Earnings call transcript: IDEX Corporation Q2 2025 earnings beat expectations

IDEX Corporation (IEX) reported its second-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $2.07 against a forecast of $1.99. The company also exceeded revenue projections, reporting $865 million compared to the anticipated $857.93 million. Despite these positive results, IDEX’s stock experienced a significant decline, dropping 11.11% to $164.61 post-announcement in pre-market trading. According to InvestingPro analysis, IDEX currently appears undervalued, with a "GOOD" overall financial health score of 2.52 out of 5, suggesting solid fundamentals despite market volatility.

Key Takeaways

• IDEX reported higher-than-expected EPS and revenue for Q2 2025.
• Stock price fell 11.11% in pre-market trading despite earnings beat.
• Organic orders and sales showed modest growth.
• Adjusted full-year EPS guidance was revised downward.
• Acquisition of Microlam highlights focus on growth in optical technologies.

Company Performance

IDEX Corporation demonstrated a mixed performance in Q2 2025. The company achieved a 2% growth in organic orders and a 1% increase in organic sales year-over-year. However, adjusted gross margins declined slightly by 10 basis points, and the adjusted EBITDA margin fell by 40 basis points to 27.4%. The company reported a strong free cash flow of $147 million, marking a 25% increase from the previous year, and maintains robust liquidity with approximately $1.1 billion. InvestingPro data reveals the company’s strong financial position with a current ratio of 2.79 and moderate debt levels, operating with a debt-to-equity ratio of 0.5.

Financial Highlights

• Revenue: $865 million, up from $857.93 million forecasted.
• Earnings per share: $2.07, exceeding the $1.99 forecast.
• Adjusted gross margin: Declined by 10 basis points.
• Adjusted EBITDA margin: Declined by 40 basis points to 27.4%.
• Free cash flow: $147 million, a 25% increase year-over-year.

Earnings vs. Forecast

IDEX Corporation’s reported EPS of $2.07 was a 4.02% surprise over the forecasted $1.99. Revenue also surpassed expectations, coming in at $865 million compared to the anticipated $857.93 million. This performance shows a positive deviation from forecasts, indicating stronger operational efficiency and market demand than analysts had anticipated.

Market Reaction

Despite the earnings beat, IDEX’s stock price fell by 11.11% to $164.61 in pre-market trading. This decline may reflect investor concerns over the company’s lowered full-year guidance and potential challenges in key market segments. The stock’s recent movement contrasts with its 52-week high of $238.22, indicating significant investor caution. InvestingPro highlights IDEX’s strong dividend profile, having maintained payments for 31 consecutive years with a current yield of 1.53%. Analyst targets suggest potential upside, with price targets ranging from $180 to $238.

For deeper insights into IDEX’s valuation and growth prospects, including access to comprehensive Pro Research Reports covering 1,400+ top stocks, consider subscribing to InvestingPro.

Outlook & Guidance

Looking forward, IDEX has adjusted its full-year organic sales growth guidance to approximately 1% and revised its EPS guidance to a range of $7.85 to $7.95. The company expects 2-3% organic revenue growth in the third quarter and anticipates a stable performance with potential recovery in the fourth quarter. The acquisition of Microlam is expected to bolster IDEX’s capabilities in the optical technologies sector.

Executive Commentary

Eric Ashleman, CEO of IDEX, emphasized the company’s strategic positioning, stating, "We deliver differentiated critical impact from low points in our customers’ bill of materials." He also expressed confidence in the company’s growth potential, noting, "We’re very confident in the quality of our businesses."

Risks and Challenges

• Market Weakness: Challenges in chemicals, automotive, and semiconductor lithography sectors could impact future performance.
• Tariff Impacts: Ongoing trade policy discussions may affect supply chain costs and pricing strategies.
• Margin Pressures: Continued declines in gross and EBITDA margins could limit profitability.
• Competition: Increased competition in advanced markets may pressure market share.
• Economic Uncertainty: Broader macroeconomic conditions could affect demand across key segments.

Q&A

During the earnings call, analysts focused on the impact of tariffs and trade policies, fluctuations in order patterns, and challenges in the semiconductor market. Management also addressed potential growth opportunities in data center and advanced technology markets, highlighting strategies to navigate current market dynamics. With a P/E ratio of 26.04 and an Altman Z-Score of 8.35, IDEX demonstrates strong financial stability despite market challenges.

Get access to over 30 additional key metrics and insights about IDEX, along with exclusive ProTips and Fair Value calculations, by subscribing to InvestingPro.

Full transcript - IDEX (IEX) Q2 2025:

Conference Call Operator: Greetings, and welcome to the second quarter twenty twenty five Adex Corporation earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press 0 on your telephone keypad. Please note this conference call is being recorded.

It is now my pleasure to introduce your host, Jim Gianakoris, Vice President, Investor Relations. Thank you. You may begin.

Jim Gianakoris, Vice President, Investor Relations, IDEXX: Thank you. Good morning, everyone, and welcome to IDEX’s second quarter twenty twenty five earnings conference call. We released our second quarter financial results earlier this morning, and you can find both our press release and earnings call slide presentation in the Investor Relations section of our website, idexcorp.com. On the call with me today are Eric Ashleman, President and Chief Executive Officer of IDEX and Akhil Mahendra, our Interim Chief Financial Officer and Vice President of Corporate Development. Today’s call will begin with Eric providing highlights of our second quarter results and a discussion of our current business outlook and strategies.

And Akhil will discuss additional financial details and our updated outlook for 2025. Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide two of our presentation, where we note that comments today will include forward looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. As IDEXX provides non GAAP financial information, we provided reconciliations between GAAP and non GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website.

With that, I will turn the call over to Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Jim. Good morning, everyone, and thank you for joining us today. I’m on Slide three. The IDEXX teams across all three segments delivered better than expected results in Q2 despite continued macro uncertainty. I’d like to thank our teams around the world for their hard work and strong execution as they navigated a very fluid environment.

Our teams are bound together with a simple value creation equation that adapts quickly to address challenges We deliver differentiated critical impact from low points in our customers’ bill of materials, typically at the component level, allowing us to quickly shift towards advantaged applications and increasingly so with integrated growth opportunities, most often driven by changes in customer demands. I’d like to walk through a real time growth example of this dynamic tuning at Airtech, a business acquired in 2021 within HST, to illustrate our team’s agility in action. Airtech delivers customer value through pneumatic solutions, most often in the form of specialty blowers or valves. It sits next to our outstanding gas business with some light integration within channels to market and functional leadership. Four years ago, at the time of acquisition, their product lines were growing within mutually exclusive application sets supported by good operational performance with room for targeted improvements.

Today, they are growing much faster as they’ve helped their customers shift their core businesses towards solutions within data center applications, specifically fuel cell power support and thermal management via liquid cooling. Airtech’s two product lines benefit from joint exposure to this fast growing space, and the leadership team at Gast is leaning in to help them drive process efficiency to fully leverage profitability to support group performance. Finally, applying eightytwenty has helped them focus and fully resource these applications in a powerful way, which in turn is multiplying their impact. As data center solutions scale, our customers have experienced additional pain points outside the scope of pneumatics. This is where other IDEXX capabilities come in.

And in this case, Air Tech is looking to technical problem to drive significant system efficiencies. Their solution is currently under review by a key customer. Finally, they are also exploring operational opportunities that leverage IDEXX’s infrastructure and world class capabilities in India. This is a great story that advanced in the second quarter. It demonstrates the power of our dynamic business model, our commitment to eightytwenty, and the leverage of IDEXX’s global capabilities with proprietary capital deployment via M and A as the key catalyst.

We’re confident in the Pneumatics team’s plans to drive even more growth and value creation in the quarters and years to come. Turning to an overview of business conditions, we saw some impactful patterns play out in Q2 and July that help us think about our likely path to close out the year. First, we have some areas of healthy demand, including food and pharma applications within IH and S and MPT, space and defense applications at Mott and Optical Technologies, North American Fire, downstream energy custody transfer, intelligent water, and data center thermal management within pneumatics. Weaker areas include chemicals, auto, semiconductor lithography, and ag. The rest of the portfolio was pretty steady.

Within q two, there were some strong demand inputs in the form of trade policy positioning statements that were unpredictable, shocking the system and setting up sine waves of up and down order patterns. Daily demand levels moved dynamically between policy announcements and negotiation deadlines as customers attempted to derisk tariff and pricing exposure. In the end, we see two implications. First, the patterns are moving around a relatively stable baseline that didn’t line up well with the quarter endpoint. However, in July, we saw a modest order recovery build through the month.

Second, and most important for us, the sudden and unpredictable shifts in policy are slowing down decision making and conviction for larger orders. This has the highest go forward impact for us in some more recently acquired areas of IDEXX where strong growth funnels supported earlier expectations of accelerating back half revenue and margins. As a result, we are lowering our back half financial projections to better reflect this dynamic. We’re very confident in the quality of our businesses. They are set up to solve some of the most complex challenges in advantaged markets.

Coupling this with our long established operational capabilities, we believe we are very well positioned to drive attractive growth and value for all of our stakeholders. I’m now on slide four. Before Akhil covers the financial details of both our Q2 performance and our updated guidance, I’d like to step back and help you understand our journey and the progress we are making towards long term revenue and margin acceleration through growth platforms. Our goal is simple, extend IDEXX’s growth potential through variable levels of integration to win in advantaged markets where customers are demanding more solutions impact than any one single business unit can provide alone. Here are two examples.

First is HST’s IDEXX Health and Science platform that we built through thoughtful capital deployment over the last twenty years. Today, IH and S is an integrated global platform of world class technologies that has added thin film optics, system integration, and microfluidic capabilities to its core fluidics portfolio. We’ve divested some small noncore businesses along the way, consolidated like businesses together in a state of the art Greenfield site in Rochester, New York, and integrated commercial and technical teams across the platform. This work has driven strong value for customers and shareholders over the years and is well positioned to meaningfully do so in the years to come. An example of this work in action today involves a key win for integrated sample prep within a cutting edge protein analysis instrument.

Our team designed a metal free ceramic valve for cutting edge core performance. Then a cross business development team enhanced overall systems performance by incorporating a suite of our platform’s fluidic connection technologies. They even pulled on nanofiltration technologies from Mott to take everything one step further. Finally, they collaborated with a customer to integrate all the technology deeply within the front end of their instrument. The initial response to the customer’s product line has been outstanding.

Our second example is the strong value created over time through the build out of optical technologies, a cornerstone within HST’s materials science solutions platform. We built the optical technologies group over the last fourteen years both organically and through multiple transactions, broadening its capabilities. We’re taking another step forward today with our news of the acquisition of Microlam, a high quality bolt on that brings proprietary difficult to machine forming capabilities into our already advantaged technical toolbox. Over the years, we helped drive a culture of eightytwenty to each individual company entering IDEXX to drive focus around core capabilities while rapidly improving profitability. In later stages, we increasingly encourage joint commercial and technical collaboration between units to attack emerging applications within semiconductor lithography and metrology.

Most recently, the group is accelerating its growth by working together to support advanced space and defense applications. Microlam is very complementary here given their customer access points and technical capabilities. Moving to slide five. Since 2020, we have focused a greater portion of capital deployment towards m and a to accelerate building and expanding our growth platforms. In the last three years, through several acquisitions, we created HST’s Material Science Solutions platform.

And last year, we added Mott, which is highly complementary to many HST businesses, adding nanofiltration technologies at scale, a meaningful and very attractive capability for us. I’d like to dive a bit deeper into both of these areas to illustrate the strong links to our past success and frame the potential for even faster growth. I’ll first discuss our value creation journey building MSS. We started with a highly optimized optical technologies business, which we just discussed. Next, we applied eightytwenty and operational improvement tools to our acquisitions of STC and all businesses within the Muon Group.

As a reminder, a large piece of our cost optimization work this year is substantially complete within these areas. Today, our teams are focusing resources on the best customers and solutions as we align teams commercially and technically to win in advanced markets. While our growth and margin expansion acceleration has hit a near term air pocket as our strong positioning with advanced semiconductor lithography is caught up in geopolitical tensions, we continue to be excited about our funnel of growth opportunities overall and in particular attractive markets like data center optical switching. Here, the muon team recently secured a multiyear win through collaboration between two of its units, a great example of our integrated growth strategy at work. And teams are attacking other attractive opportunities within a variety of advanced semiconductor applications, space and defense, sustainable energy, and precision forming.

The businesses within the MSS group are truly outstanding. They are highly differentiated and complement each other well as they provide trusted solutions to advantage markets. Turning to Mott, we are aggressively deploying eightytwenty as we help the business grow and optimize profitability. Mott has an outstanding track record of deploying its core specialty filtration capabilities in a variety of end markets to build important scale advantages. The solutions have ranged from differentiated components, like high purity gas filtration elements that serve as critical consumables within semiconductor lithography, to large scale filtration solutions that embed MOTS core technology within engineered skid based solutions.

Both lines of businesses are strong within their own relative merits, but our collective teams are leveraging eightytwenty and product line strategy to tune towards more IDEXX like highest differentiation, highest margin, component level solutions. This should even out the growth path over time and best fuel Mott’s development resources towards growth with the highest return profiles. Mott’s acceleration has slowed a bit this year as the larger, more complex opportunities within their funnel were impacted by the policy driven demand uncertainties described earlier. We expect Mott’s growth will continue to accelerate this year, but we’ve recalibrated its growth potential for the back half of the year given the pause we are seeing in customer decision making. As the team works through these headwinds, they are attacking a rapidly growing set of opportunities within space and defense and high purity semiconductor applications that match all screening elements for the best IDEXX like businesses.

The core differentiation of Mott’s nanofiltration technology deployed at scale is powerful. We continue to love the business and the team and confirm that the acquisition will be accretive exiting the year. Putting our past and present together, you can see that we’re following a simple and powerful growth formula that’s long driven value for IDEXX. But we’re more intentional today as we deploy capital and integrate more rapidly to support the emerging needs of today’s fastest growing markets. And while we didn’t dive into them today, I’d like to mention that our intelligent water and fire and safety platforms are very well positioned in this regard with very similar stories of focused cross business collaboration.

I’ll pass it over to Akhil to discuss our financials and our updated outlook in greater detail.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Thanks, Eric, and good morning, everyone. Let’s turn to Slide six. As Eric mentioned, in the 2025, IDEXX delivered strong financial performance. While revenue came in toward the midpoint of our guidance, we outperformed on both adjusted EBITDA margin and adjusted EPS. Now, all the comparisons I will discuss will be against the prior year period unless stated otherwise.

In the 2025, orders grew organically by 2%. We saw positive demand in our pharmaceutical, energy and agriculture end markets along with continued stability in diversified industrial and water. However, softness persisted in our automotive, rescue tool and parts of our semiconductor businesses. Organic sales in the second quarter increased 1% year over year. We benefited from positive price across all three of our segments as well as favorable results in businesses serving aerospace, defense, data centers, pharmaceuticals and North American fire OEMs.

Strength in these areas isn’t fully visible given challenging prior year comparisons within our FMT and FST businesses as well as continued weakness within semiconductor and automotive. Adjusted gross margin declined 10 basis points year over year primarily due to the near term dilution from the Mod acquisition, unfavorable mix and volume deleverage. These effects were partially offset by favorable price cost and operational productivity net of employee related costs. Adjusted EBITDA margin declined 40 basis points to 27.4%, reflecting our gross margin performance and lower variable compensation expense in the second quarter last year. Our platform optimization and delevering initiatives and cost containment efforts delivered a combined $14,000,000 in savings during the quarter, in line with our plans.

Both of these remain on track to achieve 62,000,000 or $0.63 per share in full year savings. Additionally, we continue to work our baseline productivity improvements plan for this year, some of which are going to be influenced by volume. Free cash flow of $147,000,000 increased 25% year over year and represents 94% conversion versus adjusted net income. The increase was driven by higher earnings and favorable timing of receivables, partially offset by payments related to our platform optimization and delayering actions. We ended the quarter with strong liquidity of approximately $1,100,000,000 including $568,000,000 in cash and $541,000,000 in undrawn revolver capacity after paying down $100,000,000 in long term debt and $12,500,000 in short term borrowings during the quarter.

Finally, we deployed another $50,000,000 to repurchase IDEXX shares in the second quarter taking our total through the first half of the year to $100,000,000 Now quickly some color on our results by segment. I’m on Slide seven. In HST, second quarter organic orders increased 2% and organic sales increased 4%. Revenue growth was supported by positive price as well as volume increases within our pharmaceutical, space defense and data center focused businesses. Demand for advanced semiconductor lithography solutions and automotive continued to face headwinds.

Adjusted EBITDA margin of 26% increased sequentially by 40 basis points, but tracked lower than we anticipated given mix pressure within our Material Science Solutions and MOP businesses. Turning to Slide eight, in FMT organic orders increased 7% and organic sales declined 2%. From an orders perspective, we experienced growth in our downstream energy, agriculture and municipal water businesses. As we said earlier, our industrial distribution businesses posted daily order rates in line with our expectations through way, but pulled back in June weighing on our expectations near term. On the revenue side, our chemical, energy and agriculture businesses declined against challenging prior year comparables.

Semiconductor remains challenging and water was down year over year, which we attribute mostly to timing. Positive price was a partial offset. Adjusted EBITDA margin of 35% increased 130 basis points year over year as positive price, cost and productivity improvements more than offset volume deleverage. I’m on Slide nine. FST organic sales grew 2%, but organic orders declined 7%.

Our Fire and Safety business continues to benefit from strong OEM demand and strong adoption of our integrated solutions. But order patterns are somewhat choppy near term, which we attribute mostly to timing in both our Fire and Safety as well as Dispensing businesses. Adjusted EBITDA margin of 29.4% increased 40 basis points year over year given positive price cost, which more than offset net productivity, volume deleverage and mix headwinds year over year. Now please turn to Slide 10 for our updated full year and third quarter guidance. We are adjusting our organic sales growth guidance for the full year to approximately 1% versus 1% to 3% previously, given the up and down day rates, slower customer decision making on larger orders and a key semiconductor customer lowering their growth expectations.

Adjusted EPS guidance moves to $7.85 to $7.95 versus prior guidance of $8.1 to $8.45 for the year. We are adjusting our profitability outlook for the 2025 given the flow through impact from lower volumes and expectations for continued mix headwinds near term. In the third quarter, we expect 2% to 3% organic revenue growth and adjusted EPS of $1.9 to $1.95 Our third quarter revenue guidance reflects our recent order performance and current backlog. We expect that revenue will be relatively flat in the third quarter versus the second quarter across each of our segments. Our adjusted EBITDA margins and adjusted EPS are expected to decrease sequentially driven by anticipated timing of corporate costs and slightly lower volumes and related deleverage.

From a tariff standpoint, we have updated our 2025 tariff impact to be approximately 50,000,000 with about two thirds of it recognized in 2025. We expect to fully mitigate tariff related inflation with price increases and additional sourcing and supply chain savings we are actively pursuing. Our 2025 guidance does not include the possibility of additional tariffs. We expect to take mitigating actions as needed to offset these additional tariffs if or as they occur. Now please turn to Slide 11 for our capital allocation strategy.

We maintain a purposeful and return focused approach to capital allocation supported by a strong balance sheet, robust cash flow generation and meaningful borrowing capacity. Organic investments remain our highest priority as we look to consistently drive innovation across our platforms. From an inorganic standpoint, our current focus is on opportunistic tuck in M and A to scale and expand critical capabilities in advantaged markets. We continue to work in active funnel to broaden our capabilities and we’ll continue to seek opportunities to leverage eightytwenty and operational improvements which together enhance the IDEXX advantage moving forward. In addition, we are focused on returning capital to maximize shareholder value.

We have a long track record of growing our dividend as we grow earnings. We also consistently evaluate additional return of capital through share repurchases. June year to date, we have paid $106,000,000 in dividends and repurchased $100,000,000 of common stock including $50,000,000 in the past quarter. And we have $440,000,000 remaining in our current authorization. As we focus on leveraging the larger platform building investments made over the past few years, we expect a more balanced approach to capital deployment in the near to immediate term.

With that, I will now turn it back over to Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Akhil. I’m on Slide 12 where we highlight the key value drivers for IDEXX shareholders. While we have recalibrated our financial expectations for the 2025 primarily due to the pause in customer decision making, we are paving the way for sustainable value creation with all three pillars here contributing and thoughtful capital allocation to drive attractive share shareholder value and return sustainably going forward. Thank you. And with that, I’ll turn it over to the operator to take your questions.

Conference Call Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Nathan Jones, Analyst, Stifel: Good morning, everyone.

Unidentified Speaker: Hey, Nathan.

Nathan Jones, Analyst, Stifel: I guess I’ll, I’ll start with the delayed orders on the on the semi side. You know, obviously, there was plenty of disruption going on in the second quarter. We are starting to get a bit more clarity on trade and tariffs. Maybe you can just talk about that as a catalyst for for getting some more decision making going on that front. And, you know, we have been waiting for these orders to improve in

Eric Ashleman, President and Chief Executive Officer, IDEXX: the back

Nathan Jones, Analyst, Stifel: half. What is your level of confidence that these things will actually come through in the next couple of quarters? I mean, projects can be deferred indefinitely. So maybe just talk about your confidence on those projects coming through versus continuing to be deferred.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Sure, Nathan. And you you started off talking about semi, but then I think the question was more broadly framed around large orders in general. So I’ll I’ll kinda hit it that way and probably go in reverse. And so so look, I no no doubt, as we talked about in the prepared remarks, we saw some oscillation in both, small order patterns and decision makings around those announcements and negotiation deadlines. What was interesting here and I think, probably gives us the most confidence is, as you know, some of that just timed out where in early July, you know, we got some resolution here that things were moving forward.

And I think I think everybody got a sense of where the pattern is likely to settle in. And so we saw order recovery, throughout July in in both buckets, frankly, the small order side and on the decision making, piece of larger orders. And so I think part of the confidence comes from, you know, our sense that while there’s still announcements and things to come, there’s kind of a predictable nature of where they’re likely to settle in, how they’re likely to play out. And we’re hearing that reflected in the conversations that we’re having with customers and decision makers along the way. So I think the confidence primarily comes from a a pattern that, you know, partially is in the current quarter that’s played out here in July.

You know, again, one of the reasons we dove as far as we did into the new, acquired larger businesses within HST is, you know, that’s really where most of the impact comes here in terms of, you know, the shift in guidance. We had we had I mean, both those, businesses, especially on the mod side, had a really, really strong funnel. They typically kinda run that business in a nonlinear way that that kinda races to year end. And and really, as q two played out, I think you saw a lot of kind of frozen decision making there, much of it released here in July. And so then ultimately, you have kind of a physics question in terms of how much they can produce in q four.

But but even some of those orders coming in for, that business and others along the way, we saw the same thing in water, with recovery in July, I think gives us a better feel as we enter the back half of the year that, you know, things are stable. They’re still likely to change up and down, but that baseline is pretty stable in both sides of the business. You opened the question, around semi in general. I just wanna say, you know, we we, you know, we see semi exposure in different ways in different businesses. Probably the piece that, you know, has given us the most pressure when we talk about mix and talk about semi mix in HST, it’s really a large chunk of business in the muon business up in our MSS platform.

It’s outstanding cutting edge lithography componentry that we that we make there. You know, that’s that’s coming from a customer that initially had had talked about inventory timing in the first half of the year and I think is more settled now that, hey, things are things are gonna be kinda steady for a while largely because of some of the geopolitical tensions, restrictions, and things that have also played out. Now the other pieces of semi within IDEXX, there’s a lot of them that are growing, growing well. Some of them quite markedly in, areas like metrology. We see that in optics.

So it’s kind of a mixed bag there depending on how we play out. But the the pressure point for us is a portion of really high quality business, that looks like it’s gonna be flatter for a while.

Nathan Jones, Analyst, Stifel: I would assume that that kind of stuff that you’re talking about there is also very high margin and very high incremental margins. Yeah. You have you have cut the the guidance full year margin guidance by 100 basis points, which kind of implies 200 basis points in the back half. Is that really outsized impacts from what are very high margin businesses that aren’t quite getting the volume that you’d anticipated? And when that volume comes in, those orders come in, we should start to see that margin improvement come back up?

Eric Ashleman, President and Chief Executive Officer, IDEXX: That is that is definitely a a piece of it, especially in the HST side. That’s some of the the best business that we have in the in the acquired group. You know, some of the the opportunity that I mentioned is a partial offset, the great work they’re doing on things like data center switching. I mean, it’s equally attractive and over time will also complement it. But there’s no doubt a return to growth there will really, really help profitability in that particular platform in HST.

I’d say the second half of it though is really the acceleration of Mott. You know, we’re tuning that business a lot. We’ve taken some cost out there, and they were heading already for a lot of volume and still are, in the back half of the year. That’s where you get full leverage. And so I think those two things together, you know, tuning and revenue, and acceleration at Mott, and then ultimately, a release on the really good margin business, towards more acceleration would be the two chief components here that we’d be looking for.

Nathan Jones, Analyst, Stifel: Awesome. Thanks very much for taking my questions.

Unidentified Speaker: Thanks, Nathan.

Conference Call Operator: Thank you. Our next question comes from the line of Vlad Bistricchi with Citigroup. Please proceed with your question.

Vlad Bistricchi, Analyst, Citigroup: Good morning, guys. Thanks for taking my questions this morning. Sure. Guess, Eric, first off, maybe can you just give us a little more granularity or specificity on what’s embedded now in the current guidance? Is it a continuation of current trends?

Are you I know you talked about sort of more predictability around the policy front, but how are you thinking about potential for any incremental volatility or downshift in those day rate trends that you’ve seen bounce around over the past couple of months, it sounds like?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I I think, really, again, we’re we’re gonna end up talking here a lot about HST because the FMT and FSDP segments, we’ve got those we had them originally modeled to be pretty steady, and that’s kinda where they’re sitting now. They’re performing really, really well. So I think we were able to kinda deal with what we had in the second quarter and come out of it with the rates in July. You know, maybe a little pressure on the third quarter.

We we would have chosen to accelerate that a bit. Ultimately, the recovery will help us get where we need to, and then we kinda got those running out from here. And so in HST, you know, that’s where we had some more aggressive, acceleration hopes, with a again, those those two most recently acquired businesses, we’ve moderated those a bit, but they are still moving forward. A lot of it coming from a pretty strong fourth quarter for Vermont. We mentioned that that’s, we’re confirming that’s gonna be an accretive business at that point.

I’d kinda take us back to the beginning of the year. You might remember we talked about a large project that we booked in q one. A portion of that starts to, come out of the business and hit the revenue line in q four. Some of the orders, even the ones delayed, are now in hand and will also support that. And it’s kind of been the natural tendency of that business to run there.

So we we have some acceleration there, but we’ve, you know, we’ve tempered that acceleration a bit, and then it’s generally steady in the other two segments.

Vlad Bistricchi, Analyst, Citigroup: Okay. That makes sense, and that’s quite helpful. And then just a follow-up for me. Within FMP specifically, I think you called out positive orders growth in the quarter, but there’s also still a red line next to ag on the slide. So I guess, can you just clarify or talk about what you’re seeing and expecting within that specific market vertical?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Sure. I’m just just reminding everybody that, you know, for us, we we’ve got a we’ve got two businesses there, the largest of which, while it has an OEM component, it’s the smaller piece of the business. A lot of it just depends on its its components that farmers retrofit as they go and as they’re, you know, planning and and harvesting. So it’s a little less tied to the dynamics of heavy CapEx and and OEMs, but it’s it’s all related certainly. I would say, look, it’s it’s still a rough cycle for ag.

However, it’s it’s kinda played out better than we originally had hoped, And I think a lot of that is coming from a a bit more confidence. Growing season’s been pretty good. And our team there has done a really good job on the commercial side of things in terms of channel management and things that they’re doing, expansion in Europe. So Put It Down is is still a a business, you know, that’s in the lower part of the cycle but performing above kind of the lower expectations that we had coming into the year.

Vlad Bistricchi, Analyst, Citigroup: Understood. That’s helpful. I’ll get back in queue.

Unidentified Speaker: Thanks.

Conference Call Operator: Thank you. Our next question comes from the line of Mike Halloran with Baird. Please proceed with your question.

Mike Halloran, Analyst, Baird: Good morning, everyone.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hi, Mike.

Brett Linzey, Analyst, Mizuho Securities: Not to belabor here.

Vlad Bistricchi, Analyst, Citigroup: I just wanna, Eric, make sure I understand the moving pieces. So it’s not so much that there’s been

Mike Halloran, Analyst, Baird: a deterioration. It’s just that the pace of growth that you’re assuming as you move to the back half of the year is slower than you originally would have thought on top of some of those project pushouts where I I I don’t think that your optimism over a medium term has really changed. It’s just the timing or the the duration of when those actually hit has shifted. Is that a fair characterization?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. No. That’s that’s dead on. And and partially here, this is you know, we again, we’re really close to customers. I mean, we, you know, of course, have a bunch of businesses that are rapidly turning components.

So any inflection, we tend to feel a lot more sensitively and quicker than others. And so we just went through a quarter where there was, you know, tremendous up and downs and some periods of frozen decision making and then release points. It played out in kind of an unusual way and then resolved itself largely in the month of July. So, you know, from an ongoing confidence standpoint, I actually feel better given that I think everybody can kinda see the patterns that are working here. It appears to be reasonable.

We can kind of draw a straighter line than we could coming into the quarter. We hear that from customers, distributors, end users, all all over the place. But, you know, for where we are, I mean, we’re we’re often, you know, coming into a quarter with x amount of the backlog secured, and then we’re hunting for the rest. That decision making has has an impact had an impact in the second quarter for us. And most specifically, again, I just point to, you know, we really had strong funnels, up in those recently acquired businesses, and those acceleration rates, you know, we just we’re we’re dealing with a pause there and a time out, again, with some resolution in the same exact capacity in July.

So confidence level pretty good, but, you know, it was it was a period of of oscillation and kinda strange patterns for us that just we’re gonna experience maybe more than some other businesses.

Mike Halloran, Analyst, Baird: Nope. That that makes sense. And then, just on the capital deployment side, maybe just some thoughts on the funnel, of opportunity. I know the the the tenor or the tone has been a little bit more measured about the pace of m and a. Is that a reflection of where the balance sheet is, a reflection of the opportunity set as you sit in the market today, and and just maybe a little bit broader thoughts on the opportunity set holistically?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. Well, I mean, obviously, we talked about, you know, bolt ons, tuck ins, and then, of course, we announced one. I I think it’s it’s largely, it’s it’s largely, the output from what the funnel looks like. You know? Because if you if you think about it, if you step back here, I mean, as we dove in and talked about the Material Science Solutions platform, you know, we we took essentially an optics platform that we built over the time horizon that I talked about in my remarks, fourteen years, and then we built the second half, largely pretty aggressively here over the last couple of years with the acquisition of the businesses that form that unit.

Now that it exists, essentially the next move and the piece we’ve been getting ready for are those tuck ins and technology fillers that really then bolt on to a really great framework. And so it’s it was always kind of the plan is to get it to this level, complete it with the technologies that we have, and then put complementary businesses like Microlam right next to it. You know, Mott’s a little different. It was a it was a kind of unusually scaled business. It prevented it presented, technologies that we’ve not had in the portfolio.

You know? So one of the things we see there is just wide applicability to almost everything we have in IHST. So we’re actually not forcing that one at the moment. We’re getting a read on where it’s, you know, kind of fits the best, where it complements things the most. We’re using it as sort of a, as I said in the comments, something in the toolbox for everybody to exploit.

But but I think the nature of capital deployment is really reflective of just whether it’s, you know, fire and rescue, water, IHNS, and now MSS, these incredible platforms that have multiple touch points that we’re attempting to take advantage of.

Unidentified Speaker: Thanks, Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Mike.

Conference Call Operator: Our next question comes from the line of Deane Dray with RBC Capital Markets.

Vlad Bistricchi, Analyst, Citigroup: Morning.

Deane Dray, Analyst, RBC Capital Markets: Hey. Appreciate all the color you’re providing here because it is kind of an unusual choppy mixed kind of signals. And you guys are really good historically at being able to identify them and, you know, versus expectations. So, in the spirit of that, can you give us any calibration on the day rates? Just you said May was as expected, June declined, July, was it up or stabilizing?

Any kind of sizing of that just because it’s really important this quarter to get a sense of, like, the amplitude. You know, how far was June down, and how much has July come back, and what the implications are?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. I appreciate it, Dean. I mean, look. It it played out with each each month kinda had its own little story over the last four. I think in, you know, April, we talked about it.

You know, we we probably, like a lot of business, experienced some pull ahead, pre tariffs after the initial announcement. In May, as expected, we saw some of that come back, and we were probably at about the position we thought we’d be at the May. I always knew, you know, June was gonna be a pretty key month, particularly with some big announcements sitting right in the July, concurrent with a holiday. And so the the backlog reductions that you see overall for IDEXX, all of it, came out of the month of June, really over kind of the last three weeks, I’d say, right into that US holiday that we had at the July. Then we got the news.

The news said, hey. Things are delayed. You start to get more clarity on, like, how this is ultimately probably gonna play out. And then all through July, you saw a steady build back. And I’d say as we closed July, in that four month period, we ended about exactly where we thought we would.

It’s just the patterns themselves were pretty dynamic, pretty different, and certainly, as we said, at least from a larger decision making perspective, I think froze some people as they were really putting their, you know, concentration towards ups, downs, and things that they could do, you know, to try to mitigate potential tariff hits or things like that. That’s that’s ultimately what was playing out.

Deane Dray, Analyst, RBC Capital Markets: Good. That’s that’s helpful. And look, we’ve all seen periods in the macro where customer decision making slows down. You know, you need extra signatures. It’s just longer to get to.

Yes. But it really does sound like for your guidance cut, it’s concentrated in Mott. So how much of the guidance cut is attributed specifically to Mott?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Well, I’d say I’d say two places really, and you you gotta think of this from a revenue and then the the profitability flow through along it. It’s really from the MSS group, which I talked about right next to Mott. I think the issue there is not so much on the revenue line. It’s the mix it’s a continued mix issue that we have with a great piece of semilithography business. It’s kind of flattened out for us, and we had long hoped that that was gonna start to move again.

But revenue, largely solid and, in fact, growing around it, just not at the same kind of mix quality. And then, you know, from Mott’s standpoint, as I said before, that that really historically has been a nonlinear business that kinda starts low and builds, throughout the quarter. That was the plan of attack for it, in 02/2025. Large funnel. I mean, they’ve got a funnel that’s frankly overbuilt for what they ultimately still need in the back half of the year.

But that decision, kind of the frozen decision making loop in the second quarter really delays just kind of the physics and fundamentals of what can possibly be produced as we exit the year. And so you’re seeing that because, you know, that’s where a lot of the margin appreciation is happening simultaneous to the volume stacking on. So I’d say those two pieces relative to what our previous call were is the significant piece of the delta. The only trailing component would be, again, I think generally had those small order patterns not played out the way I described, we might have had a little bit more cross IDEX momentum into Q3. We kinda had to build through July to kinda get back to to the zero point, but I put that as a trailing third and certainly not a chapter we’re worried about going forward.

Deane Dray, Analyst, RBC Capital Markets: Okay. That’s really helpful. And just last question for me is, you know, the past couple of years, most of the consternation was around life sciences and, the kind of destocking, extended, demand, fall off that we went through. And that doesn’t seem to be the case here. Can you just refresh us where has the life sciences gone during this period when I guess most of the focus here has been on semi, but just an update there.

Are you seeing any blanket order changes as well?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Really, I’d I’d I’d say the life science story is playing out exactly like we thought it would be. You know, it’s a it’s a slow recovery off the bottom. It’s growing low single digits. You know, there are some areas that are weaker, but they’re generally offset by things that are stronger. So for, you know, talk around NIH funding and academia, that’s definitely under a bit of pressure, but it’s a smaller piece of our business.

Those applications that are targeted to pharma drug discovery are strong and generally offsetting them. And then that core kind of moderate recovery heading to something better in the future is playing out exactly as we thought it would be.

Deane Dray, Analyst, RBC Capital Markets: That’s great to hear. Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Dean.

Conference Call Operator: Thank you. Our next question comes from the line of Brian Blair with Oppenheimer and Company. Please proceed with your question.

Unidentified Speaker: Thank you. Good morning, guys.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hi.

Jim Gianakoris, Vice President, Investor Relations, IDEXX0: You mentioned that water was down in the quarter. It’s a little bit of a surprise. I guess, I heard correctly, that was attributed to timing. Hoping you can offer a little more detail on water performance in Q2 and then more importantly, your team is seeing on an underlying basis, where there’s opportunity versus perhaps risk in terms of platform demand and what level of growth you expect in the back half?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. And, I’m glad you asked it. Actually, what we what I isolated there is that, you know, water, which has some larger order components in it, you know, more than some of the rest of IDEXX, I mean, had some of the same frozen timing dynamics in q two that we talked about elsewhere. A lot of that released in July and really does nothing to impact, you know, what we’ve generally seen, which has been a favorable run out of that business. And we’ve actually got good numbers for it going forward.

So really no pause in water. It’s just I was able to reference that that same dynamic played there and released nicely for us in July.

Jim Gianakoris, Vice President, Investor Relations, IDEXX0: Okay. Understood. And circling back to MicroLand, that’s an interesting tuck in. The technology, admittedly, not familiar with. Can you offer a little more color on the strategic fit and synergy with the MSS platform?

And then as we think of think about your tuck in strategy going forward, how does MicroLamb compare to the average prospect in your funnel, just deal size, revenue generation, etcetera?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Hi. It’s Akhil here. I’ll take this one. And then Eric, please feel free to add in any color. So when you think about microLam, right, it sort of plays in the same workflows that our optical businesses do.

When you think about what we do in optics today, right, a lot of that is on the coding side of the business. But Microlam is essentially a provider of precision optics. So they actually manufacture the optic, which can then get coated. So there’s a really nice complementarity here and a strategic fit between our optical technologies business and microLAM. And so this is, as you know, microLAM, it’s sort of, it’s will sit within our MSS platform.

And when you think about some of the other capabilities we have in there, the touch points are really interesting and unique and I think we can drive a lot of value there. As we mentioned, when we think about microLam, right, and how does it compare to, you know, will tuck ins look similar going forward? We’ve got a pretty, I think, broad funnel across our platforms here that we’re cultivating pretty actively. And we’ve got a great foundation in place with the platforms that we have built. And so we expect to strategically find opportunities that help fill a capability gap, help us scale or take us open up some new customer doors.

So it’ll continue to look like that. They have to have, I think one of the filters that we’re going to be applying here is that they have to have an existing or a touch point with an existing IDEXX business. So what you’re gonna see us is focus, acquisitions, tuck in acquisitions around businesses that we know that we can bolt on and, tuck into a platform for sure. And, again, we’ll be targeting, strong returns there. And as you see with microLam, right, we’re gonna be accretive, in the first full year of our ownership.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Just a couple a couple other comments here, you know, that while the technology is really, really complementary, I would oversimplify and say they’re really good at making the optics. We’re really good at polishing, coding, and assembling them. That’s kind of the high level where this fits. They also have outstanding customer touch points that are really complementary in the space and defense sphere based on the technologies they have. So, you know, we’ve been actually working with these guys for a while now.

Our teams know them know them really well. Everybody in OPTICS knows each other. And so, we’re gonna hit the ground running here.

Unidentified Speaker: I appreciate all the color. Thanks again.

Vlad Bistricchi, Analyst, Citigroup: Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Joe Giordano with TD Cowen. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Hey, guys. Good morning.

Vlad Bistricchi, Analyst, Citigroup: Hi, Joe. Good morning.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Hey. So, like, last quarter, I thought the messaging was more like, we are confident in the margin path because of actions that we’ve already taken that we know we’re gonna read out and that the back half acceleration was, like, really not dependent any longer on these larger semi orders coming in. Like, what changed like, I the commentary you’re saying today about, move on and stuff, it seems consistent with what you said last quarter, but, like, the outcome of it feels different now. So maybe if you can give us a little color on how that messaging is changing.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I think I I think once again, kind of in the same way when Nathan had this in a question, the only piece of semi here that really is playing out is a decent chunk of really high margin business that’s kind of up in the MUON business. And that has been a piece we’ve been talking about. We talked about originally there was an inventory correction. You know, there was a lot

Unidentified Speaker: of

Eric Ashleman, President and Chief Executive Officer, IDEXX: customer feedback pointing at acceleration after that point. Kinda saying at this point, okay. Based on our interactions with them, we don’t see that coming here. We’re not gonna get the lift from that component of it. The rest of semi elsewhere is really not an issue that plays a lot in things that are different.

So I think it’s that piece of it, and it’s the acceleration amount. Really, we were again, we’ve we’ve kind of always had a path that was gonna run, pretty aggressively for them, and having a a time out on some of the order flow there. We’ve kinda got a physics problem at the end of the year. It’s still gonna be a really, really strong q four for them, very similar to what they had last year. The funnel is still really strong.

It’s overbuilt, frankly, for what we need. So and we see good business growth past that point. But taking some time out here from frozen decision making for that business in particular does impact us.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: And then follow-up here. Can the the tie ins to some of these new acquisitions to, like, existing businesses, like, it it makes sense. I get it. Are we like, has there been a pivot more does that kind of pivot to bolting on within kind of the context of IDEX? Does it get us into a situation where, like, there could be a cast more of a cascading effect of, like, a market issue across the franchise than you’ve had previously at IDEX where I felt like there can always kinda be a problem somewhere, but these businesses are largely independent enough that there’s enough other things that would probably offset.

It feels like like one kind of problem somewhere has, like, more of an impact across more businesses now because of how they’re kind of being tied in. Is that is that accurate?

Eric Ashleman, President and Chief Executive Officer, IDEXX: I don’t I I don’t think so. I mean, I I I think I get the spirit of the the question. But if we really step back and let’s take MOD as an example, and I gave several examples in the comments where, you know, MOD’s technology is linking with current IDEXX solutions, they actually cover a pretty wide range of of end markets, everything from, you know, data center switching to something over on the life science side. And so that in itself to me says very IDEXX like. You take a core capability.

You can actually tune it in several different areas. Now to the extent a lot of the work is being done here most recently in HST, it does tend to be bracketed in faster growing emerging markets, you know, that was not gonna have necessarily the range and the fragmentation of a lot of our industrial kinda core FMT assets. So there’s a different look and feel here. But, you know, we’re not kind of chasing one singularity over and over and over here. These are very appropriable technologies.

They just happen to be a lot of them more recently here in the HST side of the house, which is a little narrower than certainly, almost everything is narrower than what we have over in very, very mature, industrial businesses.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: And maybe if I can just add, when you think about microLIM, right, essentially the applicability of that technology is very broad based. Right? Eric highlighted some of the fast growing markets that they’re levered to. But when you think about sort of the markets they can serve, it’s actually pretty broad based from a capability standpoint.

Conference Call Operator: You. Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Hey, thanks. Good morning, everyone. Hi, Jeff. Hey, hi. I wonder if we could just get to kinda the the internal cost and productivity actions.

Comment was made in the in the pitch that they’re on track, but, some vulnerability to to volume weakness, which I get, you know, makes sense, obviously. But can you just level set us on what you’ve accomplished year to date, what remains to be done in, you know, the back half of the year, and if there’s any other interpretation we need to add to your comment about maybe, you know, volume risk to those, aspirations?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Jeff. It’s Akhil. I’ll take that one. So if you recall, we had three buckets of cost actions. The first was the platform optimization and delayering initiatives, and that was the $42,000,000 that we had talked about.

So that’s in place. We’re actually at run rate. And so year to date, we’ve, or I would say in the second quarter, we achieved $11,000,000 of that. And year to date, it’s about $20,000,000 And then when you think about the second bucket, right, that was the $20,000,000 of cost containment. Again, we expect that to hit run rate in this quarter and that’s about $4,000,000 And then when you look at the total right between, those two buckets, we have we’re at about $23,000,000 and we’ll recognize the balance of those savings in the back half of the year.

And really, the third bucket is our baseline productivity. We’re still pursuing that, but some of that is a function of volume, which we will we expect to, again, ramp in the third and fourth quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Got it. Thanks for that clarification. And then also on the so called OB3 or big beautiful bill, whatever we want to call it here, are you expecting some cash flow benefits from the change in R and D, deductibility or any other impact on your financial results in 2025?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yes. And, it’s not only been the OBB, but you’ve also got some state tax laws and foreign, tax laws that have actually changed this year. That’s why when you look at the third quarter, right, you see our tax rate bumping up just marginally. That reflects really a true up of the tax changes and rules that are going into effect for the year. And then therefore, when you think about our tax rate overall for the year, you see it coming down, which would imply a lower fourth quarter.

But the OBB does help us from a cash standpoint and cash taxes and it is supportive of incremental cash there.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Right. And then maybe just one little loose end also. Just on price, it sound like it was mostly positive across the corporation. Can you just aggregate that for us? What was your price capture in q two?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yes. So when I think about price capture, right, for the second quarter, we were just shy of 3%, right? And let me just take you back, right? And when we thought about price, we implemented that in the first quarter and that’s about a percent and we came into the second quarter, tariffs got announced that we had to we were responding to tariff environment and that had us not only with traditional, but the tariff piece added on top of it that put us right under the 3% mark for the quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: And I guess you’d expect something similar for the year, maybe a little bit of dial back though as the tariffs faded, right?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: That’s right. We’re actually expecting a slight acceleration because if you think about when we put our tariff pricing in effect, right, it went into effect into Q2. So we didn’t realize the full benefit in the quarter and you’ll do that going forward. Now, this obviously assumes the current rules that are in place as August 1 comes to bear and then there’s other deadlines or tariffs move around, we’ll continue to respond accordingly.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Great. Thanks for the feedback.

Conference Call Operator: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX3: Thank you, and thank you for all the color around customers. It’s been helpful. Just a quick follow-up on that. I mean, the extent that you know when you talk to them, is the uncertainty largely tariff related? There’s obviously a few other areas of uncertainty in the world.

But as we get stability on tariff, I mean, maybe that’s what unlocked your while, but is there more of that? And then just to tack on my second one, is there your m and a activity has been great. Is there any related m and a freeze in the market if you or other potential buyers or sellers from the uncertainty we’re seeing? Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. I I would say probably 90% of all conversations are related to trade policy, you know, and then and the things that we’re covering here as we talk through q two. And it really comes down to, you know, I think two things. For anybody who’s working on a larger order with us, it’s generally remember, we’re we’re a component level to something much bigger than we are, and so it becomes a stack up issue. And I think singularly becomes how much is it gonna cost?

And I need to know that. Is it likely gonna change again? To your point, there are other factors out there, but they really don’t enter the conversation much, so they certainly didn’t in the second quarter. Was kind of where’s this gonna go, where’s it gonna settle out, Is it going to happen ten days from now, twenty days from now thirty? How can I sort of move my things around?

Again, with somebody on our side that’s generally pretty rapid fulfillment. So there’s not a lot of buffer in between us and that conversation, and that’s largely what played out. So I do think certainty in that particular area is a really good thing for us and others. And when I say certainty, that’s a relative term around, you know, a reasonable band kind of in a way to anticipate and call as we experience both sides of those conversations, potential things that could happen and what ultimately plays out. So I think that’s really, really positive.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: And on the M and A front, look, I would say that early on in the quarter when all of these tariff announcements went into play, there was really a freeze in the market and we saw a number of sale processes that were due to come to market get halted. And now I would say that’s all thought out and activity is starting to pick up and that’s just really a general, I think, view of the market at the moment.

Unidentified Speaker: Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Matt Summerville with D. A. Davidson. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX4: I just, again, want a little more clarity here. That that 20,000,000 in cost containment was a hedge against what exactly if it wasn’t a hedge against some of the things you’re describing on the call as driving down your EPS guidance for the year? And then I have a quick follow-up.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. Hey, Matt. This is Akhil. So this was a hedge against a downturn in volumes. Now it only captured a certain sort of downtrend in volume and what we’re calling here is slightly more than that.

So that containment action is in place. It is supportive of our back half. And again, it does ramp this quarter and then it will be fully at run rate in the fourth quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX4: Okay. And then throughout your prepared remarks and a few times during the Q and A, Eric, you referenced your data center Can you maybe size that up for us in terms of roughly how much revenue that will generate for IDEX in ’25? And again, just kinda big picture, you know, where that can sort of go over the next two to three years for the company. Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. Like, it’s it’s it’s not a giant part of IDEXX. It’s a decent part of the AirTech business that I talked about. You really don’t see it over in gas. So if you’re looking at performance pneumatics, AirTech’s only a portion of that, and this is becoming a larger portion of their business.

So that starts to dimensionalize it too. It’s important for that business not yet rising to a major catalyst for IDEXX. What’s interesting, though, is then we’re starting to see it in other places. I mentioned the Wynn and the Muon group. Again, these are very peripheral kind of applications.

It’s not that, you know, massive stuff that you see around the center of a data center, but it’s interesting little niches off to the side. What it can become from here? Great to see these initial wins because as you know in this space, I mean, often you can take something that’s working and delivers performance and efficiency in one area and run to lots of others and deliver that as well. So, I mean, our commercial teams are doing that. I think as it goes, we’ll certainly, probably work to dimensionalize this a little better, talk about the funnel.

But these are some interesting initial wins that are pretty early for us that we’re going to continue to drive forward.

Unidentified Speaker: Got it. Thanks, Eric.

Conference Call Operator: Thank you. Our next question comes from the line of Brett Linzey with Mizuho Securities. Please proceed with your question.

Brett Linzey, Analyst, Mizuho Securities: Hey. Thanks for taking the questions. Just first one on on China, pretty, sluggish here in the in the quarter still based on, results thus far. I know IDEXX exposure isn’t isn’t huge there, but you do have some larger landed exposure indirectly in the China and HST. So just, any color on, you know, what you’re seeing in in the in the region and then what are the expectations for the second half of the year there?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I mean, certainly, we we wouldn’t say that it’s it’s different conditions there. I mean, we’re seeing the same thing in terms of, you know, not really, really strong. It, again, is is a small piece of what we do, about 6% overall of revenue. We kind of surgically attack that, a product line at the time.

You know, probably the areas of pressure that we would note, you mentioned one of them, you know, for our HST customers, that’s an area they’ve long been talking about and are concerned about in terms of rates and when it might recover and how stimulus programs may help that. We do a little bit of direct shipping there, that has been softer. Some rescue. We’ve talked a little bit about the rescue business. We’ve got a decent franchise up there that’s also been, impacted by some of the slowdowns.

The core that we have around it, I mean, they’re generally really appropriate. They do incredible things for that local economy, and they’re, you know, kind of branded at a at a level that’s long been localized for the for the geography. So I would say it’s it’s it’s pressured. It’s small for IDEXX. You know, we’re treating it accordingly as we think of resourcing investments.

In many ways, you know, kind of our Asia Pac concentration is China and India, very surgical and specific. And the India side is more than offset that from, just really strong fundamentals.

Brett Linzey, Analyst, Mizuho Securities: Great. And then maybe shifting back over to tariffs, so you’re moving from the $100,000,000 to the 50,000,000 Could you just expand a bit on some of the underlying assumptions there? Are you assuming the incremental copper tariffs you know, embedded in that assumption and then any, any other color on some of the regional tariffs would be great?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. So what what’s, not embedded in here is obviously the, you know, the copper as you mentioned. And then the finalized rules around what’s gonna happen with Europe, Japan. That’s also not in here. I know there’s been a announcement.

Right? But we’re waiting for, further clarification on how that’s gonna be implemented. And then you got you have Taiwan, China, any changes there versus the status quo is not in here. But generally, this this if there are incremental tariffs, right, we’ll continue to offset that one for one with price.

Brett Linzey, Analyst, Mizuho Securities: All right. Appreciate all the detail. Thanks.

Conference Call Operator: Thank you. Our next question comes from the line of Andrew Viscaglia with BNP Paribas. Please proceed with your question.

Nathan Jones, Analyst, Stifel: Hi. Good morning, everyone.

Mike Halloran, Analyst, Baird: Hello.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: Apologies if I missed this, but what were your expectations for a mod’s growth into the year? And then where do you see that playing out for the full year? What what will the growth be?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. Look, I I would say from a mod standpoint, right, when we announced the transaction last year, our our expectations was the business were were gonna improve the margins in that business, and that was gonna be over a longer period. And we expected the business to be able to deliver high single digits in terms of growth. I think where we are right now, it’s more or less just given the pause, we’re calling the business flat. And then it’s just going to be a different trajectory.

But again, our expectations for the business overall, as Eric mentioned earlier, right, we’re excited about the business, the team itself remain intact and we do expect to generate our expectation is still to generate double digit returns for the business over the longer horizon.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: Okay. Got it. And maybe a lot of, like, the detailed questions are taken. And so I’d like to take a you know, ask a bigger, broader question. But, you know, we’re we’re seeing some trends across industrials where some peers are, you know, trying to reduce complexity in their businesses and, you know, making strategic decisions one way or the other to do that.

How do you guys view your portfolio at at this point given, you know, the the world has changed a lot over the last five years, even the last three, and you you quite haven’t been able to grow earnings the way one would hope. So is this is there is there a conversation to to be had, or are you having those conversations where maybe you look to rather than acquire, divest anything or or review your portfolio?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Look. We we we always consider all the pieces of our portfolio along the year while we’ve, you know, talked a lot about the things we’ve added, and we’ve added things more aggressively over the last four years. You know, we’ve we’ve pruned small to medium sized assets along the way as well because, honestly, they’re not gonna scale. And to your point, they become more complex over time if in fact they they become relatively smaller as the business goes. And so I do I do think we consider both sides of the equation.

I think really here, though, what you see is, you know, we haven’t talked a lot about FMT. We haven’t talked a lot about FSDP. I mean, to your point on complexity, I mean, we’ve taken a ton of complexity out of those two particular platforms, and they’re performing really, really well. What we’re doing with an HST is, you know, we’re arguably trying to move this portfolio over towards faster growing, more inherently advantaged markets and doing it the connection points between each business is, in some ways, is taking complexity out of the equation as well because it’s taking a large suite of end markets and things where we could go attack them single units at a time to more concentrated energy towards handful of really, really good markets where we’re trying to set those initial specification points to generate the same kind of annuity streams that we had elsewhere in industrial businesses in the two segments that we’re not spending as much time talking about. So we’re kind of very active work in the HST side now.

We’re talking about it appropriately, but it’s really to put it in a state where it’s frankly inherently simpler than it is today. And then through all of it, looking at both sides of the equation, each unit gotta kinda earn its relative merits, and we we talk about that constantly as we go.

Unidentified Speaker: Yeah.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: Okay. That’s fair. Thanks, Eric.

Conference Call Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to Eric Aschelman for closing remarks.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Okay. Thank you. Thank you all for joining here. And of course today, you know, we talked about a lot of the work we’re doing to put pieces of IDEXX together to multiply our growth input. You’ve heard examples of that, you know, today reflecting on our past when we talked about IH and S and the optical technologies and the build out of those, you know, over more than a decade or in some cases two.

We discussed our present when we talked about AIRTEC and the many HST touch points that we have for Mott. We didn’t talk about them today, but, you know, the great work that’s going on on the extended, intelligent water platform, the automation growth that’s happening in fire and safety, and then all of the future work, a lot of it within the MSS group and the larger Mott group work across HST. These are all examples of how, you know, whether it’s a couple units or a platform coming together, they’re able to go and solve problems in ways that are just very, very difficult for any one single unit, and we think are gonna absolutely propel the company going forward. We thank you for your time today, your interest in IDEXX, and we hope you all have a great day.

Conference Call Operator: Thank you. And this concludes today’s conference. You may disconnect your line at this time. Thank you for your participation. Have a great day.

Greetings, and welcome to the second quarter twenty twenty five Adex Corporation earnings conference call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. Please note this conference call is being recorded.

It is now my pleasure to introduce your host, Jim Gianakoris, Vice President, Investor Relations. Thank you. You may begin.

Jim Gianakoris, Vice President, Investor Relations, IDEXX: Thank you. Good morning, everyone, and welcome to IDAX’s second quarter twenty twenty five earnings conference call. We released our second quarter financial results earlier this morning, and you can find both our press release and earnings call slide presentation in the Investor Relations section of our website, idexcorp.com. On the call with me today are Eric Ashleman, President and Chief Executive Officer of IDEX and Akhil Mahendra, our Interim Chief Financial Officer and Vice President of Corporate Development. Today’s call will begin with Eric providing highlights of our second quarter results and a discussion of our current business outlook and strategies.

And Akhil will discuss additional financial details and our updated outlook for 2025. Following our prepared remarks, we will open up the line for questions. But before we begin, please refer to Slide two of our presentation, where we note that comments today will include forward looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings. As IDEXX provides non GAAP financial information, we provided reconciliations between GAAP and non GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website.

With that, I will turn the call over to Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Jim. Good morning, everyone, and thank you for joining us today. I’m on slide three. The IDEXX teams across all three segments delivered better than expected results in Q2 despite continued macro uncertainty. I’d like to thank our teams around the world for their hard work and strong execution as they navigated a very fluid environment.

Our teams are bound together with a simple value creation equation that adapts quickly to address challenges and deliver on opportunities. We deliver differentiated critical impact from low points in our customers’ bill of materials, typically at the component level, allowing us to quickly shift towards advantaged applications and increasingly so with integrated growth opportunities, most often driven by changes in customer demands. I’d like to walk through a real time growth example of this dynamic tuning at Airtech, a business acquired in 2021 within HST, to illustrate our team’s agility in action. Airtech delivers customer value through pneumatic solutions, most often in the form of specialty blowers or valves. It sits next to our outstanding gas business with some light integration within channels to market and functional leadership.

Four years ago, at the time of acquisition, their product lines were growing within mutually exclusive application sets supported by good operational performance with room for targeted improvements. Today, they are growing much faster as they’ve helped their customers shift their core businesses towards solutions within data center applications, specifically fuel cell power support and thermal management via liquid cooling. Airtech’s two product lines benefit from joint exposure to this fast growing space, and the leadership team at Gast is leaning in to help them drive process efficiency to fully leverage profitability to support group performance. Finally, applying eighty twenty has helped them focus and fully resource these applications in a powerful way, which in turn is multiplying their impact. As data center solutions scale, our customers have experienced additional pain points outside the scope of pneumatics.

This is where other IDEXX capabilities come in. And in this case, AirTech is looking to technical problem to drive significant system efficiencies. Their solution is currently under review by a key customer. Finally, they are also exploring operational opportunities that leverage IDEXX’s infrastructure and world class capabilities in India. This is a great story that advanced in the second quarter.

It demonstrates the power of our dynamic business model, our commitment to eightytwenty, and the leverage of IDEXX’s global capabilities with proprietary capital deployment via M and A as the key catalyst. We’re confident in the Pneumatic’s team’s plans to drive even more growth and value creation in the quarters and years to come. Turning to an overview of business conditions, we saw some impactful patterns play out in Q2 and July that help us think about our likely path to close out the year. First, we have some areas of healthy demand, including food and pharma applications within IH and S and MPT, space and defense applications at Mott and Optical Technologies, North American Fire, downstream energy custody transfer, intelligent water, and data center thermal management within pneumatics. Weaker areas include chemicals, auto, semiconductor lithography, and ag.

The rest of the portfolio was pretty steady. Within q two, there were some strong demand inputs in the in the form of trade policy positioning statements that were unpredictable, shocking the system and setting up sine waves of up and down order patterns. Daily demand levels moved dynamically between policy announcements and negotiation deadlines as customers attempted to derisk tariff pricing exposure. In the end, we see two implications. First, the patterns are moving around a relatively stable baseline that didn’t line up well with the quarter endpoint.

However, in July, we saw a modest order recovery build through the month. Second, and most important for us, the sudden and unpredictable shifts in policy are slowing down decision making and conviction for larger orders. This has the highest go forward impact for us in some more recently acquired areas of IDEXX where strong growth funnels supported earlier expectations of accelerating back half revenue and margins. As a result, we are lowering our back half financial projections to better reflect this dynamic. We’re very confident in the quality of our businesses.

They are set up to solve some of the most complex challenges in advantaged markets. Coupling this with our long established operational capabilities, we believe we are very well positioned to drive attractive growth and value for all of our stakeholders. I’m now on slide four. Before Akhil covers the financial details of both our Q2 performance and our updated guidance, I’d like to step back and help you understand our journey and the progress we are making towards long term revenue and margin acceleration through growth platforms. Our goal is simple, extend IDEXX’s growth potential through variable levels of integration to win in advantaged markets where customers are demanding more solutions impact than any one single business unit can provide alone.

Here are two examples. First is HST’s IDEXX Health and Science platform that we built through thoughtful capital deployment over the last twenty years. Today, IHNS is an integrated global platform of world class technology that has added thin film optics, system integration, and microfluidic capabilities to its core fluidics portfolio. We’ve divested some small noncore businesses along the way, consolidated like businesses together in a state of the art greenfield site in Rochester, New York, and integrated commercial and technical teams across the platform. This work has driven strong value for customers and shareholders over the years and is well positioned to meaningfully do so in the years to come.

An example of this work in action today involves a key win for integrated sample prep within a cutting edge protein analysis instrument. Our team designed a metal free ceramic valve for cutting edge core performance. Then a cross business development team enhanced overall systems performance by incorporating a suite of our platform’s fluidic connection technologies. They even pulled on nanofiltration technologies from Mott to take everything one step further. Finally, they collaborated with a customer to integrate all the technology deeply within the front end of their instrument.

The initial response to the customer’s product line has been outstanding. Our second example is the strong value created over time through the build out of optical technologies, a cornerstone within HST’s materials science solutions platform. We built the optical technologies group over the last fourteen years both organically and through multiple transactions, broadening its capabilities. We’re taking another step forward today with our news of the acquisition of Microlam, a high quality bolt on that brings proprietary difficult to machine forming capabilities into our already advantaged technical toolbox. Over the years, we helped drive a culture of eightytwenty to each individual company entering IDEXX to drive focus around core capabilities while rapidly improving profitability.

In later stages, we increasingly encourage joint commercial and technical collaboration between units to attack emerging applications within semiconductor lithography and metrology. Most recently, the group is accelerating its growth by working together to support advanced space and defense applications. Microlam is very complementary here given their customer access points and technical capabilities. Moving to slide five. Since 2020, we have focused a greater portion of capital deployment towards M and A to accelerate building and expanding our growth platforms.

In the last three years, through several acquisitions, we created HST’s Material Science Solutions platform. And last year, we added Mott, which is highly complementary to many HST businesses, adding nanofiltration technologies at scale, a meaningful and very attractive capability for us. I’d like to dive a bit deeper into both of these areas to illustrate the strong links to our past success and frame the potential for even faster growth. I’ll first discuss our value creation journey building MSS. We started with a highly optimized optical technologies business, which we just discussed.

Next, we applied eightytwenty and operational improvement tools to our acquisitions of STC and all businesses within the Neon Group. As a reminder, a large piece of our cost optimization work this year is substantially complete within these areas. Today, teams are focusing resources on the best customers and solutions as we align teams commercially and technically to win in advanced markets. While our growth and margin expansion acceleration has hit a near term air pocket as our strong positioning with advanced semiconductor lithography is caught up in geopolitical tensions, we continue to be excited about our funnel of growth opportunities overall particular attractive markets like data center optical switching. Here, the muon team recently secured a multiyear win through collaboration between two of its units, a great example of our integrated growth strategy at work.

And teams are attacking other attractive opportunities within a variety of advanced semiconductor applications, space and defense, sustainable energy, and precision forming. The businesses within the MSS group are truly outstanding. They are highly differentiated and complement each other well as they provide trusted solutions to advantaged markets. Turning to Mott. We are aggressively deploying eighty twenty as we help the business grow and optimize profitability.

Mott has an outstanding track record of deploying its core specialty filtration capabilities in a variety of end markets to build important scale advantages. The solutions have ranged from differentiated components, like high purity gas filtration elements that service critical consumables within semiconductor lithography to large scale filtration solutions that embed MOTS core technology within engineered skid based solutions. Both lines of businesses are strong within their own relative merits, but our collective teams are leveraging eightytwenty and product line strategy to tune towards more IDEXX like highest differentiation, highest margin, component level solutions. This should even out the growth path over time and best fuel Mott’s development resources towards growth with the highest return profiles. Mott’s acceleration has slowed a bit this year as the larger, more complex opportunities within their funnel were impacted by the policy driven demand uncertainties described earlier.

We expect Mott’s growth will continue to accelerate this year, but we’ve recalibrated its growth potential for the back half of the year given the pause we are seeing in customer decision making. As the team works through these headwinds, they are attacking a rapidly growing set of opportunities within space and defense and high purity semiconductor applications that match all screening elements for the best IDEXX like businesses. The core differentiation of Mott’s nanofiltration technology deployed at scale is powerful. We continue to love the business and the team and confirm that the acquisition will be accretive exiting the year. Putting our past and present together, you can see that we’re following a simple and powerful growth formula that’s long driven value for IDEXX.

But we’re more intentional today as we deploy capital and integrate more rapidly to support the emerging needs of today’s fastest growing markets. And while we didn’t dive into them today, I’d like to mention that our intelligent water and fire and safety platforms are very well positioned in this regard with very similar stories of focused cross business collaboration. I’ll pass it over to Akhil to discuss our financials and our updated outlook in greater detail.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Thanks, Eric, and good morning, everyone. Let’s turn to Slide six. As Eric mentioned, in the 2025, IDEXX delivered strong financial performance. While revenue came in toward the midpoint of our guidance, we outperformed on both adjusted EBITDA margin and adjusted EPS. Now, all the comparisons I will discuss will be against the prior year period unless stated otherwise.

In the 2025, orders grew organically by 2%. We saw positive demand in our pharmaceutical, energy and agriculture end markets along with continued stability in diversified industrial and water. However, softness persisted in our automotive, rescue tool and parts of our semiconductor businesses. Organic sales in the second quarter increased 1% year over year. We benefited from positive price across all three of our segments as well as favorable results in businesses serving aerospace, defense, data centers, pharmaceuticals and North American fire OEMs.

Strength in these areas isn’t fully visible given challenging prior year comparisons within our FMT and FST businesses as well as continued weakness within semiconductor and automotive. Adjusted gross margin declined 10 basis points year over year primarily due to the near term dilution from the Mod acquisition, unfavorable mix and volume deleverage. These effects were partially offset by favorable price cost and operational productivity net of employee related costs. Adjusted EBITDA margin declined 40 basis points to 27.4%, reflecting our gross margin performance and lower variable compensation expense in the second quarter last year. Our platform optimization and delivering initiatives and cost containment efforts delivered a combined $14,000,000 in savings during the quarter in line with our plans.

Both of these remain on track to achieve $62,000,000 or $0.63 per share in full year savings. Additionally, we continue to work our baseline productivity improvements plan for this year, some of which are going to be influenced by volume. Free cash flow of $147,000,000 increased 25% year over year and represents 94% conversion versus adjusted net income. The increase was driven by higher earnings and favorable timing of receivables, partially offset by payments related to our platform optimization and delayering actions. We ended the quarter with strong liquidity of approximately $1,100,000,000 including $568,000,000 in cash and $541,000,000 in undrawn revolver capacity after paying down $100,000,000 in long term debt and $12,500,000 in short term borrowings during the quarter.

Finally, we deployed another $50,000,000 to repurchase IDEXX shares in the second quarter taking our total through the first half of the year to $100,000,000 Now quickly some color on our results by segment. I’m on Slide seven. In HST, second quarter organic orders increased 2% and organic sales increased 4%. Revenue growth was supported by positive price as well as volume increases within our pharmaceutical, space defense and data center focused businesses. Demand for advanced semiconductor lithography solutions and automotive continued to face headwinds.

Adjusted EBITDA margin of 26% increased sequentially by 40 basis points, but tracked lower than we anticipated given mix pressure within our Material Science Solutions and MOP businesses. Turning to Slide eight, in FMT organic orders increased 7% and organic sales declined 2%. From an orders perspective, we experienced growth in our downstream energy, agriculture and municipal water businesses. As we said earlier, our industrial distribution businesses posted daily order rates in line with our expectations through way, but pulled back in June weighing on our expectations near term. On the revenue side, our chemical, energy and agriculture businesses declined against challenging prior year comparables.

Semiconductor remains challenging and water was down year over year, which we attribute mostly to timing. Positive price was a partial offset. Adjusted EBITDA margin of 35% increased 130 basis points year over year as positive price, cost and productivity improvements more than offset volume deleverage. I’m on Slide nine. FST organic sales grew two percent, but organic orders declined 7%.

Our Fire and Safety business continues to benefit from strong OEM demand and strong adoption of our integrated solutions. But order patterns are somewhat choppy near term, which we attribute mostly to timing in both our Fire and Safety as well as Dispensing businesses. Adjusted EBITDA margin of 29.4% increased 40 basis points year over year given positive price cost, which more than offset net productivity, volume deleverage and mix headwinds year over year. Now please turn to Slide 10 for our updated full year and third quarter guidance. We are adjusting our organic sales growth guidance for the full year to approximately 1% versus 1% to 3% previously, given the up and down day rates, slower customer decision making on larger orders and a key semiconductor customer lowering their growth expectations.

Adjusted EPS guidance moves to $7.85 to $7.95 versus prior guidance of $8.1 to $8.45 for the year. We are adjusting our profitability outlook for the 2025 given the flow through impact from lower volumes and expectations for continued mix headwinds near term. In the third quarter, we expect 2% to 3% organic revenue growth and adjusted EPS of $1.9 to $1.95 Our third quarter revenue guidance reflects our recent order performance and current backlog. We expect that revenue will be relatively flat in the third quarter versus the second quarter across each of our segments. Our adjusted EBITDA margins and adjusted EPS are expected to decrease sequentially driven by anticipated timing of corporate costs and slightly lower volumes and related deleverage.

From a tariff standpoint, we have updated our 2025 tariff impact to be approximately $50,000,000 with about two thirds of it recognized in 2025. We expect to fully mitigate tariff related inflation with price increases and additional sourcing and supply chain savings we are actively pursuing. Our 2025 guidance does not include the possibility of additional tariffs. We expect to take mitigating actions as needed to offset these additional tariffs if or as they occur. Now please turn to Slide 11 for our capital allocation strategy.

We maintain a purposeful and return focused approach to capital allocation supported by a strong balance sheet, robust cash flow generation and meaningful borrowing capacity. Organic investments remain our highest priority as we look to consistently drive innovation across our platforms. From an inorganic standpoint, our current focus is on opportunistic tuck in M and A to scale and expand critical capabilities in advantaged markets. We continue to work in active funnel to broaden our capabilities and we’ll continue to seek opportunities to leverage eightytwenty and operational improvements which together enhance the IDEXX advantage moving forward. In addition, we are focused on returning capital to maximize shareholder value.

We have a long track record of growing our dividend as we grow earnings. We also consistently evaluate additional return of capital through share repurchases. June year to date, we have paid $106,000,000 in dividends and repurchased $100,000,000 of common stock including $50,000,000 in the past quarter. And we have $440,000,000 remaining in our current authorization. As we focus on leveraging the larger platform building investments made over the past few years, we expect a more balanced approach to capital deployment in the near to immediate term.

With that, I will now turn it back over to Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Akhil. I’m on Slide 12 where we highlight the key value drivers for IDEXX shareholders. While we have recalibrated our financial expectations for the 2025 primarily due to the pause in customer decision making, we are paving the way for sustainable value creation with all three pillars here contributing and thoughtful capital allocation to drive attractive share shareholder value and return sustainably going forward. Thank you. And with that, I’ll turn it over to the operator to take your questions.

Conference Call Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Nathan Jones with Stifel. Please proceed with your question.

Nathan Jones, Analyst, Stifel: Good morning, everyone.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hey, Nathan.

Nathan Jones, Analyst, Stifel: I guess I’ll, I’ll start with the delayed orders on the on the semi side. You know, obviously, there was plenty of disruption going on in the second quarter. We are starting to get a bit more clarity on trade and tariffs. Maybe you can just talk about that as a catalyst for for getting some more decision making going on that front. And, you know, we have been waiting for these orders to improve in the back half.

What is your level of confidence that these things will actually come through in the next couple of quarters? I mean, projects can be deferred indefinitely. So maybe just talk about your confidence on those projects coming through versus continuing to be deferred.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Sure, Nathan. And you you started off talking about semi, but then I think the question was more broadly framed around large orders in general. So I’ll I’ll kinda hit it that way and probably go in reverse. And so so look, I no no doubt, as we talked about in the prepared remarks, we saw some oscillation in both, small order patterns and decision makings around those announcements and negotiation deadlines. What was interesting here and I think, probably gives us the most confidence is, as you know, some of that just timed out where in early July, you know, we got some resolution here that things were moving forward.

And I think I think everybody got a sense of where the pattern is likely to settle in. And so we saw order recovery, throughout July in in both buckets, frankly, the small order side and on the decision making, piece of larger orders. And so I think part of the confidence comes from, you know, our sense that while there’s still announcements and things to come, there’s kind of a predictable nature of where they’re likely to settle in, how they’re likely to play out. And we’re hearing that reflected in the conversations that we’re having with customers and decision makers along the way. So I think the confidence primarily comes from a pattern that, you know, partially is in is in the current quarter that’s played out here in July.

Again, one of the reasons we dove as far as we did into the new acquired larger businesses within HST is that’s really where most of the impact comes here in terms of you know, the shift in guidance. We had we had I mean, both those, businesses, especially on the mod side, had a really, really strong funnel. They typically kinda run that business in a nonlinear way that that kinda races to year end. And and really as q two played out, they just saw a lot of kind of frozen decision making there, much of it released here in July. And so then ultimately, you have kind of a physics question in terms of how much they can produce in q four.

But but even some of those orders coming in for, that business and others along the way, we saw the same thing in water, with recovery in July, I think gives us a better feel as we enter the back half of the year that, you know, things are stable. They’re still likely to change up and down, but that baseline is pretty stable in both sides of the business. You opened the question, around semi in general. I just wanna say, you know, we we, you know, we see semi exposure in different ways in different businesses. Probably the piece that, you know, has given us the most pressure when we talk about mix and talk about semi mix in HST is really a large chunk of business in the, Muon business up in our MSS platform.

It’s outstanding cutting edge lithography, componentry that we that we make there. You know, that’s that’s coming from a customer that initially had had talked about inventory timing in the first half of the year and I think is more, settled now that, hey. Things are things are gonna be kinda steady for a while largely because of some of the geopolitical tensions, restrictions, and things that have also played out. Now the other pieces of semi within IDEXX, there’s a lot of them that are growing, growing well. Some of them quite markedly in, areas like metrology.

We see that in optics. So it’s kind of a mixed bag there depending on how we play out. But the pressure point for us is a portion of really high quality business, that looks like it’s gonna be flatter for a while.

Nathan Jones, Analyst, Stifel: I would assume that that kind of stuff that you’re talking about there is also very high margin and very high incremental margins.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Yeah.

Nathan Jones, Analyst, Stifel: You have you have cut the the guidance full year margin guidance by a 100 basis points, which kind of implies 200 basis points in the back half. Is that really outsized impacts from what are very high margin businesses that aren’t quite getting the volume that you’d anticipated? And when that volume comes in, those orders come in, we should start to see that margin improvement come back up?

Eric Ashleman, President and Chief Executive Officer, IDEXX: That is that is definitely a a piece of it, especially in the HST side. That’s some of the the best business that we have in the in the acquired group. You know, some of the the the opportunity that I mentioned is a partial offset, the great work they’re doing on things like data sitting center switching. I mean, it’s equally attractive and over time will also complement it. But there’s no doubt a return to growth there will really, really help profitability in that particular platform in HST.

I’d say the second half of it, though, is really the acceleration of Mott. You know, we’re tuning that business a lot. We’ve taken some cost out there, and they were heading already for a a lot of volume and still are, in the back half of the year. That’s where you get full leverage. And so I think those two things together, you know, tuning and revenue, and acceleration at Mott, and then ultimately, a release on the really good margin business, towards more acceleration would be the two chief components here that we’d be looking for.

Nathan Jones, Analyst, Stifel: Awesome. Thanks very much for taking my questions.

Unidentified Speaker: Thanks, Nathan.

Conference Call Operator: Thank you. Our next question comes from the line of Vlad Dostrekki with Citigroup. Please proceed with your question.

Vlad Bistricchi, Analyst, Citigroup: Good morning, guys. Thanks for taking my, questions this morning.

Jim Gianakoris, Vice President, Investor Relations, IDEXX: Sure.

Vlad Bistricchi, Analyst, Citigroup: Guess, Eric, first off, maybe can you just give us a little more granularity or specificity on what’s embedded now in the current guidance? Is it a continuation of current trends? Are I know you talked about sort of more predictability around the policy front, but how are you thinking about potential for any incremental volatility or downshift in those day rate trends that you’ve seen bounce around over the past couple of months, it sounds like?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I I think really, again, we’re we’re gonna end up talking here a lot about HST because the FMT and FSDP segments, we’ve got those. We had them originally modeled to be pretty steady, and that’s kinda where they’re sitting now. And they’re performing really, really well. So I think we were able to kinda deal with what we had in the second quarter and come out of it with the rates in July.

You know, maybe a little pressure on the third quarter. We we would have chosen to accelerate that a bit. Ultimately, the recovery will help us get where we need to, and then we kinda got those running out from here. And so in HST, you know, that’s where we had some more aggressive, acceleration hopes with a again, those those two most recently acquired businesses. We’ve moderated those a bit, but they are still moving forward.

A lot of it coming from a pretty strong fourth quarter for Mott. We mentioned that that’s, we’re confirming that’s gonna be an accretive business at that point. I’d kinda take us back to the beginning of the year. You might remember we talked about a large project that we booked in q one. A portion of that starts to, come out of the business and hit the revenue line in q four.

Some of the orders, even the ones delayed, are now in hand and will also support that. And it’s kind of been the natural tendency of that business to run there. So we we have some acceleration there, but we’ve, you know, we’ve tempered that acceleration a bit, and then it’s generally steady in the other two segments.

Vlad Bistricchi, Analyst, Citigroup: Okay. That, that makes sense, and that’s quite helpful. And then just a follow-up for me. On, within FMP specifically, I think you called out positive orders growth in the quarter, but there’s also still a red line next to ag on the slide. So I guess, can you just clarify or talk about what you’re seeing and expecting within that specific market vertical?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Sure. Just just reminding everybody that, you know, for us, we we’ve got a, we’ve got two businesses there, the largest of which, while it has an OEM component, it’s the smaller piece of the business. A lot of it just depends on its its components that, farmers retrofit as they go and as they’re, you know, planning and and harvesting. So it’s a list little less tied to the dynamics of heavy CapEx and and OEMs, but it’s it’s all related certainly. I would say, look, it’s it’s still a rough cycle for ag.

However, it’s it’s kinda played out better than we originally had hoped. And I think a lot of that is coming from a a bit more confidence. Growing season’s been pretty good. And our team there has done a really good job on the commercial side of things in terms of channel management and things that they’re doing, expansion in Europe. So so Put It Down is is still a a business, you know, that’s in the lower part of the cycle but performing above kind of the lower expectations that we had coming into the year.

Vlad Bistricchi, Analyst, Citigroup: Understood. That’s helpful. I’ll get back in queue.

Unidentified Speaker: Thanks.

Conference Call Operator: Thank you. Our next question comes from the line of Mike Halloran with Baird. Please proceed with your question.

Unidentified Speaker: Good morning, everyone.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hi, Mike.

Brett Linzey, Analyst, Mizuho Securities: Not to belabor here.

Vlad Bistricchi, Analyst, Citigroup: I just wanna, Eric, make sure I understand the moving pieces. So it’s not so much

Mike Halloran, Analyst, Baird: that there’s been a deterioration. It’s just that the pace of growth that you’re assuming as you move to the back half of the year is slower than you originally would have thought on top of some of those project pushouts where I I I don’t think that your optimism over a medium term has really changed. It’s just the timing or the the duration of when those actually hit has shifted. Is that a fair characterization?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. No. That’s that’s dead on. And and partially here, this is you know, we again, we’re really close to customers. I mean, we, you know, of course, have a bunch of businesses that are rapidly turning components.

So any inflection we tend to feel a lot more sensitively and quicker than others. And so we just went through a quarter where there was, you know, tremendous up and downs and some periods of frozen decision making and then release points. It played out in kind of an unusual way and then resolved itself largely in the month of July. So, you know, from an ongoing confidence standpoint, I actually feel better given that I think everybody can kinda see the patterns that are working here. It appears to be reasonable.

We can kind of draw a straighter line than we could coming into the quarter. We hear that from customers, distributors, end users, all all over the place. But, you know, for where we are, I mean, we’re we’re often, you know, coming into a quarter with x amount of the backlog secured, then we’re hunting for the rest. That decision making has an impact had an impact in the second quarter for us. And most specifically, again, I just point to, you know, we’ve really had some strong funnels, up in those recently acquired businesses and those acceleration rates.

Know, we just we’re we’re dealing with a pause there and a time out, again, with some resolution in the same exact capacity in July. So confidence level pretty good, but, you know, it was it was a period of of oscillation and kinda strange patterns for us that just we’re gonna experience maybe more than some other businesses.

Mike Halloran, Analyst, Baird: Nope. That that makes sense. And then, just on the capital deployment side, maybe just some thoughts on the funnel, of opportunity. I know the the the tenor or the tone has been a little bit more measured about the pace of m and a. Is that a reflection of where the balance sheet is, a reflection of the opportunity set as you sit in the market today, and and just maybe a little bit broader thoughts on the opportunity set holistically.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. Well, I mean, obviously, we talked about, you know, bolt ons, tuck ins, and then, of course, we announced one. I I think it’s it’s largely a it’s it’s largely, the output from what the funnel looks like. You know? Because if you if you think about it, if you step back here, I mean, as we dove in and talked about the Material Science Solutions platform, you know, we we took essentially an optics platform that we built over the time horizon that I talked about in my remarks, fourteen years, and then we built the second half, largely pretty aggressively here over the last couple of years with the acquisition of the businesses that form that unit.

Now that it exists, essentially the next move and the piece we’ve been getting ready for are those tuck ins and technology fillers that really then bolt on to a really great framework. And so it was always kind of the plan is to get it to this level, complete it with the technologies that we have, and then put complementary businesses like Microlam right next to it. You know, Mott’s a little different. It was a it was a kind of unusually scaled business. It presented technologies that we’d not had in the portfolio.

You know, so one of the things we see there is just wide applicability to almost everything we have in HST. So we’re actually not forcing that one at the moment. We’re getting a read on where it’s, you know, kinda fits the best, where it complements things the most. We’re using it as sort of a, as I said in the comments, something in the toolbox for everybody to exploit. But but I think the nature of capital deployment is really reflective of just whether it’s, fire and rescue, water, IHNS, and now MSS, these incredible platforms that have multiple touch points that we’re attempting to take advantage of.

Unidentified Speaker: Thanks, Eric.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Mike.

Conference Call Operator: Thank you. Our next question comes from the line of Deane Dray with RBC Capital Markets. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Thank you. Good morning, everyone.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hi, Deane. Good morning.

Deane Dray, Analyst, RBC Capital Markets: Hey, I appreciate all the color you’re providing here because it is kind

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: of an

Deane Dray, Analyst, RBC Capital Markets: unusual choppy mixed kind of signals. And you guys are really good historically at being able to identify them and, you know, versus expectations. So, you know, in the spirit of that, can you give us any calibration on the day rates? Just you said May was as expected, June declined, July, was it up or stabilizing? Any kind of sizing of that just because it’s really important this quarter to get a sense of, like, the amplitude.

You know, how far was June down, and how much has July come back, and what the implications are?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. I appreciate it, Dean. I mean, look. It it played out with each each month kinda had its own little story over the last four. I think in, you know, April, we talked about it.

You know, we we probably, like a lot of business, experienced some pull ahead, pre tariffs after the initial announcement. In May, as expected, we saw some of that come back, and we were probably at about the position we thought we’d be at the May. We always knew, you know, June was gonna be a pretty key month, particularly with some big announcements sitting right in the July, concurrent with a holiday. And so the the backlog reductions that you see overall for IDEXX, all of it, came out of the month of June, really over kind of the last three weeks, I’d say, right into that US holiday that we had at the July. Then we got the news.

The news said, hey. Things are delayed. You start to get more clarity on, like, how this is ultimately probably gonna play out. And then all through July, you saw a steady build back. And I’d say as we closed July, in that four month period, we ended about exactly where we thought we would.

It’s just the patterns themselves were pretty dynamic, pretty different, and certainly, as we said, at least from a larger decision making perspective, I think froze some people as they were really putting their, you know, concentration towards ups, downs, and things that they could do, you know, to try to mitigate potential tariff hits or things like that. That’s that’s ultimately what was playing out.

Deane Dray, Analyst, RBC Capital Markets: Good. That’s that’s helpful. And look, we’ve all seen periods in the macro where customer decision making slows down. You know, you need extra signatures. It’s just longer to get to.

Yes. But it really does sound like for your guidance cut, it’s concentrated in Mott. So how much of the guidance cut is attributed specifically to Mott?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Well, I’d say I’d say two places really, and you you gotta think of this from a revenue and then the the profitability flow through along it. It’s it’s really from the MSS group, which I talked about right next to Mott. I the think issue there is not so much on the revenue line. It’s the mix it’s a continued mix issue that we have with a great piece of semi lithography business. It’s kinda flattened out for us, and we had long hoped that that was gonna start to move again.

But revenue, largely solid and, in fact, growing around it, just not at the same kind of mixed quality. And then, you know, from Mott’s standpoint, as I said before, that that really historically has been a nonlinear business that kinda starts low and builds throughout the quarter. That was the plan of attack for it in 02/2025. Large funnel. I mean, they’ve got a funnel that’s frankly overbuilt for what they ultimately still need in the back half of the year.

But that decision, kind of the frozen decision making loop in the second quarter really delays just kind of the physics and fundamentals of what can possibly be produced as we exit the year. And so you’re seeing that because, you know, that’s where a lot of the margin appreciation is happening simultaneous to the volume stacking on. So I’d say those two pieces relative to what our previous call were is the significant piece of the delta. The only trailing component would be, again, I think generally had those small order patterns not played out the way I described, we might have had a little bit more cross IDEXX momentum into Q three. We kind of had to build through July to kinda get back to to the zero point, but I put that as a trailing third and certainly not a chapter we’re worried about going forward.

Deane Dray, Analyst, RBC Capital Markets: Okay. That’s really helpful. And just last question for me is, you know, the past couple of years, most of the consternation was around life sciences and, the kind of destocking extended, demand, fall off that we went through. And that doesn’t seem to be the case here. Can you just refresh us where has the life sciences gone, during this period when I guess most of the focus here has been on semi, but just, an update there.

Are you seeing any blanket order changes as well?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Really, I’d I’d I’d say the life science story is playing out exactly like we thought it would be. You know, it’s a it’s a slow recovery off the bottom. It’s growing low single digits. You know, there are some some areas that that are weaker, but they’re generally offset by things that are stronger. So for, you know, talk around NIH funding and academia, that’s definitely under a bit of pressure, but it’s a smaller piece of our business.

Those applications that are targeted to pharma drug discovery are strong and generally offsetting them. And then that core kind of moderate recovery heading to something better in the future is playing out exactly as we thought it would be.

Deane Dray, Analyst, RBC Capital Markets: That’s great to hear. Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Thanks, Dean.

Conference Call Operator: Thank you. Our next question comes from the line of Brian Blair with Oppenheimer and Company. Please proceed with your question.

Unidentified Speaker: Thank you. Good morning, guys.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Hi.

Jim Gianakoris, Vice President, Investor Relations, IDEXX0: You mentioned that water was down in the quarter. It’s a little bit of a surprise. I guess if I heard correctly, that was attributed to timing. Hoping you can offer a little more detail on water performance in in q two and then more importantly, what your team is seeing on an underlying basis, you know, where there’s opportunity versus perhaps risk in terms of platform demand and what level of growth you expect in the back half.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. And, I’m glad you asked it. Actually, what we what I isolated there is that, you know, water, which has some larger order components in it, you know, more than some of the rest of IDEXX, I mean, had some of the same frozen timing dynamics in q two that we talked about elsewhere. A lot of that released in July and really does nothing to impact, you know, what we’ve generally seen, which has been a favorable run out of that business. And we’ve actually got good numbers for it going forward.

So really no pause in water. It’s just I was able to reference that that same dynamic played there and released nicely for us in July.

Jim Gianakoris, Vice President, Investor Relations, IDEXX0: Okay. Understood. And circling back to MicroLand, that’s an interesting tuck in. The technology, I’m admittedly not familiar with. Can you offer a little more color on the strategic fit and synergy with the MSS platform?

And then as we think of think about your tuck in strategy going forward, how does MicroLIM compare to the average prospect in your funnel, deal size, revenue generation, etcetera?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Hi. It’s Akhil here. I’ll take this one. And then Eric, please feel free to add in any color. So when you think about microLam, right, it sort of plays in the same workflows that our optical businesses do.

When you think about what we do in optics today, right, a lot of that is on the coding side of the business. But Microlam is essentially a provider of precision optics. So they actually manufacture the optic, which can then get coated. So there’s a really nice complementarity here and a strategic fit between our optical technologies business and microLAM. And so this is, as you know, microLAM, it’s sort of, it’s will sit within our MSS platform.

And when you think about some of the other capabilities we have in there, the points are really interesting and unique and I think we can drive a lot of value there. As we mentioned, when we think about microLambrite and how does it compare to will tuck ins look similar going forward, We’ve got a pretty, I think, broad funnel across our platforms here that we’re cultivating pretty actively. And we’ve got a great foundation in place with the platforms that we have built. And so we expect to strategically find opportunities that help fill a capability gap, help us scale or take us open up some new customer doors. So it’ll continue to look like that.

They have to have, I think one of the filters that we’re gonna be applying here is that they have to have an existing or a touch point with an existing IDEXX business. So what you’re gonna see us is focus, acquisitions, tuck in acquisitions around businesses that we know that we can bolt on and, tuck into a platform for sure. And, again, we’ll be targeting, strong returns there. And as you see with microLam, right, we’re gonna be accretive, in the first full year of our ownership.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Just a couple other comments here, you know, that while the technology is really, really complementary, I would oversimplify and say they’re really good at making the optics. We’re really good at polishing, coding, and assembling them. That’s kind of the high level where this fits. They also have outstanding customer touch points that are really complementary in the space and defense sphere based on the technologies they have. So, you know, we’ve been actually working with these guys for a while now.

Our teams know them, know them really well. Everybody in OPTICS knows each other. And so, we’re gonna hit the ground running here.

Unidentified Speaker: I appreciate all the color. Thanks again. Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Joe Giordano with TD Cowen. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Hey, guys. Good morning.

Vlad Bistricchi, Analyst, Citigroup: Hi, Joe. Good morning.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: Hey. So, like, last quarter, I thought the messaging was more like, we are confident in the margin path because of actions that we’ve already taken that we know we’re gonna read out and that the back half acceleration was, like, really not dependent any longer on these larger semi orders coming in. Like, what changed like, I the commentary you’re saying today about, move on and stuff, it seems consistent with what you said last quarter, but, like, the outcome of it feels different now. So maybe if you can give us a little color on how that messaging is changing.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I think I I think once again, kind of in the same way when Nathan had this in a question, the only piece of semi here that really is playing out is a decent chunk of really high margin business that’s kind of up in the MUON business. And that has been a piece we’ve been talking about. We talked about originally there was an inventory correction. You know, there was a lot of customer feedback pointing at acceleration after that point.

Kinda saying at this point, okay. Based on our interactions with them, we don’t see that coming here. We’re not gonna get the lift from that component of it. The rest of semi elsewhere is really not an issue that plays a lot in things that are different. So I think it’s that piece of it, and it’s the acceleration of Mott.

Really, we were again, we’ve we’ve kind of always had a path that was gonna run, pretty aggressively for them, and having a a time out on some of the order flow there. We’ve kinda got a physics problem at the end of the year. It’s still gonna be a really, really strong q four for them, very similar to what they had last year. The funnel is still really strong. It’s overbuilt, frankly, for what we need.

So and we see good business growth past that point. But taking some time out here from frozen decision making for that business in particular does impact us.

Jim Gianakoris, Vice President, Investor Relations, IDEXX1: And then follow-up here. Can the the tie ins to some of these new acquisitions to, like, existing businesses, like, it it makes sense. I get it. But are we like, has there been a pivot more does that kind of pivot to bolting on within kind of the context of IDEX? Does it get us into a situation where, like, there could be a cast more of a cascading effect of, like, a market issue across the franchise than you’ve had previously at IDEX where I felt like there can always kinda be a problem somewhere, but these businesses are largely independent enough that there’s enough other things that would probably offset.

It feels like like one kind of problem somewhere has, like, more of an impact across more businesses now because of how they’re kind of being tied in. Is that is that accurate?

Eric Ashleman, President and Chief Executive Officer, IDEXX: I don’t I I don’t think so. I mean, I I I think I get the spirit of the the question. But if we really step back and let’s take MOD as an example, and I gave several examples in the comments where, you know, MOD’s technology is linking with current IDEXX solutions, they actually cover a pretty wide range of of end markets, everything from, you know, data center switching to something over on the life science side. And so that in itself to me says very IDEXX like. You can take core capability.

You can actually tune it in several different areas. Now to the extent a lot of the work is being done here most recently in HST, it does tend to be bracketed in faster growing emerging markets, you know, that was not gonna have necessarily the range and the fragmentation of a lot of our industrial kinda core FMT assets. So there’s a different look and feel here, but, you know, we’re not kind of chasing one singularity over and over and over here. These are very appropriable technologies. They just happen to be a lot of them more recently here in the HST side of the house, which is a little narrower than certainly, almost everything is narrower than what we have over in very, very mature, industrial businesses.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: And maybe if I can just add, when you think about microLIM, right, essentially the applicability of that technology is very broad based. Right? Eric highlighted some of the fast growing markets that they’re levered to. But when you think about sort of the markets they can serve, it’s actually pretty broad based from a capability standpoint.

Conference Call Operator: You. Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Hey, thanks. Good morning, everyone. Hi, Jeff. Hey, hi. I wonder if we could just get to kinda the the internal cost and productivity actions.

Comment was made in the in the pitch that they’re on track, but, some vulnerability to to volume weakness, which I get, you know, makes sense, obviously. But can you just level set us on what you’ve accomplished year to date, what remains to be done in, you know, the back half of the year, and if there’s any other interpretation we need to add to your comment about maybe, you know, volume risk to those, aspirations?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Jeff. It’s Akhil. I’ll take that one. So if you recall, we had three buckets of cost actions. The first was the platform optimization and delayering initiatives, and that was the $42,000,000 that we had talked about.

So that’s in place. We’re actually at run rate. And so year to date, we’ve, or I would say in the second quarter, we achieved $11,000,000 of that and year to date, it’s about $20,000,000 And then when you think about the second bucket, that was the $20,000,000 of cost containment. Again, we expect that to hit run rate in this quarter and that’s about $4,000,000 And then when you look at the total right between, those two buckets, we have we’re at about $23,000,000 and we’ll recognize the balance of those savings in the back half of the year. And really the third bucket is our baseline productivity.

We’re still pursuing that, but some of that is a function of volume, which we will we expect to again ramp in the third and fourth quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Got it. Thanks for that clarification. And then also on the so called OB3 or big beautiful bill, whatever we want to call it here, are you expecting some cash flow benefits from the change in r and d, deductibility, or any other impact on your financial results in 2025?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. And, you know, it’s not only been the OBB, but you’ve also got some state tax laws and foreign tax laws that have actually changed this year. That’s why when you look at the third quarter, right, you see your tax rate bumping up just marginally. That reflects really a true up of the tax changes and rules that are going into effect for the year. And then therefore, when you think about our tax rate overall for the year, you see it coming down, which would imply a lower fourth quarter.

But the OBB does help us from a cash standpoint and cash taxes and it is supportive of incremental cash there.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Right. And then maybe just one little loose end also. Just on price, it sound like it was mostly positive across the corporation. Can you just aggregate that for us? What was your price capture in Q2?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yes. So when I think about price capture, right, for the second quarter, we were just shy of 3%, right? And let me just take you back, right? When we thought about price, we implemented that in the first quarter and that’s about a percent and we came into the second quarter. Tariffs got announced that we had to we were responding to tariff environment and that had us not only with traditional, but the tariff piece added on top of it that put us right under the 3% mark for the quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: And I guess you’d expect something similar for the year, maybe a little bit of dial back though as the tariffs faded, right?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: That’s right. We’re actually expecting a slight acceleration because if you think about when we put our tariff pricing in effect, right, it went into effect into Q2. So we didn’t realize the full benefit in the quarter, and you’ll do that going forward. Now this obviously assumes the current rules that are in place as August 1, comes to bear and then there’s other deadlines or tariffs move around, we’ll continue to respond accordingly.

Jim Gianakoris, Vice President, Investor Relations, IDEXX2: Great. Thanks for the feedback.

Conference Call Operator: Thank you. Our next question comes from the line of Rob Wertheimer with Melius Research. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX3: Thank you. And thank you for all the color around customers. It’s been helpful. Just a quick follow-up on that. I mean, to the extent that you know when you talk to them, is the uncertainty largely tariff related?

There’s obviously a few other areas of uncertainty in the world. But as we get stability on tariff, I mean, maybe that’s what unlocked July a little bit. Is there more of that? And then just to tack on my second one, is there your m and a activity has been great. Is there any related m and a freeze in the market either for you or other potential buyers or sellers from the uncertainty we’re seeing?

Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yep. I I would say probably 90% of all conversations are related to trade policy, you know, and then and the things that we’re covering here as we talk through q two. And it really comes down to, you know, I think two things. For anybody who’s working on a larger order with us, it’s generally, remember, we’re a component level to something much bigger than we are, and so it becomes a stack up issue. And I think singularly becomes how much is it gonna cost?

And I need to know that. Is it likely going to change again? To your point, there are other factors out there, but they really don’t enter the conversation much, or they certainly didn’t in the second quarter. Was kind of where’s this going to go, where’s it going to settle out, Is it gonna happen ten days from now, twenty days from now thirty? How can I sort of move my things around?

Again, with somebody on our side that’s generally pretty rapid fulfillment. So there’s not a lot of buffer in between us and that conversation, and that’s largely what played out. So I do think certainty in that particular area is a really good thing for us and others. And when I say certainty, that’s a relative term around, you know, a reasonable band kind of in a way to anticipate and call as we experience both sides of those conversations, potential things that could happen and what ultimately plays out. So I think that’s really, really positive.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: And on the M and A front, look, I would say that early on in the quarter when all of these tariff announcements went into play, there was really a freeze in the market and we saw a number of sale processes that were due to come to market get halted. And now I would say that’s all thought out and activity is starting to pick up and that’s just really a general, I think, view of the market at the moment.

Unidentified Speaker: Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Matt Summerville with D. A. Davidson. Please proceed with your question.

Jim Gianakoris, Vice President, Investor Relations, IDEXX4: Thanks. I just, again, want a little more clarity here. That $20,000,000 in cost containment was a hedge against what exactly if it wasn’t a hedge against some of the things you’re describing on the call as driving down your EPS guidance for the year? And then I have a quick follow-up.

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. Hey, Matt. This is Akhil. So this was a hedge against a downturn in volumes. Now it only captured a certain sort of downturn in volume and what we’re calling here is slightly more than that.

So that containment action is in place. It is supportive of our back half. And again, it does ramp this quarter and then it will be fully at run rate in the fourth quarter.

Jim Gianakoris, Vice President, Investor Relations, IDEXX4: Okay. And then throughout your prepared remarks and a few times during the Q and A, Eric, you referenced your data center related exposure. Can you maybe size that up for us in terms of roughly how much revenue that will generate for IDEXX in ’25? And again, just kinda big picture, you know, where that can sort of go over the next two to three years for the company. Thank you.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. Like, it’s it’s it’s not a giant part of IDEXX. It’s a decent part of the AirTech business that I talked about. You really don’t see it over in gas. So if you’re looking at performance pneumatics, AirTech’s only a portion of that, and this is, is becoming a larger portion of their business.

So that starts to dimensionalize it too. It’s it’s important for that business not yet rising to a major catalyst for IDEXX. What’s interesting, though, is then we’re starting to see it in other places. I mentioned the Wynn and the Muon group. Again, these are very peripheral kind of applications.

It’s not that, you know, massive stuff that you see around the center of a data center, but it’s interesting little niches off to the side. What it can become from here, great to see these initial wins because as you know in this space, I mean, often you can take something that’s working and delivers performance and efficiency in one area and run to lots of others and deliver that as well. So, I mean, our commercial teams are doing that. I think as it goes, we’ll certainly probably work to dimensionalize this a little better, talk about the funnel. But these are some interesting initial wins that are pretty early for us that we’re going to continue to drive forward.

Unidentified Speaker: Got it. Thanks, Eric.

Conference Call Operator: Thank you. Our next question comes from the line of Brett Linzey with Mizuho Securities. Please proceed with your question.

Brett Linzey, Analyst, Mizuho Securities: Hey, thanks for taking the questions. Just first one on China, pretty sluggish here in the in the quarter still based on, results thus far. I know IDEXX exposure isn’t isn’t huge there, but you do have some, larger landed exposure indirectly in the China and HST. So just any color on, you know, what you’re seeing in in the in the region, and then what are the expectations for the second half of the year there?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Yeah. I mean, certainly, we we wouldn’t say that it’s it’s different conditions there. I mean, we’re seeing the same thing in terms of, you know, not really, really strong. It again is is a small piece of what we do, about 6% overall of revenue. We kinda surgically attack that, a product line at the time.

You know, probably the areas of pressure that we would note, you mentioned one of them, you know, for our HST customers, that’s an area they’ve long been talking about and are, you know, concerned about in terms of rates and when it might recover and how stimulus programs may help that. We do a little bit of direct shipping there, that has been softer. Some rescue. We’ve talked a little bit about the rescue business. We’ve got a decent franchise up there that’s also been, impacted by some of the slowdowns.

The core that we have around it, I mean, they’re generally really appropriate. They do incredible things for that local economy, and they’re, you know, kind of branded at a at a level that’s long been localized for the for the geography. So I would say it’s pressured. It’s small for IDEXX. You know, we’re treating it accordingly as we think of resourcing investments.

In many ways, you know, kind of our Asia Pac concentration is China and India, very surgical and specific. And the India side is more than offset that from, just really strong fundamentals.

Brett Linzey, Analyst, Mizuho Securities: Great. And and then maybe shifting, back over to to tariffs. So you’re moving from the 100,000,000 to the 50. Could you just expand a bit on some of the underlying assumptions there? Are you assuming the incremental copper tariffs embedded in that assumption?

And then any other color on some of the regional tariffs would be great?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yeah. So what what’s, not embedded in here is obviously the, you know, the copper, as you mentioned, and then the finalized rules around what’s gonna happen with Europe, Japan. That’s also not in here. I know there’s been an announcement, But we’re waiting for further clarification on how that’s gonna be implemented. And then you got you have Taiwan, China, any changes there versus the status quo is not in here.

But generally, if there are incremental tariffs, right, we’ll continue to offset that one for one with price.

Brett Linzey, Analyst, Mizuho Securities: All right. Appreciate all the detail. Thanks.

Conference Call Operator: Thank you. Our next question comes from the line of Andrew Viscaglia with BNP Paribas. Please proceed with your question.

Nathan Jones, Analyst, Stifel: Hi. Good morning, everyone.

Unidentified Speaker: Hello.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: Apologies if I missed this, but what were your expectations for Mats growth into the year? And then where do you see that playing out for the full year? What will the growth be?

Akhil Mahendra, Interim Chief Financial Officer and Vice President of Corporate Development, IDEXX: Yes. Look, I would say from a Mats standpoint, right, when we announced the transaction last year, expectations was the business were going to improve the margins in that business and that was going to be over a longer period. And we expected the business to be able to deliver high single digits in terms of growth. I think where we are right now, it’s more or less just given the pause where we’re calling the business flat. And then it’s just going to be a different trajectory.

But again, our expectations for the business overall, as Eric mentioned earlier, right, we’re excited about the business. The team itself remain intact and we do expect to generate or our expectation is still to generate double digit returns for the business over the longer horizon.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: K. Got it. And maybe, you know, a lot of, like, the detailed questions are taken, and so I’d like to take a you know, ask a bigger, broader question. But, you know, we’re we’re seeing some trends across industrials where some peers are, you know, trying to reduce complexity in their businesses and, you know, making strategic decisions one way or the other to do that. How do you guys view your portfolio at at this point given, you know, the the world has changed a lot over the last five years, even the last three, and you you quite haven’t been able to grow earnings the way one would hope.

So is this is there is there a conversation to to be had? Are you having those conversations where maybe you look to rather than acquire, divest anything or or redo your portfolio?

Eric Ashleman, President and Chief Executive Officer, IDEXX: Look. We we we always consider all the pieces of our portfolio along the year while we’ve, you know, talked a lot about the things we’ve added, and we’ve added things more aggressively over the last four years. You know, we’ve we’ve pruned small to medium sized, assets along the way as well because, honestly, they’re not gonna scale. And to your point, they become more complex over time if in fact they they become relatively smaller as the business goes. And so I do I do think we consider both sides of the equation.

I think really here, though, what you see is, you know, we we haven’t talked a lot about FMT. We haven’t talked a lot about FSDP. I mean, to your point on complexity, I mean, we’ve taken a ton of complexity out of those two particular platforms, and they’re performing really, really well. What we’re doing with an HST is, you know, we’re arguably trying to move this portfolio over towards faster growing, more inherently advantaged markets and doing it the connection points between each business is, in some ways, is taking complexity out of the equation as well because it’s taking a large suite of end markets and things where we could go attack them single units at a time to more concentrated energy towards a handful of really, really good markets where we’re trying to set those initial specification points to generate the same kind of annuity streams that we had elsewhere in industrial businesses in the two segments that we’re not spending as much time talking about. So we’re kind of very active work in the HST side now.

We’re talking about it appropriately, but it’s really to put it in a state where it’s frankly inherently simpler than it is today. And then through all of it, looking at both sides of the equation, each unit gotta kinda earn its relative merits, and we we talk about that constantly as we go.

Jim Gianakoris, Vice President, Investor Relations, IDEXX5: Yeah. Okay. That’s fair. Thanks, Eric.

Conference Call Operator: Thank you. And we have reached the end of the question and answer session. I would like to turn the floor back to Eric Aschelman for closing remarks.

Eric Ashleman, President and Chief Executive Officer, IDEXX: Okay. Thank you. Thank you all for joining here. And, of course, today, you know, we talked about a lot of the work we’re doing to put pieces of IDEXX together to multiply our growth input. You’ve heard examples of that, you know, today reflecting on our past when we talked about IH and S and the optical technologies and the build out of those, you know, over more than a decade or in some cases two.

We discussed our present when we talked about AIRTEC and the many HST touch points that we have for Mott. We didn’t talk about them today, but, you know, the great work that’s going on on the extended intelligent water platform, the automation growth that’s happening in fire and safety, and then all of the future work, a lot of it within the MSS group and the larger Mott group work across HST. These are all examples of how, you know, whether it’s a couple units or a platform coming together, they’re able to go and solve problems in ways that are just very, very difficult for any one single unit, and we think are gonna absolutely propel the company going forward. We thank you for your time today, your interest in IDEXX, and we hope you all have a great day.

Conference Call Operator: Thank you. And this concludes today’s conference. You may disconnect your line at this time. Thank you for your participation. Have a great day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.