IDEX Corporation (IEX) Q1 2019 Earnings Report, Transcript and Summary

Greetings, and welcome to the IDEX Corporation First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Michael Yates, Vice President and Chief Accounting Officer. Thank you, Mr. Yates. You may begin.

Thank you, Doug. Good morning everyone. This is Mike Yates. I'm Vice President and Chief Accounting Officer for IDEX Corporation. Let me start by saying thank you for joining us for a discussion of the IDEX first quarter financial highlights. Last night, we issued a press release outlining our company's financial and operating performance for the three months ending March 31, 2019. And later today, we will file our 10-Q. The press release along with the presentation slides be used during today's webcast can be accessed on our company's website at www.idexcorp.com. Joining me today is Andy Silvernail, our Chairman and CEO; and Bill Grogan, our Chief Financial Officer. The format for our call today is as follows. We will begin with Andy providing an overview and an update on market conditions, geographies and our capital deployment strategies. Bill will then discuss our first quarter financial results and walk through the operating performance within each of our segments. And finally, Andy will wrap-up the call with an outlook for the quarter and the full year 2019. Following these prepared remarks, we will open the call for your questions. If you should need to exit the call for any reason you may access a complete replay beginning approximately two hours after the call concludes by dialing the toll-free number 877-660-6853 and entering conference ID number 13684162 or you may simply log onto our company's homepage for the webcast replay. Before we begin, a brief reminder. This call may contain certain forward-looking statements that are subject to the Safe Harbor language in last night's press release and in IDEX's filings with the Securities and Exchange Commission. With that, I'll now turn our call over to our Chairman and CEO, Andy Silvernail.

Thanks, Mike. Good morning, everybody and thank you for joining us for our first quarter call. I'd like to start with some key themes. Q1 results were strong and somewhat better than our expectations from 90 days ago. Bill will walk you through the details, but overall I'm pleased with our organic growth in both orders and sales, the team's execution was outstanding driving operating margin expansion and cash flow and this helped us deliver another quarterly EPS record driven by both operational outperformance and favorable tax rate. Momentum continued in our industrial, municipal and life science markets both partially offset by softness in ag and semicon as well as some lumpiness in our project-oriented businesses, specifically dispensing and MPT. There were some concerns of slowing global economic – the global economy and those do remain, but we're confident in our ability to grow faster than the underlying markets as result of our market-leading positions, our ability to capture price, and deliver on our targeted growth initiatives. Putting it all together, we're raising our full year EPS guidance while maintaining our organic revenue growth expectations. Now, I'd like to take a moment and talk about what we're seeing across the markets we serve and the regions we do business in. In the industrial market, the overall conditions remain favorable with continued strength in OEM and our targeted growth initiatives. We are however seeing some day rate volatility in pockets of our business, due to customer caution about the macro outlook. In Scientific Fluidics and Optics, our life science, our markets continue to expand. Our IVD/BIO business is leveraging new product launches and platform wins to our growth and the AI market demand remains solid. In Energy, we're seeing some rebound due to the higher oil prices. Mobile truck builder demand is increasing and we're seeing positive signs in the aviation fueling space. In municipal, the North American market continues to modestly expand. Our focus remains on new product development notably a recent launch of new hydraulic tool in our SAM system and Fire & Rescue, as well as continued expansion in emerging markets. In ag, we're expressing some contraction due to macro uncertainty around the soybean tariffs and the OEM slowdowns. We are seeing some growth in Latin America and Europe, but North America is a challenge. In semicon, we continue to see broad-based pressure by lower investments in Asia and the downturn in memory chip demand after substantial growth in 2017 and 2018. In auto, as you all know, there's been a slowdown of global light vehicle sales and that's driven some softness in this market, but as you know that's a relatively small piece for us. Now, let's move on to the geographic outlook. Sales across the majority of geographies performed well in the quarter with North America leading the way. Asia was positive, specifically India and China was primarily driven by our initiatives versus the macro trends. The European economy lost some traction in Q1 and we saw some supply chain disruptions ahead of Brexit. And finally, we are seeing some softness in the German economy. Nevertheless, our targeted growth initiatives and new products continued to drive positive results around the globe. All right. Let me turn now to capital deployment. M&A continues to be a priority for us. With that said, there remains a challenge in the current environment, due to valuation. Our teams have evaluated several deals, but our approach has not changed and we will remain very disciplined with our return framework. We will only close on a deal that fits the IDEX sales competition and delivers long-term value for our shareholders. This remains our number one priority. As I said, our balance sheet it is very healthy our gross leverage is 1.3 times and our net leverage is 0.6 times. When the right deal comes along for IDEX, we will capitalize on it. In terms of the other capital deployment, we did repurchase $52 million of stock in the quarter at an average price of about $140 a share. We also returned $33 million to our shareholders via dividends. Let me know turn it over to Bill, who is going to go over our financial results and our segment discussion.

Thanks, Andy. I'll start with our first quarter financial results on slide 4. Q1 orders of $655 million was an all-time record, and was up 4% overall and 6% organically. All three segments were up with FMT leading the way. Q1 revenue was $622 million, up 2% overall and 4% organically. We expanded gross margins by 40 basis points to 45.6%, primarily due to price, production efficiencies, and volume leverage, partially offset by investments in engineering related to new product development. Our Q1 operating margin was 23.8%, up 120 basis points compared with the adjusted prior year period, mainly driven by our gross margin expansion, lower intangible amortization, and lower variable compensation costs. Q1 net income was $110 million resulting in record-high EPS of $1.44, up $0.15 or 12% over prior period -- prior year adjusted EPS. Our Q1 effective tax rate was 19.5%, which was lower than the 24% in the prior year period, mainly due to an increase in foreign tax credits, discrete tax expense in the prior year period, and the mix of global pre-tax income. The first quarter ETR of 19.5% was also 300 basis points, lower than our previously guided amount, mainly due to a higher excess tax benefit from greater than expected stock option exercises in the quarter. This lower tax rate accounted for five out of the seven EPS favorability compared to the midpoint of our previous guidance. The remaining $0.02 of EPS favorability was operationally driven. Free cash flow was solid at $76 million, up 12% over the last year, and 69% of net income. This was our highest Q1 free cash flow of all time. In regards to the balance sheet no change here. Gross and net leverage remain very healthy. The combination of our strong balance sheet capacity on our revolver and free cash flow provides us with an ability to deploy $2 billion in the next 12 months for the right opportunities. I'll now turn to the segment discussion. I'm on slide 5, starting with Fluid & Metering. FMT continues to deliver strong numbers, from both an order and revenue perspective. Q1 orders were up 8% overall and 10% organically. Q1 sales were up 4% overall and 6% organically. Op margin was strong at 29.6%, up 110 basis points over the adjusted prior year quarter, mainly due to price, volume leverage and productivity initiatives. As Andy mentioned earlier, we are seeing some day rate fluctuation in pockets of the business, but overall the fundamental strength within the industrial sector continues to drive solid results. Our Viking and Richter businesses posted record order and sales in Q1 with continued project wins in the processing and chemical markets across the globe. The municipal water business remains steady, and the oil and gas market conditions have improved due to oil price increases and stabilization. The only business in this segment that contracted year-over-year was Banjo. The concerns we highlighted with the ag market in Q4 materialized in Q1, and we continue to be cautious on the balance of the outlook for Banjo. Overall, the targeted growth efforts across our businesses in this segment continue to gain wins and market share. Let's move on to Health & Science turning to slide 6. Q1 orders were flat overall, but up 1% organically. We highlighted on our last call, we expected a tougher comp for HST orders due to an OEM blanket we received early in Q4 of last year. Along with the last time buy we offered customers in Q1 of 2018, as we eliminated the product line as part of the Rochester COE project. Normalizing for the items, orders would have been up 5% organically for the segment. From a sales perspective, Q1 sales were up 2% overall and 3% organically. I'll give you a bit more color on this in a minute. Operating margin increased 10 basis points to 24%. This was primarily due to lower amortization. Core margin performance was negatively impacted by lower project volume in FX and MPT. Overall, HST's performance was primarily driven by continued success in Scientific Fluidics and Optics. Underlying AI and IVD/BIO markets remain positive and we continue to grow through targeted NPD efforts in collaboration with our key customers. Gast saw strong underlying industrial OEM demand and solid execution on our growth initiatives in the food and beverage market. On the negative side, organic growth was impacted by contraction in our sealing business, which was affected by both a downturn in semicon and lower auto sales. Finally, MPT backlog remains strong and has grown sequentially versus last quarter, but timing of project shipments is skewed towards later quarters in the year due to longer lead times. I'm now moving on to our final segment, Diversified. I'm on Slide 7. Q1 orders were up 5% overall and 9% organically. Revenues were down 2% overall, but up 1% organically. Operating margin of 25.8% increased 90 basis points in the quarter. This was mainly attributable to price, productivity initiatives, more than offsetting our volume decreases. FST's performance was driven by our Fire & Rescue business continuing to see growth across most of the product categories and geographies with several project wins resulting from new product launches. Band-IT saw growth in several of its verticals with aerospace leading the way. They also had some nice project wins in cable management. Our dispensing business was down around 15% organically for the quarter as they had a tough comp against some larger projects last year. We expect them to recover some as we progress through the year but will be down overall for the full year based upon timing of customer replenishment cycles. I'll now pass it back to Andy to provide an update on our 2019 guidance.

Thanks Bill. So, let's wrap things up and I'm going to summarize here with some additional details on 2019 for both the second quarter and the full year I'm on the last slide and that's slide 8. In Q2, we're estimating EPS $1.47 to $1.50 with organic revenue growth in the range of 4% to 5% and operating margin about 24%. We're projecting 2% topline headwind from FX based on the March 31st rates which translates to $0.02 headwind in EPS. Q2 effective tax rate is expected to be about 22.5% and corporate cost will be around $20 million. Looking at the full year, we're raising our full year EPS guidance. We now expect earnings to be in the range of $5.70 to $5.85. Full year organic revenue growth remains the same at 4% to 5% with operating margin of about 24%. Topline FX impact will be about 1% based on the March 31 rates. For the full year, we expect our tax rate to be about 22%, CapEx to be about $60 million, and free cash flow in the range of 105% to 110%, and finally corporate cost in the range of $80 million to $82 million. As always our earnings guidance excludes any costs associated with future acquisitions or restructuring. With that, Doug, let me pause here and we're going to turn it over for questions.

Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Allison Poliniak with Wells Fargo. Please proceed with your question.

Hi guys. Good morning.

Good morning.

Can we go back to commentary around MPT. I want to just make sure I understand that. I think Bill you were saying sales were weak in the quarter but you have a strong backlog so it's really timing of when those projects are getting delivered. Is that correct?

Yes, MPT is going to be down for the first half, but they will back up in the first half and overall positive for the full year.

Yes. So, Allison, we actually did build backlog and we actually have a great backlog position in MPT, but it's along with dispensing. Those two tend to be -- is the most lumpy of our businesses and so we're going to see that backlog flush itself through in the back half.

Got it. And then what are those one-time events that you referred to on the slide? Is that just the order commentary you are talking about?

Correct.

Okay, perfect. And then on acquisitions, we see a lot of dislocation in the markets here. Are you sensing -- I know it's been a long haul, but any sense of multiples kind of starting to pull in and any sort of change there that you think?

Not really. It's been pretty consistent and I think for us, Allison, it really continues to be working it very hard and being patient and disciplined. Eventually something will break here but the last thing we want to do is do a really expensive deal that doesn't fit our framework. So, we're going to keep our discipline.

Fair enough. And then last corporate expense, it looked that it was adjusted down a little bit. Is that just your cost control or is there something else in there?

No, just a flow through of the favorable variable compensation that we incurred in the first quarter.

Perfect. Thank you.

Thanks Allison.

Our next question come from the line of Michael Halloran from Robert W. Baird. Please proceed with your question.

Good morning gentlemen.

Good morning Mike.

So, I'm hoping to triangulate a couple of things here Andy. If I think back you were essentially projecting from an end-market perspective kind of a low single-digit environment with choppiness quarter-to-quarter. Is that still the case, any change there? And then secondarily could you triangulate that that with some of your leading indicator-type companies? I know you didn't -- I don't think you mentioned Warren Rupp could've missed, it but Gast and BAND-IT both were really strong in the quarter, so I'm hoping you can put those pieces together for me.

So, it was actually mixed Mike. So, if you go back and you look at how the quarter developed, it was pretty soft in the first half of the quarter and then strength picked up pretty broadly as we got into the second half of the quarter. So, that was a good sign and obviously building backlog in the quarter and the 6% order rate is a good sign as we walk into Q2. That being said those businesses as we look it's been very short cycle that was mix too right. So, we had some -- if you strip out some really specific wins that we know we got and you look at the day rate business, pretty choppy in some places and then relatively strong as you lean more industrially pretty strong. So, I actually don't think that the point of view has changed much from when we talked 90 days ago.

Any different on the regional side?

Yes, a little bit. I think Asia is probably a little bit better than we had expected, North America is just about what we had expected, and Europe's a little weaker.

Great. Appreciate it. Thank you.

Thanks Mike.

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

Thank you. Good morning everyone.

Hey Deane.

Hey, maybe we can start with a review of some of these sector puts and takes that a number of the multi-industries have been commenting on either there were or were not affected. So, let's start with there were some issues about pull-forward of demand out of the first quarter into the fourth quarter. There was a company last night reported at the close, where it ended up being much bigger than they thought. Did you see any of that dynamic? Was that at all related to the softer start of the year for you guys?

Not really. We had that one order in HST that we talked about at the end of the -- when we entered the quarter fourth quarter, but not a big deal.

And that wasn't tariff related somebody get ahead of something that was pure timing.

No, no, no. no. That was pure timing with the customer. So generally, Deane, we're so short-cycled that we don't tend to -- we're so short-cycled and we're not generally an off-the-shelf product that we don't play a lot in some of these lack of better term games that you see out there. Last year we did see -- as the tariff stuff was taken in, we did see some crazy activity there between the second and third quarter, but in terms of looking at 2019, 2018, I don't think it's material for us.

Good. And then I didn't hear weather come up at all, but when I hear about ag softness, there was a company Pantera had issues there with weather. Anything on your side?

Yes. The only weather here was my house being shut down by the weather but…

That was last quarter.

Exactly, you're right. That was a little bit here and there, but not enough to have mattered. Specific to ag, look that market is just soft, and we saw it coming late last year. We had that bolus of activity that we cautioned everybody on that we didn't think was going to hold and that has been reality. And they're just going to have to work through their cycle. In terms of weather or not that's bottom yet. You got some people saying that I'm not sure. And so we're going to kind of hold off making that call at this stage. And -- but it's an important business for us but we think we have it triangulated in terms of the rest of the year.

Good. And then just last one from me. Can you comment on price costs in the quarter? And any changes in the outlook for the year?

Yes. So we're still above 1% in pricing. Inflation did settle in a little bit, so we had -- we definitely had a little bit of incremental benefit relative to the expectation of that 30 bps to 40 bps so a little bit better than expected. So we think we're in a good spot for the rest of the year.

Great to hear. Thank you.

Thanks Deane.

Our next question come from the line of Matt Summerville from D.A. Davidson. Please proceed with your question.

Thanks. Two questions. First, in the prepared remarks, you referenced supply chain disruptions you saw in Europe. Can you get into a little bit more granular detail on that? And whether that's still with you here as we're into the second quarter at this point?

Yes. So Matt the bigger thing there was really specific to the U.K. and we have a number of businesses fire and sealing in particular that are in the U.K. And what you saw was you saw some hoarding of product as people were ramping up to that expected Brexit date. And so we'll see how that plays itself out now that we've got that kick down -- that can kick down the road again. But you definitely saw some behavior around relationships between the U.K. and the continent in terms of supply chain. It's not that big a deal to us, but to that -- those businesses it is. And so we'll keep an eye on it, but I expect as this continues to unfold, we'll continue to see some of that wackiness.

And then are you seeing any evidence? You mentioned sort of the short-cycle day rate business, but beyond that are you kind of thinking in some of your longer-cycle businesses, are you seeing any evidence that customers are delaying capital decisions awaiting some sort of outcome with all of this trade stuff?

Absolutely. I actually think that if you go back to last summer, what changed was people pulling in capital being much more hesitant about releasing larger chunks of capital, while this tariff stuff is working itself out, and obviously, with the government shutdown in the U.S. Those combined events I think made people skittish. And if you look across -- I was in China last week, and if you look across kind of behaviors what's happening in Asia, it's a big time wait and see. And then any U.S. businesses that do have a lot of China exposure is a big time wait-and-see attitude on how things are going to play out. So I do think that there is some constrained relationships between kind of natural supply and demand with this situation.

Thanks Andy

Thanks Matt.

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

Good morning everyone.

Hey, Nathan.

Hi Andy. Question here just on FMT and the impact that Banjo had in the quarter. I mean, you got pretty phenomenal order growth 110 basis points of margin expansion, and I think Banjo is one of the higher-margin businesses in there so it probably was a bit of a drag on margin expansion. Can you maybe talk about what the drive from Banjo was? You're getting pretty close to 30% operating margins now. Can we see that number breach this year?

Yes. So it was -- it's less than you might have thought. There is definitely some impact, but it's lessening we think for a couple of different reasons. Most importantly, the margin profile of the rest of FMT has closed some of the gap on the rest of -- relative to Banjo. So the mix impact isn't quite as big as you would think. And when it's all said and done you're talking about this a company that is sub-5% of IDEX sales. And so even if you look at it relative to FMT you're still talking about, what, 12% 14% of FMT business is that about right? So plus or minus. So it's not immaterial, but it's not that big a deal -- not as big as it would have been, say, five years ago.

Okay. Then maybe -- you did talk about pockets of weakness in FMT and you've danced a little bit around what those are. Maybe you could give us some more details on which of the businesses or which end-markets that you're seeing that weakness in?

Yes. More generally, the pockets of real weakness across the company are around ag, are around semicon and in auto. Now the good part is, is we don't -- I mean, those -- all those things together are sub-10% of revenue for IDEX. So when all said and done, yes, there's pockets of weakness there. The bigger thing that I was referencing in my prepared remarks was around the volatility of day rates. And so, we've seen this in a couple of different periods, kind of, going into 2015, 2016 coming out of 2015, 2016 and then last summer. You start -- as you look at it, one kind of inflection, positive our negative, you kind of tend to see some of this volatility and, I think, that goes back to the earlier question that was asked about capital being held up. I think, if capital gets held up, the book-and-turn business tends to have more volatility in it and also projects get kicked out. So, I think, it's a combination of those things. The good new story here is, if you get some relief on that, I think, that volatility goes away and you inflect upwards.

Okay. So going to 2015, 2016 and coming out of 2015, 2016, that volatility clearly resulted in a big downturn and a big upswing. I guess the volatility last summer didn't really move the needle in a big way one, way or the other.

I'd say, we're still -- Nathan, I would argue that we're in a six-month period. If I were to go back kind of the third quarter through the first quarter, I'd say it's been six months of that, right? We've had months that have been weak and months that have been very strong. And so, I think, we're still in that question mark zone.

Okay. So you're still in the period of volatile day rates waiting to see whether that's going to sort itself out or jump off a cliff or inflect up, or something like that. Any sense from you of what you think is going to happen around that?

The issue, I think, is this isn't tied to normal economic activities. It's very big macro and political issues and so I don't have any idea.

Fair enough. Fair enough. And I'm glad to stay in market and praise you there. All right. Thanks guys.

Thanks, Nathan.

Thanks, Nathan.

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

Hey, guys. Good morning.

Hi, Joe.

Hey. So some of like the higher-profile OEMs and some of the HST areas like on mass spec and chromatography, et cetera, talked about having -- it sounded like there was some buildup here in the channel perhaps. I'm just curious as to what you're seeing. I know its longer side -- sales cycle for you guys there. So what are you seeing relative to that? How temporary does that feel like for you guys?

Yes. So did see -- if you actually look at the life sciences piece itself that was actually pretty darn healthy. And so, we have not seen that play through. With the major customers, we have electronic Kanbans that are in place with all of them and so we have a pretty good visibility. How that might play through their supply chain -- their forward supply chain to their customers and back to us, we have less visibility on. But I don't think you're looking at something that's going to be a really big deal.

Right. FSD, I mean, I guess, the pop-in order is probably -- is a bit surprising for most people. How sustainable do you think that it is? Is that a business, as a segment, that might be down organically this year, full year? Or how you kind of -- how do you call-in that now?

No., I think, -- this is Bill. Overall, it's going to be up for the year. I think, there will be, again, quarter-to-quarter volatility for dispensing, right. Sales were down 15%, but orders were up 10%. We called on the fourth quarter we had something to push in the first quarter. We landed that order, but Fire & Rescue, really strong mid-single digit and just got the same expectations for BAND-IT.

Yes.

And then just last from me. I mean, we've talked about day rate volatility a bit a bunch here. Andy, I know, that's something that really gets you kind of laser-focused. So how are you kind of -- when you're not sure which way it's going to break how do you kind of act? Do you kind of see -- think -- do you're going to get ready for one side or the other, or get actions in place that if it goes one way we're ready cap that? I know you hate getting behind that either, but just how are you...

We are as, I've said many, many times in the past we react much better to the upside than we do to the downside. And so, we can move pretty quickly as demand inflects upwards. And I'm happy to have to chase that a little bit. That's all right with me. The contribution margins are going to be high and you're really chasing it with supply chain and labor. And so, I can deal with that. Getting way out in front and having the markets turned over on you is very painful, right? Because now you're firing people and you've got a really difficult contribution margin on the backside where the decrementals become painful. So I'd rather be conservative going into that, I have to chase the upside a little than I would, getting out in front and having to dramatically react to the downside.

That’s fair. Thanks.

Thank you.

Our next question comes from the line of Bryan Blair with Oppenheimer. Please proceed with your question.

Hi. Good morning, guys.

Hi, Bryan.

Nice start to the year.

Thank you.

I was hoping you could offer a little color on the SAM launch in Fire & Safety. I know, you literally just introduced to the market, but it seems like that's going to be a game-changing technology. Curious about initial reception? And whether it's already contributing to FSD order rate?

I appreciate the question, Bryan. So we had the North American fire show in Indianapolis here a few weeks ago and we introduced both, the SAM system and the new eDRAULIC tool. And, I think, it's fair to say that the SAM system had incredible reaction. The number of people at that booth, the reaction from customers has been terrific. We have already secured our first major customer around that. I don't want to talk about who at this time. And it's a big deal, right. We made that small acquisition -- technology acquisition last year. That was all about bringing the user interface and our ability to link all of our components into a singular system and it's really -- in terms of -- everyone was talking about IoT and digital and this is a great example of we're really on the forefront of that. And what's going to happen is over the course of years, we're going to change the productivity and the safety profile of a fire truck and that's a really big deal. Now that being said this is the stuff that happens really slowly and it happens slowly for two reasons. One there's already a year of backlog in the fire truck OEMs right. So things have all been ordered. So unless somebody wants to fundamentally change the nature of their order, it's going to take some time for that to go through the system. And then second, there's going to be conversion, right. You've got a huge installed base over time. But I think what happens is you're going to see this over the course of three to five years I believe we're going to start taking significant chunks of market share. We've got great intellectual property around this. And I do think it's a game changer for us. As you think about over a decade, our positioning in the fire market relative to this capability and how it pulls through complementary, it's a big deal.

That's extremely helpful color. Thank you. And if we could follow-up a little on M&A. Obviously you have a lot of dry powder right now and good scale and diversification across platforms. With the resources you have in place is larger scale or more transformational M&A prospective going forward?

You know Bryan, we're pretty cautious about that. If you look at the universe of businesses that would be transformational. So let's say, our size to have our size, right. If you look at businesses of that scope and scale there are very few that fit naturally with IDEX. There are a handful and those are the things that we keep up on and we work on all the time. And there are a few that we could do that would be wonderful combinations with IDEX, but it's not very many. It has to be at the right price and you've got you be able to drive real synergies. That being said, as you look from say that size down to $300 million, $500 million or so call it $300 million to $1 billion in revenue, there's quite a bit of stuff out there. And it's really a matter of timing and being able to do a deal at the right kind of economics that fits our style of competition. And if that happens, we will move really quickly. We looked at a bunch year, we put a ton of effort into them and we just need to keep to our style of competition and the discipline around our return frameworks and not get seduced into doing mid single-digit ROIC deals that are "accretive" but are really disastrous to the capital structure and the return structure of the business over the long-term. And we're just not going to do that.

Makes perfect sense. Thank you again.

Thanks, Bryan.

There are no further questions in the queue. I'd like to hand the call back to management for closing comments.

Thanks very much, and thank you everyone for joining us here on the first quarter call. More than anything else, I want to thank the teams here at IDEX who do just a tremendous job being laser-sharp focused on our customers, understanding that in a market like this we really do need to execute and execute well and they've done that. And then, discipline around how we spend this free cash flow. And so the teams, I'm very proud of the teams that we have and the culture that we've built. And I look forward to catching up with everybody in the next 90 days. Take care.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.