Q4 2024 AMETEK Inc Earnings Call
Social media, etc.
Hello, and welcome to the fourth quarter 2024 EMINTECH Earnings Conference Call.
At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star-one-one on your telephone.
You will then hear an automated message advising that your hand has been raised. Please be advised that today's conference is being recorded.
Speaker Change: It is now my pleasure to introduce Vice President Investor Relations and Treasurer, Kevin Coleman.
Speaker Change: Thank you, Andrew. Good morning and welcome to Ametek's fourth quarter 2024 earnings conference call.
Speaker Change: Joining me today are Dave Zapico, Chairman and Chief Executive Officer, and Dalip Puri, Executive Vice President and Chief Financial Officer.
Speaker Change: During the course of today's call, we will be making 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.
Speaker Change: A detailed discussion of the risks and uncertainties that may affect our future results is contained in Amitek's filings with the SEC.
Speaker Change: Amitek disclaims any intention or obligation to update or revise any forward-looking statements.
Speaker Change: Order to 2025 guidance will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization.
Speaker Change: in excluding a pre-tax $29.2 million or 10 cent per diluted share charge in the first quarter of 2024 for integration costs related to the Paragon Medical Acquisition.
Speaker Change: Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website. We'll begin today's call with prepared remarks and then we'll open it up for questions and I'll turn the meeting over to Dave.
Thank you, Kevin, and good morning, everyone.
Speaker Change: In the quarter, we established records for sales, operating income, EBITDA, and diluted earnings per share, as well as for operating cash flow and free cash flow.
Speaker Change: We also repurchased 155 million dollars in shares during the quarter and this morning we announced the acquisition of Kern Microtechnique for approximately 105 million euros.
Speaker Change: Our performance this quarter marks the culmination of a strong year in which we leveraged the proven strength of our operating model to deliver outstanding results despite a challenging economic environment.
Now let me turn to our fourth quarter results.
Speaker Change: Fourth quarter sales were a record $1.76 billion, up 2% from the same period in 2023.
Speaker Change: Organic sales were down 3%, acquisitions added 5 points in the quarter, and foreign currency was flat.
Speaker Change: Orders were solid in the quarter with organic orders up 4% versus the prior year, with positive organic growth across both our EIG and EMG segments.
Speaker Change: And we ended the quarter with a strong backlog of $3.4 billion.
Ametek's operating performance in the fourth quarter was excellent.
Speaker Change: Operating income in the quarter was a record, $469 million, a 5% increase over the fourth quarter of 2023.
Speaker Change: Operating margins were 26.6% in quarter, up 90 basis points from the prior year, while core margins, which excluded the dilutive impact from acquisitions, were up a sizable 140 basis points.
Speaker Change: EBITDA on the quarter was a record $561 million, up 7% versus the prior year, with EBITDA margins an impressive 31.9%.
Speaker Change: Diluted earnings per share were a record $1.87, up 11% versus the fourth quarter of 2023, and above our guidance range of $1.81 to $1.86 per share.
Speaker Change: Now let me provide some additional details at the operating group level.
First, the Electronic Instruments Group.
Speaker Change: EIG delivered outstanding performance in the fourth quarter with impressive margin expansion and operating margin levels that reflect the high quality of our businesses.
Speaker Change: EIG sales were $1.21 billion, down 2% from the fourth quarter of last year. Organic sales were down 3% and acquisitions added one point.
Speaker Change: Growth was strongest across our aerospace and defense businesses, while our advanced optical metrology businesses, ZYGO, also saw solid growth in a quarter.
Speaker Change: Similar to last year, our EIG businesses experienced some project delays in the fourth quarter as customers remained cautious at year-end.
Speaker Change: We view these as temporary delays as the new project pipeline remains strong.
Speaker Change: EIG operating income was a record $386.6 million, up 8% versus the prior year, and operating margins were also a record 31.8%, up a robust 280 basis points from the prior year.
Speaker Change: The electromechanical group also finished the year with strong operating performance.
EMG's fourth quarter sales were $540 million.
prior year.
with organic sales down 4%.
Speaker Change: Strong performance in our aerospace and defense businesses was offset by weaknesses in our OEM exposed businesses which continued to face headwinds from inventory destocking.
Speaker Change: EMG's operating income in the fourth quarter was $111.2 million, down 1% compared to the prior year period, while EMG's fourth quarter operating margins were 20.3%.
Now for the full year.
Speaker Change: Overall performance was strong in 2024 as we established annual records for essentially all key financial metrics.
Speaker Change: Overall sales for the year were $6.94 billion, up 5% from 2023.
Speaker Change: Operating income for 2024 was $1.81 billion, up 6%, and operating margins were 26.1% for the full year, up 20 basis points from the prior year, with core margins up 120 basis points.
Speaker Change: EBITDA for the year was $2.18 billion, up 8%, with EBITDA margins of very strong, 31.4%.
Speaker Change: Full year 2024 earnings were $6.83 per daily share, up 7% versus the prior year.
Speaker Change: We also delivered exceptional cash flows in 2024, with free cash flow up 6% versus the prior year and free cash flow to net income conversion a very strong 124%.
Speaker Change: Amitek's performance in 2024 underscores the quality of our businesses, the flexibility of our operating model, and the outstanding contributions from all Amitek colleagues.
Speaker Change: Our teams navigated a complex macroeconomic environment and delivered strong results, while also ensuring Ametek is well positioned for long-term success.
Now turning to capital deployment and acquisitions.
Speaker Change: As noted, in the fourth quarter, we repurchased approximately $155 million in shares, bringing our total share repurchases for the year to approximately $220 million.
Speaker Change: While our top priority for capital deployment remains acquisitions, our strong cash flows provide us with the flexibility to also opportunistically repurchase shares.
Speaker Change: Subsequent to the end of the first quarter, we acquired current microtechnique, which we announced this morning.
Speaker Change: Kern is a leading manufacturer of high-precision machining and optical inspection solutions that achieve industry-leading accuracy and surface finish.
Speaker Change: Fern's highly engineered solutions help customers produce highly complex and precise components used in semiconductor, medtech, space, and other high-tech industries.
Speaker Change: Kern is a strong strategic fit with our ultra-precision technologies business, expanding our existing capabilities in ultra-high precision manufacturing, and opening up new opportunities to serve customers with growing demands for miniaturization and accuracy.
Speaker Change: Headquartered near Munich, Germany, Kern has annual sales of approximately 50 million Euro.
Speaker Change: Looking ahead to 2025, we are managing a strong pipeline of high-quality acquisition candidates. We have a healthy and flexible balance sheet, providing us the opportunity to deploy meaningful capital on strategic acquisitions.
Speaker Change: With our robust balance sheet, significant financial capacity, and disciplined approach to capital deployment, Amitek is well positioned to continue driving long-term value through our acquisition strategy.
Speaker Change: In addition to acquisitions, we continue to invest in our businesses to best position them for long-term growth.
Speaker Change: In 2024, we invested approximately $90 million in incremental growth investments, largely across research, development, and engineering, and sales and marketing functions to support their organic growth initiatives.
Speaker Change: We expect to invest approximately $85 million in incremental growth investments in 2025.
Speaker Change: These investments and initiatives have strengthened our leadership positions within our niche markets, helped open up new growth opportunities in attractive adjacent markets, and accelerated our new product development and technology innovation.
Speaker Change: One such example of our technology innovation successes can be found in our latest innovation award winner at Comica.
Speaker Change: Kamika's LEAP series of atom probe microscopes provide 3D imaging and chemical composition characterization and materials at the nano scale.
Speaker Change: Historically, the LEAP product line focused on material science and geology applications targeted at highly knowledgeable academic customers at the Ph.D. level.
Speaker Change: Kamika determined that an enhanced productivity system with high sensitivity and improved yield would broaden the market and support both academic and industrial customers.
who put a premium on throughput, automation, and analytical capability.
Speaker Change: This led to the development of the new LEAP 6000 XR, which provides enhanced ease of use, new automation features for data collection, and improved analytical capabilities.
Speaker Change: With this new technology, AtomPro Tomography is now used to study nearly all classes of solid materials, from the oldest minerals on Earth to the most advanced aerospace alloys. As a result, new applications are emerging due to Comica's customer-centric approach to innovation.
Now shifting to our outlook for the year ahead.
Speaker Change: We remain cautious as we start the year given the ongoing macroeconomic uncertainties.
Speaker Change: However, we are encouraged by the strength and orders we experienced in the second half of the year, our strong backlog, our leading positions across a diverse set of markets which are poised for improved growth, and our significant capital available to deploy on strategic acquisitions.
Speaker Change: For 2025, we expect both overall and organic sales to increase low single digits on a percentage basis compared to 2024.
Speaker Change: Diluted earnings per share for the year are expected to be in the range of $7.02 to $7.18, up 3-5% compared to last year's results.
Speaker Change: For the first quarter, we anticipate overall sales to be roughly flat versus the prior year first quarter with adjusted earnings of $1.67 to $1.69 per share up 2-3% versus the prior year.
Speaker Change: To summarize, Amitech delivered a strong finish to the year, with solid performance in the fourth quarter, reflecting the strength of our portfolio and our ability to execute our growth strategy in a sluggish macro environment.
Speaker Change: Our differentiated technologies and deep industry expertise continue to position us well in attractive niche markets, providing a solid foundation for future growth.
Speaker Change: With a focus on innovation, operational excellence, and disciplined capital allocation, we are confident in our ability to drive continued growth and create long-term value for our shareholders in 2025 and beyond.
I will now turn it over to Dalip Puri.
Dalip Puri: We'll cover some of the financial details of the quarter, then we'll be glad to take your questions. Dalip? Thank you, Dave, and good morning, everyone. As Dave noted, Amitek had a strong finish to 2024, establishing records for sales, operating income, earnings per share, and cash flow in the quarter.
Dalip Puri: Now let me provide some additional financial highlights for the fourth quarter and the full year, as well as some additional guidance for 2025.
Dalip Puri: Starting with general and administrative expenses, fourth quarter G&A expenses were $28.9 million, up $2.5 million from the prior year.
Dalip Puri: For the full year, general and administrative expenses were up approximately $5 million. As a percentage of sales, G&A expense was 1.5%, in line with 2023 levels.
Dalip Puri: For 2025, general and administrative expenses are expected to be approximately 1.5% of sales.
Dalip Puri: Fourth quarter, other operating expenses were down $1 million compared to the fourth quarter of 2023 due to lower due diligence costs.
Dalip Puri: For 2025, we expect other operating expenses to be largely in line with 2024 level.
Dalip Puri: The effective tax rate in the quarter was 12.8%, down from 17.8% in the fourth quarter of 2023 due to statute expirations.
Dalip Puri: For the full year, the effective tax rate was 17.3%, which was in line with our guidance range of 17 to 17.5%.
Dalip Puri: For 2025, we anticipate our effective tax rate to be between 19 and 20 percent. As we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full-year estimated rate.
Dalip Puri: Capital expenditures were $52 million in the fourth quarter, and $127 million for the whole year. Capital expenditures in 2025 are expected to be approximately $155 million, or about 2% of sales.
Dalip Puri: Depreciation and amortization expense in the quarter was 96 million dollars and for the full year was 383 million dollars.
Dalip Puri: In 2025, we expect depreciation and amortization to be approximately $400 million, including after-tax, acquisition-related, intangible amortization of approximately $194 million, or 83 cents per diluted share.
Dalip Puri: Operating cash flow in the fourth quarter was a record at $550 million, up 2% versus the fourth quarter of 2023.
Dalip Puri: Free cash flow was also a record in the quarter, up 4% to $498 million, with excellent free cash flow conversion of 129% for the quarter.
Dalip Puri: Free cash flow for 2024 was a record $1.7 billion, up 6% versus the prior year, with full-year free cash flow conversion also very strong at 124% of net income.
Dalip Puri: For 2025, we expect free cash flow conversion to be approximately 115%.
Dalip Puri: Total debt at year-end was $2.1 billion, down $1.2 billion from the end of 2023.
Dalip Puri: Offsetting this debt is cash and cash equivalents of $374 million. As Dave noted, we spent approximately $155 million on share repurchases in the fourth quarter, bringing our total share repurchases for the year to approximately $220 million.
Dalip Puri: Additionally, subsequent to the end of the fourth quarter, we deployed approximately 105 million euros on the acquisition of Kern Microtechnique.
Dalip Puri: At the end of 2024, our gross debt-to-EBITDA ratio was 0.9 times, and our net debt-to-EBITDA ratio was 0.8 times.
Dalip Puri: We continue to have excellent financial capacity with approximately 2.5 billion dollars of cash and existing credit facilities to support our acquisition strategy and growth initiatives.
Dalip Puri: In summary, we delivered strong fourth quarter and full year 2024 operating results, highlighted by record earnings, robust margins, and excellent cash flow generation.
Dalip Puri: With a proven strategy, significant capital deployment capacity, and a strong track record of execution, we are well positioned to navigate current trade uncertainties and to drive growth and value creation in 2025.
Dalip Puri: Thanks Dalip. Andrew, could we please open the lines for questions?
Thank you.
certainly
Speaker Change: As a reminder to ask a question you will need to press star 1 1 on your telephone
Speaker Change: And our first question comes from the line of Matt Somerville with D.A. Davidson.
Thanks, Morgan and David.
Speaker Change: Could you talk a little bit about the nature of delays you saw within EIG, and if you started to see some of that break now that we're into February, and then maybe if you could also comment on
Speaker Change: your views regarding the remaining duration of the OEM destocking. You're continuing to see an EMG, and then I have a follow-up.
Speaker Change: Matt, good morning. The project delays in ERG were pretty much what we've been seeing.
Thank you.
Speaker Change: We got some delays on the shipments, but the orders were good.
Speaker Change: And similar, the destocking headwinds largely impacted our OEM-exposed businesses in EMG.
which include our Automation and Engineering Solutions sub-segment.
Speaker Change: But we're starting to see improved order patterns from some OEM customers.
Speaker Change: Others are taking a little time to de-stalk. We were encouraged by the sequential orders growth in Paragon.
Speaker Change: Groups were up organically in orders and very positive from that viewpoint and the order strength continued into January, so You know we're not through the destocking Some customers are through it some are not but you can see it definitely easing a bit as we go forward
Speaker Change: A follow-up, David. Can you talk about where you were with price cost in 24, what your views on that are for 25, and what you see as Amtech's ultimate level of price capture this year? Thanks.
Sure, I think in
Speaker Change: captured a bit more than three and our inflation was a little bit more than two.
Speaker Change: is mitigated to a great degree and I think you're in that 1.5 to 2% number for the pricing.
Got it, thank you.
Thank you.
Speaker Change: And our next question comes from the line of Jeffrey Sprague with Vertical Research.
Jeffrey Sprague: Thank you, good morning everyone. Hey David, can you give us a little bit more of an update on Paragon? You mentioned orders were firming up here as we exited the year. Can you just level set us on where we're at revenue base for that business and what you are expecting in 2025?
Yeah, I mean, even...
Jeffrey Sprague: To remind everyone, we acquired a business. It's in the med tech space. It uses, it manufactures single use and consumable surgical instruments and implantable components.
in markets with good growth rates.
Jeffrey Sprague: Long-term growing markets, excellent engineering capability, leading additive manufacturing capability, and a lot of new program wins, which we continue to execute through 2024.
Jeffrey Sprague: In 2024, they're going through a de-stocking of their customers, but as I said,
Jeffrey Sprague: Some of our customers are destocked and they've started the order aggressively, but some of the customers are not through the destocking. That effect of that is sequentially we saw a significant double-digit increase in order input.
We remain excited about the business.
Jeffrey Sprague: The end demand in procedures within their surgical and orthopedic markets remains strong. So we know it's truly a destock that the end procedures are.
Jeffrey Sprague: are continuing and the inventory is being consumed and we're gaining share with these new programs.
Jeffrey Sprague: So we're investing in the long-term growth that they continue to win new programs. So We also have a combined management team leading Paragon Combination of Amitek and legacy Paragon management team is functioning. Well as I said the inventory normalization continues the impact to business, but
Jeffrey Sprague: We're working through it, so we're encouraged, but that's a point towards growth.
Jeffrey Sprague: Dave, just to put a finer point on that, so did we end the year then somewhere around four hundred and twenty million-ish of revenues in Paragon?
Jeffrey Sprague: exactly exactly Jeff we're in that ballpark I'm not going to give the exact number but you're right on the you're on the pin there and and we expect you know that business to grow you know higher than Ametek as we move throughout the year and especially in the second half
Speaker Change: And not to overly drill on Paragon, but also just given the restructuring and everything you did last year in the business, can you give us an idea of kind of maybe order of magnitude of margin improvement you're looking for there?
Speaker Change: Yeah, I think from where they're at now, which is the substantial improvement in the next 12 months.
Speaker Change: It's biased toward the second half, but it'll definitely happen and it'll be well in excess of the 20 or 30 basis points of margin improvement we're looking at for the whole company. Well in excess of that.
Great. I'll pass the baton. Thanks a lot, guys.
Thank you.
Thank you.
Jamie Cook: And our next question comes from the line of Jamie Cook with Truist Securities
Jamie Cook: Hi, good morning, congrats on a nice quarter. I guess my first question...
Jamie Cook: You know, it sounds like we're flat in the first quarter, just trying to understand the cadence of growth that you're expecting, again, just given some of the uncertainty on the macro. Thank you.
Jamie Cook: We had a pretty typical quarter where the orders increased every month of the quarter, but December was the strongest month for the orders. But that's typical cadence, but also for the whole year.
Jamie Cook: December was the strongest month so that was a good order month and then in January that same orders positive orders continued so to last
Jamie Cook: You know, our customers aren't telling us it's to pre-buy, it's to get ahead of tariffs or anything, but it could be, you don't know, but it feels pretty strong from our viewpoint.
Jamie Cook: As soon as orders make their way into our backlog, those will make their way into sales as we go forward. We're starting out the year flat.
Jamie Cook: As we move throughout the year, DSTOC will mitigate and we have good pipelines, so it's a conservative or prudent start to the year is the way we're looking at it.
Thank you.
Thank you, Jamie.
Thank you.
Andrew, if you want to check on, you know,
Thank you. Thank you.
Thank you for your time.
Now you're breaking up.
Speaker Change: Andrew why don't we put him on hold and we'll go to the next caller
Thanks.
Certainly. One moment, please.
Speaker Change: And our next question comes from the line of Brett Lindsey with Mizzouho.
Speaker Change: Hey, good morning all. I just want to come back to the project comments. The softness at the end of the year sounds like the pipeline is building and may be strong, so front log looks pretty good. Are customers giving you any indication on the timing of when these projects might release? And how are you thinking about ES, engineered solutions, backlog conversion as part of the guidance construct?
Yeah, I think the
Speaker Change: We have a really good pipeline, and it's going to play out in 2025.
Speaker Change: I'm expecting to see projects that have been delayed are now moving.
It's in terms of the
A&ES, a piece of the business.
Speaker Change: I think that's where we're suffering from the OAMD's talk the most.
Speaker Change: But I think in the automation side of the business, we've...
Speaker Change: We've bottomed, and it's a great place to grow from where we're at right now. And on the medtech side of the business, we've already started to see the destock abate.
Speaker Change: That's where we are and that will play out in our guidance throughout the year and we expect those two businesses to do better as we progress throughout the year.
Speaker Change: Okay, great. And maybe just shifting over to aerospace and defense, could you give us an update on how you're thinking about the outlook on aero versus defense? I know a lot of moving pieces there. And then anything to think about in terms of profitability as we shift to more OE versus aftermarket and what you're embedding there in the guide for the year. Thanks.
Sure. Our A&E business, it had a.
and another strong year.
Speaker Change: and in the fourth quarter it was up mid-single digits. It was up high single digits of the year.
Missing all digits for the quarter.
Speaker Change: We think in 2025 it's going to grow at mid-single digits. And we're seeing strength in both our commercial and defense markets. So commercial may be a bit stronger than defense, but both of those will be healthy growers in 2025.
All right. Appreciate the insight.
Thank you.
Thank you.
Speaker Change: And our next question comes from the line of Rob Wertheimer with Belize Research.
Thank you. Good morning, everybody.
Speaker Change: So margin performance was very strong, especially given just the soft core environment. I wonder, can you just talk in general about how you approached cost and margin through the quarter? Was this a bit of a batten down the hatches? Is this normal improvement flowing through? Is acquisition improvement flowing through? Maybe just characterize how you see the margin improvement in the quarter.
We have reported margins, we're up 90 points.
and core margins were up 140 basis points.
and we got good productivity.
We've got a good positive price-cost, good mix.
Speaker Change: The reason that that's going to stop is it's our DNA. We're constantly working on operational excellence programs and we're executing them. And we have high contribution margin businesses that are
Speaker Change: contributing to it. So the margin performance was good. It was very good. We had some wreckers that we set, but it was kind of expected.
Speaker Change: Okay, perfect. So nothing nothing dramatic and negative. This one may be a little tricky to answer because there's obviously a lot of back-and-forth going on in government policy right now, but
Speaker Change: Is there any hiccups or stutters you're seeing in potential future demand or current demand from funding that might flow through to laboratories, test measurements, scientific instruments, and so forth? And I'll stop there. Thank you.
Thank you.
Speaker Change: I don't I don't see any specific thing that's going to going to hurt the laboratory demand. I mean it's I will say one thing about the laboratory doing it it's very strong internationally right now.
Speaker Change: So that's driving it more so than the U.S. When I think about the overall regulatory environment, I think some of the things with the new administration are positive. We have regulatory relief.
Speaker Change: We're looking forward to projects moving ahead faster. There's a different approach to antitrust
Speaker Change: We have a focus on energy development, that's good for us. There's an increased focus on military spending, and that's good for us. There's lower taxes for products manufactured in the U.S. We do a lot of manufacturing in the U.S.
Speaker Change: tax breaks plan to boost equipment investment. So I think a lot of those pro-growth policies can be really positive for us and as a U.S. manufacturer with a lot of capability in the U.S. with a significant U.S. manufacturing footprint.
provides many options and opportunities depending how the situation develops.
Speaker Change: We have a flexible asset light model, consistent with our strategy, and we think as we get throughout this year we'll see some opportunities develop.
Thank you.
Okay, we're up.
Speaker Change: And our next question comes from the line of Andrew Obin with Bank of America.
Oh yes, good morning.
Hello, Andrew.
Speaker Change: Just to clarify, what's the organic growth rate that's embedded in your first quarter guidance?
Let me see, we uh...
Speaker Change: It's a flattish number, Andrew, so both total sales and organic sales are flat.
Speaker Change: Okay, so we so we are so we are accelerating organically from fourth quarter to the first quarter. Oh, yeah
Speaker Change: Yeah, we're going from, you know, the minus, minus two, minus three.
Speaker Change: from Q4 to Q1, and it's tied to the acceleration in order input to organic order, so.
Speaker Change: I think that's going to continue throughout the year. So as those organic orders were strong, our sequential quarters, the organic growth will be increased versus Q4, and it's just a continuation of a slow acceleration through the year.
Gotcha. And just sort of combining the two questions. First...
Speaker Change: How did you, you know, all this tariff noise, do we see it in the guidance and also how does FX impact your 25 outlook because you are a meaningful U.S. exporter? So how should we think about the impact both on the revenue and margin? Thank you.
These are good questions.
The guidance we have takes into account the
Speaker Change: The things that we've we've we've heard about over the last few weeks few days few weeks But we've been making contingency plans since shortly after the elections
for Tariffs and our 2017 and 2018 playbook is relevant.
Speaker Change: That's when we executed a China for China manufacturing strategy and decoupled our supply chains from China. We executed flawlessly and we're ready to do the same thing now if it's required.
Speaker Change: We manufacture niche, highly differentiated products. We plan to pass on the cost impact of the tariffs if the tariffs get enacted to our customers as we have done previously.
Speaker Change: We have a significant U.S. manufacturing footprint, as I said. It's a flexible SLA model, so we're very agile.
Speaker Change: I think that we're well positioned to manage through the current environment. I mean, our guidance doesn't take into account
Speaker Change: doesn't assume a broader economic slowdown because of an escalating trade war, to be clear with that. No demand destruction is assumed in our budget. But with everything that we know of, and with our past success,
Speaker Change: in decoupling our supply chains from China and with our operational capability, we think we're ready for this and we've got it covered.
Speaker Change: And Andrew, on foreign exchange, obviously we're a global business, but we're primarily a U.S. dollar-centric business, so our top line is not overly exposed to foreign exchange. And we have a very balanced foreign exchange footprint at the profit and cash flow level through natural offsets, so we're not impacted by broad-based U.S. dollar movement.
Speaker Change: and I think you know the last few years you've seen a lot of FX volatility and it hasn't impacted our bottom line.
Thank you, Andrew.
Thank you.
Speaker Change: And our next question comes from the line of Christopher Glynn with Oppenheimer
Christopher Glynn: Thanks, a lot of ground covered. Just curious on current, Dave, how you think about the, you know, size of the addressable market? What's the competition like and how long you've been looking at that business?
Christopher Glynn: and we bought a business in that part of our company about 15 years ago named Prescitec.
Christopher Glynn: and they build what's called diamond turning machines that make these surfaces that are incredibly precise.
Christopher Glynn: Optical Services and the business has done extremely well for Ametek and we look at Kern as kind of a sister company with some different technology.
Christopher Glynn: and we think Kern is, they also do sub-micron level accuracy systems, their end markets are
Christopher Glynn: places that need exceptional levels of precision. It includes the medical market, the semiconductor market, the research market, the space market.
Christopher Glynn: and there's a lot of opportunities to us to grow this business.
Christopher Glynn: and then running them as sister companies with our Pressy Tech business we have.
Christopher Glynn: capability that solves a bigger set of solutions for the customers. Typical Ametek acquisition, highly differentiated, high precision.
Christopher Glynn: leader in niches, really works for the miniaturization that's going on in the
and the technology world.
Christopher Glynn: We've got a fair price for it. The management team is staying with us.
Christopher Glynn: We think it's going to be a good acquisition. And most of the most of the sales are exported outside of Germany. They're a German company, but over 70% of their sales are all outside of Germany. So the
and it fits well within Ametek's.
family of businesses.
and David Zapico.
Speaker Change: Great, thanks. And just, you know, kind of a churning part of the cycle to a degree here. Several years ago you went through some divestitures. As you look at things play out now...
Speaker Change: realizing you've really shrunk oil and metals, for instance. Are there any areas of the portfolio that are bubbling up for potential divestiture?
Speaker Change: Smaller plans are things that we continue to act on during the course of the year, but these will be inconsequential and we like the portfolio that we have right now.
Great, thanks a lot.
Thank you, Chris.
Thank you.
Speaker Change: And our next question comes from the line of Nigel Coe with Wolf Research.
Nigel Coe: Thanks, good morning, lots of information so far, but I'm sorry if I missed this, David, what is the organic, I think low school digit for the full year, but how does that break out between EMG and EIG?
Speaker Change: And I'm just curious if you're seeing a stronger rebound at EMG, just given that Paragon and Automation were, you know, quite badly impacted by D-Stock. So I'm just wondering if you're factoring in a stronger rebound in those two businesses.
Speaker Change: EMG is going to have slightly higher organic growth than ENG, so it's going to be a bit higher. It's going to be low single digit for the year, but EMG is going to be a bit higher.
A little bit higher, okay.
Speaker Change: That's great. And then just the EMG margins in fourth quarter, I mean obviously EIG was spectacular, but EMG...
Speaker Change: came in a bit lighter, and I know that there's typically some...
Speaker Change: production disabsorption in the fourth quarter. Just wondering, was there any intentional extended production shortfalls in the fourth quarter?
Speaker Change: No, it's the calendar effect, and you know we're going through a de-stocking there.
Speaker Change: and the good thing is we've leaned out the cost structure and we're really at a good place to grow. So as T's talking at Bates and that business has bottomed we're looking forward to when that turns should be some probable sales for us.
Speaker Change: And then just a quick follow-on to that comment about automation margins. Are you expecting automation to be back to positive organic growth in the first quarter next year or this year?
Speaker Change: The automation business is lagging the medical business a bit so we'll have to see how that plays out.
Okay, thank you.
Thank you.
Thank you. One moment, please.
Speaker Change: Our next question comes from the line of Joe Giordano with TD Kaplan.
Joe Giordano: Hey guys, good morning. I'm not sure, did you give the actual order number or the book to bill for the quarter? If you did, I apologize.
Yeah, let me grab that.
The
Organic order for four.
of 4%. The book to bill was 1.01.
if we exclude FX on the backlog.
Joe Giordano: Both groups were positive. The EMG was a little bit more positive than the AIG, but they were both strong.
The process declined low single digits in the fourth quarter.
Joe Giordano: We saw a strong growth in the quarter within our advanced optical metrology businesses.
Joe Giordano: as well as our high-end microscopy business had a good quarter.
Joe Giordano: And similar to last year, we experienced some temporary delays. Similar to last quarter, we experienced some temporary delays.
Joe Giordano: in project spending. And then looking forward to 2025, we expect organic sales for our process businesses to be up low single digits for the whole year.
Joe Giordano: And then I talked about the aerospace and defense business already, and there we expect ongoing strength in both commercial and defense, and to be up mid-single digits for 2025.
Joe Giordano: So process low, aerospace and defense mid. Then you go to power and industrial. Our sales were flat in the fourth quarter.
Joe Giordano: our RTDS business which provides advanced power simulation systems to utilities and research institutions saw growth in the quarter.
Joe Giordano: For 2025, we expect organic sales for our power and industrial businesses to remain flat relative to 2024 levels. And finally, the automation and engineered solutions business.
Overall sales were up low double digits.
driven by the contributions from the Paragon Acquisition.
Joe Giordano: Organic sales were down high single digits in the quarter, consistent with the levels we've seen during the year given the continued normalization of our OEM customer inventories.
Joe Giordano: And for 2025, we expect organic sales to be up mid-single digits for the year with improving growth trends throughout the year.
Thank you.
Hey, Joe.
Thank you.
Speaker Change: And our next question comes from the line of Dean Dre with RBC Capital Markets.
Speaker Change: Hi, good morning. This is Sahil Minocha on for Dean Dre.
Speaker Change: Hi, good morning. Can you provide any context on the 85 million in growth investments? How's that split between segment? And is that adding mostly sales and engineering? And what was the 2024 growth investment?
Speaker Change: research, development, and engineering spend. So I say two-thirds of the 85 is RD&E and about one-third of it is additional marketing channel sales and marketing work. So about two-thirds, one-third, and it's biased toward
EIG, largely because of the size of the EIG.
got it and then the vitality index reached
28% in the third quarter, I believe.
Speaker Change: which you noted was a strong level within the target range of 20 to 30 percent. Could you discuss the new product intros that you're most excited about for 2025 and how do you see the vitality index trending?
Speaker Change: Yeah, we talk about a vitality index being between 20 and 30 percent as a good number.
Speaker Change: And we didn't mention it, but actually it was extremely high in Q4, 30%. So it was one of our highest numbers. So the new product engine is working, and that's why we have such a strong pipeline of new orders.
Speaker Change: And I think it's going to pay off next year. We think a number like 20 to 30 is a good number for us. And we started tracking this. It was down in the.
Speaker Change: low teens, mid teens many years ago. So we think it's a good number now. You know, it's a way that we can look at the investments we're putting in and making sure we're adding value to our customers. It shows up in pricing. Also, we can get premium prices by adding features to products and having
Speaker Change: providing new value to our customers that we weren't providing before. So it's a healthy amount, we spend a healthy amount of RD&E and given our niche market focus and technology leadership, innovation leadership, it matches the strategy of the company.
Awesome. Thank you.
Thank you.
Speaker Change: Thank you. And our next question comes from the line of Robert Mason with Baird.
Speaker Change: Yes, good morning Dave, Dalip. Dave, you had mentioned that, very good, you had mentioned earlier that, you know, your labs business, you were seeing strength more, just call it rest of world, versus the U.S. right now. Can you drill into that a little bit?
Speaker Change: Is that your own overlay or footprint where you're exposed or differences in government priorities?
What's maybe driving that difference?
Speaker Change: It could be government priorities, it could be channel investments we made, but the place that we're seeing a lot of lab expansion work is in Asia.
Speaker Change: So Asia, the market's healthy everywhere, but Asia is particularly healthy.
Speaker Change: Maybe just to continue the thought there, could, you know, relative to your 2025 guidance, could you provide kind of a geographic overlay to that, just how you're thinking about the regions for 2025?
Speaker Change: I'll talk about 2024, where we ended up in 2024. We had essentially strong growth in Europe and Asia.
Speaker Change: offset by some declines in the U.S. So if you look at the full year, we had about plus two internationally and down MSD in the U.S.
Speaker Change: and that was largely our automation business that was down in the U.S.
So, and you know, and places like
Speaker Change: In Asia, we were up and China was roughly flat, so that's kind of hanging in there for us. And when we think about 2025, we're looking for all regions to grow. We're thinking we actually see some strength in Europe. Like I said, we were plus two.
Speaker Change: and some strength in Europe. We think some of the strength in Asia is going to continue. Maybe more strength outside of China than in China. We have good channels there, and we think the U.S. is going to return to growth for us.
So it will be balanced growth across all geographies.
Speaker Change: When you said China was flat, was that a Q4 number or a full year?
I think it was a four-year number.
Okay, very good. Thank you.
Thank you.
Thank you, Rob.
Thank you.
Speaker Change: And our next question comes from the line of Andrew Buscaglia with BNP Paribas
Hey, good morning, guys.
In here you're fine.
Yep, good morning.
Speaker Change: Good. Yeah, sorry about that earlier. I'm not sure what happened.
Speaker Change: So yeah, I wanted to touch on, you know, your orders you're saying are up 4% and you had some good commentary, you know, just about your subsegments for sales, but what about, sounds like orders are getting a little bit better, the momentum is picking up, what about order momentum in each subsegment or where's that coming from?
Yeah, I think there's a...
Speaker Change: What you really have is in the sub-segments, the big thing in the automation and engineer solutions, that was the destock abating, and we're starting to see some of the customers place orders now, specifically in the medtech area.
Speaker Change: That's positive and on the automation part of the business We think it's bottomed and we've leaned out cost structure. So we're optimistic about what what that's going to do when it increases
Speaker Change: The process and the power businesses, you know, we think we're well positioned and those are the project businesses. We saw some delays. We're hoping that those are going to abate a bit and quoting a lot of activity, good pipelines there.
and David Zipico. Thank you. Thank you.
We think both our military and our commercial aftermarket is...
They're going to do well, have ongoing strength.
and both sides of it.
Speaker Change: Yeah, okay. And yeah, you are generating a ton of cash, great cash flow in the quarter.
Speaker Change: This year, are we going to see a series of current deals, or do you expect another Paragon-ish size deal in 2025?
Speaker Change: That's a great question. Right now we have we have bigger deals in our pipeline and we also have smaller technology deals, what I put Kernan in our pipeline, so and we have a
We could probably spend five billion dollars.
Speaker Change: That's EBITDA of about two and a half the way we calculate it So we're we're very aggressive in that area and there's there's properties prop Businesses that were you know people were holding back on it seems like the market is picking up a bit. So
to get deal done, we're going to be able to...
Speaker Change: be opportunistic with share buybacks and we're going to reward our shareholders, long-term shareholders with...
Speaker Change: a ever-increasing dividend, small dividend but ever-increasing, so we have a balance sheet where we can do it all, and we're going to do it all. But I think the most optimism is in the M&A area right now.
Yeah, okay. Thank you.
Thank you
Thank you.
Speaker Change: Thank you, Andrew, and thanks, everyone, for joining our call today. And as a reminder, a replay of the webcast can be accessed in the investor section of Ametek.com. Have a great day.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.
Speaker Change: For Questions and Details, contact the Geological Survey. Please Like, Comment and Subscribe.
Speaker Change: Hello, and welcome to the fourth quarter, 2024 Amitech Earnings Conference Call.
At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone.
Speaker Change: You will then hear an automated message advising that your hand has been raised.
Please be advised that today's conference is being recorded.
Speaker Change: It is now my pleasure to introduce Vice President Investor Relations and Treasurer Kevin Coleman.
and many more. Thank you. Thank you.
Speaker Change: Thank you, Andrew. Good morning and welcome to Ametek's fourth quarter 2024 earnings conference call.
Speaker Change: Joining me today are David Zapico, Chairman and Chief Executive Officer, and Dalip Puri, Executive Vice President and Chief Financial Officer.
Speaker Change: During the course of today's call, we will be making 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.
Speaker Change: A detailed discussion of the risk and uncertainties that may affect our future results is contained in Amitek's filings with the SEC.
Speaker Change: Amitek disclaims any intention or obligation to update or revise any forward-looking statements.
Speaker Change: Any reference made on this call to 2023 or 2024 results.
Speaker Change: Order to 2025 Guidance will be on an adjusted basis excluding after-tax acquisition-related intangible amortization.
Speaker Change: in excluding a pre-tax $29.2 million or 10 cent per diluted share charge in the first quarter of 2024 for integration costs related to the Paragon Medical Acquisition.
Speaker Change: Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website. We'll begin today's call with prepared remarks and then we'll open it up for questions and I'll turn the meeting over to Dave.
Thank you, Kevin, and good morning, everyone.
Speaker Change: In the quarter, we established records for sales, operating income, EBITDA, and diluted earnings per share, as well as for operating cash flow and free cash flow.
Speaker Change: We also repurchased 155 million dollars in shares during the quarter, and this morning we announced the acquisition of Kern Microtechnique for approximately 105 million euros.
Speaker Change: Our performance this quarter marks the culmination of a strong year in which we leveraged the proven strength of our operating model to deliver outstanding results despite a challenging economic environment.
Speaker Change: Fourth quarter sales were a record $1.76 billion, up 2% from the same period in 2023.
Speaker Change: Organic sales were down 3%, acquisitions added 5 points in the quarter, and foreign currency was flat.
Speaker Change: Orders were solid in the quarter with organic orders up 4% versus the prior year. With positive organic growth across both our EIG and EMG segments.
Speaker Change: And we ended the quarter with a strong backlog of $3.4 billion.
Ametek's operating performance in the fourth quarter was excellent.
Speaker Change: Operating income in the quarter was a record, $469 million, a 5% increase over the fourth quarter of 2023.
Speaker Change: EBITDA in the quarter was a record $561 million, up 7% versus the prior year. EBITDA margins then impressive, 31.9%.
Speaker Change: This operating performance led to robust cash generation, with free cash flow a record $498 million in the quarter, up 4% versus last year's fourth quarter, and free cash flow to net income conversion of 129%.
Speaker Change: Diluted earnings per share were a record $1.87, up 11% versus the fourth quarter of 2023, and above our guidance range of $1.81 to $1.86 per share.
Speaker Change: Now let me provide some additional details at the operating group level.
First, the Electronic Instruments Group.
Speaker Change: EIG delivered outstanding performance in the fourth quarter with impressive margin expansion and operating margin levels that reflect the high quality of our businesses.
Speaker Change: EIG sales were $1.21 billion, down 2% from the fourth quarter of last year. Organic sales were down 3% and acquisitions added one point.
Speaker Change: Growth was strongest across our aerospace and defense businesses, while our advanced optical metrology businesses, ZYGO, also saw solid growth in the quarter.
Speaker Change: Similar to last year, our EIG businesses experienced some project delays in the fourth quarter as customers remain cautious at year-end.
Speaker Change: We view these as temporary delays as the new project pipeline remains strong.
Speaker Change: EIG operating income was a record $386.6 million, up 8% versus the prior year, and operating margins were also a record 31.8%, up a robust 280 basis points from the prior year.
and David Zipco. Thank you.
Speaker Change: The electromechanical group also finished the year with strong operating performance.
EMG's fourth quarter sales were $540 million.
prior year.
with organic sales down 4%.
Speaker Change: Strong performance in our aerospace and defense businesses was offset by weaknesses in our OEM exposed businesses which continued to face headwinds from inventory de-stocking.
Speaker Change: EMG's operating income in the fourth quarter was $111.2 million, down 1% compared to the prior year period, while EMG's fourth quarter operating margins were 20.3%.
now over the full year.
Speaker Change: Overall performance was strong in 2024 as we established annual records for essentially all key financial metrics.
Speaker Change: Overall sales for the year were $6.94 billion, up 5% from 2023. Operating income for 2024 was $1.81 billion, up 6%. And operating margins were 26.1% for the full year, up 20 basis points from the prior year, with core margins up 120 basis points.
Speaker Change: EBITDA for the year was $2.18 billion, up 8%, with EBITDA margins of very strong, 31.4%.
Speaker Change: Full year 2024 earnings were $6.83 per daily share, up 7% versus the prior year.
Speaker Change: We also delivered exceptional cash flows in 2024, with free cash flow up 6% versus the prior year and free cash flow to net income conversion a very strong 124%.
Speaker Change: Amitek's performance in 2024 underscores the quality of our businesses, the flexibility of our operating model, and the outstanding contributions from all Amitek colleagues.
Speaker Change: As noted, in the fourth quarter, we repurchased approximately $155 million in shares, bringing our total share repurchases for the year to approximately $220 million.
Speaker Change: While our top priority for capital deployment remains acquisitions, our strong cash flows provide us with the flexibility to also opportunistically repurchase shares.
Speaker Change: Subsequent to the end of the first quarter, we acquired current micro technique, which we announced this morning.
Speaker Change: Kern is a leading manufacturer of high-precision machining and optical inspection solutions that achieve industry-leading accuracy and surface finish.
Speaker Change: Fern's highly engineered solutions help customers produce highly complex and precise components used in semiconductor, medtech, space, and other high-tech industries.
Speaker Change: Kern is a strong strategic fit with our ultra-precision technologies business, expanding our existing capabilities and ultra-high precision manufacturing and opening up new opportunities to serve customers with growing demands for miniaturization and accuracy.
Speaker Change: Headquartered near Munich, Germany, Kern has annual sales of approximately 50 million Euro.
Speaker Change: I'm excited to welcome all current colleagues to the Emmet Tech family.
Speaker Change: Looking ahead to 2025, we are managing a strong pipeline of high-quality acquisition candidates. We have a healthy and flexible balance sheet, providing us the opportunity to deploy meaningful capital on strategic acquisitions.
Speaker Change: With our robust balance sheet, significant financial capacity, and disciplined approach to capital deployment, Amitek is well positioned to continue driving long-term value through our acquisition strategy.
Speaker Change: In addition to acquisitions, we continue to invest in our businesses to best position them for long-term growth.
Speaker Change: In 2024, we invested approximately $90 million in incremental growth investments, largely across research, development, and engineering, and sales and marketing functions to support their organic growth initiatives.
Speaker Change: We expect to invest approximately $85 million in incremental growth investments in 2025.
Speaker Change: These investments and initiatives have strengthened our leadership positions within our niche markets, helped open up new growth opportunities in attractive adjacent markets, and accelerated our new product development and technology innovation.
Speaker Change: One such example of our technology innovation successes can be found in our latest innovation award winner at Comica.
Speaker Change: Kamika's LEAP series of atom probe microscopes provide 3D imaging and chemical composition characterization and materials at the nano scale.
Speaker Change: Historically, the LEAP product line focused on material science and geology applications targeted at highly knowledgeable academic customers at the Ph.D. level.
Speaker Change: Kamika determined that an enhanced productivity system with high sensitivity and improved yield would broaden the market and support both academic and industrial customers.
who put a premium on throughput, automation, and analytical capability.
Speaker Change: This led to the development of the new Leap 6000 XR which provides enhanced ease-of-use, new automation features for data collection, and improved analytical capabilities.
Speaker Change: With this new technology atom probe tomography is now used to study nearly all classes of solid materials from the oldest minerals on earth to the most advanced aerospace satellites.
Speaker Change: As a result, new applications are emerging due to Comica's customer-centric approach to innovation.
Thank you for watching!
Now shifting to our outlook for the year ahead.
Speaker Change: We remain cautious as we start the year given the ongoing macroeconomic uncertainties.
Speaker Change: However, we are encouraged by the strength and orders we experienced in the second half of the year, our strong backlog, our leading positions across a diverse set of markets which are poised for improved growth, and our significant capital available to deploy on strategic acquisitions.
Speaker Change: Diluted earnings per share for the year are expected to be in the range of $7.02 to $7.18, up 3-5% compared to last year's results.
Speaker Change: For the first quarter, we anticipate overall sales to be roughly flat versus the prior year first quarter with adjusted earnings of $1.67 to $1.69 per share up 2-3% versus the prior year.
Speaker Change: To summarize, Amitek delivered a strong finish to the year, a solid performance in the fourth quarter, reflecting the strength of our portfolio and our ability to execute our growth strategy in a sluggish macro environment.
Speaker Change: Our differentiated technologies and deep industry expertise continue to position us well in attractive niche markets, providing a solid foundation for future growth.
Speaker Change: With a focus on innovation, operational excellence, and disciplined capital allocation, we are confident in our ability to drive continued growth and create long-term value for our shareholders in 2025 and beyond.
Speaker Change: I will now turn it over to Dalip Puri, who will cover some of the financial details of the quarter. Then, we will be glad to take your questions. Dalip? Thank you, Dave, and good morning everyone. As Dave noted, Ametek had a strong finish to 2024, establishing records for sales, operating income, earnings per share, and cash flow in the quarter.
Speaker Change: Now, let me provide some additional financial highlights for the fourth quarter and the full year, as well as some additional guidance for 2025.
Speaker Change: Starting with general and administrative expenses, fourth quarter G&A expenses were $28.9 million, up $2.5 million from the prior year.
Speaker Change: For the full year, general and administrative expenses were up approximately $5 million. As a percentage of sales, G&A expense was 1.5%, in line with 2023 levels.
Speaker Change: For 2025, general and administrative expenses are expected to be approximately 1.5% of sales.
Speaker Change: Fourth quarter, other operating expenses were down $1 million compared to the fourth quarter of 2023 due to lower due diligence costs.
Speaker Change: For 2025, we expect other operating expenses to be largely in line with 2024 levels.
Speaker Change: The effective tax rate in the quarter was 12.8%, down from 17.8% in the fourth quarter of 2023 due to statute expirations.
Speaker Change: For the full year, the effective tax rate was 17.3%, which was in line with our guidance range of 17 to 17.5%.
Speaker Change: For 2025, we anticipate our effective tax rate to be between 19 and 20 percent. As we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full-year estimated rate.
Speaker Change: Capital expenditures were $52 million in the fourth quarter, and $127 million for the whole year. Capital expenditures in 2025 are expected to be approximately $155 million, or about 2% of sales.
Speaker Change: Depreciation and amortization expense in the quarter was 96 million dollars and for the full year was 383 million dollars.
Speaker Change: In 2025, we expect depreciation and amortization to be approximately $400 million, including after-tax, acquisition-related, intangible amortization of approximately $194 million, or 83 cents per diluted share.
Speaker Change: Operating cash flow in the fourth quarter was a record at $550 million, up 2% versus the fourth quarter of 2023.
Speaker Change: Free cash flow was also a record in the quarter, up 4% to $498 million, with excellent free cash flow conversion of 129% for the quarter.
Speaker Change: Free cash flow for 2024 was a record $1.7 billion, up 6% versus the prior year, with full-year free cash flow conversion also very strong at 124% of net income.
Speaker Change: For 2025, we expect free cash flow conversion to be approximately 115%.
Total debt at year-end was $2.1 billion.
down $1.2 billion from the end of 2023.
offsetting this debt is cash and cash equivalents.
Speaker Change: of $374 million. As Dave noted, we spent approximately $155 million on share repurchases in the fourth quarter, bringing our total share repurchases for the year to approximately $220 million.
Speaker Change: Additionally, subsequent to the end of the fourth quarter we deployed approximately 105 million euros on the acquisition of Kern Microtechnique.
Speaker Change: At the end of 2024, our gross debt-to-EBITDA ratio was 0.9 times, and our net debt-to-EBITDA ratio was 0.8 times.
Speaker Change: We continue to have excellent financial capacity with approximately 2.5 billion dollars of cash and existing credit facilities to support our acquisition strategy and growth initiatives.
Speaker Change: In summary, we delivered strong fourth quarter and full year 2024 operating results, highlighted by record earnings, robust margins, and excellent cash flow generation.
Speaker Change: With a proven strategy, significant capital deployment capacity, and a strong track record of execution, we are well positioned to navigate current trade uncertainties and to drive growth and value creation in 2025.
Kevin.
Kevin Coleman: Thanks Dalip. Andrew, can we please open the lines for questions?
Thank you.
certainly
Kevin Coleman: As a reminder to ask a question you will need to press star 1 1 on your telephone
Speaker Change: And our first question comes from the line of Matt Somerville with D.A. Davidson.
Thanks, Morgan, David.
Matt Somerville: Maybe, could you talk a little bit about the nature of delays you saw within EIG, and if you started to see some of that break now that we're into February, and then maybe if you could also comment on your views regarding the remaining duration of the OEM destocking, you're continuing to see an EMG, and then add follow-up.
Speaker Change: Good morning. The project delays in ERG were pretty much what we've been seeing.
Thank you.
Speaker Change: We got some delays on the shipments, but the orders were good.
Speaker Change: And similar, the destocking headwinds largely impacted our OEM-exposed businesses in the EMG, which include our automation and engineering solutions subsegment.
Speaker Change: But we're starting to see improved order patterns from some OEM customers.
Speaker Change: Others are taking a little time to de-stalk. We were encouraged by the sequential orders growth in Paragon.
Speaker Change: They had substantial double-digit order growth. We're also encouraged by the orders in the EIG.