariff impacts, its effect on the overall 2025 pricing outlook, and whether the company's approach to margin protection has changed. He also asked about contingency plans for a potential economic slowdown and the company's recession playbook.

Answer

President and CEO Christopher O'Herlihy explained that the strategy is to offset tariffs with appropriate pricing, aiming for an EPS-neutral or better outcome. He emphasized that pricing decisions are decentralized to the 84 divisions, which leverage product differentiation. Regarding a recession, O'Herlihy stated ITW would stay invested in growth initiatives, utilizing its flexible cost structure and enterprise initiatives to protect margins, similar to its 'win the recovery' strategy during the pandemic.

Vladimir Bystricky questioned the underlying demand trends in China's medical market, the longevity of the investment cycle in the existing nuclear fleet, and the strategic rationale behind the OncoSpace acquisition.

Answer

CEO Tom Logan attributed the recent slowdown in China's medical market to the country's anti-corruption programs but noted Mirion's cautious planning has helped mitigate the impact. He expressed strong optimism about the nuclear fleet, stating it's 'still early days' for a long-term capital investment cycle driven by compelling economic incentives for plant operators. Regarding OncoSpace, Logan and CFO Brian Schopfer described it as a small, proprietary, and strategically important deal with a creative, low-upfront-cash structure that enhances their SunCHECK software platform.

Vladimir Bystricky of Citigroup questioned the potential risk of reimbursement changes affecting the nuclear medicine business and asked for an update on the timing and gating factors for the previously announced $300-$400 million pipeline of large orders.

Answer

CEO Tom Logan stated that the company does not see a risk from reimbursement changes, noting that recent CMS code approvals for theranostics have actually created positive momentum. Regarding the large order pipeline, Logan reiterated that the opportunities are expected to materialize over the next year, the pipeline has broadened, and Mirion has not lost any of the potential deals, though the timing for large projects remains inherently difficult to predict.