Eric D. Ashleman
Chief Executive Officer and President at IDEX
Thank you, Allison, and good morning, everyone. I'm on Slide six. I'd like to start with some key first quarter highlights. We delivered record sales with positive organic growth across all three of our segments, $2.09 adjusted earnings per share and strong free cash flow. Our FMT and FSD segments performed exceptionally well, both achieving record sales and strong profitability, offsetting some pressure in our HST segment. Price/cost was positive and above IDEX historical performance. As we look ahead to Q2 and the balance of the year, our outlook has changed.
The last time we spoke, we anticipated short-term volume pressures within life sciences from inventory calibration concentrated in a few select OEM customers. However, as we progressed through the quarter, we saw signals of a broader, more prolonged recalibration within our HST segment, largely centered in our analytical instrumentation, life science, pharma and semiconductor markets. End-market demand is still positive, but we believe our customers have sufficient inventory of our critical components to support their needs in the near term. Over the past two years, we experienced robust growth in HST, with sales up over 30% organically to support strong end-user demand and customer-specific inventory replenishment.
But as supply chain conditions improve and the broader demand profile normalizes, our OEM partners are aggressively attacking higher inventory levels, beginning with those suppliers that have demonstrated the quickest returns to pre-pandemic lead times. The sharp and simultaneous nature of this inventory recalibration exceeds all prior historical cycles. In response, we proactively executed cost reductions to offset a portion of this volume impact. We tailored our approach to the specific challenges in individual businesses as well as broader discretionary costs across the entire company, managing through the short term but not losing focus on our longer-term growth path.
These top line challenges, net of our cost-containment plan, drive $0.25 of adjusted EPS headwind for the year. Therefore, as we noted in our press release, we revised our full year adjusted 2023 EPS guidance from $8.25 to $8.55. Bill will discuss the specifics in greater detail during our segment and guidance updates. Regardless of these end-market challenges, we remain confident in our ability to deliver total shareholder returns over the long term. Our capital deployment plan remains consistent. We continue to look to M&A as a significant source of value creation. To that end, we announced our intent to acquire Iridian Spectral Technologies for CAD150 million or approximately USD111 million.
Iridian is a world leader in custom optical filter solutions serving the space, life science and telecommunications markets. Iridian expects fiscal 2023 revenues of CAD36 million and EBITDA margin in the low-30s range. It is about a 13 times EBITDA-trailing deal. And within the IDEX family of businesses, Iridian complements and expands upon the solutions provided by our Scientific Fluidics and Optics businesses within HST. This transaction is expected to close in the second quarter. Iridian will be our sixth acquisition since the beginning of 2021, and we remain bullish on our ability to deploy capital on high-quality assets irrespective of the macro conditions.
The integration of our Muon Group acquisition, which closed in fourth quarter 2022, is progressing well. We've deployed key elements of our operating model, and there continues to be a strong cultural fit between IDEX and Muon as our teams work together to unlock value between our businesses. Finally, I traveled last week to India to officially open our second plant in the state of Gujarat. It is a world-class facility that effectively doubles our production capacity in the country. Coupled with the opening of our plant expansion in China in late 2022 and our recent commissioning of sales and logistics centers in Singapore and Dubai, we now have a strengthened footprint to attack markets across Asia and the Middle East, a key element of our growth strategy. With that, I'll turn it over to Bill to discuss our financial results.
William K. Grogan, IDEX Corporation - CFO & Senior VP4
Thanks, Eric. Moving on to our first quarter consolidated financial results on Slide eight. All comparisons are against first quarter 2022, unless otherwise stated. Orders of $826 million were down 4% overall and down 10% organically, mainly driven by the timing of project orders for dispensing in FSD and next-gen sequencing in HST as well as OEM pressure across the life sciences, analytical instrumentation, pharma and semiconductor markets in HST. Record sales of $845 million were up 13% overall and up 6% organically. We experienced 9% organic growth within our FMT and FSD segments and 3% growth in HST. Gross margin of 45.2% contracted by 40 basis points.
This was driven by unfavorable mix, largely centered in HST, the dilutive impact of acquisitions and employee-related inflation, partially offset by favorable price cost and productivity. Adjusted EBITDA margin, which includes $6 million related to accelerated recognition of share-based compensation, was 27.2%, down 140 basis points. I'll discuss the remaining drivers of adjusted EBITDA on the next slide. Our effective tax rate for the quarter was 22.2% and was relatively flat compared with our prior effective tax rate of 22.4%. Net income was $140 million, which resulted in EPS of $1.84. Adjusted net income was $159 million with adjusted EPS of $2.09, which was up $0.13 or 7%.
The accelerated recognition of share-based compensation that I mentioned earlier lowered adjusted EPS by $0.06. Finally, cash from operations was $148 million and up 86%, primarily due to lower investments in working capital versus last year. Free cash flow for the quarter, which included higher year-over-year capital investment, was $121 million, up 91% versus last year and coming in at 76% of adjusted net income. This represents the strongest first quarter free cash conversion we have experienced in the past five years.
Moving on to Slide nine, which details the drivers of our first quarter adjusted EBITDA. Adjusted EBITDA increased $15 million compared to the first quarter of 2022. Our 6% organic growth contributed approximately $6 million flowing through at our prior year gross margin rate. Price/cost was accretive to margins, and we drove operational productivity that more than offset employee-related inflation. Mix was unfavorable by $3 million, mainly centered in HST due to volume declines in our analytical instrumentation and life science components businesses. Resource and discretionary spending increased by $8 million. As we noted in our prior guidance, this was carryover from last year. In 2022, we did not return to a sustainable level of discretionary spending until the second quarter.
Equally, we ramped up our resource investment spend as we progress through the year. This will come down as part of our cost mitigation plan for the balance of the year. We had $6 million related to accelerated recognition of share-based compensation due to the timing of certain participants reaching retirement eligibility status. These results yielded a 5% organic flow through. Excluding the impact of accelerated share-based compensation, our organic flow-through was around 20%. Nexsight, KZValve and Muon acquisitions, net of the Knight divestiture and FX, contributed an additional $13 million of adjusted EBITDA. Inclusive of acquisitions, divestitures and FX, we delivered 16% flow-through.
Excluding the impact of accelerated share-based compensation, we delivered 22% flow-through. With that, I'll provide a deeper outlook for our segment performance. I'm on Page 10. In our Fluid & Metering technology segment, we experienced strong order and sales performance with organic growth of 5% and 9%, respectively. Adjusted EBITDA margin expanded by 50 basis points versus last year, driven by strong price/cost, volume leverage and productivity, which more than offset higher employee-related costs and discretionary spending as well as the dilutive impact of acquisitions.
Industrial demand remained steady throughout the quarter. We experienced tailwinds from energy, mining, chemical and lithium-ion battery markets. Our water businesses performed well. Quote activity remained strong due to U.S. infrastructure funding initiatives, and we see continued momentum around the adoption of AI and cloud technologies. Our energy markets continue to be strong, driven by favorable oil export and mobile truck demand. In the chemical market, we are experiencing wins in the energy transition space as well as strong China and Middle East demand. The agricultural demand landscape is mixed.
Farm fundamentals are positive with stable commodity prices and net farm incomes as well as lower fertilizer costs versus last year. However, distribution inventory levels were higher than typical coming into the planting season, and a slower start to the season due to weather has delayed the turnover of this inventory. Moving on to the Health & Science Technologies segment. Organic orders contracted 23%, driven by the OEM inventory calibration impact as well as timing of a large next-gen sequencing order we received in the first quarter of last year.
As Eric noted, our life science and analytical instrumentation businesses are being impacted by broad-based inventory destocking as our customers recalibrate to a more normalized demand pattern. We expect that these markets will continue to see this pressure through the second quarter with some recovery in the back half of the year. The semiconductor market is experiencing softness resulting from memory oversupply as well as customers feeling the impact of U.S. export controls. We anticipate that macro conditions will improve as we progress through the remainder of the year.
We do continue to leverage share gain to buffer some of the broader market declines. Our material processing technology business is seeing softness across pharma, biopharma and nutrition markets, driven by tighter capital availability and customer hesitancy due to recession concerns. Our funnel does remain strong, and we expect some recovery in the second half of the year. The automotive market remains positive. We continue to see a solid global trend towards electrification driving opportunities for our growth.
We delivered 3% organic sales growth in the first quarter, driven by strong next-gen sequencing, satellite broadband and fuel cell-targeted growth initiatives with some offset from the market factors I mentioned earlier. Adjusted EBITDA margin contracted by 300 basis points versus the first quarter of 2022. Most of this pressure is in the gross margin line, with unfavorable volume leverage and mix more than offsetting favorable price/cost. The recent Muon acquisition is accretive to HST's overall EBITDA margin. Finally, turning to our Fire & Safety Diversified Products segment. Organic orders contracted by 4%, mainly driven by timing of project orders in our dispensing business last year.
Organic sales results were strong at 9% growth, with double-digit growth in both Fire & Rescue and BAND-IT offsetting the decline in dispensing. Adjusted EBITDA margins expanded by 160 basis points versus last year, largely driven by strong price cost performance, volume leverage and productivity more than offsetting higher discretionary spend and employee-related costs. The paint market is mixed, with pressure from the North American replenishment cycle coming to an end and softness in Southeast Asia being offset with strong European and Indian demand. Within our Fire business, demand for trucks remains strong. North American OEM volumes continue to be constrained by supply chain.
However, we are gaining share with North American mid-tier and China OEMs with our integrated system strategy and have pivoted our go-to-market approach for our SAM product to retrofit in-service trucks to bypass the OEM backlog constraints. Our rescue markets are stable, and we have experienced favorable demand in Europe and good project activity across most of the globe. BAND-IT results continue to be positive. Industrial demand is steady, energy is strong, and we continue to drive higher than market performance in automotive due to our position on high-demand vehicles and share gain.
With that, I'll give an update on our outlook for the second quarter and full year 2023. I'm on Slide 11. I'll now provide some additional details regarding our revised 2023 guidance for both the second quarter and the full year. In Q2, we are projecting GAAP EPS to range from $1.86 to $1.89 and adjusted EPS to range from $2.10 to $2.13, with organic revenue growth of approximately 3% and adjusted EBITDA margins ranging from 27.3% to 27.7%. We anticipate that HST volumes will be negative in the second quarter, and the strength we saw in Q1 industrial performance sustains.
Turning to the full year. As Eric mentioned, we have reduced our full year revenue guidance, reflecting headwinds related to OEM destocking across the HST segment. At the midpoint, we expect volume and mix impact reduces EPS by $0.48, offset by $0.23 of cost actions, yielding $0.25 of net pressure on our annual guide. This equates to a full year low single-digit organic revenue contraction in HST and low- to mid-single-digit growth in FMT and FSD. Our view on the industrial market has not changed, and we continue to assume a second half decline with a modest recovery in the back half for HST.
Bringing it all together, we project GAAP EPS of $7.30 to $7.60 and adjusted EPS to range from $8.25 to $8.55. We expect full year organic revenue growth of 0% to 3% and adjusted EBITDA margin to range between 27.5% and 27.9%. The high end of our range implies that we will sustain our record profitability from last year. Capital expenditures are anticipated to be about $70 million, and free cash flow is expected to be 100-plus percent of adjusted net income. With that, I'll turn it over to the operator for your questions.
