IDEX Corporation (NYSE:IEX) Third Quarter 2022 Results Conference Call October 26, 2022 10:30 AMm. ET
Participating companies
Allison Lausas – Vice President and Chief Accounting Officer
Eric Ashleman – Chief Executive Officer and President
Bill Grogan, Senior Vice President and Chief Financial Officer
Conference Call Participants
Mike Halloran – Robert W. Baird
Nathan Jones – Stifel
Deane Dray – RBC Capital Markets
Allison Poliniak – Wells Fargo
Brett Linzey – Mizuho
Thomas Johnson-Morgan Stanley
Vlad Bystricky – Citi Group
Rob Wertheimer – Melius Research
Matt Summerville – District Attorney Davidson
Scott Graham – Loop Capital Markets
Michael Anastasiou – Cowen and Company
Operator
Greetings and welcome to IDEX Corporation’s third quarter 2022 earnings convention call. [Operator Instructions] As a reminder, this convention is being recorded lately.
Now I must introduce you to your host, Allison Lausas, Vice President and Chief Accounting Officer. Thank you. You can start.
Allison Lausa
Hello everyone. Meet Allison Lausas, Vice President and Chief Accounting Officer of IDEX Corporation. Thank you for joining us in our discussion of IDEX’s monetary highlights for the third quarter of 2022.
Last night, we issued a press release outlining the monetary and operational functionality of our company for the 3 months ending September 30, 2022. The press release, along with the presentation slides that will be used in today’s webcast, can be found in our company at idexcorpArraycom.
With me are Eric Ashleman, our CEO and president; and Bill Grogan, our chief financial officer.
Today, we’ll start with Eric offering a review of the state of IDEX’s business, then Bill will talk about IDEX’s third-quarter monetary results, provide an update on segment functionality in the markets we serve, and talk about our outlook for the fourth quarter. and full year of 2022. Following our prompt observations, we open the call for your consultations.
If you wish to abandon the call for any reason, you can fully play it approximately two hours after the call ends by calling toll-free (877) 660-6853 and entering the convention ID 13724804 or simply log on to our corporate home page for a replay of the webcast.
Before we begin, a little reminder. This call could involve certain forward-looking statements on the subject of port language in last night’s press release and IDEX’s filings with the Securities and Exchange Commission.
With that, I will now pass this on to our CEO and president, Eric Ashleman.
Eric Ashleman
Thank you, Allison, and good morning everyone. I’m on slide 6. Our global groups generated solid effects in the third quarter. We achieved record sales, tight EPS and loose cash flow. Organic sales increased 15% with record double-digit expansion across all 3 segments. The quarter, however, outstanding order positions remain strong overall. So far, this has been a record year for IDEX, which is not easy to achieve in this environment. I would like to thank all of our IDEX International employees for their remarkable efforts.
On the capital deployment side, we announced last month our target to raise Muon Group for €700 million, marking our largest acquisition to date. Muon is emerging as an emerging core of market-leading precision component technologies, a portfolio domain in which we continue to invest organically and inorganically. Muon’s technical capabilities, like many others within IDEX, are well positioned, differentiated and adaptable to high-growth niche programs within broader megatrends. The Muon generation solves critical disorders in the ultimate sets of non-easy semi-manufacturing, patient care in medical technologies, food production and other markets. This acquisition demonstrates the good fortune of our broader M&A strategy.
We combine bottom-up business intelligence with research and insights from a small strategic network within IDEX to build conviction within a network of high-quality niche applications. Increasingly, as we build and optimize the portfolio, we are locating that we can drive expansion within a multi-issue vertical target organically within IDEX’s business and externally through mergers and acquisitions. This technique is unique and beneficial. Take advantage of 80-20 segmentation, our operating model, and the quality and strength of our diverse set of businesses.
We also finalized the sale of our Knight LLC business in the third quarter. Knight handles cleaning and disinfection in the hospitality and concierge markets. As we have discussed in the past, we continually seek to optimize our portfolio. Product lines that have the prospect of growing and thriving for other owners, we divest ourselves of those assets. I would like to express my gratitude to the Knight team for all they have contributed in their 25 years with IDEX.
Next, I need to share some exciting news from the organization. I am pleased to announce that Melissa Aquino recently joined IDEX as Senior Vice President and Group Director for FMT and FSD. Operational and leadership functions. He has broad and deep experience in many industries, adding customer sciences, industrial, diagnostics and life sciences. While we align those segments under one single internal leader, they will remain distinct prominent segments.
I would also like to take a moment to celebrate the tenure and achievements of our HST Group Director, Marc Uleman. We have seen exceptional effects in his more than 10 years of leadership at IDEX, driving biological growth, operational excellence and capital deployment at our fastest pace. Segment under development.
Finally, we recognize that lately there is abundant turnover in the global economy, whether related to geopolitical uncertainty, inflationary interest rates, or recession concerns. There are several scenarios that can play out, ranging from continued business expansion to slight short-term expansion. decline into a deeper recession. We have a plan of attack for everyone, and I am confident that we will outdo ourselves as we have in the past. Our groups are wise and agile. They will adapt temporarily and put their resources into opportunities. This is at the heart of our operational approach.
We have made wonderful progress in building a strong and sustainable growth engine. It is based on a forged foundation of execution in any environment. It’s the “and” and the “or” that we communicate about all the time at IDEX. As a team, we take a look at the demanding situations and opportunities ahead.
That said, let me give Bill the floor to talk about our monetary results.
Bill Grogan
Thank you, Éric. Je will begin with our consolidated monetary effects on slide 8. Third quarter orders of $781 million were up 1% overall and down 1% organically. We saw an expansion in orders in FMT, but some contraction in HST and FSD, basically due to the timing of some larger orders. The so-called base for rates remains positive in all segments.
Third quarter sales of $824 million were up 16% overall and 15% internally. We achieved record sales with double-digit biological increases in all 3 segments and functionality across all geographies.
Third quarter gross margin increased through 250 foundation issues and adjusted gross margin increased through 10 foundation issues year-over-year at 45. 1%, driven by strong volume leverage and favorable charge pricing, partially offset by top employee charges.
Operating margin for the third quarter was 24. 5%, up 190 core issues year-over-year. Adjusted operating margin was 24. 9%, 60 more core issues. Additional amortization similar to Nexsight’s acquisitions in KZValve had an adverse effect on the adjusted operating margin of 30 basic problems. I’ll talk about the additional points of the adjusted operating revenue stream on the next slide.
Our effective third-quarter tax rate of 21. 8%. It decreased compared to the last TIE by 23. 4%, mainly due to tax benefits related to the sale of the Knight business.
Third quarter net revenue source $179 million, resulting in EPS of $2. 36.
Adjusted net income was $162 million, resulting in EPS and adjusted EPS of $2. 14, an increase of $0. 35 or 20% over the prior year. Finally, loose money for the quarter was $182 million, or 112% of adjusted net profit. For us, basically thanks to higher earnings, we see stock levels stabilizing and expect additional discounts at the end of the year.
Let’s move on to slide 9, which pinpoints the main drivers of our adjusted operating revenue stream. The adjusted operating income source for the third quarter increased by $28 million compared to last year. Our 15% biological expansion contributed approximately $26 million to our adjusted gross margin rate last year. We have benefited greatly from higher volumes and have been able to capture costs to offset inflation headwinds. The cost of pricing increased margins and returned to historic grades with our FMT and HST segments, with FSD making sequential innovations compared to the current quarter. We had a slightly positive allocation of $2 million in parts of the portfolio. We reinvested $6 million in engineering and business resources in corporations and M resources
Finally, discretionary spending increased by $6 million from last year, which is slightly lower than the current quarter of 2022. As we said last quarter, we achieved a more normalized post-COVID spending rate and particularly higher sales volume. Flow of 31% during the quarter. The flow then has a negative effect through the dilutive effect of acquisitions, disposals and foreign exchange transactions, bringing us to our reported flow of 30%. With that, I’ll take a deeper look at how our segment is performing.
I’m at 10. In our Fluid segment
Our trading markets continued to show solid demand with favourable winds from energy, mining and infrastructure moderated by some European weakness. Our vision for our municipal water businesses remains positive. We see healthy listing activities in line with the underlying market trends of expansion urbanization, adoption of CCTV inspection, and infrastructure investments in the United States. Agriculture remains strong. We are seeing positive signs from our OEMs and distributors. Commodity costs remain high and emerging fuel and fertilizer costs are driving farmers to invest in precision technologies.
Our investment in Banjo’s procedure automation has enhanced our delivery, putting us in a smart position to capture market share, and we continue to leverage KZValve’s expertise and generation for our offerings. of products. Our energy business is doing well with the strong help of oil and LPG prices. We continue to see favorable upward effects with intermediate investments lagging somewhat behind due to supply chain constraints on our consumers in further delays in allocation expenses.
Orders contracted by 4%, but sales remained solid by 13%. Our position in the order book remains strong. The contraction and orders were driven by several giant orders that delayed the quarter. European and comparable smart capital compared to last year when we increased orders organically up to 44%. Hst-adjusted operating margin decreased through 70 core issues since last year The segment experienced strong volume leverage and positive cost pricing, which were more than offset by increased investment in engineering and resources, higher discretionary spending, and some inefficiencies we incurred as we continue to address supply chain challenges to meet demand and address to them.
We continue to face strong demand for analytical tools in chromatography and mass spectrometry, as well as next-generation sequencing technologies for oncology research and testing. Our specific expansion projects similar to global broadband and energy efficient fuel cells are working very well. Two wonderful examples of how we are harnessing our generation in fast-growing niche marketplaces. The semiconductor market remains stable. We are seeing customer-like supply chain issues causing some slowdown, however we are offsetting this headwind with market place percentage gains. We supply consumables and generation at plant efficiency, which protects us from part of the slowdown in capital expenditures on the new appliance side. Our fabric processing business remains strong thanks to continued demand from the pharmaceutical and biopharmaceutical industries. We are seeing some slowdown in orders due to delays in our clients’ investments, but our funnel remains strong and of high quality. Our functionality in the HST trading market is very similar to the FMT experience.
Finally, let’s go to our Fire, Safety product segment.
Our distribution business performed well with the delivery of a volume of projects in North America and the continued strength of the global architectural paints market; however, orders were down 30% year-over-year due to the gigantic North American replenishment orders we got last year. Our fireplace business, OEMs continue to struggle with supply chain constraints, but we have noticed positive biological expansion through value realization, improved execution and favorable functionality of bulk equipment. On the rescue side, we continue to win with our state-of-the-art E3 tool, bringing improved tool features to market.
Finally, BAND-IT recorded strong effects in the industrial, automotive and energy market places. We continue to gain market share by having shorter delivery times and availability. Content in high-volume precedence vehicles.
With that, I would like to provide an update to our outlook for the fourth quarter and full year 2022.
I’m on slide 11, which shows our updated advice. For the fourth quarter of 2022, we expect biological earnings expansion of approximately 9% and an operating margin of approximately 23. 5%. We expect volume to be minimized sequentially from the third to the fourth quarter due to overall seasonality and scheduled maintenance outages. The expected operating margin for the fourth quarter is lower than that of the third quarter due to the leverage of losses in minimizing earnings. be between $1. 92 and $1. 97.
Let’s move on to the full year. Based on our strong functionality over the past 3 quarters, we are increasing our full-year guidance. We now expect biological gains to expand by around 12% for the full year. We expect GAAP EPS to be between $7. 75 and $7. 80 and EPS between $8. 04 and $8. 09. Our full-year operating margin is expected to be approximately 24% and we expect loose money as a percentage of adjusted net profit to be between 75% and 80%. .
With that, I’d like to move back to Eric for final remarks.
Eric Ashleman
Thanks Bill.
In closing, I’d like to share my thoughts with our team in Puleder and Punta Gorda, Florida. Who is still dealing with the aftermath of Hurricane Ian?All of our workers are and our values shine through as our other IDEX corporations have come together to provide launch materials to our colleagues there and our IDEX Foundation Board of Directors has approved a significant donation to the American Red Cross. Our facilities were damaged, but we resumed operations.
I would also like to extend my public congratulations to Katrina Helmkamp for replacing Bill Cook as non-executive chairman of our Board of Directors. Bill Grogan and I have worked extensively with Katrina since she joined our Board in 2015, and we look forward to proceeding to leverage her strong operational leadership skills and delight in multiple markets and technologies to drive IDEX forward. I would also like to thank Bill Cook, who has been an invaluable contributor to our company, our Board of Directors, and my progression from his 14 years in the role.
With that, I will pass on to the operator for your questions.
Q&A session
Operator
[Operator Instructions] Our first consultation is from Mike Halloran of Robert W. Baird. Continue your consultation.
Mike Halloran
Hello everyone.
Eric Ashleman
Hi mike.
Mike Halloran
So, a few questions here more about the on-demand aspect of orders. First, on the aspect of the controls, the flash commands instead of the complex multi-year battery compositions here. This turns out to be a sequentially inferior intelligent result. When I think about those order numbers, is there anything there from a weakening standpoint that we deserve to think about?And then, how much of this sequential substitution is seasonality or just a general airbag that develops when timelines start to generalize to traditionally?General levels?
Eric Ashleman
Oui. Je, well, it touches on a lot of things out there. I mean, there’s a component of that that we suspected would be there as we start to come out of an incredibly high backlog, especially for a short-cycle, rapid-response Corporate like ours. So there’s one component that will undoubtedly be that, and we’ll be keeping an eye on the speed of your adventure as it wears out. There’s a bit of summer: a kind of seasonality of the summer months that’s also there. I would argue that from the standpoint of categorical softness, probably the only domain we would point out that covers a large number of IDEX corporations would only be a general relaxation on the European Front, which is probably not too surprising. And then, I’m sure we’ll communicate later here about projects, big projects and things of that nature.
It’s an engaging story. I mean they were, at the beginning of this total recovery, I mean, there was a lot of caution on the part of people, they held them back, I think in the middle or for a lot of the duration, honestly, there just wasn’t enough time and power to get there or resources. And now you see him leaning back, probably a cautious tone again. We have some things that have moved and that have been placed in the decisions of the first quarter of next year, things of that nature as well. So, some things we can highlight. Some things are a bit general depending on the status of the order book and the time of year, but below and around everything, they’re actually strong at all levels.
Mike Halloran
Thank you for that. Super helpful and in the ready comments, he talked about IDEX’s ability to take care of any kind of environment in his path in 2023 and in fact his track record backs him up quite aggressively. What is the base case as we reflect on it today?for next year? Obviously, we’ve talked a lot about the desire and opportunity for a strong business cycle. That doesn’t mean you can’t get some of the weaknesses we’re heading for next year. End markets Looking ahead to next year, how do you envision this configuration and what are the opportunities for expansion?
Eric Ashleman
Oui. Eh well, I think, as I said in the prepared comments, you might see some roads flowing here. I mean, one that’s more positive, anything that’s short-term and kind of short-term setback and then notoriously maybe anything with a catalyst that’s more negative than any of us can imagine. I always come back, when we talk about this in the company, I mean, we literally represent each of those scenarios. It is variable, which is not variable in all our activities. At all times we return to the greatest expansion of the company, which almost all of us can see time travel here. We also take that into account. In fact, we’ve learned a lot, as have all companies, about the lowest point of discretionary spending, which in many tactics is less than we had a conceivable idea before.
We know where that terrain is and how we would compare it to one of those scenarios. We talked for a while about the workforce, we would be careful. Talent is hard to come by, I mean, we’re not literally in a hunting position. there anyway. We are still quite thin and would be very careful there. And then, honestly, we would: we would turn to the strong and look at the weaker spaces in place. Predictive here because I think it’s still quite variable in our minds, but our technique for each of those paths is not, we know exactly what it is.
Mike Halloran
Thank you for that. I appreciate it.
Eric Ashleman
Thank ou
Operator
Our next one comes from Nathan Jones’ lineage with Stifel. Continue with yourArray
Nathan Jones
Hello everyone.
Eric Ashleman
Hello Nathan.
Nathan Jones
I just searched with a price/cost discussion. You said the price-cost ratio had a dilutive effect on margins in 2022, that’s all you aim to recover in 2023 because we started to see moderate costs. Do you think you can that margin that was lost in 2022 at price/cost?
Eric Ashleman
Sí. No, definitely. As you said in your prepared remarks, we are back to our old levels here in the third quarter as we continue to rise, our value capture, inflation is down but has moderated a bit. So as we look ahead to value rigidity we have positioned ourselves here as we move into 2022, this remains positive in 2023 about our ability to remain above our historical levels.
Nathan Jones
It is ok. And maybe you can only communicate a little about the cadence of orders in your shorter-cycle activities. I know you have some corporations that tend to be canaries in the coal mine. I think you said that BAND-IT is still quite strong, however, can you comment on the corporations that you see as main signs of the speed of orders there?
Eric Ashleman
Yes. They are still very strong. I mean they’ve remained solid in many, many places and there are 4 or five. We’ve done a very smart job by combining a strategic inventory. Our herbal ability to temporarily fill allowed us to capture a percentage and a few. orders, then convert them and convert them into sales fairly temporarily for most of that. Therefore, there are no real symptoms of tension from this very short cycle we are talking about. It’s still a massive demand for it. It requires a lot of capacity and this has been quite indicative of the point at which the commercial device works, as much of it is a one-to-one replacement. And I think, I mean all of our factories are running pretty fast and I suspect that’s the case for a lot of jobs that we supply. So it holds up well.
Nathan Jones
And one last only at their own stock levels. Obviously, everyone has done a little extra inventory through those interrupted time plans about where you think this is going in 2023 and what kind of catch generation we deserve for next year.
Eric Ashleman
Listen, the third quarter was the first time in several years that we didn’t accumulate more stock and get started. We stabilized our existing titles and look to bleed here in the fourth quarter moving forward into the early part of next year. Obviously, we’ve set our long-term purpose of a cash flow conversion above one hundred percent and I think we’ll move toward that point in the next two quarters. The first part is a bit smooth from a money flow point of view and we are more than part loaded. But we expect to continue to increase stock balances here over the next six months.
Nathan Jones
Thank you very much for answering my questions.
Eric Ashleman
Thank you Nathan.
Operator
Our next one comes to Deane Dray’s line with RBC Capital Markets. Continue with yourArray
Deane Dray
Thank you. Hello everyone.
Eric Ashleman
Hello Deana.
Deane Dray
Hey, I’d like to continue Nathan’s last query about Bill. Is there a way to quantify the stock you bring that would be a reserve stock?That is, the deadlines begin to normalize, you can start promoting That?And then Eric just talked about being competitive with opportunity in some of the fast, short-cycle businesses that stocks are in a position to go into. So, and this is kind of how I would make up for it. But can you quantify what this opportunity would be to normalize current capital?
Bill Grogan
I think internally we are aiming somewhere between a U-turn and a return as we move to our historic highs. Reserve stock is probably at the lower end of what we’ll be left with, which is that corporations are on edge. Strategic side, in which we have been able to take part in part of this stock point. We will maintain it and focus attention on the fact that we have accumulated stock to cushion or have had to accumulate degrees of stock based on the quantities we had to dedicate to you or to consumers who have interrupted some of your shipments while solving the problems of the chain of origin at your destination. We build some finished products. These components will be the first to bleed and things that we think are strategic to allow some of the capture of stocks will stay there.
Deane Dray
Well, good. It’s useful. And then, can we just review anytime you need percentage of the customer’s total COVID testing app cancellation?I think he explained how, how it happened and the deterioration he suffered. Is this the end in terms of this?being absolutely canceled, and have they included it in their operating results, which we appreciate?
Eric Ashleman
Yes. This is the end. I mean, there are small, some small shipments here in the fourth quarter, but basically, this was an initiative that we introduced and highlighted in 2020. We partnered with this consumer and had a wonderful appointment with the association on generation progression and engagement. significant capital to support our production functions. And obviously, because they moved in another direction and came out of testing, that caused all deferred earnings to be recorded and then identified here during the quarter. So most of the rumors are that they got stuck here in the third trimester. We have evolved with significant acquired wisdom in terms of production and generation functions that we will continue to exploit as we move forward.
Deane Dray
It’s helpful, thank you.
Eric Ashleman
Of course.
Operator
The following comes from Allison Poliniak’s lineage with Wells Fargo. Continue with yourArray
Allison Poliniak
Hello smart tomorrow. Eric, he would like a little more color in resolution to align FSD and FMT under a single leader. Does this imply more divestments as you look to refine the portfolio in the future?Does it only matter there?
Eric Ashleman
I would appreciate the question. What I wanted to emphasize in the comments was that we were looking for a leader with frankly experience, breadth and intensity of experience and broad reach, who would be compatible with what we want to go through as a company. That by combining those corporations at least under their leadership, it essentially allows us to position the skills, attract someone of that caliber, and put someone on the team who honestly has fun in some of the spaces we need to move into. That’s what it’s all about. Everything else underneath Melissa is the same as what we’ve noticed before. We kept it very separate and distinct. We manage it in exactly the same way, but it allows a user to sign up for the team with very, very smart skills.
Allison Poliniak
So, Bill just got back at the helm of HST, I think he alluded to the fact that they were fair: there were orders that were essentially pushed in the fourth quarter. Do they have commissions or is it something we are still looking to offer here?
Bill Grogan
Sí. No, not yet. The groups are still negotiating the final value of things that will be sold next year. So if we get them in the fourth trimester, the first component of the first trimester, we’ll have them. It’s just a matter of time.
Allison Poliniak
Thank you very much.
Bill Grogan
Of course.
Operator
Our next one comes from Brett Linzey’s lineage with Mizuho. Continue with yourArray
Brett Linzey
Hello. Hello everyone.
Eric Ashleman
Hi Bret.
Brett Linzey
Hey, I hope you can analyze how you envision the accumulation from this year to next on a transfer basis for the two recent acquisitions, Muon and KZ.
Bill Grogan
In incremental steps?
Brett Linzey
So, the EPS accumulation is built into the consultant for this year, and then what do you think about next year’s postponement?
Bill Grogan
This year, it’s just pennies here in the back. And then we’re going to have a few cents there, in the first part of next year, it’s going to be offset as we move into the third and fourth quarters.
Brett Linzey
It is ok! So I was hoping that maybe I could give some insight into the regional dynamics in orders, and then, more specifically, what was the speed of that search as the quarter on a monthly basis and what you see in October in Europe specifically?
Bill Grogan
Sorry, Brett, the order cadence in the month in the third quarter?
Brett Linzey
Oui. Je idea more on a regional basis what is the speed of orders per month and how did it progress in October also according to the other regions?
Bill Grogan
I would say that the third quarter traditionally had some seasonality compared to the European holidays and the sluggishness in August. Compared to the overall control patterns, there was nothing that was a significant outlier compared to what we’ve noticed over the years. As Eric mentioned, core orders in our book and vessel businesses were strong during the quarter. It continued to be strong here in October. Most of the sweetness, as we said, a little bit about books and shipping in Europe, and then some of the activities related to the project and some of the orders were probably the greatest detail of our European geographical appearance; North America and Asia are still very, very strong.
Eric Ashleman
And October consistent with what we saw in the 3rd quarter.
Brett Linzey
It is ok! Super. I will. Thank you.
Operator
Our next one comes from Thomas Johnson’s lineage with Morgan Stanley. Continue with yourArray
Tomas Johnson
Hello. Thank you. Congratulations on a smart quarter. I just had a query about the kind of short-term results expressed here for the HST activity, it provided us with some pretty useful feedback on some of those key drivers, declining productivity. and some of the discretionary investments that offset the volume and improvement in value burden of a third-quarter margin attitude. Therefore, it would be useful if there was a way to quantify the impact of this on EBIT margins in a sequential basis?Do I just want to think about the evolution from Q2 to Q3 from those headwinds?And maybe how you see it progress throughout the year.
Bill Grogan
Oui. Je would probably focus on some of the productivity-demanding situations, as we’ve accelerated some of the high-tech elements in some corporations within HST. Yes, sequentially, it declined from the current quarter. up here as business continues to grow, normalize and become more effective in several of the services, we will see a recovery in the fourth quarter.
Tomas Johnson
Super. Thank you. That’s it for me.
Operator
The next one comes from Vlad Bystricky’s line with Citi Group. Continue with yourArray
Vlad Bystricy
Hi, guys. Thank you for taking the call.
Eric Ashleman
Hello Vlad.
Vlad Bystricy
Hello. So, can you tell us about? It has clearly communicated the acquisition to take a percentage, given its ability to serve consumers and its ability to availability. So as we begin to see chain of origin restrictions gradually relax, can you tell us how it is?Do you expect percentage market trends to evolve, as some of your competition may have become more at times paralyzed or become more online to normalize service levels?
Eric Ashleman
Of course. Well, there are probably two things I need to cover. There’s one I would say we use almost every day. We have shorter lead times than many other people we compete with when things are in general condition. We’ve designed businesses to work that way and everything is in place there.
What has happened to us here with much of the fairness that has taken over the last two quarters is that we have made very sharp calls about safe actions that are quite specific, very technical, and not plentiful. to their credits without approval loops and things we don’t want in a business like ours,” they said, well, we know how critical it is, we can see where it’s going to go, we’re going to put a little. So almost all of the shared capture we’re talking about, can bring it back to very specialized hardware that we’ve accumulated.
So, I think it’s vital because otherwise you might think it’s very benign things and steel pieces and supports and things like that we just have to have them on the floor. It would normalize as things improved. It’s a very, very strategic stock that those corporations have accumulated. Therefore, it is a state of merit outside the door. That’s what we’re talking about at length here.
But then, as we move forward and things normalize, we normalize and maintain that merit, the herbal merit that we have in many of our businesses. So it’s just a domain that we focus on. It’s been incredibly positive for us because of the potential very, very smart options in companies.
Vlad Bystricy
It is ok. It is a useful color. And then, perhaps just when we’re thinking about organic sales, it’s been dazzlingly surprised to the upside over the past few quarters and just raised its bio-expansion outlook for 2022. So could you perhaps analyze a little more, what drives this further expansion of profits?To what extent is a price build-up, higher than you expected compared to further volume-driven expansion?
Eric Ashleman
Well, yes, I mean, there are definitely parts of superior performance that are here. So I’m glad you’re talking about it. I mean, our award is the highest point we’ve had in the year. We continue to insist on that. This is the kind of environment where our differentiated products will get the highest value point. So, it’s definitely a component and it’s a competitive advantage.
We communicate a lot about the company’s most productive bets, the most productive expansion bets. They are of the highest quality we have ever had. And so, interspersed with all the numbers that we’re communicating about, you see important things like broadband and external area and things that we’re doing in genomics and some of the things that are happening in water and precision agriculture and through FMT and now an acceleration that we expected and the activities of Fire and FSD, So those bets are full of a higher unit of measurement than we have traditionally noticed in addition to the recovery of markets and well-positioned companies. That’s kind of the right we have. It’s really worth capturing and a big stack of: it’s the company.
Vlad Bystricy
It’s useful. Great neighborhood. Thanks guys.
Eric Ashleman
Thank ou
Operator
The next one comes from Rob Wertheimer’s line with Melius Research. Continue with yourArray
Rob Wertheimer
Hello everyone.
Eric Ashleman
Good morning.
Rob Wertheimer
So, I only have one general question. I wonder if you can tell, I guess, the story of the Muon Group acquisition and how it separates itself from the new process, the multiples and other opportunities it has, if it absorbs much of the availability or if it is still active. Just kind of a walk about how evidently a good fortune and acquisitions have been forged lately, and that’s been a purpose and I’d just like to have some color and how it was.
Eric Ashleman
Oui. Eh, well, this is a company we’ve known for a few years. It is a corporate IDEX. That is, it is a very fast niche component that does an excellent job for a variety of high-end markets, adding the ones you knew in the previous comments. I gave a lot of credit to Marc Uleman, whom I referred to in my opening remarks. Marc lives in the Netherlands and has maintained a very active speed with this team in recent years. We discovered a time and a place where we were able to generate some capacity for action and we closed the deal basically because we can perceive very, very temporarily discovered in the paintings that we have done in recent years and our familiarity with it.
The wonderful thing about a company like this, and the reason I say it looks so much like IDEX, is that it’s really very adjustable. That’s one of the reasons we love those quick component companies. So, this applies to some of the bestsemicon quality spaces, there are wonderful programs in medical devices, food production, high-end food production, all the spaces we examine and participate in the company. We can then take merit from this data and then apply it to a top – quality niche businesses like this.
Longer, turn on the road, this is next to many things we have in our science and fluidic optics. Therefore, there are industrial relationships that we can take credit for there. In fact, there are some very attractive technical issues and things that will be explored in combination over a longer period of time. And then honestly, when you think about price creation, you start applying the way you manage things at IDEX. You can take a high-quality company like that, we’d get to start with 80-20. Not all programs are created equal. We have a way of thinking about this that we can teach others, things like capturing prices with customers. I mean, we do it very well. And there are also a lot of leveraged assets, only they apply to an already very, very strong company that has a proven track record of growth.
So I think we’re very excited about that. I think that’s indicative of the kinds of things we’re looking for and looking for. And yes, we are passing through to see, we are passing through to communicate it. as we pass.
Bill Grogan
And then, Rob, your comment on capacity, I mean, after Muon is completed, we will have spent about $1. 5 billion in the last two years with a minimum of additional leverage. So we’re going to have $1. 5 billion to spend here over the next 12 months with a physically powerful funnel, lots of exploitable assets in that funnel.
Rob Wertheimer
No, it’s a complete answer. Any observations on whether this is an abnormally vital asset in your funnel, whether it is dotted with a giant one and a small one?And with that, I stop.
Eric Ashleman
Sí. No, I mean, it’s a little bigger than we’ve noticed before. But I mean the nature of those kinds of height quality niches, they have a finish to be in very similar spaces and the type of height finish of their length is relatively consistent even in the wide variety of businesses we have. So, a company that is well located and closer to the most sensitive of the line in a niche of height quality like the one we think is that length.
So, it’s a bit superior to what we’ve noticed before, but there’s more like that out there.
Rob Wertheimer
Super. Thank you.
Eric Ashleman
Thank ou
Operator
Our next one comes from Matt Summerville’s lineage with D. A. Davidson. Continue with yourArray
Matt Summerville
With FSD, how far is this company in terms of cargo price, i. e. what additional margin can we expect as it absolutely narrows that gap?And then, staying with this company on the distribution side, how much profit do we deserve to be?Expecting in 2023 those big projects that generate profits this year?And then I have a follow-up.
Eric Ashleman
Of course. I think we are in favor of FSD continuing its ramp. We said the last quarter had bottomed out, it will continue to progress as we move forward. With the caveat that we still want to compare the allocation funnel for next year for distribution. Correct now, we don’t think there is a big hole. There will be a bit of weakness on the replenishment side. If we were unable to complete some of those larger allocations, SDF margins would be affected relative to the progress made. through the chimney and rescue services.
So, for now, we’re still comparing the impact of what the allocation funnel is for distribution and clearly giving you more important points here when we enter the advisor in January.
Matt Summerville
And then just one of modeling. Can the sale, the sale of Knight, reveal the monetary profile of this company?
Bill Grogan
Yes, I mean, less than 1% of turnover and, obviously, non-material, non-profit for us.
Matt Summerville
They gave it to me That’s it for me. Thank you.
Operator
Our next one comes from Scott Graham’s lineage of Loop Capital Markets. Continue with yourArray
Scott Graham
Yes, hello. Hello everyone. And congratulations on another remarkable quarter. I have queries. Just write a general query about biological first. With the chain of origin improving a bit, several quarters ago, Eric was able to make his most productive guess to quantify what the negative matrix is. With the improvement of the chain, can you perhaps quantify what?positive in biological this quarter?
Eric Ashleman
I mean, from a shared capture and the things we’re going to do, I mean. . .
Scott Graham
In fact, looking for perhaps a percentage of the catch is in fact one of them. But a little more like backwardness, exhaustion, things that come out, that were trapped in the backwardness that maybe you did not expect, I guess there is a little additive to the biological of a larger chain.
Eric Ashleman
I think it’s a small amount. Scott, I think we’ve stabilized relative to our production grades when you look at where we are from an earnings perspective, it’s a little high. So, a point or two at most, we burn a bit of delay in the quarter, however, the order book position is still high.
Bill Grogan
High enough. It was a minor burn.
Scott Graham
I’ve got you. Okay! Super useful. Also, and I hope this doesn’t count as a follow-up. What’s the price, I didn’t hear it if you said it?
Bill Grogan
No. No we did. In the quarter at the time, we were at 4%. We have higher here at 3rd just over 5%.
Scott Graham
It is bien. Merci. Et then only a consultation about the water business. It’s a big deal. You called it a domain of strength. Can you tell us about the quarter’s expansion dynamics?Is it a market that could also be a kind of green market for you next year?
Eric Ashleman
I mean, it’s a smart market. I remind others that the work we do there has an analytical aspect to help the infrastructure skill work well. So, this kind of work, I mean, fits well into a lot of the virtual answers out there. This is where some of our ultimate virtual businesses are located. So exploration robots and flow tracking to prevent overflows and things that can harm the environment, that’s the job we’re doing. The bottom line.
Of course, we recently made an acquisition to deepen this here. So we have very smart assets. We think long-term, obviously there is no doubt that the paintings want to be made. This is somewhat overdue. There is a decent amount of government stimulus and aid that takes longer to break through projects than other people imagine. But, frankly, it extends over several years or two.
So we put it in a positive sense. I agree with the appearance of green shoots. We are very, very well positioned. We are advancing in the integration tables with the acquisition that we want to deepen in our main geographies. And we are very supportive of it.
Scott Graham
they gave it to me Good, thanks again.
Eric Ashleman
Thank ou
Operator
Our next one comes from Joe Giordano’s line with Cowen. Continue with yourArray
Michel Anastasiou
Hi, this is Michael for Joe.
Eric Ashleman
Hi Michael.
Michel Anastasiou
In the prepared remarks, he discussed the strength around energy. Can you tell us a little bit about LNG customers for FMT and if there are opportunities for long-term energy choice?I know this has been an inorganic growth domain.
Eric Ashleman
Yes, well, I think our energy business has recovered quite well over the year. That is, we have noticed some: we do not have much upstream presence, but it has been more powerful here lately. I think the midstream sector has delays and things in the allocation aspect and the source chain look, some of the old things, but it probably lines up behind that, because there are things that are behind it.
I mean we have a kind of business of moving old assets, many of which are fossil fuel-based with existing assets. Much of this technology, we ask all the questions, as you can imagine, about how mobile it is to other energy resources of choice. and things that may exist. Anyway, whether hydrogen or other gases and liquids, it will be needed – other people will have to be paid and we will have to measure that the custody movement occurs. And that’s the kind of paintings we’ve been doing for a long time that we’re passionate about.
There are other IDEX spaces that have support for some of those same vectors in a way that would likely hit outsiders is also quite unusual. That’s one of the tactics we think about a trend like this is that we draw lines and tentacles on other vertical ones. within IDEX, and then we take credit for a review of how the work is done, how things are delivered, and then distribute it to a variety of IDEX corporations that might be involved. Even being in the same room, but in fact, some of the same dynamics are meaningful to them in terms of why they would need to invest.
So that’s a domain that interests us in terms of how it will develop over time. But I think, for now, the kind of fundamental things we have work pretty well with a decent path and a follow-up of us.
Michel Anastasiou
Thank you, that’s helpful. And only in a follow-up if I may. Are there product adjacencies in the sphere of power that you see as more favorable?What if there’s something in the funnel for the next 12 months or so?
Eric Ashleman
I mean, we have big plans there. As you can imagine, they’re getting very, very specific very, very quickly. For example, we have a wonderful app that makes sure that when you download a railway car with propane, you get everything from the bottom. I mean, it sounds pretty funny, you guessed it, everyone would suspect it happens, but it’s not. Therefore, our team has developed anything that ensures that one hundred percent of the fuel is removed from the car, and then this should be taken as productivity for a variety of people. So, it’s this kind of paint that’s kind of: it’s the unit of measurement of things that we think about and expand for customers. And there are others along the way, however, it’s just the one we saw about a month ago that is literally, literally interesting.
Michel Anastasiou
Thank ou
Operator
That’s all the time we have for questions. I would like to remind you of control for final comments.
Eric Ashleman
Well, thank you. I appreciate the feedback and the image reflected in what we think will be a very smart quarter here. To all IDEX team members, I need to personally thank you for your hard work. Certainly complicated circumstances, many adjustments are decreasing from quarter to quarter, month to month. But as I said at the end of my comments, this is a business that we rely on in that. Whenever the world gets tough, the challenge is to solve the value. And we solve them, with well-positioned companies, that is, it is a huge monetary merit for us and our shareholders.
So thank you for your interest. Looking to talk to you more along the way.
Operator
Ladies and gentlemen, this concludes today’s teleconference. Thank you for your participation. You can disconnect your lines at this time. And may he have a glorious day.