Greetings, and welcome to the Q1 2022 IDEX Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Allison Lausas, Vice President and Chief Accounting Officer. You may begin.

Good morning, everyone. This is Allison Lausas, Vice President and Chief Accounting Officer for IDEX Corporation. Thank you for joining us for the discussion of IDEX first quarter 2022 financial highlights. Last night, we issued a press release outlining our company’s financial and operating performance for the 3 months ending March 31, 2022. The press release, along with the presentation slides to be used during today’s webcast, can be accessed on our company website at idexcorp.com. Joining me today are Eric Ashleman, our Chief Executive Officer and President; and Bill Grogan, our Chief Financial Officer. The format for our call today is as follows: we will begin with Eric providing an overview of the state of IDEX’s business; then Bill will discuss IDEX first quarter financial results. He’ll also give an update on segment performance and the markets they serve and provide our outlook for the second quarter and full year 2022. Following our prepared remarks, we will open the call for your questions. If you should need to exit the call for any reason, you may access a complete replay, beginning approximately 2 hours after the call concludes, by dialing the toll-free number 877-660-6853 and entering conference ID 13724803 or simply log on to our company homepage for the webcast replay. And before we begin, a brief reminder, this call may contain certain forward-looking statements that are subject to the safe harbor language in last night’s press release and in IDEX’s filings with the Securities and Exchange Commission. With that, I’ll now turn this call over to our CEO and President, Eric Ashleman.

Thank you, Allison, and good morning, everyone. I’m on Slide 6. The first quarter was an outstanding start to the year for IDEX. I’d like to thank our IDEX employees around the globe for their hard work and contributions to our success. We saw strong broad-based demand for our differentiated technologies with growth across all 3 of our segments leading to record orders, sales and backlog. This robust market plus outstanding operating performance resulted in 12% organic sales growth and excellent margins. We achieved adjusted EPS of $1.96, setting another IDEX record. Overall, the operating environment in the first quarter was much like the fourth quarter of 2021, but our team’s improved their ability to navigate through this challenging environment. We effectively mapped our 80s and 20s from customers through work cells [ph] and back to the supply base in a way that increased overall throughput and velocity. We also work together to attack our most problematic supply challenges through resourcing or to redesign. Although, we expect these challenges will remain with – for us in the near term, we are confident in our ability to adapt, execute and deliver for our customers. This period of rapid economic recovery coupled with geopolitical disruptions and constrained supply continues to drive material and freight costs higher. We kept pace with our own robust price capture efforts as we leverage the highly differentiated nature of IDEX’s product portfolio and our leadership positions in critical niche markets around the world. We also saw strong benefits from our productivity initiatives, specifically benefits from our site consolidations in FMT, capital investments that drove efficiencies, and product design changes that reduce material consumption. The results in Q1 are a testament to our team’s long view across business cycles as they build productivity roadmaps to support growth and…

Thanks, Eric. I’ll start with our consolidated financial results on Slide 8. Q1 orders of $856 million were up 20% overall and up 16% organically. We experienced favorable performance across all our segments and built $105 million of backlog. First quarter sales of $751 million were up 15% overall and up 12% organically. We saw favorable performance within each of our segments led by strong results in HST. Q1 gross margin expanded 70 basis points and adjusted gross margins expanded 60 basis points versus last year at 45.6% driven by favorable volume leverage, operational productivity and favorable price cost, despite rising inflation. First quarter operating margin was 25%, up 110 basis points compared to prior year. Adjusted operating margin was also 25%, up 70 basis points compared to prior year. Excluding the impact of acquisition-related intangible amortization, adjusted operating margin expanded 130 basis points. I’ll discuss the drivers about adjusted operating income on the next slide. Our Q1 effective tax rate was 22.4%, down slightly versus our prior year rate of 22.6% due to the mix of global pre-tax income among their jurisdictions. First quarter net income was $140 million, which resulted in EPS of $1.83. Adjusted net income was $150 million, resulting in an adjusted EPS of $1.96, up $0.34 or 21% over prior year adjusted EPS. Finally, free cash flow for the quarter was $64 million, approximately 43% of adjusted net income. This result is driven by higher earnings being more than offset by increases in working capital due to the volume impact on receivables, as well as additional inventory we’ve strategically added to help mitigate some of the longer lead times we are experiencing. Moving on to Slide 9, which details the drivers of our adjusted operating income. Adjusted operating income increased $29 million for the quarter…

And at this time, we’ll be conducting a question-and-answer session. [Operator Instructions] And our first question comes from the line of Mike Halloran with Robert W. Baird. Please proceed with your question.

Hey, good morning, everyone.

Hi, Mike.

Hey there, Eric. So maybe just start on the demand side of things. Obviously, there’s a lot going on the environment here. But sounds like demand still pretty healthy order. It’s still pretty healthy underneath the hood for you, I know, you mentioned in the prepared remarks maybe some hesitancy on the larger project side of things. But I’d like to a little sense for how you’re thinking about how those challenges from a broader perspective are impacting the business from the demand perspective. Are you seeing any cracks emerging anywhere? How was momentum through the quarter? Just really any context you can give around what you’re seeing?

Yeah, thanks, Mike. Look, it’s holding pretty steady for us all over the place. I mean, the sectors we outline have been strong, they were strong through the first quarter that momentum has continued into the early part here the second quarter. Probably the only thing that we’ve seen continually here that it’s been held back a bit is the large projects category that we talk about a lot. I continue to see that, honestly, it’s just a question of resource availability, ability to focus on doing the work, either in the current context or even projecting across the future as people consider all the things that that are on the table there that could disrupt that. That being said, we’ve seen some projects here and there, and places like energy, and certainly a few in the chemical space, some short-term stuff in water that indicates, people are trying to get at capacity just like we are and throughput, so that continues to add to the mix. So I – very, very strong, overall steady, and that’s one thing that makes it pretty easy to navigate.

No, that makes sense. And on the margin side of things, the FMT margins really stood out this quarter. I know, Bill highlighted some of the reasons, but maybe just some thoughts on sustainability on that side, if there’s anything that wasn’t repeatable in that mix, as we look forward here?

Yeah. Now look, I think, we – as you can see, and I said on the remarks, I mean, we made some nice progress on throughput and velocity that always helps our situation. It’s nice from a leverage perspective and it also implies that things are working more efficiently. The impasse the consolidations that we had last year in FMT specifically has been a big benefit for us as we go. And then, I know, we’ll dive into price cost along the way. But, of course, we’ve done our best there to keep our head above water. You’ve kind of put that into the mix with more throughput and output. That’s a good mix for us overall, and you see it reflected in performance.

Appreciate it. Thanks for time.

Thanks, Mike.

Our next question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Good morning, everyone.

Hi, Nathan.

Just a couple of questions on the guidance to start with, it looks like pretty much your guidance for revenue for the rest of the year, even at the high end relative to the first quarter, the quarterly run rate is up only by about as much as the Nexsight acquisition adds. I think, Bill, you said you built $100 million-plus of backlog during the quarter. Is this really you guys just assuming that supply chain limits your output for the remainder of the year maybe core demand is a little bit better than that. But you’re just assuming that you don’t get a lot of relief from the supply chain constraints and that restrains what you can actually ship?

Not exactly, Nathan. As we look at, obviously, the team’s ability to increase their output directions we’re taking internally has improved with some of the external events that have happened recently in the unknown longer-term implications just can’t count on significant ramp from our current volumes that we’re at now. Obviously, if things unwind and resolve there’s upside opportunity in the back half, definitely based upon the strong backlog that you’ve highlighted.

Okay. I think cautions fair enough that things could only get worse, right?

Yeah, exactly.

Second question I had is on capital deployment here. You guys have certainly stepped up the pace of acquisitions, and how aggressive you’ve been there. The markets clearly worried about recession in 2023. Does this change your calculus in how you are thinking about going up there acquisitions in terms of, how you’re de-risking your deal models, risk premiums, that you’re putting on things. Any change to the calculus that you guys are using over there as you’re approaching acquisitions at the moment?

Yeah, I’d say, I mean, not a lot in the short-term, again, it come back to kind of the nature of the assets that we’re looking at here. They’re very representative of kind of classic IDEX businesses, high mission critical solutions, risk adverse end markets, I mean, they’re not the kind of businesses that Bob and we’ve a lot in the short-term. And ultimately, the valuation on the part of the seller and for us on the part of the buyer comes down to the assurance of pretty steady growth and cash streams and high quality earnings over time. And, of course, what we think we could do to a business on the inside, which is mostly under our control anyways. So not to say, we’re discounting any of those things, but certainly – particularly in the short-term, it doesn’t really change the view of what we think is favorable for the long-term health of the company.

Have you seen that uncertainty in the market out there at the moment from the seller’s perspective, improved pricing at all on any of these assets that you’re looking at?

No, I wouldn’t say we’ve seen that that’s often a lagging phenomenon. And again, this – we’re in very high quality waters, with generally long histories that anybody would refer to, and just degrees of health in the future, all positive. So it doesn’t really enter the mix of these kinds of assets too much.

Perfect. Thanks for taking my questions.

Thank you, Nathan.

Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Thank you. Good morning, everyone.

Hi, Deane.

Hi. When we see record orders, record sales, record backlog, and upside in organic, it’s not sure that you did miss any revenues, because of supply chain. But did you have any projects that you couldn’t ship past due anything you could size there?

I mean, there was a couple of isolated things, the amount left on the table versus the number we quoted in Q4 was down substantially. Again, the team’s ability to work through some of the operational output, and then just slight improvements in some of the supply chain areas, a lot less than, I think, we quoted around 3% in the fourth quarter, much lower number kind of a couple of basis points type of framework.

That’s really helpful. And on the cascade on that shows the growth investments in discretionary, I’m always interested in knowing some of the specifics inside there, because, obviously, you could cut-back on growth investments anytime and dress up quarterly earnings, but that’s not what you all do. So what’s in the growth investment and the discretionary buckets? And what kind of payback should we expect?

Yeah, Deane, we’re committed to invest, making these investments and outside of what happens in the short-term, these are things that we’re committed to that are going to drive growth for us long-term. We talked about engineering resources, different commercial initiatives we have across the portfolio. Eric’s highlighted several times just the build out of our M&A team to improve the conversion that you’ve seen in our M&A pipeline. And we’ve got great projects in all 3 segments, either through new product launches, investigating new markets to leverage different applications for our technologies. And then even in the second quarter here, we’ve got some larger trade shows that we’re back in the largest North American trade show for Fire & Rescue that we’re going to launch a couple new products and bring those to market. So a lot of exciting things across the portfolio that we’re committed to investing, as we progress through the year like we talked about, we gave our initial guidance. And then, Eric, anything else you’d want to add.

Yeah, I would just continue to highlight, we talk a lot about the top kind of those that list of top organic bets for the company, the resources, Bill was talking about maps really, really solidly to that list. So it’s not spread evenly. It’s very disproportionately tuned with that addition for sort of more enterprise work around strategy and sectors we’re interested in as we think of putting money to work.

That’s really helpful. And Eric, since you asked – to be asked about price costs take us through where the pricing is expected to read through the rest of the year, and how you expect to end up on price cost?

Yeah, I’ll hit it generally, like, Bill kind of fill in the blanks in terms of models and numbers. But, I mean, like we’ve been, as you’d suspect, very, very aggressive on the pricing front and talking about it for a long time, where we think we’re entitled to it, given the differentiation and the problems that we solve out there. We’ve worked at very systematically across the company, I mean, there’s an approach to how we do that. We take into consideration, the long and deep often personal relationships that we have customers and how to navigate that effectively in an environment like this. So I would say here, as we’ve talked through last year, we got some ways that the cycle came up, and the velocity of it was in many ways unexpected in the beginning of the year. We kind of caught up with it in the back half. And then, I see us in a more favorable position as we enter the year here, and I think you see that reflected in the margins.

Yeah, I think, continued progression here in the first quarter. I think as each month goes by the additional pricing actions we’ve taken, we have seen increased inflation, the teams are doing a much better job getting out in front of it. And, I think, towards the back half of the year will be add or an excess of our historical price cost based upon the line of sight to what we have as of now.

That’s real helpful. Thank you.

Thanks, Deane.

Our next question comes from the line of Allison Poliniak with Wells Fargo. Please proceed with your question.

Hi, good morning.

Hi, Allison.

I just want to get back to your comments on the project side, Eric. You had mentioned, it seemed like it was more of a win not if kind of scenario with, obviously, elevated concerns of this next downturn, which seemed more consumer facing at the time. Just would love your perspective, as you kind of think forward here in terms of this project is, would it support maybe a more shallow recession, if when one comes for industrial just any thoughts on your view there?

Well, I mean, the second half of that is a broader question that involves a lot of other things. But I would say, just from what we can see here, it’s just been a consistent story. I mean, I think a lot of companies have got work that they need to get at. In many ways, it’s concentrated in certain areas that are more favorable than others, they would love to deploy capital and get at it sometimes at larger scale. But you just see, increasingly, I mean, that the bigger the project, the harder it is to put together, you’ve got to have the people to do it, they’ve got to be familiar with the company, and then you got to be able to marshal all the resources and count on it across a horizon that’s going to be longer than it has been before, so all lead times are much longer than they have been. So any projects duration has got to be able to traverse essentially more risk and uncertainty. And so, I think, what we’re seeing and in fact, even some of the things that I look at that we deploy in our own companies, you kind of go to the head of the list and you say, all right, well, where’s the absolute place that we have to put some money to work and you can see the return sitting in front of us, because the demand is pronounced. And if you can do it in a slightly different way maybe it’s a little bit faster, it’s quicker the scale is of a different nature. Those are the kinds of things that we’re in interacting with. And it’s kind of it matches the deployment within our own business, which, of course, is sort of a different scale. So, I think, that bigger transformative project stuff that’s out there, it’s just that’s the situations that it face, I don’t know, when that ends, I guess, that’s the open question for all of us. But, I see a lot of that related to, it’s just got to find a way to settle into a very different planning environment that has been this way now for a while. But, I think, if folks had a magic wand, they would like it to go away, and they’d like to put that capital to work. That’s what continues to kind of give us the competence and the momentum on the longer term nature of the cycle, as you can see how much of it does need to be deployed?

That’s great. And then just a question on max and neutral in the quarter, just based on the backlog, and it’s certainly the pricing items, but more on the mix side. How should we think about that mix as we kind of moved through the year based on what you’re seeing in your order book at this point?

No material impact on the year-over-year, I think, for us a lot of the margin mix will be just the FMT margin expansion that’ll be more consistent this year relative to other productivity initiatives that we had last year, so more productivity driving the margin expansion versus favorable or unfavorable mix having major impact.

Great. Thank you.

Thank you.

Our next question comes from the line of Joe Giordano with Cowen. Please proceed with your question.

Hey, good morning, everyone.

Hi, Joe.

So I’m just curious, like obviously with what’s going on in Europe, some major themes around how we transfer energy and food shortages globally. I mean, it realizes are more international problems and domestic here, but just curious if you can kind of take us through how you might be able to help attack those problems that are emerging now.

Yeah. Well, of course, we go from macro to micro pretty quick, when we start to think of, how that impacts us. But I like the way you framed it, which is actually anytime there’s disruption, there are problems to solve, and that’s usually healthy for us. So, as things swing around in production goes from one zone to another that means largely the infrastructure might be used in ways that’s more aggressive or higher rates than it has before. We do things like custody transfer on the energy side, if we’re shipping it around the world, or building out ports to do that, that’s places that we play. And so, I think, ultimately, I’d put that in the net favorable for us. And, I think, we saw some of that activity in the first quarter in places like energy. Same thing over on food production, I mean, is that becomes a bigger deal and starts to move around in different geographies and things like that, where capital may be or may not be a need to be deployed, we come along with it with the mission critical fluidic solutions that we have in there as well. So a lot of a lot of major trends to track and get a sense of where they’re heading or where they’re coming from. But I would say just the fact that they’re changing, often presents opportunities for us in the ways that that I described here.

That’s helpful. And just on the backlog, just given the orders and the backlog where it is. What’s your ability to kind of protect what’s there, I assume that the duration of the backlog is long, and it’s longer than it typically is. So as you get like kind of inflation while it’s still there, you’re able to protect the margins inherent in the backlog?

Yeah, in most of it, Joe, we’ve been able to evolve our terms and conditions over the last 18 months to make sure that we can pass on incremental inflation as it comes into there’s certain contracts that we have that we can’t, but I think we’re well positioned overall.

Yeah.

Thanks, guys.

Our next question comes from the line of Vlad Bystricky with Citigroup. Please proceed with your question.

Good morning, guys. Thanks for taking my call.

Sure.

So strong results, impressive first quarter, and you put up strong operating leverage and productivity, despite what we know is a challenging period given Omicron in North America for a lot of the companies we hear from. So can you just talk more about how you were able to navigate that environment and what you’ve seen now in terms of ongoing productivity runway in your plants?

Yeah. That’s a great question. So there’s a number of factors at play, some of which we turned to our advantage here in the quarter. I mean, from an external perspective, I’d say the supply chain environment is basically the same difficult some subjects better, some worse, but that not really markedly different. The labor availability piece, I mean, we’re low labor content, but it is critical, somebody eventually has to put things together, that actually improved for us in the first quarter, mainly from absenteeism. We enter the year with high rates. And then as we went on February and March, that actually improved. And I’d say labor availability, generally, while it’s a tough market out there for people, I mean, it did get a bit better for us. And we’ve got less kind of open roles, especially in the production side overall. So that was a component that turned more favorable for us. And then a lot of the work that we do, I mentioned in the remarks, it’s tuning 80/20, from beginning to end supply right through the factory, right to the customer base. We’ve kind of always naturally had that orientation and how we produce, the harder part is actually to draw those connections all the way back into the supply chain, and then move them around. And that’s where I’d say, we’ve done the best work here over the last really 6 months, but you saw the benefit in the last 3. So all that simply means is, you’ve got your best supplier making the part, that’s the most critical for our best part of the factory to our best customer set that alignment is in place, we’ve got ways to query that across the company now. And we can really see the benefit of that, and then that gives you a lot of that volume throughput that we referenced. And I don’t want to lose the other 2 pieces we called out. I mean, we did very difficult consolidations in the middle of a very difficult time. Last year, we’re now, those are completely behind us and they’re in parts of the business that have got good order velocity against them. So that’s like an additive component here.

That’s great color and it shows in the results. Maybe just one follow-up from me on the capital allocation side, it’s nice to see you deploy some cash to share buybacks. And, I guess, first we’ve seen in the past year plus, can you just talk about given the stock performance year-to-date, how you and the board are thinking about repurchases going forward, and whether that’s an area we could maybe see you be more aggressive through the years, the shares remain around where they are?

Yeah. No, Vlad, I’ll take that one. We’ve historically had a very disciplined approach for our share buyback program. When we think the stocks undervalued, what we consider our intrinsic value of the company, we’re back in buying shares. And, obviously, with the significant decline we’ve seen here, and we think that’s short-term related, a lot of the conversation, Eric’s highlight is we’re really bullish on the next couple years, both from an industrial cycle and our ability to put broader capital work in the M&A space. So we’re taking advantage of where the share price is, and we’re going to continue to buy at the current level, if we’re still at this value here as we progress through the quarter.

Great. That’s helpful. Thanks.

Sure.

Our next question comes from the line of Scott Graham with Loop Capital Markets. Please proceed with your question.

Hey, good morning, all. Thanks for taking my question. I understand for sure from your comments, Eric, that the impact of supply chain on the top line was a lot less than this quarter than last. But is that a number that you guys can maybe give us the impact on sales?

Well, I mean, it so from how much that we would attribute to gating is supply chain conditions overall? I mean, it’s a slight step down, I think, we’ve said typically before we’ve been somewhere in the point or two, things we wish we would have been able to get out or otherwise. And I’d say, this is a slightly more favorable tune, or landing position for us, largely for a lot of the work that I just talked through there. I mean, I’d say the one external component is that slight uptick in labor availability for us, recognizing again it’s a relatively small part of kind of our spent in P&L.

Understood. Thank you. And as far as like the 20 to 25 projects, I know that they look a little bit different today than they did a pre-COVID. Recall that you talked about the monetization when you guys pivoted into a post-COVID environment. Forgive me for not remembering that number, I thought it was like $100 million in incremental sales, something like that that you guys envision maybe being able to capture. Can you kind of tell us where you guys are on that curve?

Scott, maybe I’ll take that one. So, yeah, back in late 2020, we said, a $50 million to $100 million of potential incremental COVID opportunities. In 2021, we said incrementally was probably flat, 50 versus 50, so no big increase last year. And as we progress through this year, it’s been pretty consistent. There’s been no material pickup in COVID opportunities or decrease. So…

But then that would – Scott that would still leave kind of standard deck to drive out performance for us 200 to 300 basis points. And as Bill said, we went through a period where there was more COVID things in it. Now, those have kind of normalized to some degree, and we’re back looking at fast growing applications that kind of map to the world we see ahead of us. So we tune that fairly regularly and we’re always looking at what should be up there, which should be – should not, we don’t do that around sort of calendar cycles, we’re continually evaluating that and saying, if we hit a milestone that would suggest something needs to come off, and we’re seeing an opportunity elsewhere.

Got it. Well, thank you. And if I could just squeeze one in on dispensing, fourth quarter, the call you were a little bit of a lot got it on the dispensing outlook for this year, and then it looks like it had a pretty good first quarter. Could you kind of update on what you’re seeing there and what to expect?

Yeah, Scott, I think that’s a first half versus second half. We continue through the back half of last year to win some larger projects here in North America, that’ll be delivered in the first half, so continued strength here over the second quarter, and then much more difficult comps in the back half of the year.

Thanks very much.

Thanks, Scott.

Our next question comes from Matt Summerville with D. A. Davidson. Please proceed with your question.

Hi, this is Will Jellison on for Matt, this morning. Good morning.

Hi.

So I want to ask about the first quarter performance and try to understand better the extent to which the performance was enabled by preparation measures taken throughout 2021 versus things that were more on the fly, if you will, in response to things as they arose through that first quarter?

Well, I mean, if I go back to the comments, I had just a few moments ago, where I sort of delineated, the labor impact, which was positive for us, I mean, I would say almost all of that that’s an external situation playing through, coming off the Omicron infection rates and higher absenteeism, and then that moderated as we went through the quarter. And I do think labor availability, more generally, in some of the regions we do business improved from conditions last year. So I put that on the external side, that’s a component, the tuning I talked about relative to 80/20, and supply chain, and how we move that through the supply base or resourcing. I made some comments about that engineering, resourcing in our engineering design work in the opening comments, prepared remarks. And that’s our side of it. That’s things we’ve long been doing to try to keep pace with a very, very difficult supply environment. So I don’t know with the exact balance, I would say, but you got some of both coming together there. And, in both, I think likely to continue for us as we go forward.

Understood. That’s helpful. And then I do want to ask you about China, I know that at this point, it’s a relatively small portion of the footprint. But I know that throughout 2021, you were making investments in facilities there. I’m wondering at this juncture in April, given the kinds of lock downs activity we’ve seen there. What’s your view on the impact, or potential impact there might be and how IDEX might be positioned to respond to it?

Well, I think like everybody else were watching the current situation play out, I mean, pretty hard to predict how things are going to go, also hard to imagine that this is a big long-term event, I mean, there’s no doubt be some overhang here. But I would just kind of go back to what we said, when we made when we thought of the investment, we talked to everyone here about it. This is a massive economy. Our approach there is very local, it’s completely local. So we’ve got resources on the ground, we’ve got technologies available, and we’ve got domain expertise to solve local problems from within the economy. And so, that doesn’t insulate it entirely from macro events that happen there, but it does minimize the sort of disruptive things you can get doing lots of cross border, and that’s never really been our model there, it isn’t the model for India as well, we have a similar campus there. So the investments that we talked about the facilities expansion is, is actually nearing completion. And we look forward as everybody does for hopefully a healthy resolution to what’s going on over there where we’ve got a lot of employees in the region and are going to start there with our first concern is with their health and well being. And then, I still feel very confident about the investments we’re making to be appropriate given the potential of that economy.

I appreciate that. Thanks for taking my question.

Our next question comes from the line of Connor Lynagh with Morgan Stanley. Please proceed with your question.

Yeah, thanks. I think we’ve covered a lot on the full year outlook, so just wanted to ask a couple on the near-term thoughts here. I mean, it seems like your overall messages demand looks strong and there aren’t any sort of warning signs you’re seeing, but you want to be conservative given the overall macro environment. I guess, I’m curious, just in the second quarter, it seems like you are pointing to some potential for some margin compression. Is that based on what you’ve actually seen thus far, either in March or April? Or is that just similar sort of conservative vein there?

No, I think, we highlighted sequential margins decline, 50 basis points of it just the Nexsight acquisition coming into the fold on the dilutive impact of the deal amortization. It depending on what your competence, there’s kind of another 50 to 100 basis points, primarily through incremental investments on the discretionary and resource side. As we said, hey, we’re going to have about $20 million, $25 million for each category this year. We spent 4 [ph] in both incrementally that’s going to ramp a little bit here in the second quarter compressed margins slightly.

Okay. Understood. Understood. And then just in terms of capital deployment for the year, so the CapEx guidance for the full year would indicate that you’re sort of accelerating there. Just want to make sure, we have context for – what are the incremental things that you’re investing in there? What are sort of some of the big focal areas for you guys over the next year here?

Yeah, I think some of the big ones, Eric highlighted, continued investments in facilities in emerging markets are China expansion and India expansion, the CapEx associated with that’ll ramp here over the next few quarters. And then, we talked about a large infrastructure investment in our Banjo business, with new technology to increase automation and overall output is that business has continued to grow and scale here relative to the differentiation that that product brings to market along with a bunch of other investments is for growth and productivity across the portfolio.

Yeah, we got some things in life sciences and in our ceiling business related to semicon expansion, too. So we’re invested in that machine tools and equipment to do that, I wouldn’t say within additive emphasis on the automation capabilities that are out there today, that also has a secondary benefit of helping us on the labor front.

Makes sense. Thanks very much.

Thank you.

Our next question comes from the line of Andrew Shlosh with Vertical Research. Please proceed with your question.

Hey, good morning, guys.

Hi, Andy.

Firstly, do you know what total price was in the quarter?

Yeah, it’s close to 3%.

3%, right. That’s great color. The other thing I was kind of curious about, what do you think the demand outlook is for kind of [bios/medical flow?] [ph] What are you seeing there?

I mean, that’s been very, very healthy. I mean, obviously, there’s a piece of that that’s involved with COVID, or at a minimum the vaccine that therapeutic side of that, lots of interesting things going on with cell-based therapies and other things that are out there. So, I mean, it’s an area of focus for us, we’ve got a nice presence there that has done well, and we continue to stay very interested in it.

Great. Thanks for the color. I’ll pass it on.

Our next question comes from the line of Brett Linzey with Mizuho. Please proceed with your question.

Good morning, all.

Good morning.

Hey, I wanted to come back to the guidance framework. You brought up the low-end, left some contingency there and certainly understandable, you mentioned the potential risks. I was just hoping, you could put a finer point on are there specific 1 or 2 regions or areas of the portfolio that where you’re most in this is really a demand side versus price cost, any color would be great?

I’d say from a high level there, none of this really comes back to specific areas of concern that map against where we are and kind of where we intersect the world out there. They’re more general, and they’re pretty close to the same ones that everybody else is thinking about. So region locked down in China and what happens is that all plays out and broader exposure to Asia-PAC and supply sides back into mature economies you put us. But it’s on the radar keeping an eye on that certainly the issues geopolitically in Europe. We don’t have a lot of direct presence there. But there’s a bunch of derivative impacts for us and others, we’ll see how that plays out. But I don’t think we’re looking at it, units of measure that are different than the ones that are on the macro screen for most people.

And again, I think relative to some of the earlier commentary, less on the demand side, more on the supply side.

Yeah.

Got it. Makes sense. And then just back to HST, the continued wins in sequencing in semiconductor. I was hoping you could just unbundle that in what the contribution was to the 20% order print. And then specifically within semiconductor, how are you aligning with some of these big capital commitments here in the U.S. and Europe on the fabs?

Well, I mean, so like I – it’s kind of hard to do that specifically, because it goes in different businesses and goes in different places, I would just say, very, very strong on both of those categories. On the semi side, I mean, we’re – like we’re involved in different aspects of that we’re involved in some businesses, we kind of come in there on the fab side, when we build out infrastructure, and other places, we’re actually involved in the metrology side, or the inspection of things that are made in that infrastructure. So we’re well positioned throughout and well positioned with the names that most people think of when they think of that industry.

Okay, great. I appreciate it. Thanks a lot.

You bet.

Our next question comes from Rob Wertheimer with Melius Research. Please proceed with your question.

Hi. Thanks. Good morning, everybody.

Hi, Rob.

I just wanted to see if you’d round up discussion a little bit on capital deployment and acquisition, where you’ve obviously been successful and steady in the past year, and to this quarter, 1Q and 2Q. Can you give any just sort of background on how the funnel looks versus a year-ago versus a year and change ago, you’d be operational focus, I think is shifting more and more towards there, any changes to how that broads out the funnel or accelerates progress through it? And I’ll stop there.

Sure. Well, I think for a while we’ve been talking about the intentionality of the work, so we resourced it in a different way, put some people on, brought some folks in from the outside, I mentioned, Roopa, in my earlier comments, she brings a lot to the effort as we go. But a lot of this comes from – bottoms up, I mean, it comes out of the businesses who know their worlds and markets the best. And you can kind of see that if you look at the last few acquisitions in particular, they’re all very close to home to our businesses. And, in fact, we’ve known them for a long, long time. So in some ways, we’re taking advantage of targets that have been out there that we’ve understood with much more focused cultivation, understanding and ability to get the transaction done, and then integrate it successfully in the company. So that’s always going to be a big piece of what we do. Right next to that, then is broadening that work and starting to think about, well, if you go slightly to the left or to the right, or extend out the time horizon a bit further, what does that suggest about the universe that’s out there, which could be known in some cases isn’t known. And so it’s very, very focused work, it’s process driven. You can think of it is almost a grid of intersection between the work that we do and the problems that need to be solved in the world and where they cross over. Again, a lot of it is relatively close to home, because we’re looking to leverage the domain expertise that we have the market insight and presence and positioning of current businesses. But it’s coming together in an interesting way, and we long, et cetera, I’d said, ever since I took the seat, I was trying to level loaded a bit. And that’s now happened, it makes that resource base more stable, and makes the work more predictable, and it’s easier to optimize. So that’s kind of where we are now looking forward to where we’re going to take it and talking to you about it as we go.

That’s fantastic. And so that’s obviously the process focus seems like it’s paying off. I mean, as you look at your metrics on just scale of opportunities, out of opportunity progress through, I assume you anticipate this higher level of acquisition activity is well supported to continue.

That’s the plan. I mean, we’ve got the – to complete the kind of growth maps that we have for the businesses, we’re going to often want to bring in some technologies and position points that we don’t have today. This is a great way to do it. And we’ve got the great cash generating facility and balance sheet to pull it off. And so, but doing it in a way that works for us process driven, people dependent, we like that. And that’s what we’re trying to build there.

Perfect. Thank you.

Thank you.

And our next question comes from the line of Walt Liptak with Seaport Research. Please proceed with your question.

Hey, thanks. Good morning, everyone.

Hi, Walt.

Hi. We didn’t cover a lot of ground, but I thought I’d try and drill into a couple of things. Certainly, you recognize that the Europe and plenty of geopolitical things are in the quarter. Did you notice anything with demand like orders or with any kind of project delays or anything like that? And if you compare it and contrast in supply chain in the U.S. versus Europe, or can you see any differences?

I would say nothing yet. Nothing on the front that’s hit the radar here. And we have a big broad cross section of different markets, different pressure points, and I wouldn’t be able to pick anything out specifically yet.

Okay. All right. Fair enough. And then, I think, Bill’s remarks about the paint dispensing market. I think, he made a comment that globally, it was looking, okay, is what I wrote down. But, and then on the follow-up question, you said that it was still the second half where you thought that was going to slow down. I just wanted to make sure I didn’t miss hear something, was there some sort of a pickup in dispensing internationally for orders that might get better?

Yeah, Walt, I think overall, the paint markets strong, obviously, from time to time, there’s large replenishment orders in North America that were coming off of the back of a huge cycle there that’ll be have the tougher comps in the second half of the year. So demand – core demand is still strong across the globe with just tough comps on some of these projects.

And you still have a lot of especially the Asia side of things is, I mean, it’s just now automating we’re still involved in that cycle, which is a little bit more steady state, less project specific. So it’s really how these things come together and timeout.

Okay, great. Okay, thanks very much.

Thanks.

And we have reached the end of the question-and-answer session. I’ll now turn the call back over to CEO, Eric Ashleman for closing remarks.

Thanks very much. I’d like to thank everybody on the call for your interest and support to IDEX. Just 2 final points for me: one, that just a really, really big thank you to our IDEX teams and business partners that are out there. Bill and I do our best to simplify the story here makes it seem easy enough, it’s not. I mean, we deliver highly engineered solutions to very demanding customers to solve super critical problems. It’s tough to do on the best days. This has been a pronounced difficult environment. And I’m really, really proud of how our teams have come together and made the improvements and progress they have here. So I just really want to thank them. And look, we talked a lot about those challenges that are out there, the things that that folks are wondering about. And I just remind everybody, our company is uniquely positioned to help with many of those problems to solve them. It’s reflective our mission and values, and when we do our job as well. We’re rewarded financially with gross margin expansion tasked to take the business to the next level. So we’re leaning forward, we feel good about where we are and look forward to talking with you, as we go about the progress we’re making. Thanks very much.

And this concludes today’s conference, and you may disconnect your line at this time. Thank you for your participation.