Q4 2023 AMETEK Inc Earnings Call

Operator: Bye-bye. Good day, and thank you for standing by. Welcome to the fourth quarter 2023 Ametek earnings conference call. At this time, all participants are in a listen only mode.

Yeah.

Okay.

Speaker Change: Good day and thank you for standing by welcome to the fourth quarter 2023, AMETEK earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you will hear an automated message.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: Advising that your hand is raised to withdraw your question. Please press star one again.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Kevin Coleman, Vice President of Investment Relations and Treasurer. You may begin. Thank you, Tanya.

Speaker Change: Be advised that today's conference is being recorded I would now like to hand, the conference over to your Speaker, Kevin Coleman, Vice President of investment Relations and Treasurer you may begin.

Kevin C. Coleman: Thank you Tania and good morning, and thank you for joining us for Ametek's fourth quarter 2023 earnings Conference call.

Kevin C. Coleman: Good morning, and thank you for joining us for Ametek's fourth quarter 2023 earnings conference call. With me today are David Zapico, Chairman and Chief Executive Officer, Bill Burke, Executive Vice President and Chief Financial Officer, and Dalip Puri, Senior Vice President, Operational Finance. During the course of today's call, we will make forward-looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risks and uncertainties that may affect our future results is contained in Ametek's filings with the SBA. Ametek disclaims any intention or obligation to update or revise any forward-looking statement.

Kevin C. Coleman: With me today are Dave <unk>, Chairman and Chief Executive Officer, Bill Burke, Executive Vice President and Chief Financial Officer.

Kevin C. Coleman: Perry Senior Vice President operational finance.

Kevin C. Coleman: During the course of today's call, we will make forward looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations.

Kevin C. Coleman: Tailed discussion of the risks and uncertainties that may affect our future results is contained in ametek's filings with the SEC.

Kevin C. Coleman: AMETEK disclaims any intention or obligation to update or revise any forward looking statements.

David A. Zapico: Any references made on this call? 2022 or 2023 results or to 2024 guidance will be on an adjusted basis excluding after-tax, acquisition-related, intangible amortization. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section of our website. We'll begin today's call with prepared remarks, and then we'll open it up for questions. I'll now turn the meeting over to David.

Kevin C. Coleman: Any references made on this call to 2022 or 2023 results or to 2024 guidance will be on an adjusted basis, excluding after tax acquisition related intangible amortization.

Kevin C. Coleman: Reconciliations between GAAP and adjusted measures can be found in our press release and on the investors section of our website.

Kevin C. Coleman: We'll begin today's call with prepared remarks, and then we'll open it up for questions I will now turn the meeting over to Dave.

David A. Zapico: Thank you, Kevin, and good morning, everyone. Before I get into the financial results for the quarter, it is with mixed emotions that I share the news of changes in our financial leadership, which we announced on January 16. After an outstanding 36-year career at Ametek, our Chief Financial Officer, Bill Burke, has decided to embark on a well-deserved retirement effective April 2.

Dave: Thank you, Kevin and good morning, everyone.

Dave: Before I get into the financial results for the quarter.

Dave: It's with mixed emotions that I share the news of changes in our financial leadership, which we announced on January 16th.

Dave: After an outstanding 36 year career at AMETEK.

Dave: Our Chief Financial Officer, Bill Burke has decided to embark on a well deserved retirement effective April <unk> 2024.

David A. Zapico: 2020. Bill's tremendous leadership of our finance organization and his strategic guidance have been instrumental in Ametek's long-term growth and success. His legacy is deeply woven into the fabric of our organization, and we express our heartfelt gratitude for his exceptional contribution. In light of this transition, I'm delighted to announce the appointment of Dalip Puri as our new Executive Vice President and Chief Financial Officer. Dalip, currently serving as Senior Vice President, Operational Finance, brings a wealth of experience with expertise to the company. He joined Ametek in 2017 as treasurer.

Dave: Bill's tremendous leadership of our finance organization and a strategic guidance has been instrumental in ametek's long term growth and success.

Dave: His legacy is deeply woven into the fabric of our organization and we express our heartfelt gratitude for his exceptional contributions.

Dave: In light of this transition.

Speaker Change: Delighted to announce the appointment of <unk> as our new executive Vice President and Chief Financial Officer.

Speaker Change: Dallas currently serving as senior Vice President of operational finance brings a wealth of experience and expertise to this role.

Speaker Change: Dallas joined AMETEK in 2017, as Treasurer and subsequently took on the role of group controller, providing financial oversight for over half of ametek's businesses before transitioning into his current role of operational finance.

David A. Zapico: Subsequently, he took on the role of group controller, providing financial oversight for over half of Ametek's business, before transitioning into his quorum, of Operations. Dalip's leadership of key financial initiatives at Ametek, along with a proven track record, make him the natural choice to lead our financial organization. I am confident that under his leadership, our financial organization will continue to thrive, contributing significantly to the success of Ametek To ensure a seamless transition, Bill will stay on as a Senior Advisor until April 2025.

Speaker Change: Dallas leadership of key financial initiatives in AMETEK, along with a proven track record make him a natural choice to lead our financial organization into the future.

Speaker Change: I'm confident that under Dallas leadership, our financial organization will continue to thrive contributing significantly to the success of AMETEK.

Speaker Change: To ensure a seamless transition that will stay on as a senior advisor until April 2025.

David A. Zapico: Thank you, Bill, for your exceptional service and congratulations, Dalip. I'm truly excited about it. Now let me turn to this quarter's results. Ametek delivered exceptional performance in the fourth quarter, Delivering Record Results in Outstanding Operational Execution, leading to results ahead of our expectations. In the quarter, we set records for sales, Operating Income, Earnings Per Share, EBITDA, and Cash Flow.

Speaker Change: Thank you Bill for your exceptional service and congratulations to Alabama truly excited about the future.

Speaker Change: Now, let me turn to this quarter's results.

Speaker Change: AMETEK delivered exceptional performance in the fourth quarter.

Speaker Change: Delivering record results and outstanding operational execution, leading to results ahead of our expectations.

Speaker Change: In the quarter, we set records for sales operating income earnings per share EBITDA and cash flow.

David A. Zapico: [inaudible] Furthermore, in the quarter, we successfully deployed over $2 billion on a strategic acquisition, Enhancing our Portfolio with the Acquisitions of Amplifier Research and Paragon Medical. These results capped a record year for acquisitions and underscored the strength of Ametek growth. These results reflect a record year for acquisitions and underscore the strength of Ametek's growth. QualityOfOurBusiness.com, The success of our organic growth. Ametek's continued success is also the result of the dedicated efforts of our global employees.

Speaker Change: We also ended the quarter with record backlog.

Speaker Change: Furthermore, in the quarter, we successfully deployed over $2 billion on strategic acquisitions, enhancing our portfolio with the acquisitions of amplifier research and Paragon medical.

Speaker Change: These results capped a record year for acquisitions and underscore the strength of the AMETEK growth model the.

The quality of our businesses and the success of our organic growth initiatives.

Speaker Change: Ametek's continued success is also the result of the dedicated efforts of our global employees.

Speaker Change: I want to thank all AMETEK colleagues for your efforts and significant contributions in 2023.

Speaker Change: Now, let me turn to our fourth quarter financial results.

Speaker Change: Fourth quarter sales were a record $1 $73 billion.

David A. Zapico: I want to thank all the Ametek colleagues for your efforts and significant contributions in 2020. Now, let me turn to our fourth quarter financial reserve. Fourth quarter sales were a record $1.73 billion, up 6.5% over the same period in 2022. Organic sales growth was approximately 1.5%.

Speaker Change: Up six 5% over the same period in 2022.

Speaker Change: Organic sales growth was approximately one 5%.

Speaker Change: Acquisitions added four points and foreign currency added one point.

Speaker Change: We ended the quarter with a record backlog of $3 five 3 billion.

Speaker Change: Which is up 10% from the start of 2023.

Speaker Change: Ametek's operational performance in the quarter was outstanding with robust margin expansion and strong incremental margins.

Speaker Change: Operating income in the quarter was a record $445 million, a 12% increase over the fourth quarter of 2022.

David A. Zapico: Acquisitions added four points, and foreign currency added one. We ended the quarter with a record backlog of $3.53 billion, which is up 10% from the start of 2020. Ametek's operational performance in the quarter was outstanding, with robust margin expansion and strong incremental margins. Operating income in the quarter was a record $445 million, a 12% increase over the fourth quarter of 2020. Operating margins were 25.7% in the quarter, up an impressive 120 basis points from the prior year, while core margins were up 200 basis points.

Speaker Change: Operating margins were 25, 7% in the quarter up an impressive 120 basis points from the prior year.

While core margins were up 200 basis points in the quarter.

Speaker Change: This strong margin expansion reflects the strength and flexibility of our operating model and the quality and differentiation of our businesses.

Speaker Change: EBITDA in the quarter was a record $526 million up 8% over the prior year with EBITDA margins an impressive 34%.

Speaker Change: Our strong growth and operating performance led to robust cash generation.

Speaker Change: With free cash flow up 47% in the quarter.

Speaker Change: To a record $481 million.

Speaker Change: This tremendous operating performance led to record diluted earnings per share of $1 68.

David A. Zapico: This strong margin expansion reflects the strength and flexibility of our operating, Quality, and Differentiation. Even on the quarter was a record $526 million, up 8% over the prior year, with EBITDA margins an impressive 30.4%. Our strong growth and operating performance led to robust cash generation, with free cash flow up 47% in the quarter to a record 481 million.

Speaker Change: Up 11% versus the fourth quarter of 2022.

Speaker Change: And above our guidance range of $1 61 to $1 63 per share.

Speaker Change: Now let me provide some additional details at the operating group level.

Speaker Change: First the electronic instruments group.

Speaker Change: The electronic instruments group had an excellent quarter with strong sales growth and tremendous operating performance.

Speaker Change: Sales for AIG were a record $1 two $4 billion in the quarter up 7% from the fourth quarter of last year.

Speaker Change: Organic sales were up three 5%.

Acquisitions added three points with currency accounting for the balance.

David A. Zapico: This tremendous operating performance led to record diluted earnings per share of $1.68, up 11% versus the fourth quarter of 2022 and above our guidance range of $1.61 to $1.75. Now, let me provide some additional details at the operating group level. First, the electronics.

Speaker Change: <unk> sales growth in the fourth quarter was strongest across our aerospace and defense businesses and our materials analysis Division.

Speaker Change: Yes. He is operating performance was impressive was strong profit growth and exceptional margin expansion operating income was a record $359 million about 17% versus the prior year.

Speaker Change: While <unk> operating margins were 29% up an outstanding 250 basis points from the prior year.

Speaker Change: Okay.

Speaker Change: The electromechanical group also finished the year with strong performance. Despite the continued impact from the normalization of inventory levels across our OEM customer base.

David A. Zapico: The Electronic Instruments Group had an excellent quarter with strong sales growth and tremendous operating profits. Sales for EIG were a record $1.24 billion in the quarter, up 7% from the fourth quarter of last year. Organic sales were up three and a half percent. Acquisitions added three points, with currency accounting for the balance. EIG sales growth in the fourth quarter was strongest across our aerospace and defense businesses and our materials analysis. EIG's operating performance was impressive with strong profit growth and exceptional margins. Operating income was a record, $359 million, about 17% versus the prior year, while EIG operating margins were 29%, up an outstanding 250 basis points from the prior year. The Electromechanical Group also finished the year with strong performance. Despite the continued impact from the normalization of inventory levels across our OEM customers, fourth quarter sales for EMG were $495 million, up 6% versus the prior year, driven by the contributions from recent acquisitions. EMG's fourth-quarter operating income was $112 million, and operating income margins were 22.7% in the quarter.

Speaker Change: Fourth quarter sales for EMG were $495 million up 6% versus the prior year driven by the contributions from recent acquisitions.

Speaker Change: Amg's fourth quarter operating income was $112 million.

Speaker Change: Our operating margin operating income margins were 22, 7% in the quarter.

Speaker Change: Excluding the dilutive impact from acquisitions.

Speaker Change: <unk> core margins were up 100 basis points versus the prior year.

Speaker Change: Now for the full year results.

Speaker Change: Overall performance was outstanding in 2023.

Speaker Change: Establishing annual records for essentially all key financial metrics.

Speaker Change: Overall sales for the year were $6 6 billion.

Speaker Change: Up 7% from 2022.

Speaker Change: Organic sales increased 4% with acquisitions accounting for the balance of the growth.

Speaker Change: <unk> margins were 25, 9% for the full year with margins up 150 basis points versus the prior year.

Speaker Change: EBITDA for the year was $2 billion with.

Speaker Change: With EBITDA margins, a very strong 35%.

Speaker Change: And full year 2000, and 2023 earnings were $6 38 per diluted share up 12% versus the prior year.

Speaker Change: Our performance in the fourth quarter and full year highlights the strength of the AMETEK growth model.

Speaker Change: Our differentiated businesses are strategically aligned with diverse and attractive markets.

Speaker Change: While our organic growth initiatives position us for sustained long term growth.

Speaker Change: Our distributed operating structure empowers, our businesses to executing our growth strategies and quickly adapt to evolving market dynamics.

Speaker Change: This structure is a cornerstone of our success in navigating throughout different economic cycles.

David A. Zapico: The EMG core margins were up 100 bases. Now for the full year results. Overall performance was outstanding in 20, establishing annual records for essentially all key financial institutions.

Speaker Change: Furthermore, our asset light business model and strong operational execution.

Speaker Change: And exceptional cash flow generation.

Speaker Change: This robust cash flow coupled with our strong balance sheet provides AMETEK with plenty of firepower to support our growth initiatives and to deploy on acquisitions.

David A. Zapico: Overall sales for the year were $6.6 billion, up 7% from 2020. Organic sales increased 4%, with acquisitions accounting for the balance of the growth; margins were 25.9% for the full year, with margins up 150 basis points versus the prior year. Even though the full year was two billion dollars, with Evita Martins, a very strong 30.5%. Pool Year 2023 Earnings were $6.38 per diluted year, up 12% versus the prior year.

Speaking of acquisitions.

Speaker Change: We are very active in 2023.

Speaker Change: Successfully deploying approximately $2 5 billion on five acquisitions, including the acquisitions of amplify research and paradigm medical in the fourth quarter.

Speaker Change: I am very excited to welcome all acquire companies to AMETEK.

Speaker Change: Each acquisition is an excellent strategic fit with AMETEK as they help expand our product and technology offerings and highly attractive growth markets and applications.

Including renewable energy development in the modernization and the power grid.

Speaker Change: In addition, our latest acquisition <unk>.

David A. Zapico: Our performance in the fourth quarter and four years highlights the strength of Ametek growth. Our differentiated businesses are strategically aligned with diverse and attractive markets, While our organic growth initiatives position us for sustained long-term success and navigating throughout different economic conditions. Furthermore, our asset-laid business model and strong operational results result in exceptional cash flow generation. This robust cash flow, coupled with our strong balance, provides Ametek with plenty of firepower to support our growth initiatives and to deploy on Aqua. Speaking of acquisitions, Thank you. Thank you.

Speaker Change: Ron Medical which we closed in the middle of December.

Speaker Change: Nicely expands our presence in the medical technology market.

Speaker Change: Paragon is a leading manufacturer specializing in highly engineered medical components and single use consumable surgical instruments.

Speaker Change: Their product portfolio spans crucible medical applications and a reputation for quality and precision has earned the trust of a diverse customer base, including top tier medical device Oems.

Speaker Change: Looking ahead to 2020 for our acquisition pipeline remains robust.

Speaker Change: As noted we have a strong and flexible balance sheet and anticipate remaining active deploying capital in acquisitions.

Speaker Change: In addition to our acquisition strategy AMETEK remains committed to making strategic investments in organic growth initiatives.

David A. Zapico: We were very active in 2020. Successfully deploying approximately 2.25 billion on five acquisitions, including the acquisitions of Amplify Research and Paragon Medical in the. I'm very excited to welcome all the acquired companies to Ametek. Each acquisition is an excellent strategic fit with Ametek as they help expand our product and technology offerings and highly attractive growth markets in Apple, including Renewable Energy Development and the Modernization of the Power Plant. In addition, our latest acquisition was Paragon Medical, which we closed in the middle of December. This acquisition nicely expands our presence in the medical technology market. Paragon is a leading manufacturer specializing in highly engineered medical components.

Speaker Change: And 2023, we invested an incremental $100 million in growth initiatives and in 2024, we expect to invest another incremental $100 million.

Speaker Change: A majority of this investment will be within our research development and engineering and sales and marketing functions.

Speaker Change: In the quarter Harvey Italian index, which reflects.

Speaker Change: Sales from new products introduced in the last three years was a very healthy 29%.

Speaker Change: Through these strategic investments and acquisitions, we have seen a steady transition of ametek's portfolio with an expanded presence in secular growth markets and reduced exposure to more cyclical markets.

Speaker Change: This strategic evolution of the portfolio.

Speaker Change: And bind with our proven operational acumen positions AMETEK well for continued strong and sustained growth.

Speaker Change: Now shifting to our outlook for the year ahead.

David A. Zapico: Their product portfolio spans crucial medical applications. Reputation for Quality and Precision. This earned them the trust of a diverse customer base, including top-tier medical devices. Looking ahead to 2024, our acquisition pipeline remains robust. As noted, we have a strong and flexible balance sheet and anticipate remaining active in deploying capital and acquisitions. In addition to our acquisition strategy, Ametek remains committed to making strategic investments in organic growth.

Speaker Change: For 2024, we expect overall sales to be up low double digits on a percentage basis.

Speaker Change: With low to mid single digit organic sales growth.

Speaker Change: Diluted earnings per share for the year are expected to be in the range of $6 to $6 85 up 5% to 7% compared to last year's results.

Speaker Change: For the first quarter, we anticipate overall sales to be up low double digits with adjusted earnings of $1 56 to $1 60 per share up 5% to 7% versus the prior year.

In summary, ametek's performance in the fourth quarter and throughout the full year of 2023 was outstanding.

David A. Zapico: In 2023, we invested an incremental $100 million in growth initiatives, and in 2024, we expect to invest another incremental $100 million. The majority of this investment will be in our research, development, and engineering, and sales and marketing. In the corner, our Vitality Index, which reflects sales from new products introduced in the last three years, was a very healthy 29%.

Speaker Change: Our businesses delivered exceptional results with all elements of the AMETEK growth model, playing a key role in our success.

Speaker Change: I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter and then we'd be glad to take your questions Bill.

William J. Burke: Thank you Dave I appreciate your kind words at the top of the call is Dave noted I've made the decision to retire after 36 years with AMETEK nearly eight of which I had the privilege of serving as Chief Financial Officer.

William J. Burke: I want to express my deepest gratitude and thanks to the entire AMETEK family for the incredible journey. We've shared it has been an honor to contribute to the tremendous growth and success of AMETEK.

David A. Zapico: Through these strategic investments and acquisitions, we have seen a steady transition of Ametek's portfolio. This strategic evolution of the portfolio, combined with our proven operational accuracy, Well for Continued Strong Assembly. Now shifting to our outlook for the year ahead. For 2024, we expect overall sales to be up low double digits on a percentage basis, with low to mid-single digit organic growth. Diluted earnings per share for the year are expected to be in the range of $6.00 to $6.85, up 5-7% compared to last year.

William J. Burke: To Dave and the board of directors. Thank you for your confidence and your support and leadership has been invaluable.

William J. Burke: And to my colleagues for their dedication has been the driving force behind our share of success and I am truly thankful for the privilege of working closely with you.

Speaker Change: I look forward to remaining with the company as a senior advisor until April 2025 to ensure a seamless transition I'm confident in <unk> leadership, and then the very strong and talented financial organization at AMETEK.

Speaker Change: Before I get into the results for the fourth quarter dollar so I'd like to say a few words. Thank.

Speaker Change: Thank you Bill and good morning, everyone I look forward to meeting and working with all of you in the near future.

Speaker Change: I too want to express my thanks to Dave to build to the board of directors and the leadership team for their trust and confidence in me. It is an honor to serve as a ametek's EVP and CFO and I'm very excited to lead Ametek's incredible finance organization.

Speaker Change: And to a partner with Dave as we continued to deliver sustained and strong growth across our portfolio of businesses.

David A. Zapico: For the first quarter, we anticipate overall sales to be in the low double digits with adjusted earnings of $1.56 to $1.60 per share, up 5-7% versus the prior year. In summary, Ametek's performance in the fourth quarter and throughout the full year of 2023 will be outstanding. Our businesses delivered exceptional results, with all elements of the Ametek growth model playing a key role in our success. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter, and then we will go to the agitator. Phelps.

Speaker Change: I also want to express my thanks to Bill for his guidance and Mentorship over the years and his commitment to a smooth transition.

Speaker Change: That I will turn it back to you Bill.

William J. Burke: Thank you Donald now onto the fourth quarter results as Dave highlighted AMETEK had an impressive finish to 2023 with outstanding operating performance leading to better than expected results in the fourth quarter.

William J. Burke: Let me provide some additional financial highlights for the fourth quarter and the full year as well as some additional guidance for 2024.

William J. Burke: Fourth quarter General and administrative expenses were $26 $3 million up $3 million from the prior year, but unchanged at one 5% of sales.

William J. Burke: For the full year general and administrative expenses were up $7 million as a percentage of sales were one 5% in line with 2022 levels.

William J. Burke: For 2020 for general and administrative expenses are expected to be approximately one 4% of sales.

William J. Burke: Fourth quarter other income and expense was additional expense of $7 million compared to the fourth quarter of 2022, driven by higher due diligence costs and lower pension income.

William Joseph Burke: Thank you, Dave. I appreciate your kind words at the beginning of the call. As Dave noted, I've made the decision to retire after 36 years with Ametek, nearly eight of which I had the privilege of serving. I want to express my deepest gratitude and thanks to the entire Ametek family for the incredible journey. It's been an honor to contribute to the tremendous growth and success. Dave and the Board of Directors. Thank you for your confidence.

William J. Burke: 2024, we expect other income and expense to be largely in line with 2023 levels.

The effective tax rate in the quarter was 17, 8% down from 18, 9% in the fourth quarter of 2023 through the statute expirations.

William J. Burke: For 2024, we anticipate our effective tax rate to be between 19% and 20%.

William J. Burke: And as we've stated in the past actual quarterly tax rates can differ dramatically either positively or negatively from this full year estimated rate.

William Joseph Burke: Support and leadership have been invaluable. To my colleagues, your dedication has been the driving force behind our shared..., and I am truly thankful for the privilege of working closely with them. I look forward to remaining with the company as a senior advisor until April 2025 to ensure a seamless transition. I'm confident in Dalip's leadership and in the very strong and talented financial organization.

William J. Burke: Capital expenditures were $60 million in the fourth quarter and $136 million for the full year.

William J. Burke: Capital expenditures in 2024 are expected to be approximately $160 million or about 2% of sales.

William J. Burke: Depreciation and amortization expense in the quarter was $92 million and for the full year was $338 million.

William J. Burke: 2024, we expect depreciation and amortization to be approximately $400 million.

William J. Burke: Including after tax acquisition related intangible amortization of approximately $190 million or <unk> 82 per diluted share.

Dalip M. Puri: Before I get into the results for the fourth quarter, Dalip would like to... Thank you, Bill. And good morning, everyone.

William J. Burke: For the quarter operating working capital was 17, 2% of sales and cash flow in the fourth quarter was superb with operating cash flow a record at $541 million.

Dalip M. Puri: I look forward to meeting and working with all of you. I, too, want to express my thanks to Dave Tebill, to the Board of Directors and the... Trotter, it is an honor. Ametek.

William J. Burke: Up 40% versus the fourth quarter of 2022.

William J. Burke: Free cash flow was also a record in the quarter up 47% to $481 million with free cash flow conversion of 140% for the quarter.

Dalip M. Puri: I'm very excited. Deliver it. I also want to express my thanks to Bill for his guidance and mentorship. Thank you, Dalip.

William J. Burke: Free cash flow for 2023 was $1 6 billion up 58% versus the prior year and 122% of net income.

William Joseph Burke: Now on to the fourth quarter results. As Dave highlighted, Ametek had an impressive finish to 2020, with Outstanding Operating Performance and better-than-expected results. Let me provide some additional financial highlights for the fourth quarter and the full year, as well as some additional guidance. Fourth quarter general and administrative expenses were $26.3 million, up $3 million from the prior year, but unchanged at $1.5 million.

William J. Burke: For 2024, we expect free cash flow conversion to be between 110% and 120% of net income.

William J. Burke: Total debt at year end was 331 billion up from $239 billion at the end of 2022 due largely to the Paragon acquisition in December.

William J. Burke: Offsetting this debt is cash and cash equivalents of $410 million.

William J. Burke: As Dave noted during the fourth quarter, we deployed approximately $2 billion on the acquisitions of amplifier research and Paragon medical.

William J. Burke: Our gross leverage was one five times at the end of 2023 up from one two times at the end of 2022.

William Joseph Burke: For the full year, general administrative expenses were up $7 million, and the percentage of sales was $1.5 million, in line with 20. 2024 General Administrative Expenses are expected to be approximately $1.4 billion. Fourth quarter other income and expense was an additional expense of $7 million compared to the fourth quarter of 2020, driven by higher due diligence costs and lower pension. In 2024, we expect other income and expense to be largely in line with 2023. The effective tax rate in the quarter was 17.8%, down from 18.9% in the fourth quarter of 2020 due to statute.

William J. Burke: Despite deploying approximately $2 to $5 billion on acquisitions during the year.

William J. Burke: We remain very well positioned to deploy additional capital and have enough and have approximately $1 5 billion.

William J. Burke: Cash and existing credit facilities to support our growth initiatives.

William J. Burke: In summary, our businesses performed exceptionally well in the fourth quarter and throughout all of 2023, delivering strong growth in our high quality of earnings.

William J. Burke: We are well positioned for continued growth and success in 2024.

William J. Burke: Thank you once again and now I'll turn it back to Kevin.

Kevin C. Coleman: Great. Thank you Bill Tani can we please open the line for questions.

Kevin C. Coleman: Certainly as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby will be compile the Q&A roster.

William Joseph Burke: In 2024, we anticipate our effective tax rate. And as we've stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from the Spooley. Capital expenditures were $60 million in the fourth quarter and $136 million.

Kevin C. Coleman: And our first question will come from Matt Summerville of D. A Davidson your line is open.

Matt J. Summerville: Thanks, Good morning, and congrats Bill.

Matt J. Summerville: Thank you I wanted to first ask about the EMG business and the inventory normalization you are seeing there using a baseball analogy what inning are we in with respect to that normalization and when do you start to see inflection in organic orders within.

William Joseph Burke: Capital expenditures in 2024 are expected to be approximately $160 million or about. Appreciation and amortization expense in the quarter was $92 million, and full year was $338,000. In 2024, we expect appreciation and amortization to be approximately $400 million. Including after-tax, acquisition-related, intangible amortization, approximately $190 million or $0.82 per diluted share. The quarter operating working capital was $17 million.

Speaker Change: <unk>. So if you can first maybe start by elaborating there and then I have a follow up. Thank you sure sure Matt maybe the first thing I wanted to do is.

Speaker Change: And the outlook for 2024.

Speaker Change: Kevin told me that May have not come through clearly the diluted EPS for the year is $6 70.

Speaker Change: To $6 85.

Speaker Change: So that's just.

Speaker Change: Maybe a correction of what I had said before if it didn't come through clearly and I'll get to your question Matt.

William Joseph Burke: [inaudible] Cash flow in the fourth quarter was superb, with operating cash flow at a record at $541 million, up 40% versus the fourth quarter of 2020. Free cash flow was also a record in the quarter, up 47% to $481 million. Free Cash Flow Conversion of $140,000. Free cash flow for 2023 was $1.6 billion, up 58% versus the prior year and 122% in. In 2024, we expect free cash flow conversion of between 110% and 120%. Total debt at year-end was $3.31 billion, up from $239 billion at the end of 2020, due largely to the Paragon acquisition. All setting this debt is cash and cash equivalents of $410 million.

Speaker Change: We think that the.

Because we talked about the OEM parts of our business and and we think that OEM destocking largely played out as we expected during Q4.

Speaker Change: We expect it to continue through the first half of the year.

Speaker Change: We're going to have some difficult comps in Q1.

Speaker Change: Then I will finish in Q2, and then we're going we're pretty good for the second half of the year. The way we're forecasting so again, we're working off our backlog right now so.

Speaker Change: While not an immediate impact on revenue, but that Destocking will continue for the first half of the year, probably a bit more in Q1 and Q2, but we think will be good for the second half of the year and it's already starting to happen some customers are.

Speaker Change: <unk> corrected their inventory levels, but it will continue through the first half of the year.

Speaker Change: Got it and then can you review what you experienced in terms of price capture in 'twenty three over 22, and what we should be thinking about in 'twenty, four and ultimately what that price cost relationship looks like this year. Thank you, yes sure.

William Joseph Burke: As Dave noted, during the fourth quarter, we deployed approximately $2 billion on the acquisitions of amplifier..., and Paragon Medical. Our gross leverage was 1.5 times at the end of 2023, up from 1.2 times at the end of 2022, despite deploying approximately $2.25 billion on acquisitions. We remain very well positioned to employ additional capital and have approximately $1.5 billion in cash and existing credit facilities.

Speaker Change: Sure.

Speaker Change: In the fourth quarter price was about.

Speaker Change: 5% of sales.

Speaker Change: And total inflation was about.

Speaker Change: Three 5%.

Speaker Change: And.

Speaker Change: When we transition to 2024, we really see inflation decreasing so the.

Speaker Change: The time, where we had very significant price increases to be.

Speaker Change: At or above inflation as is coming to an end and we think.

Speaker Change: Pricing in 2024.

Speaker Change: About 3% across the entire portfolio and we think.

Speaker Change: Inflation will be at about two 5%.

Speaker Change: And so we maintain a positive spread.

Speaker Change: We have the product differentiation, we're creating value you'll see our new products are selling very well, but we budgeted.

William Joseph Burke: In summary, our business has performed exceptionally well in the fourth quarter and throughout all of 2020, delivering strong growth and high quality. We are well-positioned for continued growth and success in 2020. Thank you once again, and now I'll turn it back.

Speaker Change: I'd say conservatively at 3% price capture during 2024.

Speaker Change: Great. Thanks, David Thank you Matt.

Speaker Change: And one moment for our next question.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: And our next question will be coming from Deane Dray of RBC capital markets. Your line is open.

Deane Dray: Thank you and good morning, everyone.

Deane Dray: <unk>.

Deane Dray: Hey, just like to add my congrats to bill and dialogue and Bill that is just.

Operator: Great, thank you, Bill. Connie, can we please open the line for questions? Yes. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by. We'll be compiling your questions like you in a rough, and our first question will come from Matt Summerville of D.A. Davidson.

Deane Dray: The epitome of a distinguished career, so congratulations and youll be missed I appreciate that thank you very much.

Deane Dray: Hey, Dave maybe you can take us through the key end markets.

And what Youre seeing in terms of demand orders and then what is Paragon deal in terms of increasing your <unk>.

David A. Zapico: Thanks, morning, and congrats, Bill. I wanted to first ask about the EMG business and the inventory normalization you're seeing there. Using a baseball analogy, what inning are we in with respect to that normalization? And when will you start to see inflection in organic orders within EMG?

Dave: Percent of medical is that is that in the range that you're comfortable with and.

Dave: And how do you expect to grow it from there.

Dave: Yes, I'll start with that with the Paragon acquisition, our portfolio has about 21% of sales into the med Tech space.

David A. Zapico: So if you can first maybe start by elaborating on that, and then I have a follow up. Thank you. Sure, sure. Maybe the first thing I want to do is, in the outlook for 2024, Kevin told me that it may have not come through clearly, but the unlevered EPS for the year is $6.70. $6.85. So that's just maybe a correction of what I had said before. Come through clearly, and I'll get to your question, Matt.

Dave: We'd like to see that even larger so we're still looking for.

Speaker Change: For acquisition in that space, and we plan to grow nicely within that space.

Speaker Change: In fact.

Speaker Change: The fourth quarter Q4.

Speaker Change: We were up mid single digits with strong growth on our EMC and Rolland businesses before we got to.

Speaker Change: Paragon integrated so we're happy with the space, we want to continue to grow it and we're still looking for deals in this space.

Speaker Change: Now I'll go around the.

Speaker Change: The warrant per Se I don't look at our various sub segments and end markets and I'll start with our process businesses, which are the largest.

Speaker Change: Our sub segments in <unk>.

Speaker Change: Organic sales for process were up low single digits in the quarter.

Speaker Change: Completing a strong year that saw broad based growth across the segment.

David A. Zapico: I mean, we talked about the OEM parts of our business, and we think that OEM destocking largely played out as we expected during Q4. We expect it to continue through the first half of the year. We're going to have some difficult comps in Q1, then it will finish in Q2, and then we're pretty good for the second half of the year, the way we're forecasting. So again, we're working off our backlog right now, so it's not an immediate impact on revenue, but that destock will continue for the first half of the year. Probably a bit more in Q1 than Q2, but we think we'll be good for the second half of the year. And it's already starting to happen. I got it.

Speaker Change: Growth was strongest.

Speaker Change: Within our Kamika and <unk> businesses, given their strong technology position with attractive.

Speaker Change: Research optics and medical applications.

Speaker Change: We look to 2024.

Speaker Change: We expect organic sales for the process businesses to be up low single digits for the full year. So it's a.

Speaker Change: Low single digits in 2023 low single digits in 2024.

Speaker Change: Aerospace and defense.

Speaker Change: Our strong fourth quarter to complete an excellent year growth was broad based across all segments.

Speaker Change: Organic growth was up high single digits in the quarter.

Speaker Change: The growth was balanced across our commercial and aerospace businesses.

Speaker Change: And for 2024, we expect the organic sales of the aerospace and defense businesses.

Speaker Change: So again be up high single digits.

Speaker Change: With similar growth across commercial aerospace and defense.

David A. Zapico: And then can you review what you experienced in terms of price capture in 23 over 22? And what we should be thinking about in 24? And ultimately, what that price cost relationship looks like this year? Thank you. Fisher, http://www.youtube.com.uk In the fourth quarter, price was about 5% of sales.

Speaker Change: I'll move to our power businesses.

Speaker Change: They were up low double digits in the fourth quarter with contributions from the acquisitions of Rts.

Speaker Change: <unk> an amplifier research.

Speaker Change: Offset by a low single digit organic sales growth.

Speaker Change: Our power businesses have been very active on the acquisition front with three highly strategic acquisitions over.

Speaker Change: Over the past 15 months.

Speaker Change: Acquisitions broadened our exposure to attractive applications tied to renewable energy.

David A. Zapico: Total inflation was about... 3 12. When we transition to 2024, we really see inflation decreasing. You know, the time where we had, you know, very significant prices, at or above inflation, coming to an end, and we think pricing in 2024 will be about 3% across the entire portfolio, and we think inflation will be at about two and a half. And so we maintain a positive spread. We have the product differentiation.

Speaker Change: Modernization of the power grid.

Speaker Change: For 2024, we expect organic sales for power and industrial businesses to be up.

Speaker Change: Low to mid single digits.

Speaker Change: There is some project business is more impacted by certain projects.

Speaker Change: Feel pretty good that we're going to be able to to grow low to mid single digits in 2020 for some positive project evolutions.

Speaker Change: And then finally, our automation and engineered solutions.

Speaker Change: The segment was up mid single digits in the quarter with contributions from the acquisitions of Paragon medical and Bison engineering.

Speaker Change: Being offset by a mid single digit decrease in organic sales.

David A. Zapico: We're creating value. You see, our new products are selling very well. But we budgeted for.

Speaker Change: Our results were in line with expectations.

David A. Zapico: I would say conservatively at 3% price capture during. Great. Thanks, David. Thank you.

Speaker Change: The impact of the normalization of inventory levels that Matt asked about cross our OEM customer base and they really continued in the quarter as expected and we expect them to continue into 2024.

Deane Michael Dray: And one moment for our next question. And our next question will be coming from Deane Dray of RBC Capital Markets. Your line is open. Thank you. Good morning, everyone. Hey, just like to add my congratulations to Bill and Dalip. And Bill, that is just the epitome of a distinguished career. So congratulations, and you'll be missed.

Speaker Change: In 2024, we expect the automation and engineered solutions business to be up.

Speaker Change: Low single digits.

Speaker Change: With stronger growth in the back half of the year.

Speaker Change: As our.

Speaker Change: Customer base normalized inventory levels.

Speaker Change: And then in the first half so the second half for that sub segment will be stronger growth in the first half.

Speaker Change: That's around the warrant gain.

Speaker Change: Thats Fabulous I appreciate it and just its remarkable how.

Speaker Change: We're seeing that momentum from 'twenty three carry into your expectations for 'twenty four.

William Joseph Burke: So congratulations, and you'll be missed. I appreciate that, Deane. Thank you very much.

Speaker Change: And just one quick follow up on the.

David A. Zapico: Dave, maybe you can take us through the key end markets and what you're seeing in terms of demand, orders, and then what does Paragon do in terms of increasing your percent of medical? Is that in the range that you're comfortable with, and how do you expect to grow from there? Yeah, I'll start with that pair with the Paragon acquisition.

Speaker Change: $100 million in growth investments.

Speaker Change: How does that stack up in terms of the product categories is there anything is it skewed.

Speaker Change: One way or the other or is it evenly distributed and where does new product vitality go from here you are 29%.

Speaker Change: This quarter your 26 last quarter is there a target in mind.

David A. Zapico: Our portfolio has about 21% of sales into the medtech space, and Yeah, we'd like to see that even larger. So we're still looking for acquisitions in that space, and we plan to grow nicely within that space. 4th quarter Q4.

Speaker Change: I think anywhere between 20 and 30% is a good number so that's what we've always said when we started tracking this it was back in the 15% range. So we certainly have made tremendous.

Speaker Change: Progress with our new product development efforts.

David A. Zapico: We were up mid-single digits with strong growth in our EMC and Rollin businesses before we got... Paragon Integrated. So we're happy with the space. We want to continue to grow it. And we're still looking for deals in the space. Now I'll go around the...

Speaker Change: In terms of where the 100 million come from it's really bottom up so our business units put plans together and if they want to go beyond what they invested in the prior year.

Speaker Change: Those plans and their budgeting and.

Speaker Change: It is spread across the business. It goes out our best growth opportunities and it's going to be about $100 million. This year.

David A. Zapico: The Horn, per se, and I'll look at our various sub-segments and end markets, and I'll start with our process. The largest component of our subsegment. Organic sales for process were up low single digits in the quarter.

Speaker Change: Thank you thank you Deane.

Speaker Change: And one moment our next question.

Speaker Change: Okay.

Speaker Change: Our next question will be coming from Allison <unk> of Wells Fargo. Your line is open.

Allison: Hi, good morning, Congrats and look forward to working with you down.

David A. Zapico: Completing a strong year that saw broad-based growth. Growth was strongest, and then our Kameka and Zygo businesses, given their strong technology.

Speaker Change: Dean's R&D question.

Allison: The $100 million incremental from the 23 that you did $100 million.

Allison: You pushed into the Med Tech space.

Allison: Does that number need to go up higher I mean, just trying to think through the investments needed to continue that trajectory.

Allison: We're currently investing.

David A. Zapico: Research, Optics, and Medical. Looking to 2024, we expect organic sales to the process businesses to be below single digits for the full year. Low single digits in 2023, low single digits. Aerospace and Defense. A strong fourth quarter to complete an excellent year. Growth was broad-based across all segments. Organic growth was up high single digits in the quarter.

Allison: Just under five five.

Allison: Sales on research development, and engineering and as we buy higher technology businesses that that number will increase modestly.

Allison: I think this year, we expect to spend $400 million on R&D, which is up a good healthy double digit amount on the total R&D spend so.

Allison: Our R&D is a key part of our business, we have a lot of industrial technology products that we wanted to maintain leadership positions and it allows us to get the pricing that we can get because we're providing unique value to our customers I don't think youre going to see a big jump anywhere but it's.

David A. Zapico: The growth was balanced across our commercial and aerospace businesses, and for 2024, we expect the organic sales of the aerospace and defense business to again be up high single digits, similar growth across commercial aerospace. I move to our power businesses. They were up low double digits in the fourth quarter with contributions from the acquisitions of RTDS, UEI, and Amplifier Research being offset by low single-digit organic growth.

Allison: It's happening as we naturally evolve our portfolio to higher technology products.

Speaker Change: Great and just any color on M&A, you, obviously had a record year last year, it's still in a good position from a leverage point.

Speaker Change: What are you seeing or what are we expecting I know you mentioned medical Med Tech is sort of that vertical you wanted to go into where are you seeing the greatest opportunities any difference in terms of size that we should be thinking through just any thoughts there.

David A. Zapico: Our power businesses have been very active on the acquisition front with three highly strategic acquisitions over the past 15 months. These acquisitions broaden our exposure to attractive applications tied to renewable energy, such as modernization of the power grid.

Speaker Change: I think we're looking at.

Speaker Change: The more traditional size deals and we're also we.

Speaker Change: Have a few of the larger sized deals in our pipeline and I would.

Speaker Change: Characterize paragon at on the outer edge of the law.

Speaker Change: Larger size.

David A. Zapico: In 2024, we expect organic sales for the power and industrial businesses to be at low to mid single digits, so there are some projects that business is more impacted by certain projects, and we feel pretty good that we're going to be able to grow it at low to mid-single digits. And then finally, our automation and engineering solutions. The segment was up mid-single digits in the quarter with contributions from the acquisitions of Paragon Medical and Bison Engineering, being offset by a mid-single-digit decrease in organic... Results were in line with expectations.

Speaker Change: We're very happy with the five deals we got done we deployed $2 to $5 billion.

Speaker Change: We did it across our business in different parts of it.

Speaker Change: They were high quality additions they expanded our presence in attractive growth markets.

Speaker Change: We have a very clear path to add value to these companies.

Speaker Change: Each business has a strong technology position.

Speaker Change: The deals will meet our traditional financial harder hurdles remember that's a 10% return on invested capital in year three.

In terms of our pipeline our pipeline remains very strong.

Speaker Change: And we are actively looking at a number of high quality deals across a broad set of markets.

Speaker Change: As always.

Speaker Change: We will remain disciplined when we do this.

Speaker Change: And I really think that we have the opportunity to differentiate our performance with the.

David A. Zapico: The Impact of the Normalization of Inventory Levels Matt asked about across our OEM customer base, and they really continued in the quarter as expected, and we expect them to continue in 2024. We expect the automation and engineering solutions business to be up, low single digits.

Speaker Change: The M&A element of our growth strategy combined with our balance sheet and cash flow positions.

Speaker Change: We excel when the markets are slowing and choppy and because we had great opex and great M&A and and we see tremendous values in the market that we're tracking the way the markets evolving it's probably going to be.

Speaker Change: Sure.

234, second quarter third quarter fourth quarter with them.

Speaker Change: The bulk of the opportunities are so but really this year the pipeline looks good and we're optimistic.

David A. Zapico: Stronger growth in the back half of the year because the customer base normalizes inventory levels, and then in the first half. So the second half for that subsegment will be stronger growth. That's a round of applause. That's fabulous.

Speaker Change: Great. Thank you thank.

Thank you.

Speaker Change: And one moment for our next question.

Speaker Change: Our next question will be coming from Jeffrey Sprague of vertical research. Your line is open Jaffray.

David A. Zapico: I appreciate it. And it's remarkable how we're seeing that momentum from 23 carry into your expectations for 24. And just one quick follow-up on the $100 million in growth investments. How does that stack up in terms of the product categories? Is there anything, is it skewed in one way or the other? Is it evenly distributed?

Jeffrey Todd Sprague: Hi, Thank you good morning, everyone.

Jeffrey Todd Sprague: Hey, good morning.

Hey, just just on deals Dave.

Jeffrey Todd Sprague: On Paragon <unk>.

Jeffrey Todd Sprague: Youre expecting most or the accretion to really kick in in 2025, not so much 24, but can you just give us a little color on what what is the EPS impact embedded in your guide for Paragon in 'twenty four and the other deals also how well sure.

David A. Zapico: [inaudible] When we started tracking this, it was back in the 15% range, so we certainly have made tremendous progress with our new product development. In terms of where the $100 million comes from, it's really bottom-up.

Jeffrey Todd Sprague:

Jeffrey Todd Sprague: Related to Paragon specifically.

Jeffrey Todd Sprague: During the first half of the year, we're going to be doing some.

David A. Zapico: So our business units put together plans, and if they want to go beyond what they invested in the prior year, they'll pitch those plans in their budgeting. It's spread across the business, it goes to our best growth opportunities, to be about $100 million. Thank you.

Jeffrey Todd Sprague: I expect some muted growth for a couple of reasons. One there is a an inventory correction going on in the med Tech market.

Jeffrey Todd Sprague: And we're going to look at the portfolio and potentially <unk>.

Jeffrey Todd Sprague: <unk>, some less product less profitable product area. So there's a whole process that we're going to go through and during this first half and the.

Jeffrey Todd Sprague: But all of that said, we're expecting the second half to be very strong because they've got some new product introductions that are very exciting.

Allison Ann Marie Poliniak: Our next question will be coming from Allison Poliniak of Wells Fargo. Your line is open. Hi, good morning.

Jeffrey Todd Sprague: But we continue to expect within the in our guidance is 8% to 10% accretion in 2024.

And this is backend loaded as we layer in the integration costs.

David A. Zapico: Congratulations, Bill, and look forward to working with you, Dal. Just following on Deane's R&D question, you know, the $100 million is incremental from the $23 million that you did. As you push into this med tech space, does that number need to go higher? I mean, I'm just trying to think through the investment.

Speaker Change: Does that clarify.

Speaker Change: Eight to 10 sites.

Speaker Change: Thanks, Jeff.

Speaker Change: And then just drill in a little bit further into some of the end markets. Thanks for kind of going through and the around the world but.

Speaker Change: Kind of a semi related markets in particular, what you've kind of been the bane of a lot of People's existence here recently kind of looking for the bottom and the turn like what are you seeing in those markets.

David A. Zapico: Yeah, we're currently investing just under 5.5% of sales in research, development, and engineering. And as we buy higher technology businesses, that number will increase moderately. I think this year we expect to spend $400 million on RD&E, which is up a good, healthy double-digit amount on the total R&D spend. So our R&D is a key part of our business. We have a lot of industrial technology products that we want to maintain leadership positions in. It allows us to get the prices that we can get because we're providing unique value to our customers.

Speaker Change: What did you see in the quarter, specifically and how does 2024 look.

Speaker Change: We are a little different dynamic in semiconductor and I talked about it on a couple of.

Speaker Change: Past calls because we have the.

Speaker Change: The memory downturn that a lot of people were seeing we saw that too but at the same time, we have some exceptional.

Speaker Change: Exceptional technology and our <unk> business.

Speaker Change: Next generation technology.

Speaker Change: Really is in demand and just about all Fabs and we also have a.

Speaker Change: And our <unk> business, we're one of the few companies that can manufacture.

<unk> extreme ultraviolet optics and semiconductor fabrication so.

David A. Zapico: I don't think you're going to see a big jump anywhere, but it's a... is happening as we naturally evolve our portfolio to higher. In just any color on M&A, you obviously had a record year last year, still in a good position from a leveraged CMC. What are you seeing or what are we expecting? I know you mentioned MedTech is sort of the vertical you want to go into.

Speaker Change: Those are those are two growing dynamics, that's a good place to be.

Speaker Change: They were able to offset some of the weakness we had in the.

Speaker Change: I'll call it the core memory part of the portfolio.

Speaker Change: And for 2023, we ended up 10%. So it was a growing market for us.

Speaker Change: And for 2024, we expect to additionally, grow another plus mid single digits. So.

Speaker Change: Largely because of the technology.

David A. Zapico: Where are you seeing the greatest opportunities? [inaudible] You know, I think we're looking at the more traditional size deals, and we're also... We have a few of the larger size deals in our pipeline, and I would characterize Paragon on the outer edges of the larger side.

Speaker Change: We're able to grow in 'twenty, three and we think will continue to grow in 'twenty four.

Speaker Change: Great. Thank you for the color. Thank you Jeff.

Speaker Change: And one moment for our next question.

Speaker Change: Our next question will come from Nigel Coe of Wolfe Research Nigel Your line is open.

Nigel Coe: Thanks, Good morning, everyone then bill congratulations.

Nigel Coe: On your retirement.

David A. Zapico: You know, we're very happy with the five deals that we got done. We deployed $2.25 billion, and parts of it. They were high-quality additions; they expanded our presence in attractive growth markets. We have a very clear path to add value to these companies.

Nigel Coe: So just a few bottom line for me between for the.

Nigel Coe: The guidance for revenue growth of low double digits.

Nigel Coe: The high single digits coming in from M&A, obviously, mainly Paragon is that is that the right kind of ballpark of about 9% coming from M&A, which implies sort of two 3% organic is that the right level youre in the ballpark Nigel.

David A. Zapico: The business has a strong technology position. The deals will meet our traditional financial hurdles; remember that's 10%. Turner invested capital in Year 3.

David A. Zapico: You know, in terms of the pipeline, our pipeline remains very strong, and we are actively looking at a number of high-quality deals across a broad set of markets. As always, we'll remain disciplined when we do this, and I really think that we have the opportunity to differentiate our performance with the M&A element of our growth strategy combined with our balance sheet. We excel when the markets are slowing or choppy because we have great OPEX and great M&A. We see tremendous values in the market that we're tracking, the way the market's evolving, it's probably going to be a... 2, 3, 4, 2nd quarter, 3rd quarter, 4th quarter, where the... The bulk of the opportunities are, but really this year, the pipeline looks good, and we're optimistic. Great, thank you.

Nigel Coe: Okay great.

That's helpful. And then just anything to call out so on incremental margins across both.

Nigel Coe: Both segments.

Nigel Coe: But coming off some pretty pretty tough comps in AIG. So just curious.

Nigel Coe: Think about maybe overall margins, but more importantly core incremental margins.

Speaker Change: Are you talking about for 2024 or 2023.

Speaker Change: Okay cool.

Speaker Change: For yes.

Speaker Change: Yes, yes, yes.

Speaker Change: A fantastic margin here.

Speaker Change: 2023, and the margins were up core margins were up 200 basis points in.

Fourth quarter reported margins are up 120 basis points.

Speaker Change: AIG had a great quarter EMG.

Speaker Change: Dilutive because of acquisitions and when you Peel away what was going on there actually up 100 basis point, so really good margins really good incrementals in <unk> and <unk>.

Jeffrey Todd Sprague: In one moment for our next question. Our next question will be coming from Jeffrey Sprague of Vertical Research. Your line is open, Jeffrey. I thank you. Good morning, everyone.

Speaker Change: For 2024.

Speaker Change: They're going to moderate a bit where theyre going to continue to grow them, but theyre kind of moderate a bit and.

David A. Zapico: Hey, good morning. Hey, Dave, just on deals, Dave, I think on Paragon, you're expecting most, or, you know, the accretion to really kick in in 2025, not so much in 24. But could you give us a little color on what you know, what is the EPS impact embedded in your guide for Paragon and 24 and the other deals also? Oh, well, yes, related to Paragon specifically.

2024, we believe that core margins.

Speaker Change: We're going to be up 30 basis points.

Speaker Change: We think that the core incrementals are going to be up about 30 basis points.

Speaker Change: And.

Speaker Change: We have built on our model cost reductions and pricing and things like that but the whole thing thats to the core.

Speaker Change: Margins being up 30 in the core Incrementals.

Speaker Change: 30 basis points, when you look at as reported margins for the year.

Speaker Change: Those will be down probably about 50 basis points due to acquisition dilution. So that's the whole story okay.

David A. Zapico: During the first half of the year, we're going to be doing some, expect some muted growth for a couple of reasons. One, there is an inventory correction going on in the Metech market. And we're going to look at the portfolio and, potentially. [inaudible] But all that said, we're expecting the second half to be very strong because they have some new product introductions that are very exciting. But we continue to expect within the NR guidelines 8 to 10% accretion in 2024, and it is back and loaded as we learn about integration.

Speaker Change: That's really helpful. Thanks, Thanks, David and then just quickly on geographies, if you've gone through the end markets.

But just wondering if there's anything to call out in 'twenty four geographically.

David: Yeah, I'll do a summary of Q4 geographically so you know where we stand in.

Speaker Change: We had growth in the quarter led by the U S and Asia.

Speaker Change: So the U S has been strong all along.

Speaker Change: Just picking up a bit.

Speaker Change: The U S was up mid single digits.

Speaker Change: With notable strength in our materials analysis division and aerospace and defense.

Speaker Change: Europe was down high single digits, driven in part by our automation business.

Speaker Change: And Asia was up about a little under 10% about 9% with strength in our materials analysis Division and our ultra precision technology Division.

David A. Zapico: And then just drilling a little bit further into some of the end markets, thanks for kind of going around the world, but, you know, kind of the semi-related markets in particular, which have kind of been the bane of a lot of people's existence here recently, kind of looking for the bottom and the turn, like, what are you seeing in those markets? You know, what do you see in the quarter specifically, and how does 2024 look? All right, we have a little different dynamic in semiconductors, and I talked about it on a couple of past calls because we have the, you know, the memory downturn that a lot of people are seeing. We saw that, too.

Speaker Change: We have dynamic there was a little different than what's going on in the.

Speaker Change: General.

Speaker Change: Marketplace, our China sales were up 22%.

Speaker Change: In Q4.

Speaker Change: Up about 14, 15% in the year of 22% in Q4 strong growth in our materials analysis division in <unk>.

Speaker Change: And when we look when we look into <unk>.

Speaker Change: 2024.

Speaker Change: We think we'll grow in Asia, but we think China is going to moderate to more of a flattish market.

Speaker Change: Because there was some one off project businesses that we benefited from so it's still going to be good for us, but we are seeing the broader impacts on the economy, and we think it'll be flattish on an orders basis.

David A. Zapico: But at the same time, we have some... We have exceptional technology in our Cameca business. It's a next-generation technology that's really in demand in just about all fabs. And we also have and our ZYGO business. We're one of the few companies that can manufacture E.U.V. Extreme Ultraviolet Optics and Semiconductors.

Speaker Change: In 2024.

Speaker Change: In China, and we will grow in Asia.

Speaker Change: Great. Thank you very much thank you Nigel.

Speaker Change: And one moment our next question.

Speaker Change: Yes.

Speaker Change: Our next question will be coming from Scott Graham of Seaport Research Partners Scott Hi.

Hi, good morning.

Speaker Change: Bill.

Scott Graham: Congratulations on a great run its been in complete pleasure working with you.

Scott Graham: I Hope you remain happy invest your families. Thank you. Thank you very much Scott I appreciate it.

Scott Graham: I was hoping Dave you could go through the orders a bit for the quarter.

David A. Zapico: So. You know, those are two growing dynamics. It's a good place to be.

Dave: Both in total and organically.

Dave: Yeah sure.

Dave: The.

Dave: Okay.

Dave: Yes.

Dave: Alright fair Yeah, Yeah, the orders in total for the quarter were up 16%.

Jeffrey Todd Sprague: They were able to offset some of the weakness we had in, I'll call it, the core memory part of the portfolio. And for 2023, we ended up 10%. So it was a growing market. And for 2024, we expect to additionally grow another plus mid-single digits. So. [inaudible] Great, thank you for the color.

No that was largely.

Dave: Driven by the Paragon acquisition because of the orders get booked as <unk>.

Dave: Backlog the first when you acquire a business so.

Dave: That 16% orders.

Dave: <unk> orders were up 3% and EMG orders were up 43%.

Dave: And again, the EMG orders were driven by Paragon.

Dave: Organically.

Dave: The orders were minus two.

Dave: And that translated into a.

Nigel Edward Coe: In one moment for our next question. Our next question will come from Nigel Coe of Wolf Research. Nigel, your line is open. Thanks. Good morning, everyone.

Dave: Book to Bill of 110.

Dave: Yeah.

Speaker Change: Thank you and would you expect that sometime in the first half perhaps the second quarter that the orders may be really kind of flatten out for you organically and then start to progress.

David A. Zapico: And Bill, congratulations on your retirement. So just a few bottom lines for me for 24. The guidance for revenue growth of low double digits. I've got high single digits coming in from M&A, obviously mainly Paragon. Is that the right kind of ballpark, about 9% coming in from M&A, which implies 2%, 3% organic? Is that the right level?

Speaker Change: For the second half.

Speaker Change: Thank <unk>.

Speaker Change: The first quarter, we have some pretty difficult comps.

Speaker Change: So I do expect.

Speaker Change: Similar trend.

Speaker Change: With orders trailing sales, but then as we get out in the.

Speaker Change: The second half of the year, maybe even the second quarter I think the orders will outpace sales yes.

Speaker Change: Yes.

Nigel Edward Coe: You're in the ballpark, Nigel. Okay, great. That's helpful.

Speaker Change: Got it. Thank you and then Mike just one other question within the guidance I guess, it's a little bit surprised that the level of organic youre expecting.

David A. Zapico: And then just anything to call out on Infernal Margins across both segments. You know, we're coming off some pretty tough comps in EIG, so just curious how we should think about maybe overall margins, but more importantly, core Infernal Margins. Are you talking about for 2024 or 2025? 2024. 2024. Yeah, I mean, we had a, you know, a fantastic margin year in 2023.

Speaker Change: In a good way.

Speaker Change: And it looks to me off of your summary that.

That is stemming from.

Mike: The aerospace and defense businesses.

Speaker Change: Would you mind.

Speaker Change: <unk> out for the total company kind of what youre expecting in sort of aerospace versus.

Speaker Change: Defense in this year and maybe tack on what the drivers are particularly in commercial.

David A. Zapico: And you know, margins were up. Core margins were up 200 basis points. For the fourth quarter, reported margins were up 120. EIG had a great quarter, EMG, it was dilutive because of acquisitions, and when you peel away what was going on, they're actually up 100 basis points, so really good margins, really good incrementals, and we think for 2024, they're going to moderate a bit, they're going to continue to grow them, but they're going to moderate a bit. In 2024, we believe that core margins are I think that the core incrementals are going to be up about 30 basis points, and we have built on our model, cost reductions in pricing, and things like that. But the whole thing that's to the core, margins being out 30 in the core incrementals. When you look at as-reported margins for the year, those will probably be down probably about 50 basis points due to acquisition. That's the whole story.

Speaker Change: Yes.

Speaker Change:

Speaker Change: The overall organic growth for the company as a low to mid single digit number.

Speaker Change: And thats going to be in both groups AIG and EMG.

And in terms of aerospace, we think we're going to.

Speaker Change: Grow about the same level that we did this year plus high single digits, and we have really good diversity in that business and the.

Speaker Change: The.

Speaker Change: The military orders.

Speaker Change: Our strong and the.

Speaker Change: Commercial OE aftermarket are strong.

Speaker Change: And the commercial OE are good too so.

Speaker Change: We think largely.

Speaker Change: Both.

Speaker Change: The <unk>.

Speaker Change: Military and total commercial markets youre going to be up high single digits in 2024.

Speaker Change: Pretty optimistic about that.

Speaker Change: That's great. Thank you. Thank you Scott.

Speaker Change: And one moment our next question.

Speaker Change: Okay.

Speaker Change: Our next question will come from Rob Wertheimer.

Rob Wertheimer: Malleus Research your line is open.

Rob Wertheimer: Thank you.

Rob Wertheimer: So first question is just on growth into 'twenty, four and maybe even beyond on the growth algorithm. It seems like your expectation starting out the year is more price led in volume and I assume obviously saw a destock or channel that you talked about is holding that back but as we get into two eight. So we're looking at return to normal volume growth and then in May.

David A. Zapico: That's really helpful. Thanks. Thanks, David. And then just quickly on geographies, you've gone through the end markets. But just wondering if there's anything to call out in 24, you know, geographically. Yeah, I'll do a summary of Q4 geographically, so you know where you stand. We had growth in the quarter led by the U.S. and Asia. The U.S. has been strong all along.

Rob Wertheimer: And then place environment I don't know if you have a bigger picture view on where pricing is going your way in more of a 3% world.

Rob Wertheimer: And as volume comes back that kind of ticks up core as we exit the year. That's my first question. Thanks.

David A. Zapico: Asia's picking up a bit. The U.S. was up mid-single digits, with notable strength in our Materials Analysis Division and Aerospace Independence. Europe was down high single digits, driven in part by our automation. And Asia was up about a little under 10%, about 9% with strength in our Materials Analysis Division and our Ultra-Precision Technology.

Rob Wertheimer: Very well could happen.

Speaker Change: Rob I think.

Speaker Change: I think we're in a 3% pricing world and I think.

Speaker Change: Our volume has the potential to be to be a little stronger in the second half than the first half.

So that what you're saying is.

Speaker Change:

Speaker Change: Kind of how we're thinking about it.

Speaker Change: We're pretty conservative in our second half.

Speaker Change: Outlook.

Speaker Change: If there was something that could exceed it it will be the second half volume sales volume organically.

Okay, Perfect and then I wonder just given the rise of Av.

David A. Zapico: We had a dynamic that was a little different than what's going on in the general marketplace. Our China sales were up 22%. 15% in the year, 22% in Q4, strong growth in our materials analysis division, and when we look into 2024, we think we'll grow in Asia, but we think China is going to moderate to more of a flattish market because it was some, you know, one of our project businesses that we benefited from. So it's still going to be good for us, but we are seeing the broader impacts in the economy. And we think, Flatish on an orders basis. Great. Thank you very much.

Speaker Change: The tech in the portfolio, if you could just give a general.

Speaker Change: General thoughts on your value add there is a different from anything in the core general thoughts on core growth. There and then if the acquisition environment differs at all or if it's more white space or its more competing against others in deals.

Just a couple of general thoughts there. Thank you.

Speaker Change: We may acquire some good medical businesses I mean, if you go back and look the raw business has been <unk>.

Speaker Change: <unk> winter for us and that business is growing in the market and we made an EMC acquisition and that business had been very successful in that bid.

Speaker Change: As in the same similar market that Paragon sense, so that gave us confidence in it.

Nigel Edward Coe: Thank you. And one moment for our next question. Our next question will be coming from Scott Graham of Seaport Research Partners. Scott, your line is open. Hi, good morning.

Speaker Change: And if they are your.

Speaker Change: Your classic AMETEK businesses.

Speaker Change: We went in the market based on technology based on engineering.

Speaker Change: They're a little more OEM end market, then, but we are basically our OEM businesses more OEM than end market.

Scott Graham: Bill, congratulations on a great run. It's been a complete pleasure working with you. I hope you remain happy and best to your family.

Speaker Change: You have long longer looks at your customers in terms of.

William Joseph Burke: Thank you. Thank you very much, Scott. I was hoping, Dave, you could go through the orders a bit for the quarter, both in total and organically. Yeah, sure. Yeah, the orders in total for the quarter were up 16%. Now that was largely driven by the Paragon Acquisition because the order to get people, Backwell. I don't know that 16% order. EIG orders were up 3%, and EMG orders were up 45%. Again, the EMG orders were driven by Paragon organically. The orders were minus two, and it translated into a.

Speaker Change: What youre going to be building in the future so its a pretty.

Speaker Change: Pretty stable market and we just think.

Speaker Change: That growth in the case of Paragon over the next.

Speaker Change: Three years, and it will be a little bit slower getting on a gate because of some of the things that are going on but we're pretty confident it's going to be a low double digit grower over the next few years. So we think and with that with these portfolio additions are going to grow just a bit greater than the rate of our base portfolio.

Speaker Change: Great. Thank you.

Speaker Change: Thank you Rob.

Speaker Change: And one moment for our next question.

Speaker Change: Yes.

Speaker Change: My Mama.

Speaker Change: Yes.

Speaker Change: And our next question will come from Andrew Buscaglia of BNP Carrabba's Exane. Your line is open.

Speaker Change: Yes.

David A. Zapico: I booked a bill of $1.1 million. Thank you. And would you expect, Bill, that sometime in the first half, perhaps the second quarter, that the orders may be really kind of flattened out for you organically and then start to progress into the second half? Yeah, I think in the first quarter we have some pretty difficult comps.

Andrew Buscaglia: Again, Andrew your line is open.

Andrew Buscaglia: Andrew.

Yes.

Andrew Buscaglia: Okay.

Andrew Buscaglia: Andrew are you there.

Andrew Buscaglia: Can you hear me Okay, Yes, we hear you.

Andrew Buscaglia: Yeah.

Speaker Change: Now, let's go to the next caller.

Speaker Change: Back in the queue certainly moving forward.

Speaker Change: Our next question is going to come from Andrew <unk> of Bank of America Andy.

David A. Zapico: So I expect a similar trend with orders trailing sales, but then as we get out in the second half of the year, maybe even the second quarter, I think the orders will outpace. Got it. Thank you. And then, Mike, just one other question. Within the guidance, I guess I'm a little bit surprised at the level of organic growth you're expecting, you know, in a good way.

Speaker Change: Andrew Your line is open.

Andrew Buscaglia: Yes. Good morning can you hear me.

Andrew Buscaglia: Hello, Andrew Good morning, excellent Hey, Bill Congratulations thank you I appreciate it.

Andrew Buscaglia: Yes, so just a little bit more color you think other automation slashed short cycle companies expect second half rebound your comments sort of indicate something very similar what kind of visibility do you have on that and what gives you confidence that things are.

David A. Zapico: And it looks to me from your summary that that's stemming from the aerospace and defense businesses. Would you mind, you know, parsing out for the total company kind of what you're expecting in sort of aerospace versus defense this year, and maybe tack on what the drivers are, particularly in commercial? Yeah, I mean, the, um...

Andrew Buscaglia: Actually are going to turn over the second half.

Speaker Change: Acknowledged that it was very much consistent with what we hear from everybody else yes.

Speaker Change: I think that in that second half for automation in particular.

David A. Zapico: The overall organic growth for the company is a low to mid-single-digit number, and that's going to be in both groups, EIG and EMG. And in terms of aerospace, we think we're going to grow about the same level that we did this year at plus high single-digit, and we have really good diversity in that business. [inaudible] Commercial OE aftermarket is strong, and the commercial OE is good too

Speaker Change: We're conservative on the <unk>.

Speaker Change: And put that we're getting from our customers in the marketplace.

Speaker Change:

Speaker Change: I think that.

Speaker Change: For the entire.

Segment.

Speaker Change: We're forecasting it to be up.

Speaker Change: Low single digits.

Speaker Change: So so.

Speaker Change: We're not out.

Speaker Change: If we just put in there what our customers are telling us it will be higher.

Speaker Change: There was a bit of conservatism that we place on it and is largely from talking to customers and understanding their inventory levels and.

Speaker Change:

Speaker Change: So the typical work that we do to set a plan for the year.

Speaker Change: And.

Speaker Change: So.

Speaker Change: We think we.

David A. Zapico: I think largely the military and the total commercial markets are going to be up high single digits. That's pretty optimistic. That's great.

Speaker Change: You will see a positive second half as those orders as those backlog they are depleted.

Speaker Change: Excellent.

Scott Graham: Thank you. In one moment for our next question. Our next question will come from Rob Wertheimer of Mellius Research. Your line is open. Thank you. So my first question is just on growth into 24 and maybe even beyond the growth algorithm.

Speaker Change: Just maybe a follow up building on that.

Speaker Change: You talked about sort of increasing investment, but other business units that need to start expanding capacity.

Speaker Change: Where are you broadly in capacity utilization and finally as you are expanding capacity.

Robert Cameron Wertheimer: It seems like your expectation starting out the year is more price-led than volume, and I assume obviously some of the D-Stock or channel that you talked about is holding that back. But as we get into 2H, are we looking at a return to normal volume growth? And then maybe we're in an in-place environment.

Speaker Change: What are you going to do differently about supply chain and where you are putting this capacity versus maybe pre COVID-19. Thank you.

Speaker Change: Yes.

Speaker Change: In terms of the supply chain.

Speaker Change: We did a lot of work to to eliminate the risks from China.

Speaker Change: We did it actually before Covid. So we are well positioned during it.

David A. Zapico: I don't know if you have a bigger picture view on where pricing is going. Are we in more of a 3% world? And as volume comes back, that kind of ticks up core as we exit the year. That's my first question. Thanks. Yeah, that very well could happen.

Speaker Change: I think the.

Speaker Change: So our supply chain is developing naturally around the different regions of the world and it's not as China centric because of that so that's that's one item I think that too in terms of capacity, we put significant capacity investments in.

Speaker Change: Over the past few years, where a low capex business in.

David A. Zapico: Rob, I think we're in a 3% pricing world, and I think our volume has the potential to be a little stronger in the second half than in the first half. So that's what you're saying. This is kind of how we're thinking about it. We're pretty conservative in our second half. If there was something that could exceed it, it would be the second half.

Speaker Change: Did not.

Speaker Change: I'll have to come to you and get away from our typical 2% of sales we did it within our 2% of sales guideline, we put incremental capacity in our Mexican facilities, we put incremental capacity in our Malaysia facilities, we put incremental capacity in our Serbian facility. So so.

Speaker Change: We're pretty we have a asset light business model.

Speaker Change: We can easily ramp up pretty quickly and we have the flexibility to reduce cost very quickly. So.

Robert Cameron Wertheimer: Allboy, Okay, perfect. And then I wonder, you know, just given the rise of medtech in the portfolio, if you could just give a general, general thoughts on your value add there, is it different from anything in the core, general thoughts on core growth there. And then if the acquisition environment differs at all, if it's more white space, if it's more competing against others and deals, just just a couple general thoughts there, if you would. Thank you. Yeah, we've, I think it requires some good medical businesses to go back and look. The Rollin' business has been a fabulous winter.

Speaker Change: That's one of the advantages of the AMETEK model with our low Capex environment, we can.

Speaker Change: Sales and adjust sales on the downside without.

Speaker Change: Big capacity investments are out without stringent investments when we downsize so.

Speaker Change: Excellent positioned to grow.

Speaker Change: And we've done all that work over the past few years, so I feel really confident that we're going to be able to do.

Speaker Change: To keep up with the growth through the next growth cycle.

Speaker Change: Well you guys makes it look as if thanks a lot.

Speaker Change: Thank you Andrew.

Speaker Change: And one moment our next question.

Speaker Change: Our next question is coming from Brett Linzey.

Brett Logan Linzey: Your line is open Brian.

Brett Logan Linzey: Hey, good morning, all and congratulations to everyone.

Brett Logan Linzey: I wanted to what does it come back to the pruning comment on Paragon. So you indicated youre running down some of the less profitable areas.

David A. Zapico: And that business is growing in the market, and we made an EMC acquisition, and that business has been very successful, and that business is in the same similar market that Paragon is in. And you know, they're classic Ametek businesses. We went into the market based on technology, based on engineering. There is a little more OEM than end market, but basically, our whole EMG business is more OEM than end market.

Brett Logan Linzey: Makes sense I guess in the context of the broader portfolio as you continue to shift towards this higher growth higher margin areas is there is there more pruning to do on the other side in the context of that.

Brett Logan Linzey: Of the total AMETEK portfolio.

Brett Logan Linzey: This pruning process is something that we do with.

Brett Logan Linzey: With just about every new acquisition. So this is not new.

David A. Zapico: Then, you know, you have a longer look at your customers in terms of what you're going to be building in the future. So it's pretty growth, in the case of Paragon, over the next. We'll be a little bit slower getting out of that gate because of some of the things that are going on, but I'm pretty confident it's going to be a low double-digit grower over the next few years. So we think with those portfolio additions, they're gonna grow just a bit greater than the rate of our base. Great, thank you. And one moment for our next question. One moment.

Brett Logan Linzey: Paragon is a little bigger business and I'm going to be careful with it but it's something that we do all the time so.

Brett Logan Linzey: Oh M&A deals will go through this process Paragon is going to be gone through in the first half.

Brett Logan Linzey: And we look at our own portfolio and we do that kind of thing all the time. So yes. It can continue.

Brett Logan Linzey: And we're pretty good at that portfolio rationalization things.

Brett Logan Linzey:

Speaker Change: You have another question Brett.

Brett Logan Linzey: Yeah. Thanks, and then just a second question on Opex versus Capex I guess as you look at the customer spending environment for this year and if you were to hone in on just those capital spending intensive businesses.

Brett Logan Linzey: The planning assumptions or the tone changed in the last few months.

Robert Cameron Wertheimer: And our next question will come from Andrew Buzgalia of BNP Paribas-Xaine. Your line's open. Again, Andrew, your line is open. Andrew, if you're on mute.

Brett Logan Linzey: And that capital the capital spending.

Brett Logan Linzey: Business is at all.

Brett Logan Linzey: In the U S. There's a record number of projects.

Brett Logan Linzey: Clean energy power grid semiconductor.

Operator: Yeah. Andrew, are you there? Can you hear me okay?

Brett Logan Linzey: They're just at a different level than they've been before and a lot of that is from the.

Brett Logan Linzey: Government spending and backing so.

Operator: Yes, we hear you. Yeah. Let's go to the next caller and back in the queue, certainly moving forward. Our next question is going to come from Andrew Obin of Bank of America. Andrew, your line is open. I guess so. Good morning. Can you hear me?

So that's largely continued and at some point, it's going to provide an optimistic.

Brett Logan Linzey: Playing field for a lot of people in the industry and I don't think we have that kind of upside built into our model right now but.

Brett Logan Linzey: And so there are sort of planning going on with those projects right now.

Brett Logan Linzey: <unk>.

Brett Logan Linzey: That that particular dynamic about the the U S spending draw.

Andrew Burris Obin: Yeah. Hello, Andrew. Excellent. Hey, Bill, congratulations. Yeah, so just a little bit more color, you know. I think other automation slash short cycle companies expect a second half rebound. Your comments sort of indicate something very similar. What kind of visibility do you have on that?

Brett Logan Linzey: Driving the typical project so we're tracking to a very high number.

Speaker Change: Okay, great. Thanks, a lot best of luck. Thank you Brian.

Speaker Change: And our next question.

Speaker Change: Our next question will come from Joe Jia Dong.

Speaker Change: Donna at it.

Speaker Change: TD Cohen.

Speaker Change: Donald.

Speaker Change: Hey, guys how are you doing.

Speaker Change: So a lot of companies are seeing have seen orders kind of decline organically for multiple quarters now.

David A. Zapico: And what gives you confidence that, you know, things are actually going to turn in the second half? And I acknowledge that your view is very much consistent with what we hear from everybody else. I think that in the second half, for automation in particular, we were conservative on the input that we're getting from our customers in the marketplace.

Speaker Change: And.

Speaker Change: Predominantly it's all attributed to inventory adjustment in supply chain and hardly anyone said anything about underlying conditions not being fine. So just curious if one of you would agree with that and to have that worries you that everyone is seeing order declines and no one is saying anything.

David A. Zapico: We're forecasting it to be below the single digits. So, so. We're not out.

Speaker Change: Is happening other than supply chain adjustments and it really doesn't because it's a one on 101 in 100 year pandemic I mean, yes.

David A. Zapico: If we just put in there what our customers are telling us, it's largely from talking to customers and understanding their inventory levels, as those backlogs are... Excellent.

Speaker Change: You saw what happened to supply chains were broken people put inventory in place and.

Speaker Change: As I just got done.

Talking to the last call. The project business is so strong so.

David A. Zapico: And maybe a follow-up building on that, you know, you talked about sort of increasing investment, but are there business units that need to start expending capacity? Where are you broadly in capacity utilization? And finally, as you are expanding capacity, what are you going to do differently about your supply chain and where you are putting this capacity versus maybe pre-COVID? Thank you. Yeah, I mean, in terms of supply chain, we did a lot of work to eliminate the risks from China, and we did it actually before COVID. So we're well positioned for it. And I think the, you know, our supply chain is developing naturally around the different regions of the world, and it's not as China. So that's one item. I think that in terms of capacity, we have made significant capacity investments over the past few years. We're a low-capital-expenditure business. Not a, you know, we don't have to come to you and get away from our typical 2% of sales. We did it within our 2% of sales guideline.

Speaker Change: And we have a similar view or.

Speaker Change: Our.

Speaker Change: Businesses in health care Aerospace defense power and energy are performing well they have a lot of projects and.

Speaker Change: We just think that.

Speaker Change:

Speaker Change: We've got a we're going to work off the inventory and then theyre going to be.

Speaker Change: <unk> returned to more typical growth for the industrial market I mean at the end of the day, though nobody knows.

Speaker Change: If we run into a recession, we have good muscle memory in that area. So.

Speaker Change: So we will be able to react as we always react and we can run our business appropriately.

Speaker Change: And in fact select businesses have already been doing that during 'twenty three margins in our automation business that those people did a great job of.

Removing excess costs from the business so.

Speaker Change: And we're pretty good at reacting.

Speaker Change: But right now we don't see that we see.

Speaker Change: Inventory being worked off mainly in our OEM businesses.

Speaker Change: And looking towards the future.

Speaker Change: We're optimistic with a number of new projects, we have in the future.

Speaker Change: Thanks, Dave Thank.

Dave: Thank you Joe.

Thank you one moment for our next question.

Dave: Our next question is going to come from Steve Barker.

Keybanc capital markets. Your line is open.

Steve Barger: Hey, Good morning, Hey, Steve how are you doing Dave.

David A. Zapico: Incremental capacity in our Mexican facilities; we put incremental capacity in our Malaysian facilities; we put incremental capacity in our Serbian facilities, so I think we're pretty good. We have an asset-based business model. We can usually ramp up pretty quickly, and we have the flexibility to reduce costs very quickly. So that's one of the advantages of the Ametek model with our low capex environment. Just Sales on the downside without big capacity investments or without stringent investments.

Steve Barger: Good.

Steve Barger: The semi business you mentioned your exposure to optics, which is great, but does that extend to advanced packaging applications, which are expected to show strong growth rates for the next couple of years and if not is getting specific exposure there something the team is looking at for M&A, yes.

Speaker Change: Yes, we have a little bit of exposure to advanced packaging.

Speaker Change: But it's spread across the business in different places, we're selling some components. So that's one of the items that our M&A teams are looking at.

David A. Zapico: We're in an excellent position to grow. We've done all that work over the past few years, so I feel really confident. Keep up with the growth. Well, you guys make it look easy. Thanks a lot.

Speaker Change: And we have exposure, but we'd like to have more.

Speaker Change: Okay, and then on the memory side. It seems like pricing is improving finally, and maybe fab utilization rates are starting to improve a bit is that translating into product inflection for you yet or is there still inventory that needs to be cleared on the memory side specifically.

Andrew Burris Obin: Thank you, Andrew, for one moment for our next question. Our next question is coming from Brett Linzey. So Mizuho, your line is open, Brett. Hey, good morning, all, and congratulations to everyone. I wanted to come back to the pruning comment on Paragon.

Speaker Change: Yes, I think that.

Speaker Change: That market on the memory side that market has pretty much bottomed.

Speaker Change: So I don't think Theres anything else.

And when that picks up there's going to be.

Brett Logan Linzey: So you indicated you're running down some of the less profitable areas, which makes sense, I guess, in the context of the broader portfolio, as you continue to shift towards this higher growth, higher margin areas, is there, is there more pruning to do on the other side, in the context of, you know, the total Ametek portfolio? I did this pruning process is something that we do. Just about every new acquisition, so this is not new, and Paragon's a little bigger business. Be careful with that, but it's something that we do all the time.

Speaker Change: I think thats immediately going to flow to the bottom line I think the inventory there is mainly cleared out.

Speaker Change: Yep, great. Thank you Steve.

Speaker Change: Steve.

And one moment for our next question.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Our next question comes from Andrew Buscaglia.

BNP <unk> your line is open.

Andrew Buscaglia: Hello, Andrew.

Andrew Buscaglia: Okay.

Andrew Buscaglia: Andrew go ahead Andrew.

Andrew Buscaglia: Yes.

I am going to release Andrew.

Andrew Buscaglia: Thank you.

Speaker Change: Youre welcome.

Speaker Change: And our next question will be coming from Rob Mason of Baird.

Rob W. Mason: Robert Your line is open.

Rob W. Mason: Yes, good morning.

Rob W. Mason: Hello from my congratulations as well Bill.

David A. Zapico: All M&A deals will go through this process, you know; Paragon is going to be going through it in the first half. And we look at our own portfolio, and we do that kind of thing all the time. So, yes, it can continue. We're pretty good at that portfolio rationale. Another question, Brett?

Rob W. Mason: It gave a lot of questions have been asked but just circle back to the process business, you talked about that going to be up low single digits.

Rob W. Mason: Yes, there is a lot in there from a business mix and market standpoint could you.

Rob W. Mason: Maybe speak to anything they could outperform that low single digits or anything that would stand out and we.

Rob W. Mason: And just for clarity sake, what is what is the actual process industry.

Brett Logan Linzey: Yeah, yeah, thanks. And then just a second question on off X versus capex. I guess as you look at the customer spending environment for this year, and if you were to hone in on just those capital spending intensive businesses, have the planning assumptions or the tone changed in the last few months? You know, in that capital, you know, the capital spending, you know, type businesses at all? You know, in the US, there are a record number of projects. Clean Energy, Power Grids, Semiconductors.

Rob W. Mason: Exposure there now.

Speaker Change: Yes, the process is a broader look at our process and analytical instruments business.

Speaker Change: The specific process industry would be.

Speaker Change: More of the.

Speaker Change: The process and analytical instruments business, which is a good part of it.

Speaker Change: And.

Speaker Change: I think what youre going to see there is our energy businesses or perhaps they grew nicely in Q4 and they.

Speaker Change: Thanks.

But outlook for 2024, I think we saw a lot of business to Asia and China is a.

Speaker Change: Told you to talk about it being flat so that's not something that we're we're concerned within the year for process.

David A. Zapico: They're just at a different level than they were before, and a lot of that is government spending and backing. So that's largely continued, and at some point, it's going to provide an optimistic, playing field for a lot of people in the industry. I don't think we have that kind of upstate built into our model right now, but there's planning going on with those projects right now.

Speaker Change: But as long as we keep developing state of the art projects that are unmatched by our competitors.

Speaker Change: We're going to be fine in process and as evidenced by our Kamika as I go.

Speaker Change: Broader <unk> brought our MA sales so.

Speaker Change: So.

As the research market.

Speaker Change: The optics market.

Speaker Change: That are driving the business and there are some medical applications in our rolling business that are in that segment. So.

David A. Zapico: Spending, driving the typical project, so we're tracking to a very high number. Okay, great. Thanks a lot.

Speaker Change: There is a mix of different end market drivers, but.

Speaker Change: When you look at the thing in total we're calling it up low single digits. This year and again the international parts of the business will be weaker than the.

Brett Logan Linzey: Best of luck. Thank you, Brett. And one moment for our next question. Our next question will come from Joe Giordano at T.D. Cohen, Joe Giordano.

Speaker Change: U S parts.

Speaker Change: That's great. Thank you.

Speaker Change #100: Thank you Rob.

Speaker Change #100: Thank you and I'm showing no further questions I would now like to turn the conference back to Kevin Coleman for closing remarks.

Joseph Craig Giordano: Hey guys, how are you doing? Um, so a lot of companies have seen orders kind of decline organically for multiple quarters now. And, predominantly, it's all attributed to inventory adjustment and supply chain. And hardly anyone has said anything about underlying conditions not being fine. So just curious if one and two, if that worries you that everyone is seeing order declines, and no one is saying anything is happening other than the supply chain. It really doesn't. 101 on one 100 year pandemic.

Kevin C. Coleman: Again, Tanya and thank you everyone for joining us for the conference call today and as a reminder, a replay of the webcast can be accessed in the investors section of AMETEK Dot com have a great day.

Speaker Change #100: Yeah.

Speaker Change #101: This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change #101: Okay.

Speaker Change #101: [music].

Speaker Change #101: Okay.

Speaker Change #101: [music].

David A. Zapico: We saw what happened. The supply chains were broken. People put inventory in place, as I just got done talking to the last call of the project business, which is so strong. So we have a similar view where businesses in healthcare, aerospace, defense, power, and energy are performing well; they have a lot of projects. And, you know, we just think that we've got to work off the inventory, and then there's going to be a return to more typical growth for the industrial market. I mean, at the end of the day, though, nobody knows.

Speaker Change #101: Yes.

Speaker Change #101: [music].

Speaker Change #101: Okay.

Speaker Change #101: [music].

David A. Zapico: And if we run into a recession, we have good muscle memory in that area. So, you know, we'll be able to react as we always react, and we can run our business appropriately. So, you know, in fact, select businesses have already been doing that during 23. Good job, removing excess cost from the business. So we're pretty good at reacting, but right now, we don't see that.

Speaker Change #101: Okay.

Speaker Change #101: Okay.

Speaker Change #101: Yes.

Speaker Change #101: [music].

Joseph Craig Giordano: Inventory is being worked off mainly in our OEM business, looking toward the future. I'm optimistic about the number of new projects we have. Thank you.

Steve Barger: One moment for our next question. Our next question is going to come from Steve Barger of KeyBank Capital Markets. Do you mind?

David A. Zapico: Hey, good morning. Hey, Steve. How are you doing? Dave.

David A. Zapico: Good. For the semi-business, you mentioned your exposure to optics, which is great, but does that extend to advanced packaging applications, which are expected to show strong growth rates for the next couple of years? And if not, is getting specific exposure there something the team's looking at for M&S?

Speaker Change #101: Yes.

Speaker Change #101: [music].

Steve Barger: Yeah, we have a little bit of exposure to advanced packaging, but it's spread across the business in different areas. We're selling some components, so that's one of the items that our M&A teams are looking at. We have exposure, but we'd like to have more. Okay, and then on the memory side, it seems like pricing is finally improving, and maybe fab utilization rates are starting to improve a bit. Is that translating into product inflation for you yet? Or is there still inventory that needs to be cleared on the memory side?

Speaker Change #101: Yes.

Speaker Change #101: Okay.

Speaker Change #101: Okay.

Speaker Change #101: Okay.

Speaker Change #101: [music].

Speaker Change #101: Yes.

David A. Zapico: Yeah, I think that, you know, that market on the memory side is pretty much bottomed out. So I don't think there is. When that ticks off, there's going to be a... I think that's immediately going to flow to the bottom line. I think the inventory there is.

Speaker Change #101: [music].

Steve Barger: Yep, great. Thank you. And one moment for our next question. Our next question comes from Andrew Buscoglia of BNP Pavia Succinct. Your line is open. Hello, Andrew. Andrew, go ahead.

Operator: I'm going to release Andrew's line. [inaudible] And our next question will be coming from Rob Mason of Baird. Robby Linus Open.

Operator: Yes, good morning, and I want to offer my congratulations as well, Bill. A lot of questions have been asked. Just circle back to the process business. You talked about that going to be up low single digits for the year. There's a lot in there from a business mix and market standpoint. Could you maybe speak to anything that could outperform that low single digits or anything that would stand out?

David A. Zapico: And just for clarity's sake, what is the actual process industry? exposure there now. Yeah, the process is a broader look at our process and analytical, and the Specific Process Industry. More of the process and manual, what a coincidence, is a good part of it. And, you know, I think that what you're going to see there is our energy businesses. They grew nicely in Q4.

David A. Zapico: Good outlook for 2024. I think we sell a lot of business to Asia and China is a, I told you to talk about it being flat. So that's something that we're concerned about in the year for process. But as long as we keep developing state-of-the-art projects that are unmatched by our competitors, we're going to be fine in process, and as evidenced by our Kameka, Zygo, and other partners, broader UPT, and broader MAD sales. So, you know, it's the research market, it's the optics market, and there are some medical applications in our rolling business that are in that segment. There's a mix of different and market drivers, but when you look at the thing in total, calling it up, low single digits this year. Again, the international parts of the business will be weaker than before.

Speaker Change #101: Okay.

Speaker Change #101: Okay.

[music].

Speaker Change #101: Thank you.

Speaker Change #101: Yes.

[music].

Speaker Change #101: Sure.

Speaker Change #101: [music].

David A. Zapico: That's great. Thank you. Thank you. And I'm not asking any further questions.

Kevin C. Coleman: I would now like to turn the conference back to Kevin Coleman for closing remarks. Thank you again, Tanya, and thank you everyone for joining us on the conference call today. And as a reminder, a replay of the webcast can be accessed in the investor section of Ametek.com. This concludes today's conference call. Thank you for participating. You may now disconnect.

Speaker Change #101: Sure.

Speaker Change #101: [music].

Speaker Change #101: Thank you.

Speaker Change #101: Okay.

Speaker Change #101: Yes.

Speaker Change #101: [music].