William Grogan
Senior Vice President and Chief Financial Officer at IDEX
Thanks, Eric. In our Fluid & Metering Technology segment, industrial day rates were steady in the fourth quarter, and we expect they remain at this level in the near term with strong price support. We've seen initial signs that customers are returning to a book-and-bill order pattern, consistent with pre-pandemic behavior. We continue to monitor day rates to evaluate longer-term expectations as this is our most short-cycle market exposure. We expect another strong year in agricultural business with strong farmer sentiment and high crop prices.
We continue to see positive signals from both our OEMs and distributors and a trend towards investing in precision technologies as a means of mitigating higher input costs. We are on our next phase of process automation at Banjo and see continued improvement in delivery and efficiencies putting us in a good position to capture share. Our outlook for our municipal water business continues to be favorable. The healthy quoting activity we experienced over the past few quarters is expected to translate into 2023 growth. And we continue to identify opportunities to leverage our technology to capture new programs.
The EPA just received record funding and the Infrastructure Bill could provide a tailwind in the back half of the year. The chemical markets overall are soft. We see opportunities for growth in U.S. green energies and strong project activity in the Middle East, but this is offset by softer European demand due to higher energy costs and cuts to production capacity. In our energy business, we see favorable demand for energy exports and natural gas production as well as continued oil price support. However, customers continue to delay larger investments as they focus on cost, inventory and supply chain issues.
The strong price capture and productivity achieved in 2022 as well as new pricing actions in '23 will continue to drive improvements in FMT margins with some risk of offset from lost volume leverage, depending on the second half volumes. Moving on to the Health & Science Technology segment. We expect HST to remain our highest growth segment. Our life sciences and analytical instrumentation businesses will continue to grow in '23 due to strong next-gen sequencing applications and continued expansion of cell-based therapies in various chromatography and mass spec applications. In the short term, however, several of our OEM customers are holding excess inventory, driving volume out of the first quarter and into the balance of the year.
We believe this is a short-term issue, and the overall market outlook remains extremely positive for this sector. Our targeted growth initiatives tied to a wide variety of applications from satellites and space, to energy-efficient fuel cells continue to perform well, and our industrial businesses are seeing market trends similar to FMTs. We are seeing some slowing in semiconductor market, driven by higher memory device inventory levels and declining customer chip spending. Fabrication spending and new fab construction are both expected to be down for the year.
That said, we provide critical consumable components for a large installed base, which tends to be more stable despite end market and capex cycles. Where we play in the market and our recent share gains are expected to drive continued outperformance versus the broader market. We are seeing overall signs of slowing demand in pharma and biopharma, particularly around larger projects. Customers are hesitant to make larger investments given inflation and higher interest rates.
India continues to accelerate and the easing of China restrictions could drive growth and recovery in the region to offset some. Lastly, our auto business is expected to perform well. Global auto production is stable, and our presence in premium vehicle segments in EV and hybrids is driving a faster recovery as compared to the overall market. HST margins will expand in '23 due to pricing, productivity and volume, partially offset by continued reinvestment in our highest growth businesses and some mix headwinds in the short term due to expected life science AI demand patterns.
Finally, we expect our Fire Safety and Diversified Products segment will experience growth towards the lower end of our guided range. In fire safety, U.S. and European fire OEM volumes remain constrained by supply chain and throughput issues, but backlogs are strong and volumes are steady. We expect continued share gain with smaller builders that are coming online to capture surplus demand. Our rescue business remains positive with strong NPD, and we continue to leverage our integrated model to drive distribution growth.
We expect our Banjo business to continue to outperform across industrial, automotive and energy markets as it leverages its inventory and differentiation to capture share. Finally, our dispensing business has achieved strong results for the last two years, but will be down in 2023, driven by lower North American project volume as customer equipment refresh cycles approach their final innings. We continue to see growth in India, offset by some moderating demand in Europe and Southeast Asia.
For the segment, we expect price cost and operational productivity will drive margin expansion with some offset for mix as we see lower dispensing project volume in the segment. With that, I'll discuss our financial results. Moving on to our consolidated financial results on Slide 9. Q4 orders of $803 million, were up 1% overall and up 1% organically. We experienced continued orders growth in FMT, driven by strong water and energy results and an FSD due to strong fire and rescue orders as well as the receipt of a large project order for dispensing in the quarter. HST orders were down 8%, mainly due to the life science and AI OEM orders and softer semi demand I highlighted earlier.
For the year, orders were up 8% overall and up 5% organically. We experienced positive orders growth across all three of our segments. Fourth quarter sales of $811 million, were up 13% overall and up 12% organically. We experienced nearly 20% organic growth in HST and strong growth across both FMT and FSD. Full year sales of $3.2 billion, were up 15% overall and up 13% organically. We saw strong double-digit growth across FMT and HST and 9% growth in FSD.
Q4 margin contracted by 140 basis points compared to the fourth quarter of 2021 and adjusted gross margin of 43.6% contracted by 40 basis points. This was driven by unfavorable mix within HST and FSD, the dilutive impact of acquisitions, employee-related inflation and unfavorable productivity in HST, partially offset by volume leverage and strong price cost. For the full year, gross margins expanded by 50 basis points, and adjusted gross margins expanded by 10 basis points to 44.8%, primarily driven by strong volume leverage, positive price/cost and productivity, more than offsetting employee-related inflation and engineering resource investments.
Fourth quarter adjusted EBITDA margin was 27%, up 10 basis points versus 2021. A bridge of Q4 adjusted EBITDA as well as Q4 adjusted operating income can be found in the appendix of this presentation. Full year adjusted EBITDA margin of 27.9%, is up 20 basis points versus 2021's adjusted EBITDA of 27.7%. This represents record profitability for IDEX. I will discuss the drivers of full year adjusted EBITDA on the next slide. Our Q4 effective tax rate of 20.5%, decreased versus last year's effective tax rate of 22.5%, primarily due to tax benefits realized as we recognize certain foreign currency impacts for tax purposes with the funding of the Muon Group acquisition.
Our full year effective tax rate of 21.7% also included tax benefits from the sale of our Knight business and was down from the 2021 effective tax rate of 22.5%. Fourth quarter net income was $130 million, which resulted in an EPS of $1.71 Adjusted net income was $153 million, with an adjusted EPS of $2.01, which was up $0.30 or 18% over prior year. Full year net income was $587 million, which resulted in an EPS of $7.71. Adjusted net income was $618 million, resulting in an EPS of $8.12, up $1.25 or 18% over prior year adjusted EPS.
Finally, free cash flow for the quarter was $147 million, 96% of adjusted net income, mainly driven by improved working capital performance. For the year, free cash flow was $489 million, down 1% versus last year and coming in at 79% of adjusted net income. mainly driven by higher net working capital, partly offset by higher income. As we exit the year, we made progress in reducing core business inventories and have momentum behind us to continue to drive further reduction into next year.
Moving on to Slide 10, which details the drivers of our total year adjusted EBITDA. Full year adjusted EBITDA increased $119 million compared to 2021. Our 13% organic growth contributed approximately $91 million flowing through at our prior year gross margin rate. We levered well on the volume increase and had record price capture to offset record inflation. Price/cost was accretive to margins and has returned to historic levels. As we exited the year, all three of our segments posted positive price/cost results.
We drove operational productivity to offset supply chain-driven inefficiencies and realized the benefits of our energy and Italian site consolidations. Mix was a small positive for the year. We saw unfavorable mix pressure in the fourth quarter of about $3 million that reversed a majority of the year-to-date favorability. We invested $20 million taking in the form of engineering and commercial resources in the business and M&A and diversity equity inclusion resources in corporate.
Tracking to the lower end of the $0.20 to $0.25 of full year spend we highlighted at the beginning of the year. Discretionary spending increased by $25 million versus last year, closer to the high end of the $0.20 to $0.25 range on significantly higher sales than our original guide. We exited the year with a solid 30% organic flow-through. ABEL, Nexsight, KZValve and Muon acquisitions, net of the Knight divestiture and FX contributed an additional $14 million of adjusted EBITDA.
Inclusive of acquisitions, divestitures and FX, we also delivered 30% flow-through. With that, I would like to provide an update on our outlook for the first quarter and full year 2023. I'm on Slide 11. We expect full year organic revenue growth to be in the range of 1% to 5%. This range reflects the uncertainty in the second half of the year given the short-cycle nature of our business. This organic growth rate equates to $0.12 to $0.60 depending on the top line results.
This range includes price cost, which we anticipate will be positive for the year and some mix pressure stemming from HST and dispensing volume in FSD. We expect that our operational productivity will more than offset pressure from employee-related wage and benefits inflation. We operated in a challenging supply chain environment in 2022, and we expect the easing of these conditions as well as driving our own internal productivity funnel will deliver $0.06 to $0.08 of net productivity for the year.
In 2022, we returned to a more sustainable level of discretionary spending post-pandemic and invested in the people needed to drive our strategy. Travel and external services did not fully rebound until the second quarter of 2022. And we hired an increasing rate as we move through the year. Although our spend is only moderately increased versus our 4Q exit rate, we'll see pressure of approximately $0.09 on a year-over-year basis. This impact is entirely felt in the first quarter of 2023.
Although not to the same level as in 2022, we will continue to invest for the future. People, new products as well as applications for existing products, and these investments will provide up to $0.20 of pressure in 2023, depending on top line results. The range indicates how we will focus on resource allocation and an uncertain period and dial in our investments appropriately. Net of the divestiture of our Knight business last year, we expect acquisitions to contribute $168 million of revenue and $0.43 of EPS.
Now let's look at a couple of non-operational items. Interest expense associated with the Muon acquisition represents a headwind of $0.12, and we expect FX to be a small impact, providing $0.02 of EPS pressure. So in summary, we are projecting organic revenue growth of 1% to 5% for the year, adjusted EPS expectations are in the range of $8.50 to $8.80, a 5% to 8% growth over 2022. The midpoint of our guidance implies a solid 30% adjusted EBITDA flow-through.
Moving on to Slide 12. We I'll now provide some additional details regarding our 2023 guidance for both the first quarter and full year. In the first quarter, we are projecting GAAP EPS to range from $1.74 to $1.79 and adjusted EPS to range from $1.98 to $2.03, with organic revenue of 3% to 5% and adjusted EBITDA margins of approximately 27%. Our guidance includes $0.07 of pressure from accelerated recognition of share-based compensation as well as a delay in HST OEM shipments to the latter part of the second quarter that is lowering our organic growth expectations for the quarter.
These factors, plus the carryover item I mentioned on the previous slide, mutes our year-over-year flow-through for the quarter, but expect to deliver solid flow-through for the year. Turning to the full year 2023. We project GAAP EPS of $7.55 to $7.85 and adjusted EPS to range from $8.50 to $8.80. We expect full year organic revenue growth of 1% to 5% and adjusted EBITDA margins to be 28% or higher. Capital expenditures are anticipated to be about $70 million, in line with 2022 spending as we continue to identify opportunities to reinvest in our core businesses. And free cash flow is expected to be 100-plus percent of adjusted net income. With that, I'll turn it back to Eric.
