IDEX Corporation (IEX) Cash Flow Statement

The OCF/NI ratio has been consistently above 1.0 except for 2026Q1 (0.86) and 2024Q2 (0.95), suggesting that reported earnings are well-backed by cash generation. The 2026Q1 dip appears tied to a significant working capital outflow of -$89.9M, likely reflecting seasonal or timing effects, but the subsequent quarter's recovery to 1.39 underscores the underlying strength. This pattern implies that the gap between net income and operating cash flow is primarily driven by working capital swings rather than aggressive revenue recognition.

The FCF trajectory shows a clear upward trend, with 2026Q2 FCF of $177M representing a 20% increase year-over-year, while FCF margins have improved from the mid-teens to nearly 20%. This growth is supported by record orders and raised guidance, suggesting that the company's cash generation is inflecting upward. The consistency of FCF margins above 15% in most quarters indicates that IDEX is converting its earnings into cash efficiently, which supports its capacity for capital deployment.

IDEX's capital expenditure is modest relative to its revenue, averaging around 2% of sales, which is typical for a high-mix, low-volume manufacturer with a decentralized model. This low capital intensity suggests that the company can generate substantial free cash flow without heavy reinvestment, and the slight uptick in 2026Q2 to 2.5% may indicate targeted investments in growth areas like life sciences. The depreciation and amortization of roughly $50M per quarter comfortably covers maintenance capex, implying that the remaining capex is likely growth-oriented.

The working capital line shows significant quarterly swings, with negative changes in several quarters indicating cash outflows, likely due to inventory builds or receivable timing. However, the positive changes in 2025Q3 and 2024Q4 suggest that the company is able to collect on receivables and manage payables effectively. The 2026Q1 outflow of -$89.9M appears to be an outlier, possibly related to seasonal inventory builds for the HST segment, but the subsequent quarter's recovery to -$4.0M indicates that the company is not experiencing a structural deterioration in working capital efficiency.

The company has consistently paid dividends of around $52M per quarter, reflecting a stable payout policy. Buybacks have ramped up significantly, from no repurchases in 2024 to over $75M per quarter in 2026, indicating a shift toward more aggressive shareholder returns. This deployment is supported by strong free cash flow and a fortress balance sheet, with debt-to-equity of only 0.46%, providing ample flexibility for both organic investments and M&A.

The cumulative OCF of $1.65B versus net income of $1.25B over the ten-quarter period shows a positive divergence, with OCF exceeding net income by $400M. This suggests that IDEX's earnings quality is high, and the company is generating more cash than its accounting profits, likely due to non-cash charges like D&A and favorable working capital management. This divergence supports the view that the company's reported earnings are conservative and that cash flow is a reliable indicator of underlying performance.