Q1 2025 AMETEK Inc Earnings Call
Okay.
Speaker Change: Hello, and welcome to the first quarter 2025, AMETEK 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 this session you will need to press star one one on your telephone.
You will then hear an automated message advising your Hana has been raised.
Speaker Change: To withdraw your question. Please press star one again please.
Speaker Change: Please be advised that today's conference is being recorded.
Speaker Change: It is now my pleasure to introduce vice President of Investor Relations and Treasurer, Kevin Coleman.
Speaker Change: Thank you Andrew Good morning, and welcome to Ametek's first quarter 2025 earnings Conference call.
Speaker Change: Joining me today are Dave <unk>, Chairman and Chief Executive Officer, Dr. Perry Executive Vice President and Chief Financial Officer.
Speaker Change: During the course of today's call, we will be making forward looking statements, which represent the company's current expectations and are based on information currently available to the company.
Speaker Change: Various risk factors and uncertainties, including government trade policies and tariffs could cause actual results to differ materially from our current expectations.
Speaker Change: A detailed discussion of the risks and uncertainties that may affect our future results is contained in ametek's filings with the SEC.
AMETEK disclaims any intention or obligation to update or revise any forward looking statements.
Speaker Change: Any references made on this call to 2024 for 2025 results for 2025 guidance will be on an adjusted basis, excluding after tax acquisition related intangible amortization and excluding a pretax $29 2 million or <unk> 10 per alluded per diluted share charge in the first.
Speaker Change: <unk> 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 investors section of our website. We'll begin today's call with prepared remarks, and then we'll open it up for questions I will turn the meeting over to Dave.
Dave: Thank you, Kevin and good morning, everyone.
Dave: AMETEK had a strong start to 2025 with excellent first quarter results.
Dave: We delivered robust margin expansion generated strong free cash flow and delivered earnings above our expectations.
Dave: Additionally, orders were again strong in the quarter.
Dave: Our results reflect the strength of the AMETEK growth model.
Dave: The quality of our niche differentiated businesses and most importantly, the outstanding efforts from our colleagues.
Dave: Now, let me turn to our first quarter financial results.
Dave: Sales were $1 $73 billion essentially in line with the first quarter of 2024.
Dave: Organic sales were down 1%.
Dave: Acquisitions added one and foreign currency was flat.
Dave: Orders were strong in the quarter with overall orders up 8% and organic orders up 3% versus the prior year.
Dave: Book to Bill in the quarter was a 1.04 and we ended the first quarter with a backlog of $3 $47 billion near record levels.
Dave: Ametek's operating performance to start the year was excellent.
Dave: Operating income in the quarter was $455 million, a 2% increase over the first quarter of 2024.
Dave: Operating margins were $26 three.
Dave: And 3% in the quarter up 60 basis points from the prior year.
Dave: And excluding the dilutive impact from acquisitions core margins were up 90 basis points in the quarter.
Dave: EBITDA in the quarter was $559 million up 3% versus the prior year with EBITDA margins and an impressive 32, 2%.
Dave: This operating performance led to strong cash generation with free cash flow of $394 million in the quarter and our free cash flow to net income conversion of 112%.
Dave: Diluted earnings per share were $1 75 up 7% versus the first quarter of 2024 and above our guidance range of $1 67 to $1 69 per share.
Dave: Now let me provide some additional details at the operating group level.
Dave: First the electronic instruments group.
Dave: Our electronic instruments group continues to deliver excellent operating performance, resulting in robust operating margins.
Dave: <unk> sales were $114 billion down 1% from the first quarter of last year organic.
Dave: Organic sales were down 2%.
Dave: Acquisitions added two points and foreign currency was a one point headwind.
Dave: <unk> operating income was up slightly to $354 $1 million and operating margins were very strong at 31% up 50 basis points from the prior year, while core margins were an impressive.
Dave: 110 basis points.
Dave: <unk> delivered strong growth and excellent operating performance in the quarter.
Dave: Emg's first quarter sales were a record <unk>.
Dave: $588 3 million up 2% versus the prior year with organic sales also up 2%.
Dave: In the quarter, we experienced improving order patterns.
Dave: Especially within our Paragon medical business.
Dave: Emg's operating income in the quarter was $128 $7 million up 7% compared to the prior year period.
Dave: Emg's operating margins were.
21, 9% up a sizable 120 basis points from the first quarter of 2024.
Dave: I am pleased with our performance in the first quarter with robust margin expansion strong order growth excellent cash flow generation and 7% earnings growth. Despite a continued uncertain economic environment.
Dave: We remain committed to making strategic investments in our businesses to best position them for long term growth.
Dave: These investments are supporting our global and market expansion and technology innovation strategies.
Dave: For all of 2025, we continue to expect to invest an incremental $85 million in support of these initiatives with key investments in research development and engineering to help advance our product differentiation.
Our vitality index, which measures the sales of new products introduced in the past three years was a strong 26% in the first quarter.
Dave: We are confident that these investments will further solidify our competitive positions in our core markets and broadened our exposure with a new attractive growth markets.
Dave: I wanted to take a moment to highlight just two of many.
Dave: Recent new product introductions across the company.
Dave: <unk>.
Dave: From a <unk> a leader in electron microscope technology.
Dave: They recently launched the <unk> elite Ultra energy dispersive X-ray spectroscopy system.
Dave: The elite Altra solves a common challenge in advanced materials research by improving the ability to map and quantify elements and very thin samples.
Dave: This system provides faster more accurate results, allowing for deeper insights into material composition.
Dave: One of the key features of the elite Altra is a larger sensor, which captures more X rays and improves the system sensitivity to a wider range of elements, leading to better data and faster analysis.
Dave: <unk> worked closely with another AMETEK business Amtech and a development of this advanced sensor technology.
Dave: This is just one example of the ways our businesses partner together to help support and accelerate our technology innovation.
Dave: With this new product introduction.
Dave: <unk> continues to lead the way in developing advanced solutions that help scientists and engineers push the boundaries of their scientific research.
Dave: Vision Research also launched a new line of small powerful high speed cameras.
Dave: <unk> K T series.
Dave: These cameras leveraged our custom designed high speed sensor from fourth of Silicon another AMETEK business.
Dave: These sensors provides superior image quality and performance, making them ideal for advanced applications there.
Dave: Theyre compact design makes them easier to use in a variety of settings, whether for industrial testing motion analysis or medical research.
Dave: Through this latest innovation vision research continues to lead the market in high speed imaging technology, offering researchers powerful tools to capture and analyze fast moving phenomenon.
Dave: These advancements along with many others introduced in the quarter.
Dave: Highlight our continued commitment to our customers and position.
Dave: Position us well to drive long term success and meet evolving needs across emerging applications.
Dave: Now switching to capital deployment.
Dave: Strategic acquisitions remain our number one priority for capital deployment.
Dave: We are managing a robust pipeline of attractive acquisition candidates.
Dave: While our top priority for capital deployment remains acquisitions.
Dave: We're also well positioned to deploy capital and share buybacks.
Dave: We have a one 5 billion share repurchase authorization and.
Dave: And as we've shown in prior periods of market dislocation, we are willing to opportunistically purchase shares.
Dave: Given our robust free cash flow generation and a strong flexible balance sheet, we are well positioned to deploy capital on both strategic acquisitions and opportunistic share purchases.
Dave: Now, let me share our views on the rapidly evolving trade conflicts and all AMETEK is approaching this period of heightened uncertainty.
Dave: Taking a step back.
Dave: During the first quarter, we saw improving order patterns and generally solid conditions across both markets and geographies.
Dave: While there was still some cautiousness from customers conditions were improving and we were encouraged with our start to the year.
Dave: With the introduction of the tariffs in early April and subsequent back and forth trade negotiations over the past month the level of uncertainty around trade policy and its implications have increased.
Dave: Although it is impossible to know all of these trade conflicts will evolve we.
Dave: We are confident in our ability to successfully navigate an uncertain and changing economic environment.
Dave: Our distributed operating structure empowers local teams to respond quickly and appropriately to the unique dynamics of their businesses markets supply change and customers.
Dave: This level of flexibility as a meaningful advantage in this dynamic environment such as the current one.
Dave: Our portfolio of highly differentiated products and mission critical applications will allow us to effectively pass through higher input costs, including tariffs.
Dave: While continuing to deliver strong margins and cash flows.
Dave: Sure.
Dave: Our broad exposure in diversification across end markets and geographies limit our dependence on any single customer product technology supplier or region.
Dave: This diversification as a strategic strength and that will shield the entire company from our concentrated risk.
Dave: Our large global manufacturing footprint and supplier base, along with our asset light business model will allow us to localize production and adjust supply changes.
Dave: And lastly, our strong balance sheet and outstanding cash flow generation provides us with the ability continue playing offense through acquisitions and opportunistic share repurchases, while also continuing to invest in our businesses.
Dave: During the first wave of the China tariffs in 2018 during Covid and then again during the resulting supply chain races through higher levels of economic uncertainty and each time, our businesses quickly reacted and strengthened their positions.
Dave: Our business is robust by design and resilient by nature, we use periods of disruption to make our business is stronger and more efficient.
Dave: We use our strong cash flows and balance sheets to better position AMETEK for accelerated growth. Following the period of uncertainty. We're confident we can do the same in this environment.
Dave: More specifically our businesses have responded quickly and have developed tariff response plans, which includes specific mitigation actions to offset the impact from tariffs.
Dave: These mitigation actions include select pricing initiatives.
Dave: <unk> in our production operations.
Dave: Adjustments to our supply chain and targeted productivity actions.
Dave: We are also finding opportunities created by the tariffs to take advantage of our substantial U S manufacturing footprint to broaden our customer base and support their growth in the U S.
Dave: While uncertainty has increased as a result of the global trade dynamics, we believe we can offset tariff headwinds to the implantation.
Dave: The implementation of these mitigation actions.
Dave: As a result, we continue to expect full year sales to be up low single digits on a percentage basis compared to 2024.
Dave: We also continue to expect diluted earnings per share to be in the range of $7 <unk> to $7 18 up 3% to 5% compared to last year results.
Dave: We expect the benefits from these various mitigating actions to build throughout the year.
Dave: We remain confident in our full year outlook and our ability to deliver strong results and 2025.
Dave: In summary, AMETEK delivered strong results to start the year or.
Dave: Our businesses executed exceptionally well delivering strong margins solid orders growth and earnings ahead of our expectations.
Dave: The durability of the AMETEK growth model combined with our diversified market exposures outstanding cash flows improvement management capabilities position us well to navigate through these uncertain economic times.
Dave: We remain focused on delivering long term growth and creating long term value for our shareholders.
Dave: I will now turn it up turn it over to Dallas, who will cover some of the financial details of the quarter, then we'll be glad to take your questions.
Dallas: Thank you, Dave and good morning, everyone as Dave noted AMETEK delivered a strong start to the year highlighted by excellent operating performance robust core margin expansion and strong free cash flow conversion.
Dallas: Now, let me provide some additional financial highlights for the first quarter.
Dallas: First quarter general and administrative expenses were $28 million up $1 5 million from the prior year.
Dallas: For the full year, we continue to expect general and administrative expenses to be up modestly versus 2024 levels and to remain at approximately one 5% of sales.
Dallas: First quarter other operating expenses were up $1 million compared to the first quarter of 2024 due to lower interest and investment income.
Dallas: First quarter interest expense was $19 million.
Dallas: The effective tax rate in the quarter was 19% in line with the first quarter of 2024.
Dallas: For 2025, we continue to anticipate our effective tax rate to be between 19 and 20%.
Dallas: As we have stated in the past actual quarterly tax rates can differ dramatically either positively or negatively from this full year estimated rate.
Dallas: Capital expenditures in the first quarter were $23 million and for the full year, we expect capital expenditures to be approximately $155 million.
Dallas: We're about 2% of sales.
Dallas: Depreciation and amortization expense in the quarter was $106 million for.
Dallas: For the full year, we expect depreciation and amortization to be approximately $410 million, including after tax acquisition related intangible amortization of approximately $203 million or.
Dallas: Or <unk> 88 per diluted share.
Dallas: Operating working capital in the first quarter was 18, 1% of sales that compares to 18, 7% in last year's first quarter.
Dallas: Operating cash flow was $418 million up 2% versus the first quarter of 2024, while free cash flow was $394 million up 3% over the prior year.
Dallas: Free cash flow conversion was strong at 112% in the quarter for.
Dallas: For 2025, we continue to expect free cash flow conversion to be approximately 115% of net income.
Dallas: Total debt at March 31 was one 9 billion.
Dallas: Down from $2 1 billion at the end of 2024.
Dallas: Offsetting this debt is cash and cash equivalents of $399 million.
Dallas: At the end of the first quarter, our gross debt to EBITDA ratio was 0.9 times and our net debt to EBITDA ratio was <unk> seven times.
Dallas: We continue to have excellent financial capacity and flexibility with approximately $2 5 billion.
Dallas: And cash and available credit facilities to support our growth initiatives and our active acquisition pipeline.
Dallas: While acquisitions remain our number one capital allocation priority for use of our free cash flow. We also seek to provide value to our shareholders through opportunistic share repurchases and a consistently increasing dividend.
Dallas: In February we announced an 11% increase in our quarterly cash dividend to <unk> 31 per share our sixth consecutive year of 10% plus annual increases in our dividend payouts.
Dallas: Additionally, <unk> board of directors approved a $1 $25 billion share repurchase authorization in February that provides us with added flexibility to enhance shareholder value.
Dallas: In summary, our businesses delivered strong results to start the year, our proven operating capabilities drove strong earnings robust margin expansion and outstanding free cash flow conversion.
Dallas: With a proven strategy significant capital deployment capacity and a strong track record of execution. We are confident in our positioning to navigate current trade uncertainties and drive growth and value creation in 2025, I will now pass it to you.
Dallas: Andrew can we please open the lines for questions.
Speaker Change: 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.
Speaker Change: And our first question comes from the line of Matt Summerville with D. A Davidson.
Speaker Change: Thanks, Good morning.
Speaker Change: Dave could you maybe provide a little bit more detail on what you are seeing specifically in paragon and the broader group of medical related businesses, especially given do you explicitly called out Paragon is seemingly seen notable inflection in orders after a period of soft.
Speaker Change: And that business. After shortly after you acquired it a year and a half or so ago, so a little bit more color on Paragon, a medical and then I have a follow up sure Matt.
Speaker Change: As you know Paragon is a business that we acquired a little over a year ago. They specialize in single use and consumables surgical instruments, and implantable components and attractive med Tech markets and as you said when we bought it.
Speaker Change: Right after that they went through a destocking and we took that period of time over the past year to really.
Speaker Change: Execute our multiyear improvement plan, where we're dramatically improving the cost position of the business. The business is in growing markets that as excellent engineering capability. They have a weighted leading additive manufacturing capability are substantial.
Speaker Change: A number of new program wins, and we just viewed the softness as our customers were.
Speaker Change: No.
Speaker Change: Re aligning with the current market environment, there was some over buying during the.
Speaker Change: Prior period, and what we saw in the.
The quarter was very encouraging.
Speaker Change: Customers are beginning to destock.
Speaker Change: If you look broader at the.
Speaker Change: OEM automation in the Med Tech OEM businesses those businesses that were really the places where we saw the destocking.
Speaker Change: And some of those orders were up 25% in the quarter. So across all of those businesses, 25% and Paragon led all of those businesses. So paragon was greater than 25% substantially greater than 25%. So.
Speaker Change: So the customers are destocking.
Speaker Change: Business also performed very well on our profit margin basis, it was 25% in the quarter. So.
Speaker Change: We have a new management team there and the businesses executing we're working through some of our business improvement plans.
Speaker Change: Those orders that we have in the first half of the year are going to.
Speaker Change: Lead to us having some substantial growth in the second half of the year. So we're feeling really good about it and the team is performing very well.
Speaker Change: It's good that the market is performing exactly as we thought it was and we told you about the past few quarters.
Speaker Change: Thanks, David just as a follow up can you speak more broadly across AMETEK as to the order cadence you have experienced through the first four months of the year have you seen.
Speaker Change: I don't think so given most of what you do is fairly customized to a degree but are you seeing any sort of buy ahead any sort of discernible demand destruction. If you can maybe comment on what price realization looks like in Q1. Thank you yes.
Speaker Change: I'll take the second part first I mean during the quarter.
Speaker Change: We saw a couple of points of inflation, and we were able to offset that with.
Speaker Change: With price so the positive spread.
Speaker Change: <unk>.
Speaker Change: In terms of orders.
Speaker Change: As I said in the prepared remarks overall orders were up 8% in the quarter.
Speaker Change: Organic orders were up 3%.
Speaker Change: And so that shows continued improvement that we've seen in poor third quarter in a row and.
Speaker Change: And sequentially they were up about 2% and we have a near record backlog so thats very good.
Speaker Change: The cadence the cadence in March.
Speaker Change: Was the strongest month.
Speaker Change: For orders in the year, so it improved throughout the quarter.
Speaker Change: When we started Q2 and.
Speaker Change: We were concerned because of all the.
Speaker Change: Tariff things going on but our orders are still solid we are really really good and we feel good about it.
Speaker Change: So pretty typical quarter with March being the strongest and we also had a strong strong April.
Dave: Thank you thank you Dave.
Dave: Thank you.
Speaker Change: Next question comes from the line of Deane Dray with RBC capital markets.
Speaker Change: Thank you and good morning, everyone. Good morning, Deane and maybe we will start right, where you left off with Matt's question, maybe just the next layer of detail because youre really adept at taking us through key end markets geographies and really if there's ever been a time, where we're interested in the nuance.
Speaker Change: Is it sounds like no demand destruction, but just how are you.
Speaker Change: <unk>.
Speaker Change: It looks like the orders have been strong, but any kind of call outs positives or negatives would then geographies in your particular verticals.
Speaker Change: Yes.
Speaker Change: And the geography area.
Speaker Change: <unk>.
Speaker Change: Positive growth in the U S.
Speaker Change: Offset by modest declines internationally so.
Speaker Change: We're up a bit in the U S and just down a bit in Europe and Asia.
Speaker Change:
Speaker Change: Our China market was down about <unk>.
Speaker Change: 10%.
Speaker Change: Asia, Excluding China was roughly flat.
Speaker Change: So it kind of kind of played out how we thought it would but.
Speaker Change: It was again strength in the U S offset by modest decline declines in other areas.
Speaker Change: If I go around the.
Speaker Change: The worn on our process business.
Speaker Change: <unk> sales for that business.
Speaker Change: Declined low single digits in the first quarter.
Speaker Change: Sales were pretty much in line with our expectations, but in.
Speaker Change: And long term project activity remains solid but customers are still remaining cautious about when they place to the PEO given.
Speaker Change: The broader macro uncertainties and there were some delays in project timing and process and we now expect organic sales for our process businesses to be roughly flat for the year.
Speaker Change: Our aerospace and defense business had a strong start to 2025 organic sales were up mid single digits in the first quarter.
Speaker Change: Growth was strongest in our commercial OEM business.
Speaker Change: Our after market business also had a very good quarter as we have content across a broad range of <unk>.
Speaker Change: Commercial aerospace platforms and aftermarket capabilities.
Speaker Change: Really position us well.
Speaker Change: For the full year in A&D, we continue to expect organic sales to be up mid single digits.
Speaker Change: And our.
Speaker Change: Third market segment commentary.
Speaker Change: Organic sales for our power business were up low single digits in the quarter with solid growth across our power platform.
Speaker Change: We continued to manage a strong growth funnel.
Speaker Change: Oh.
Speaker Change: Good new business pipeline.
Speaker Change: Good opportunities in power grid monetization and electrification.
Speaker Change:
Speaker Change: We are expecting some cautious customer behavior and the international markets in the near term given some of the tariff uncertainty.
Speaker Change: But for the full year, we continue to expect organic sales to be roughly flat versus the prior year.
Speaker Change: And then ill.
Speaker Change: Lastly, I will talk about our automation and engineered solutions business.
Speaker Change: The organic sales were down low single in the quarter.
Speaker Change: Continued solid sequential sales growth.
Speaker Change: Orders were strong in the quarter I talked about our OEM customers already as a response to to Matt's questions, but clearly.
Speaker Change: Clearly the orders or normalizing.
Speaker Change: Both year over year and solid sequential orders growth.
Speaker Change: <unk> highlighted the <unk>.
Speaker Change: Most of our Paragon medical business and for the full year, we continue to expect mid single digit organic sales growth. So.
Speaker Change: We got through the quarter I mean, it was a good quarter pretty much as expected.
Speaker Change: But margins were good.
Speaker Change: Cash flow strength with good base earnings were good.
Speaker Change: Orders will continue on a positive strength our balance sheet strength is really good. So there's a lot of positives in the first quarter game.
Speaker Change: Yes, it really does sound that so I appreciate that color and just one data point on the tariffs and that's exactly what we would've expected you to go through all the mitigation plan.
Speaker Change:
Speaker Change: Can you just size for us yeah, China as a.
Speaker Change: As a percent China sourcing as a percent of Cogs.
Speaker Change: Or just that data point helps us frame, what kind of headwind that youre up against right I'll go through the.
Speaker Change: Uh huh.
Speaker Change: The entire.
Speaker Change: Tariff mitigation, where we're working on so and I'll cover China, specifically, a couple a couple of different ways than what were sort of in the interim what we're selling there. So so.
Speaker Change: <unk>.
Speaker Change: Good.
Speaker Change: A good summary.
Speaker Change: We estimate our annual.
Speaker Change: Tariff impact direct impact of tariffs to be about $100 million.
Speaker Change: And we expect to be able to offset this direct impact through our mitigating actions and that we and Thats why we feel.
Speaker Change: Comfortable to reaffirm our full year sales and EPS guidance.
Speaker Change: Given our strong start to the year and some of the things that I talked about now.
Speaker Change: Now if I break down that 100 million that comes from really three sources.
Speaker Change: There was a 10% across the board tariffs for all countries.
Speaker Change: The second component of it includes is the 145% tariffs on China imports to the U S.
Speaker Change: Now we have fairly limited exposure here given the proactive actions we started back in 2018 to shift sourcing away from China, We've talked about that multiple times over the years and in.
Speaker Change: In fact, the remaining sourcing cost in this category are firm recently acquired businesses.
Speaker Change: So the bulk of AMETEK is not sourcing from China, when we source from China, we sell in China.
Speaker Change: But we have some new acquisitions that we have to work on like the Paragon deal like some of the more recent deals we're doing some work in China, but it's relatively modest.
Speaker Change: Get that 100 <unk>.
Speaker Change: 41, 45% tax on trade.
Speaker Change: The other element of it is in terms of Mexico.
Speaker Change: Glad to find out that were over or people, who have done good work and we're over 98% compliant with the U S MCA guidelines.
Speaker Change: So very very little exposure. So we feel really good about our ability to offset the $100 million of direct tariff exposure through our various mitigating actions.
Speaker Change: Now the other element that I want to make you aware of is separate from those direct impacts.
Speaker Change: We.
Speaker Change: We have the 125% retaliatory tariffs imposed by China on the U S.
Speaker Change: And as you know.
Speaker Change: We do about 9% of our sales in China.
Speaker Change: A lot of its local for local but we do have approximately 4% of our sales.
Speaker Change: So in the case of.
Speaker Change: The second quarter that will be about $70 million or direct U S to China.
Speaker Change: And we expect we're seeing short term delays here given the magnitude of the tariffs.
Speaker Change: Our customers are taking a wait and see attitude.
Speaker Change: Theyre confirming to us that they still want the products.
Speaker Change: But they are waiting for lower tariff levels.
Speaker Change: Much of this product is our higher end instrumentation and optics business, where there's really limited.
Speaker Change: <unk> to AMETEK with similar capability products.
Speaker Change: And as you May know, we've been very careful to protect our IP for this product for many years. So so we are building the product in the U S. We're shipping it around the globe, our Chinese customers' desire our products, but that that $70 million in Q2 is very difficult to predict the outcome of near term and we don't have.
Control over that situation, we may be able to.
Speaker Change: Ship at all in Q2.
Speaker Change: May not we may not be able to ship. It in Q2, because those are risks beyond our control and the related to country to country dynamics.
Speaker Change: So when we looked at that risk.
Speaker Change: We have ways to fix it we we understand that some of our products are so specialized that.
Speaker Change: There is a I'll call it an opaque process and China, where customers can go and get exemptions, we understand that that some of our products are qualifying for those exemptions, but we don't.
Speaker Change: We're monitoring the situation, but we don't have more details on that.
Speaker Change: We're also initiating.
Speaker Change: One element of our manufacturing localization plan that will change the value added nature of some of our production processes. So that we don't run into this problem. So we're using we're going to use our footprint to.
Speaker Change: Changed some sourcing some assembly some test and calibration processes. So we get substantial transformation in markets that arent subject to tariffs.
Speaker Change: Finally, with the <unk>.
Speaker Change: We can sell these products set to outside of China. This isn't an issue where we can sell them. There. They are just they are just in the queue. They've been started for $70 million planned for it for Q2. So so we're really dealing with a shorter term issue here and.
Speaker Change: And how that's going to turnaround in Q2, I am not certain.
Speaker Change: It could turn out well it could be delayed.
Speaker Change: We are comfortable that we can offset the problem in the year.
Speaker Change: Over the balance of year feel very good with our.
Speaker Change: Very good plans and I can talk a little bit more about.
Speaker Change: That is the issue that we're dealing with very near term in terms of Q2 and it could swing either way. It could go in Q2, it could shift to Q3, we just got uncomfortable.
Speaker Change: Dealing with the uncertainty in the near term with something we didn't really control.
Speaker Change: And.
Speaker Change: That's why we're confident in the year, but that the swing between Q2 and Q3, we're not certain of.
Speaker Change: Dave that all sounds like you've got it dialed in right. We understand these are extenuating circumstances, but you guys have been through this before.
Speaker Change: At least in terms of supply chain challenges. We appreciate all the color. Thank you and best of luck. Thank you Deane.
Speaker Change: Thank you and our next question comes from the line of Jamie Cook with Truest.
Jamie Cook: Hi, good morning, a nice quarter.
Steve Mike: Steve Mike.
Speaker Change: Hi, My question, if you look at the spread obviously, the EMG margin had been under pressure relative to history for reasons, we all know, but im just wondering with some of the positive momentum youre seeing any orders for that segment in particular paragon with some of the.
Speaker Change: Cost actions, you've taken as orders and sales start to improve how do we think about.
Speaker Change: The margin trajectory for that business I guess, that's my first question and my second question, obviously acquisitions at your your your your specialty just wondering if just given the.
Speaker Change: The complexity around trade war and tariffs and all that type of stuff is some of the larger acquisitions that you guys had been contemplating.
Speaker Change: That's sort of on hold at this point and then just lastly, administrative I think I, usually guide one quarter out and I don't think you've got it for the second quarter. So I just wanted to know if I missed anything.
Speaker Change: Jamie you did in the really the response to a dean in my prior question then uncertainty around the Q2 sales and whether the kind of skipped a later nears why we didn't guide for Q2, So we affirmed a year, but we did not guide to Q2 because of the uncertainty related to the the.
Speaker Change: Paragon margins, we're going to see upside in the second half of the year for sure because we're continuing to.
Speaker Change: Worked through our improvement plans and now we have some volume. So so we have some some upside in margins for sure and Paragon.
Speaker Change: In the second half of the year.
Speaker Change: And then I guess I'm thinking EMG total like just the spread between EMG IMG, obviously paradigm in EMG.
Speaker Change: I think that.
Speaker Change: The way I E.
Speaker Change: <unk> margins are extremely good and they're performing extremely well.
Speaker Change: I think if you want to think about it from your perspective.
Speaker Change: We have a hedge on EMG margins, we there is some upside there and given the acceleration in that business.
Speaker Change: And then the third thing you are.
Speaker Change: M&A.
Speaker Change: Yes.
Speaker Change: We have a very very robust pipeline and we're very active in the pipeline.
Speaker Change: Some of the deals.
Speaker Change: The uncertain nature of it.
Speaker Change: There has been some delays.
Speaker Change: Some of them are going forward.
Speaker Change: And we have over the history of time, we've been buyers and.
Speaker Change: Markets and down markets and we've been able to buy some of the best businesses. The best returns for our shareholders in down markets. So.
Speaker Change: We're very active.
Speaker Change: If you are.
Speaker Change: Think about this thing I mean.
We are ideally positioned to deal in this changing environment.
Speaker Change: We're very good operators.
Speaker Change: Been through challenge before us as we talked about with Dean.
Speaker Change: We've got an experienced management team.
Speaker Change: Got a distributor distributed operating structure that really empowers local management.
We have our portfolio of the set Assurant essential mission critical businesses that allow us to pass through higher input costs I mean.
Speaker Change: We expect to differentiate our performance in M&A is going to be part of that.
Speaker Change: It's very difficult to predict.
Speaker Change: We signed a deal.
Speaker Change: A couple of weeks or so.
Speaker Change: The deal at the end of the year, but we're not backing off at all and we're in the fortunate position that we can do two things at once and we're going after M&A and we also have a balance sheet and in periods of dislocation.
Speaker Change: We've used our balance sheet to initiate buybacks also.
Speaker Change: Thank you very much and great job, yes, thanks, Jamie.
Speaker Change: Thank you and our next question comes from the line of Jeff Sprague with vertical research partners.
Speaker Change: Hey, Thank you good morning, everyone. Good morning, Jeff.
Speaker Change: Good morning. Thanks.
Steve Mike: Thanks for that Steve.
Steve Mike: For detailed kind of tariff runs down I wonder if you could just give us the punch line, though.
Steve Mike: China specifically.
Steve Mike: What is it that you're looking to overcome there on that 145%.
Steve Mike: While the 145%.
Steve Mike: Is.
Steve Mike: Is built into the $100 million.
Steve Mike: And so it's.
Steve Mike: It's a 125%.
Steve Mike: Well yeah.
Steve Mike: You've got you guys.
Steve Mike: So on the supply chain is a 145, that's what's in the $100 million and that's fairly small so again, we just have.
Steve Mike: A couple of recent acquisitions. So so that goes into the $100 million and were offsetting the $100 million is the total amount.
Steve Mike: Of thing is going to the U S.
Steve Mike: Got it and then just thinking about this possible shipping delay in Q2 and appreciate.
Steve Mike: The guidance uncertainty it creates we should just assume thats very high incremental margin business, though right I would guess.
Steve Mike: That grows 10 10 or more of <unk>.
Steve Mike: Sort of variance it.
Steve Mike: That all else equal construct as it relates to Q2.
Speaker Change: Yes, I think Thats I think youre thinking about the right way, it's our high end products.
Steve Mike: That capability is.
Speaker Change: Not available for many places in the world.
Speaker Change: And it's higher margin business, and I think youre thinking about it right.
Speaker Change: And we've gotten some inbound questions just about your research exposure and those risks and anything of that along those lines could you just address what if anything youre seeing there.
Speaker Change: What your exposure is.
Speaker Change: Total research exposures about 10% of sales, it's international and a lot of the dose stuff has been in a lot of life Science research and we have some exposure there but not much.
Speaker Change: So there are some delays with our government customers.
Speaker Change: At this point for us is relatively modest.
Speaker Change: And then just maybe last from me just on price can you share I, sorry, if I missed it what price was in the quarter.
Speaker Change: I don't think you changed the organic growth outlook, but I would assume your outlook implicitly would now include some more price maybe with some volume detraction on the economic uncertainty is exactly right and when we wrote up the whole year.
Speaker Change: Volume was down a little bit, but the pricing was up a little bit and as part of our tariff mitigation plan and we felt comfortable keeping the full year guide to plus low single digits.
Speaker Change: Accurately in terms of the specific price.
Speaker Change: We're not going to give out that Pacific specific number, but I can tell you that.
Speaker Change: <unk> covered all inflationary cost in Q1.
Speaker Change: We had a good positive spread and we expect that to continue throughout the year.
Speaker Change: Thank you thank.
Joe: Thank you Joe.
Joe: Thank you.
Joe: Next question comes from the line of Andrew <unk> with Bank of America.
Speaker Change: Hi, guys. Good morning, good morning, Andrew.
Speaker Change: Can we just talk about just particular in test and measurement side.
Speaker Change: We've heard a lot of concerns and these are broad macro concerns that a lot of the components that go into the high end instrumentation.
Speaker Change: Ah sourced by many in the industry in China, and I think you guys have done a fairly good job as you pointed out are adjusting.
Speaker Change: Your supply chain away from China over the past.
Speaker Change: 567 years.
Speaker Change: What kind of opportunities does it create a REIT because theres big concerns that shipments are going to come to a grinding halt in may.
Speaker Change: You guys seem to have better supply chain I would imagine on the margin some of your competition in the U S.
Speaker Change: Yes.
Speaker Change: Does come internationally could.
Speaker Change: Could you just describe the opportunity set that that creates for you.
Speaker Change: Yes, it really is.
Andrew: It's a great question, Andrew we have.
Speaker Change: We have a.
Speaker Change: Good structure good bones to deal with this situation, we have 100 plants approximately in the U S and we have 50 internationally.
Speaker Change: And we're already.
Speaker Change: Working with some customers.
Speaker Change: That we havent worked with in the past.
Speaker Change: On some opportunities in the U S to use our infrastructure in the U S.
Speaker Change: To be able to win market share. So there is a.
Speaker Change: We're clearly focused on the tariff mitigation.
Speaker Change: But there are opportunities to using our structure in the U S.
Speaker Change: And I think that structure of 50 plants outside of the U S.
Speaker Change: Really gives us some flexibility to look at localization at a different level and the transformation of the value add so that.
Speaker Change: As we move through the course of the year.
Speaker Change: We're going to be able to mitigate the impact of tariff. So so I think it's a comprehensive plan.
Speaker Change: The alpine I reviewed the.
Speaker Change: One of the things we've done a good job over the years.
Speaker Change: Great operating system, great business system, but providing a structure and then getting all of our teams to execute within it and we learn from that so we doubt when I went through plans with every one of our businesses and we're going to continue that for a period of time and there were planned in the business and it talked about the tariff mitigation and talked about sourcing changes.
Speaker Change: You talked about the <unk>.
Speaker Change: Select pricing opportunities you had talked about.
Speaker Change: Going on offense and we spent a lot of time understanding where our competitors are located and where we're located in areas.
Speaker Change: Areas of advantage that we're going to have in the new structure and we are working on those now and we're getting positive.
Speaker Change: Positive payback from our customers.
Speaker Change: And just a follow up question.
Speaker Change: Given.
Speaker Change: This new round of tariffs how are you and the board thinking.
Speaker Change: About manufacturing footprint.
Speaker Change: Our supply chain, because clearly you have made major adjustments in the aftermath of the first wave what if any adjustments just directionally you and the board are thinking longer term and the follow up question on that is what are you guys doing to your capex spending. This year is it going up or has it gone down. Thank you.
Speaker Change: Yes, I think the.
Speaker Change: The board is very pleased that we started to reduce our risk from China supply chain five years ago.
Speaker Change:
Speaker Change: We are constantly acquiring businesses. So we're working on.
Speaker Change:
Speaker Change:
Speaker Change: Exiting those businesses and that's in process I think in terms of our manufacturing footprint.
Speaker Change: I just think having.
Speaker Change: Expanded localization in various countries so that longer term we are less.
Speaker Change: Pendant on some of the.
Speaker Change: The tariffs is the right thing to do so we're not we're not changing maybe we'll rebuild the core technology, but we are shifting.
Speaker Change: The value add to more and more locales around the world and we've been doing that over time. That's why we have 50 plants outside of the U S. That's why we've been so successful in these international markets almost.
Speaker Change: I think in the quarter high 40% sales worked for international markets.
Speaker Change: <unk>.
Speaker Change: We're going to continue doing that so so we think thats the right strategy. The right plan in terms of Capex, we're not reducing our capex.
Speaker Change: We have some very aggressive.
Speaker Change: Digital.
Speaker Change: Programs going on right now.
Speaker Change: We're looking to improve our sourcing with AI.
Speaker Change: We're looking to.
Speaker Change: Improve R.
Speaker Change: E Commerce.
Speaker Change: Capabilities. So we have some very very long term.
Speaker Change: Strategic plans that are around.
Speaker Change: Improving our capability through software investments and we're going to continue those and we also have a.
Speaker Change: We have a good footprint already so is largely.
Speaker Change: Effectively effectively utilizing that footprint, so I feel good about that and.
Speaker Change: I see no reason at this time to change our capital spending plan.
Andrew: Thanks, so much thank you Andrew.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: And our next question comes from the line of Brett Linzey with Mizuho.
Speaker Change: Hey, good morning, all Hey, Brian.
Brett Linzey: I wanted to come back to the Destocking comment around automation and engineered solutions, perhaps just an update on the level of OEM inventory in some of those channels and then anything in terms of the pulse on capital projects are you seeing any shift in timelines.
Speaker Change: As it relates to some of those businesses.
Speaker Change: In terms of the timelines I talked about a little bit in our process business. We are seeing we're not seeing projects cancelled, but we're seeing uncertainty in some projects are delayed and we made an adjustment in our annual outlook related to that business because of that so that is definitely happening.
Speaker Change:
You had another question, yes, the OEM inventory.
Speaker Change: We are seeing is that they the destock is not <unk>.
Speaker Change: <unk> for all customers.
Speaker Change: Once it ends.
Speaker Change: And then you see a pop and those customers are recalibrating to the demand levels, so and youre going to see that as we work through the course of 2024.
So by 2025 excuse me by the time 2525 is completely over I think all the Destocking will be done I was thinking.
Speaker Change: It's starting to happen now and it's driving.
Speaker Change: Rove strong orders in the first quarter.
Speaker Change: Okay got it I guess, just a quick follow up there so I guess the assumption for.
Speaker Change: For the year from a planning perspective is that persist through the balance of the year or does that improve in the second half any any.
Speaker Change: Any thoughts there.
Speaker Change: Yes, you're talking about our sales are you talking about orders or are you talking about what part of our business just talking about the level of inventory.
Speaker Change: Do you think that gets worked out.
Speaker Change: Okay, Yeah, I think in the automation area.
Speaker Change: That's working itself through.
Speaker Change: We're seeing.
The U S is kind of a.
Speaker Change: I'll call it finished.
Speaker Change: Some of the Destocking is still occurring in Europe places like Germany.
Speaker Change: So thats automation in terms of the Med Tech OEM is I think its OEM dependent and they all have different supply chains in there.
Speaker Change: They're good at running their business, but they seem to not really have a very tight control on their inventory. So we are seeing.
Speaker Change: It's difficult to predict a difficult for them to predict and it's difficult for us to predict because of that but you are seeing as they as they work through their process.
Speaker Change: The destock is ending and theres more normalization of inventory and we saw.
Speaker Change: A big chunk of that in Q1, and that's like what we saw with the Paragon orders right Paragon orders were up much much more than 25% in Q1 and that was our customers getting to the point, where they are recalibrating their normalized and they are setting their plan for the year and as we can.
Speaker Change: We as we go through the year, we're going to see other med tech customers do that.
Speaker Change: What is.
Speaker Change: This is happening as we thought it would.
Speaker Change: Appreciate the insight and then maybe just one more on A&D not much ground was covered here how are those businesses performing versus expectations and as youre thinking and outlook changed between commercial or defense based on any developments we've seen.
Speaker Change: Yes, we're still feeling really good about the aerospace business. It grew mid single digits in the quarter.
Speaker Change: We're expecting it to grow mid single digits for the year with balanced growth across both our <unk>.
Speaker Change: Commercial segment and our defense segment.
Speaker Change: When I think about the commercial segment.
Speaker Change: Do you have the OEM multi year backlogs.
Speaker Change: No that was that drove a significant part of our growth in Q1, and they have 810 year backlog is depending on what you look at it so we feel good about that and.
Speaker Change: Sure.
Speaker Change: In the defense area. The funding is solid and we feel good about that in terms of the aftermarket.
Speaker Change: A lot of older planes are flying now because there have been some delays on this OEM side and that plays to our strength with the slower.
Speaker Change: Slower fleet retirements and that business is.
Speaker Change: Good domestic business, but also good international business and older planes are flying.
Speaker Change: In the U S. There's some dislocation now the airlines, but they are still flying the planes are flying older planes are few.
Speaker Change: Fuel costs are coming down and.
Speaker Change: The dynamic there is if we don't get the OEM sale. It's okay. Because we have such a strong aftermarket presence and that team running that business has just done a great job for us so.
Speaker Change: For us and we're in some niche is in this aerospace business, it's about the <unk>.
17%, 18% of our company, but.
Speaker Change: I would say it's.
Speaker Change: So very very stable strong growing business for us right now.
Speaker Change: I appreciate all the detail as always thanks, a lot. Thank you Brent.
Speaker Change: Thank you and our next question comes from the line of Scott Graham with Seaport Research partners.
Scott Graham: Yeah, Hey, good morning, all and thanks for taking my questions.
Scott Graham: I wanted to maybe unbundle aerospace and defense a little bit I know you just did a little bit more just now Dave but.
Scott Graham: When you went through your prepared remarks.
Scott Graham: Question and answer period with them A&D, you didn't specifically talk about <unk>.
Scott Graham: And I know that that business has been.
Scott Graham: A little bit flat.
Scott Graham: Flat down the last couple of quarters are you, suggesting.
Scott Graham: <unk> seeing that defense kind of gets better in the second half of the year.
Speaker Change: And then my follow up on that would also be on the aerospace side. I know you just indicated that you're comfortable with your aftermarket business, but.
Scott Graham: There is some.
Scott Graham: Passenger.
Scott Graham: We're in this to travel and I'm wondering how that might roll into the second half yes, great question.
Scott Graham: Specifically on defense.
Scott Graham: We're expecting growth balanced growth across all sub segments. So we're expecting defense to grow in the second half of the year and well see what gets.
Scott Graham: Passed in Congress and things, but it's pretty pretty optimistic right now so I think we're well positioned there and there's long term threats obviously.
Scott Graham: In terms of the aftermarket Youre exactly right. I mean, you are seeing some airlines, some stress and but again thats why I was.
Scott Graham: The planes are still flying.
Scott Graham: And older planes in particular.
Scott Graham: Our flying longer because fleet retirements have slowed and.
Scott Graham: I, just think that our aerospace business and aftermarket.
Scott Graham: As a as a U S and international business and our international business, we have operations all over so.
Scott Graham: Have a feeling that if the U S slows the international market will strengthen or will stay strong because they are a little bit different cycles, but right. Now we're looking at is all sides of the business are strong.
Scott Graham: So.
Scott Graham: Yes.
Scott Graham: I just wanted to also ask if I could about.
Scott Graham: Capital allocation.
Speaker Change: You seem to have a little bit more jump in your speech.
Speaker Change: We're talking about capital it seemed like you were a little bit more excited about M&A and then talked about share repurchases at a bit more than you've talked about in the past.
Speaker Change: You have a lot of capital to deploy your net leverage number is very low obviously and I was just wondering.
Speaker Change: On the M&A side are you seeing bid ask spreads kind of.
Speaker Change: Again, a little bit more favorable than on the share repurchase side do you see being more active this year.
Speaker Change: Yes, I think that.
Scott Graham: We're well positioned Scott I mean, we have as you said, our net our net debt to EBITDA 0.7 and.
Scott Graham: When you go through dislocations like this a couple of times in your career.
Scott Graham: You realize that opportunities are going to be there and we're working with people I think good assets are still demanding good prices. So so its not like youre seeing.
Scott Graham: Tremendous bargains they've come in a bit.
Scott Graham: We have a really good pipeline, we have a good reputation.
Scott Graham: We're working with some people.
Scott Graham: There's a lot of processes going on and I think that we're just in an ideal position to acquire some businesses and also.
Scott Graham:
Scott Graham: Act on the.
Scott Graham: Dislocation in stock price.
Scott Graham: Could it be occurring and when I put the two together in a time where are.
Scott Graham: You may be on your back foot, we're not on our backwoods. So spring in our steps forward lean. So I think you got that right.
Scott Graham: This is a time, where we can differentiate our performance.
Steve Mike: Thank you Steve.
Speaker Change: Thank you Andrew.
Speaker Change: Our next question comes from the line of Rob Wertheimer with Melius research.
Rob Wertheimer: Hi, Thanks, I just wanted to kind of follow on the acquisition topic, that's come up a couple of times.
Speaker Change: Obviously, there's a lot of uncertainty maybe more than an.
Speaker Change: On our side of the phone than what you guys appear to be seeing to date at least with the comments around April and <unk>. Okay.
Speaker Change: Conversations around acquisitions change I mean, there is uncertainty of cost a little bit of uncertainty in the demand environment do you have to wait until you get clarity.
Speaker Change: How do you kind of approach that uncertainty from evaluation indoor closing standpoint, and Thats a great question Robyn it's deals specific.
Speaker Change: So for example, if youre going to acquire a business that as a huge supply chain from China.
Speaker Change: That may be a weight right now and delayed because you see how that he is going to play out. But then you deal specific you have other dynamics so and.
Speaker Change: We've done this for a long time it is an uncertain time, especially when you look at it month to month, but we're looking at it.
Speaker Change: We're looking at in the long term and we've been through this before and it's going to be there are opportunities arising.
Speaker Change: And.
Speaker Change: And we got we got some issues.
Speaker Change: Issues were managing through we talked about them getting a tremendous amount of detail on them.
Speaker Change: But overall.
Speaker Change: I think that we're well positioned to do well and I think that you are correct. There is some some deals are moving add some deals have been.
Speaker Change: <unk> for a period of time.
Speaker Change: Because of the trade dynamics, but there is enough.
Speaker Change: Our pipeline that we're still working aggressively on that.
Rob Wertheimer: To answer your question Rob.
Speaker Change: It does thank you okay. Thank you.
Speaker Change: Thank you and our next question comes from the line of Joe Giordano with TD Cowen.
Speaker Change: Hello, Joe.
Speaker Change: Hi, This is Dan on for Joe.
Speaker Change: And I had a question on commercial aerospace.
Speaker Change: You spoke about obviously U S travel volumes potentially declining, but you mentioned that international might remain strong.
Speaker Change: But in terms of actions that the airlines are taking one of the material and the company spoke about reducing maintenance spend.
Speaker Change: Is that something that you see broadly in the industry or is that something that would impact you guys leader.
Speaker Change: Basically any color on what youre hearing from customers or how something like that would impact your business.
Speaker Change: Yes, I think that.
Speaker Change: <unk>.
Speaker Change: The impact on our business is relatively muted.
Speaker Change: The aftermarket piece of the business is a small.
Speaker Change: Smaller part compared to the OE piece of the business and component fair to the defense business.
Speaker Change: Yes, we are.
Speaker Change: We could see a downturn in that part of the business, we're not seeing it now, but we're very diversified interests in specific areas and.
Speaker Change: There is a future downturn, we will deal with it but right now it's not happening and Thats a fact.
Speaker Change: In our business.
Speaker Change: No I appreciate that thank you.
Speaker Change: And I apologize.
Speaker Change: I joined the call a bit late but.
Speaker Change: Are you seeing any pre buy it's broadening the market and.
Speaker Change: Specifically for you guys.
Speaker Change: Was any part of your mitigation actions with tariffs that include you yourself pre buying.
Speaker Change: Yeah, I think that we build custom.
Speaker Change: Customized product so we.
Speaker Change: We didn't see there could be some pre buying but we didn't see a lot of it.
Speaker Change: So I think that we'd see that less than most but there could have been some there.
Speaker Change: In terms of.
Speaker Change: Inventory purchases were certainly doing smart things and.
Speaker Change: We have our operators and our distributed model that are very very that run their businesses like they own them and if they think they want to bring some inventory in it because it makes sense, they're making those decisions.
Speaker Change: Appreciate that very helpful. Thank you.
Speaker Change: Thank you and our next question comes from the line of Andrew Buscaglia with BNP Paribas.
Andrew Buscaglia: Hi, good morning, everyone.
Speaker Change: Good morning, Andrew.
Speaker Change: Yes, David I wanted to ask you your backlog has been at record levels almost every quarter now going back as far as I can remember so yeah. I'm curious what look gets this backlog to convert because presumably tariffs are now kind of delaying that conversion.
Speaker Change: Youre not seeing that but that's a thought I had I guess I guess.
Speaker Change: You're very unique to AMETEK and it sets you up pretty interesting once it does start to convert so kind of look at that go on here.
Speaker Change: I think that.
Speaker Change: The backlog is at high levels.
Speaker Change: Yes, there are.
Speaker Change: Are some delays related to tariffs we talked about.
Speaker Change: Some of the delays for the products that we're shipping directly to China, we're talking about other other situations, where the tariffs are causing customers that will go back and have to get more money to byproduct. So so I think the tariffs are going to cause some delays in.
Speaker Change: I think we have a good tariff mitigation plan, we have good localization plans and yes. There is some comfort in having that backlog as we navigate through this thing over the next year in terms of the coming quarters.
Speaker Change: But youre right. There are some delays caused by the tariffs.
Speaker Change: Yeah.
Speaker Change: Are you noticing any pattern than the last few quarters, where the backlog, but backlog specifically built building it sounds like A&D.
Speaker Change: Even some of your medical stuff, but.
Speaker Change: Is there a concentration in one area that Youre seeing are you can you talk a little bit more about the color within that backlog well I don't think is concentrated I think you hit the areas A&D backlog has a longer cycle business is strong and I think the big changes the med tech with <unk>.
Speaker Change: <unk> backlog is increasing.
Speaker Change: Yes, okay.
Speaker Change: Thanks, David.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Now I'll hand, the call back over to Vice President of Investor Relations and Treasurer, Kevin Coleman for any closing remarks, thanks, again, Andrew and thanks, everyone for joining our call today and as a reminder, a replay of the webcast can be accessed in the investors section of AMETEK com have a great day.
Speaker Change: Ladies and gentlemen, thank you for participating this does conclude today's program and you may now disconnect.
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