Eric Ashleman: Well, I think it was — it’s a nice little business. I think as we looked at it, we just don’t have a lot of technology that’s similar. We didn’t see necessarily an ability to scale it. And larger-scale versions of it tend to be in markets that are not as attractive for us. So I do think that level of thinking is something that we do constantly, and you could see it play out that way from time to time. But I wouldn’t view it just as this one as a massive transformational shift in portfolio for IDEX. But as we increasingly think about — look, what we’re trying to do here is drive growth outperformance, a little tighter integrated ability between the pieces of IDEX. I referenced that in the opening comments. Things that kind of stand-alone that don’t have that ability to scale, we’re going to take a look at, assess that carefully.
And then it seems like the right decision is a potential different element, then we’ll continue to make those choices. But I wouldn’t sum it up to something more aggressive than that.
Operator: Our next question comes from Vlad Bystricky with Citigroup.
Vlad Bystricky: So maybe just one more on HST. I know you previously talked about an expectation for semicon markets to stabilize during 3Q with recovery, I think, beginning in 4Q. I don’t know if I missed it, but maybe you can give us more color on how semicon markets specifically are trending versus your prior expectations and your views on the likely trajectory of semicon-related demand going forward?
Eric Ashleman: Yes. Again, it’s an important, but a small part of IDEX at less than 10%. But I think I think that one is pushed further into 2024. I mean it’s stable here. We’re certainly — and we hit it from a variety of levels. We’re in fabs. We’re in metrology instruments. We’re in memory. We’re in sophisticated sides of it. And so we see it from a whole bunch of different spots, but I think all of it suggests the recovery of that sector is a little bit further out into 2024. We’re certainly close to those customers. We’re critical. They can’t do much with our parts and components. So we’ll get that intelligence, but I suspect the order ramp will start somewhere out into 2024.
Vlad Bystricky: Okay. That’s helpful. And then maybe just shifting to FSDP. Again, on the orders that FSDP took a step down sequentially. So I guess just any color on, is there something seasonal there? Or just how you’re thinking about FSDP orders evolving into 4Q and going forward?
Allison Lausas: Sure, Vlad. No, I can take that. That’s really the step down due to dispensing as that replenishment cycle did come to an end there. So you see that slowdown in the third quarter. You’ll see it also a bit into fourth. But also in fourth quarter, we’ve got a bit of seasonality in Fire & Rescue, fewer production days.
Operator: Our next question is from Rob Wertheimer with Melius Research.
Rob Wertheimer: I joined the conversation and the education on life sciences and HST has obviously been a bit more volatile than many expected. And I wonder if you could do almost like a 101, what normalization looks like? With the simpler question is, what drives customer purchasing? Is it your customers’ volumes? Is it innovation cycles? Is it CapEx cycles and confidence cycles? Just how your products flow through that life cycle?
Eric Ashleman: No, I appreciate it, Rob. So look, this is — first of all, it’s a super direct business. So we’re talking with a relatively concentrated customer set of leading OEMs. So it’s quite different from many other parts of IDEX in that respect. Up until the pandemic and some of the forces that we’ve seen here in the last 3 or 4 years, it’s not typically been a very cyclical kind of industry. It’s generally stayed at the kind of mid- to high single digits depending on where we sort of jump in, with the exception of the semi portion, of course. In all cases, you can think of this as — these are platform-centric businesses. So an innovation stream comes in, somebody is looking to move to the next level, and it’s either their instrument, or their lithography machine, or their device, is moving up well ahead of that.
Our engineers are in there on the design cycle and working on the spec points and you secure the spec. So essentially, it’s a pretty classic platform business. Once you’re in on a platform, you run the duration of it. And you’re concurrently always working on different iterations of things in either early gestation or late. So it’s very, very classically aligned that way. So you do have good visibility into plans for programs, plans for program launches the variable that you run into, of course, is the adoption, the runout of those devices, the take up, the inventory positions on them, all the things that we’ve talked about as we’ve kind of gone through the last year here.
Rob Wertheimer: Perfect. And if I — I know there was a lot on that topic, but I appreciate it. And then if I can just go a little bit further field, just in the general acquisition market. You’ve seen cost of capital rising for private equity, perhaps faster than when you guys have pretty good cash flow are getting easier to win? Or any general characterization of that market? And I’ll stop there.
Eric Ashleman: Yes. Well, I mean, certainly and for — I mean we’ve tried here for the last 2 or 3 years to be very, very focused on, frankly, cultivating proprietary transactions. We’re taking advantage a little bit of the environment where we’re comfortable. We were planning components in niche environments. We often see things and interact with people that maybe are not as well-known in the outside world. So we depend on multiyear relationships and conversations to try to get ourselves to a position where frankly, there aren’t a lot of competitors in line as we’re looking at an asset. That’s not always possible to the extent it isn’t. I would agree that you’ve seen something quite different here with higher interest rates.
There’s obviously some levels because people that need a lot of debt financing can only get to and can’t pass. That will allow a property to probably stay out and play longer with strategics like us and others that might be taking a look at it. So you could view that as quite positive. I would say on the other side, though, too, because of that environment, maybe here more recently, you see some others that are a little bit more reluctant to transact in that way because they want to wait for a recovery loop or better demand curves that would support higher valuations in terminal values. So I think it’s probably a little bit of wash on that side. But in many ways, we’ve always considered this better for us if we’re working it much more discretely a bit more in the weeds and ideally in a proprietary way.
