AME - Earnings call transcript Q3 2017

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Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 AMETEK, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I would now like to turn the call over to Kevin Coleman, Vice President, Investor Relations.

Kevin C. Coleman

Andrew. you, Thank thank quarter and joining for us Good conference you call. third earnings AMETEK's morning, for With morning President Officer; and Officer. me Chief Bill and this Burke, are Dave Executive Vice and Financial Chairman Chief Zapico, Executive third available on in are the AMETEK's morning section of our and electronically results earlier market were this quarter ametek.com. and on Investors systems website released This website. accessed on call our is also being webcasted, and can be site be archived and later our today. will on webcast The available made

by forward-looking made during Before nature you started, that that we not the I remind are statements get call to are want any to statements. AMETEK historical in be considered

questions. of be ametek.com excluding basis, now references with non-GAAP adjustments. and your to over the a it year call on turn reconciliation fourth As results results I that this filings and such, update may various any Dave We'll cause quarter the subject of Please that to obligation also uncertainties or call discussion adjusted remarks I'll from Dave. prepared of change section open Securities to that risk contained to with results based for XXXX any detailed differ AMETEK during significantly statements. up this by begin future may to affect you Commission. these on the today's Bill, is AMETEK's statements financial forward-looking measures any financial XXXX the are will then, actual full disclaims on expectations. uncertainties any risk factors conference in Exchange call. call and an the and Investors for and will intention A to used to refer note or revise our of

David A. Zapico

good Kevin, morning, everyone. and you, Thank

diluted cash quarter. third conversion, AMETEK contributions of of sales our both performance and generated which generated earnings the and cash to very We free nature strong with from excellent of performance significant we model level speaks high-quality organic drove a results, with in operating We recent continues level a with another flow level pleased record sales, We record operating which quarter. delivered outstanding performance. impressive of per The acquisitions. of the AMETEK's our deliver high-quality exceptional share with flow growth business are solid

a we across guidance again all full-year As metrics. our raising are result, XXXX key

Now, Acquisitions highlights AMETEK's on was third and to in financial $X.XX up a were sales the XX% third business added compared quarter. a foreign and the quarter quarter sales Organic X%, currency for up one-point of billion, X%. the were to XXXX. the record benefit.

strength It strong are broad level We based remains continued growth. and businesses. sales of reflects underlying encouraged by niche very organic the the of our

the income the nearly Operating at XXXX. XX.X%, $XXX.X was strong organic while In Overall level to organic of we see addition to quarter quarter quarter orders XX% year. orders. from orders to compared in million, up billion. up record our drove Operating growth income were excellent backlog basis $X.X points X%. in the were up of same were growth continued the XX up last XX% in of sales growth, third the margins This quarter,

quarter impact of up operating points acquisitions, same dilutive the margins on the XX%, margins XXXX. the in in Excluding versus recent period basis were income XX

quarter $X.XX, per earnings of increase record to diluted quarter a year's last an XX% were compared Third share third $X.XX.

was Our prior over cash excellent Operating leading continued XX% in the $XXX flow efficiently, flow businesses operate generation. up to cash strong year. million, to extremely at quarter the

the to turning individual Now, operating groups.

contributing the sales. million, XX% Organic sales of Group. quarter increase of Electronic in XX% Rauland record First, up were with the XXXX. a and quarter in versus the third up X%, were Instruments the acquisition third sales EIG $XXX.X MOCON

at and the in XX.X%. operating million, the quarter income up were XX% the to $XXX.X increased was small EIG's year over strong in a operating tailwind currency prior Foreign quarter. income third margins

double-digit broad-based quarter very acquisitions dilutive up were the a and up points acquisition contributing a year. quarter margins, basis of year. the has Group in the basis all nine XXXX. versus the an third EMG quarter the Organic through in XXX with operating and the margins impact with $XX.X had were growth $XXX.X in increase points Excluding performance growth up third The great same at across XX on Electromechanical over first compared of of excellent, was foreign first Operating sales last margins currency prior and million, strong, to with third sales XX.X%, of XXXX. growth and points of up excellent both earnings of of XX.X%, the quarter In EIG income been Laserage year, million, XX% summary, the third sales AMETEK, excellent XX%, benefit. the were XX% months sales year-over-year. the the quarter was operating one-point period EMG's over two performance. nine were months

on touch that I recent success our our before events strategies. outlook Now, the the of some some year, growth for discuss highlight let of exciting me updated

First, our pleased we're with performance and very of acquisitions. integration the recent

we The into With in new sales. materials. MOCON $XXX AQUATRAN as in to instrumentation, such thus The million MOCON performance have gas field Model recently for to quality the these the assist panels, LED sensitive, the a water expand care developed by Related system care the nursing by was highly effective workflow two solutions leading communication sensor, providing of Also, the and of system the XXXX, and that of and films This million AQUATRAN an which flexible delivery organic approximately Rauland in and and each in communication adjacencies. new the repeatable used molecule displays several engineered and launched water care approximately acquisitions $XXX providing a rate third capital high-growth damage. leader televisions design electronics economic in out passes of facilities, results. high product new transition through market provider Rauland, be and can barrier analysis to critical deployed materials, nursing far ultra-high providing will product, This and will the moisture laboratory acquisitions, hospitals for new solar new measures launched accurate, and of in a a solutions. of with quarter, MOCON, and X XXXX. high-end Responder of vapor facilities push affected highly solution and during help exciting photovoltaics measure residents acquired

result, the levels a care As ensure with nursing facilities higher leading to value-based can purchasing reimbursement. Responder XXXX programs, help Medicare of compliance

for internationally, markets. So, use for has customized workflow also the communication solution with and hospitals efficient those solutions in been

excited and of potential, opportunities: new very pleased growth are strategies. offerings performance their very We with are given global product AMETEK's and expansion growth of pillars these of and recent attractive acquisitions stream two market the with new the four their

excellence sales develop to products to solve increase index commitment and combined innovation. product very our and most be XXXX, of products seen addition which these to challenging and all quarter, and work years. vitality last expect coming in new The through our XX% index, is also success problems. businesses solutions roughly products new In our our new introduced our the over new through within from orders our Rauland excellent to to in operational with million, new our investment growth, investing In the our to initiatives. our strengthen businesses acquisitions to of engineering and vitality XX%, reflecting Along XXXX. In customers' on share MOCON, RD&E organic strong can appropriately with up continued measures of these development from we sales the capability, differentiated three sales, X% was $XXX and continued which at products, and this approximately solutions and

operational we initiatives we excellence the have throughout exciting across organic focused our are year, very businesses. enhancing on As highlighted out several growth opportunity the rolling

Our seen these excited the with teams results are are we we engaged have efforts. and from early

Einstein's components results key solutions products project. general the businesses the to these business excellent supplier continue the optical high approximately that, to electro-optical savings me as elements critical achievement manufactured Physics, of observation would Nobel research for I to congratulate Along in their Observatory. was important Albert moment. our metrology reductions, final which the involves outlook for of our discuss strengthening customers optical and improvements on focused in his in to gravitational observatory year. proved savings, we all to time, Bill generation, for expect speaks Zygo continuing first nature total cash remain to technical XXXX successfully productivity of operational detected working continue news management, for also We Laser high the The Zygo, cost the science in making. Interferometer instruments, to continue relativity. Zygo waves to positive and as to a With in Prize gravitational XXXX. bit like important and components systems, of further One to three complex leadership outstanding AMETEK's and with drive and flow precision their with the for will world. differentiated in impressive a one in $XXX which quality are capital work highly important this leading updated finish excellence million exciting our deliver We develop contributions and a the contributions This throughout in waves. products of theory like and would their and result, impact of to I of scientists share for Gravitational-Wave let and for they awarded we our

percentage expect increased from We overall adjusted Once sales diluted our basis by a share. of up prior XX% increase $X.XX prior low-double to to basis have XXXX. are XXXX, expected the Organic is over on to earnings XXXX. of expect For now percentage now compared diluted for mid-single per to again, $X.XX all range we $X.XX. This guidance to guidance range digits a $X.XX we be sales per earnings increase earnings digits on an increase now over share, our to XXXX's year.

of To with $X.XX $X.XX, per sales performance an in the quarter delivered third a Fourth of finish anticipating up adjusted are XX% digits. on XXXX, compared to quarter earnings percentage digits and diluted sales AMETEK for are are be a expected to positioned increase strong basis, XXXX. be XXXX mid-single XX% fourth of earnings. summarize, to well the up low-double share For to fourth overall we the quarter to we quarter outstanding to organic

to I Then, are earnings Burke, for details cover a foundation the over solid success for which is and providing be will Bill take strategies. some now who year. very questions. growth to we'll four turn growth high-quality teams glad quarter producing their of future and our through world-class your it financial the the Our operating Bill? businesses will well,

William J. Burke

Thank you, Dave.

to As our continue record generating Dave businesses well, quarter. third results mentioned, during the perform very

was core were quarter up provide core General highlights. selling with were In XX.X%, the year, and The over financial in line year's line expenses some effective expense. third million additional rate me $X.X XX%. third the with prior quarter last compensation in up growth. Let of the rate higher in sales to due expense third quarter tax the for quarter, third administrative largely

and to For XXXX, we XX% our now rate be expect XX.X%. tax between

As rates quarter, at XX.X% in receivables positively from the rate. quarterly differ of this XXXX. actual sales was tax million plus same payables, were inventory through in $XX excellent can Capital for $XX dramatically and or the we Working XXXX. of months less past, of period negatively XX.X% quarter, the stated expenditures third defined in as capital, full-year down either from the the million nine first

expenditures amortization We quarter Depreciation million. was million. expect year to the capital be for $XX full approximately $XX and

depreciation and full be $XXX we approximately to expect million. the year, For amortization

cash continue businesses generate flow. Our to excellent

flow quarter operating income. million, of Third was million, third the the flow quarter XXX% in increase a was of outstanding compared cash net $XXX cash quarter XXXX. $XXX Free XX% an to

full approximately the be to $XX made contribution million expect XXX% of quarter, the pension year, cash in free the net For we we income. flow excluding first

strategic this generation support of to cash strong Our use acquisitions. is primary

credit debt $X.XX As XX%. the billion the debt equivalents is September of At this Dave cash end on deploying XX quarter XXXX. front and capital cash $X.X from million XX businesses performance billion summarize, very Offsetting our facilities strong mentioned, a outstanding our September resulting earnings. To acquisitions provided well of approximately out in in debt we've billion, of had balance from at a of quality Kevin? the and to and of positioned growth been excellent $XXX $XXX strong million, initiatives initiatives. high and cash end, flow. the quarter we our to existing sheet support to cash at MOCON. $X.XX was net in at and with up was on support during of We to XXXX, Rauland ratio our this remain look forward active approximately Total closing growth year,

Kevin C. Coleman

you, questions, Bill. line Great. Andrew, to Thank open we'd like the please. for

Operator

Certainly.

Bank with from Merrill Lynch. Andrew Obin Our first question comes line of of the America

is line Your open. now

Andrew Burris Obin

quarter. Great guys. morning, Good

David A. Zapico

Andrew. you, Thank

Andrew Burris Obin

downturn ask period, will was question. just talk we're of to prolonged thinking what Can does get normal? If seem level in operating versus to this I out sort tad challenges can right the a specific kind getting much how the I coming and new back leverage now. a whether XXXX, it your XXXX and leverage Thank Now, higher it back operating of old of you. we is just as need costs look XXXX, about we you be should you or add at this

David A. Zapico

had Sure, Andrew. We And were wise. the up remarks, QX incrementals the as We XXX volume. in to EIG prepared XX.X%, actually they basis group a group. think up incremental XX quarter we points basis the XX% actually basis incrementals, the in I XX up we great on And core XX%, But go excluding EMG, up you points. were lines, each points. if were and margin acquisitions, were said ex in saw acquisitions,

So, for when acquired a acquires businesses. much what seeing businesses. the AMETEK results they and mid-teens lower-margin were it's MOCON, them, to is good shareholders And believe you're low and And obviously our with is profitable. more pleased we we're when very we EBITDA the AMETEK Rauland thing

the businesses tremendous improve those and to driving in dilutive returns and the for may up be excellent we of run substantially creation But, long the they margins ends margins capital. on value So, short-term.

pleased we with performance endorsed think the what do So, with to very we're business. strategy trying we're the with it's the and of

Andrew Burris Obin

XX%, nothing to at. sneeze

Dave, implementing? since sort the culture AMETEK, what you a business taken share internal of more about structured just you We're over, are you're hearing can happening question, systems. that of Another changes approach to what's sort What about, talk can you've about wise? inside

David A. Zapico

hasn't we've definitely part years culture I our Andrew, the I've of to been culture I a two about, with made of XX we approach culture a changed. we've really, for we of the we're to and talked the the organic that and that, and with to part it and opportunity. businesses program scale was that that past structured understand want really forward, size larger the growth excellence mean, the company going the the of we're and of the business. our the and and earnings on And the have to put getting part emphasis second adding and toolkit growth, company five our of then, help the issue years. operational related to the the tools our next We traction organic over is areas double

weren't So, $XXX of in we bit acquisition businesses our pipeline of to increased little Prior deals. time, a revenue. larger, million pipeline the they million to that in $XXX

years. them. pipeline So, right feel kind the we those is it's company. strategy we're they're think value five the and to it's working and at tweak we through enough bigger deals next confident looking right the on The same can same flexible we when deal to in needed. track it the But, headed But, for of really the direction the add and we're

Andrew Burris Obin

much. so you Thank Terrific.

David A. Zapico

you. Thank

Operator

question Graham BMO our Scott from comes And with Markets. Capital of next the line

Your is now open. line

R. Scott Graham

Bill, are you? Good Kevin. How morning, Dave,

David A. Zapico

Scott. morning, Good

R. Scott Graham

if typical go was your by-business... wouldn't wondering you through I

William J. Burke

(XX:XX). sure Sub-segment

R. Scott Graham

Yeah. now And that, half month about not about like the wondering year last the But before more as orders And could percentage looked just basis. a dollars but there, if you as on your even, each stability of in comment obviously, quarter as done, that with seasonality, passed? I to progressed? some may, of maybe you talk of year-over-year what I'm can because And change talking show kind orders. Because well? second starts October if

David A. Zapico

Yeah.

were organically quarter up the for orders X%. Our

a it it markets quarter end strong based very a followed broad orders had typical pattern. and geographies, and was in we and So, across

strongly. really started the quarter and lower So, bit little a we we finished

through AMETEK. military the for year, quarter. overall overall into sub-segments. And last strengthened So, I'll similar to quarter. business. across strong we across the Aerospace sub-segments the get across growth saw were that that start business. our up orders in we our question. – growth low-single answers strong Go digits the last to quarter, Sales around Similar saw Aerospace the of I'll with

Our really up. military has business picked

and solid new a to be market of of regional mid-single with all business to segments. wins. due in we business Aerospace saw each ramp of XXXX, support to And digits shipments expect also program to jet up growth up our We expected our across continue and our growth across low business for

million secured platforms. platforms. In already year, you in growth our $XXX of jet, long-term and Year-to-date, And program a addition business continue Aerospace long-term to of a and to wide have awards life is over this win delivering the the program solid have new success commercial, programs. across Aerospace range have across excellent teams business wins military range to of a new business teams in our

about talk I'll Next, process.

Our process The driven businesses. overall saw an Rauland broad sales across from especially organic contributions expect performance, had third organic the mid-single quarter, the growth year. based that we've and sales growth. our for our digit and with excellent technologies, Precitech MOCON given increased quarter's and across by sales And up of in excellent to business, our units. mid-single by acquisitions now has businesses we ultra-precision process strong was business be for organic TMC, process growth business the we XX%, the bit. our Well, our a digits solid up UPT And Zygo

and mid-single segment. for power power, test We mid-single-digit power solid industrial sales growth particular third to organic up expect quarter to low growth. Our was in digits to segment, the industrial be performed with and saw we continue well industrial strength sales and from year. full business across very the And solid each and for measurement power our organic

the digits, our with our markets. very third businesses growth see very Control to EMG as across benefiting businesses Dunkermotoren key businesses. and Motion Our businesses, up in quarter as it Precision quarter, perform across remains low-double demand growth our organic excellent were we're well, Motion Within In to business, end strong strong our with its differentiated EMIP EMG for another strong sales of continued continuing markets. differentiated our growth from Control is conditions automation within Precision solid key particularly

to to Specialty digits now So, of EMG smallest were Motors, our our for Floorcare business for segment, be low-single customers. continues across for third elements quarter, key business and & in mid business organic versus its XXXX, sales up sales Specialty digits we solid organic & differentiated XXXX, up as at continue digits. its demand for to all high-single this markets this And to the for And mid-single sales to expect and all across in key organic we see be finally, key XXXX. Motors Floorcare expect

R. Scott Graham

Thank That'll do it. you.

David A. Zapico

Scott. you, Thank

Operator

And question the our of next Vertical line from Linzey Research. comes Brett with

Your line open. is now

Brett Logan Linzey

morning, all. good Hi,

David A. Zapico

morning, Good Brett.

Brett Logan Linzey

initiatives. what's in of identify and unbundle the to and you're want growth to driven I development taking the being share order initiatives? the these measures are if the a you're X% some to based Just look some were guess, quarter, on winning of lot the some between at that back of come by able gain there of you you the the that think opportunities rate traction market channel or on rate Obviously, to what and of internally. you

David A. Zapico

and driving efforts also those growth see success great initiatives share in continue also, that to the and Yes, also the businesses. success product definitely broad world. seeing year. share mentioned, markets some throughout organic the market dissect we're development X% the And But of in you niche with we we're to it's are clearly our see win geographical you gains. very based seeing new of and both first from strength we organic in improvement we're from our growth, months nine QX across certainly our as improved difficult seeing But, end tangible

saw But XX% market if automation point this we're share, in in very art The delivering and working technology, the the across that our And motor improvements the and have businesses Haydon we're customers businesses, motivated, acquisitions to around And market. general, board, the it's Technologies difficult the some resulted our of perfected seeing winning And break growth performance, and of unison, from those is in in automation and PMC it's sales growing we they're some We're to custom also share, we're really in Ultra a of where participation those based Dunkermotoren market so, I improvements result business. I share you is and about core in excellent of out. our AMETEK. acquisitions share tremendous good to we're is definitely for Kerk. business. and also Precision growing and in geographies, benefiting markets in and end subassemblies growing

Brett Logan Linzey

to construct runway from back the the into dilutive EIG I obviously those sort XX Understood. How to XXXX think XXXX, I good EIG deals months at, But, headwind of you or guess, two you And was the then, XXXX. as run you what into integrations some over operational in normalize, performance these more about margins, businesses? just operating this of a year? in much improve to next trying guess, as do their the margins have the And kind course? placeholder what's for I'm get pressure

David A. Zapico

Right. question. I the understand

guidance always our meeting fourth January. year. we and plans and going budget our do, detailed through work, this their EMG in review for to provide we'll And month those we'll we XXXX are both EIG for business next be late quarter in with As earnings our businesses each when release

say the capability. points our margins that think margins a XX taking to that XX% can the for for XX-plus that we've used, that eye on that we I'm not as company. comment see the as stated will our to tremendous high in XXXX. pricing we've is get the really power, But of contribution adding there's I our number and far And to operating So, expansion number expectations to contribution basis that opportunities externally our XX business, to by position basis and points. And of we percent, margin adding

sit we a to on comment term, I yet. and work a the because So, be business as but margins, look we'll want done out long expanding or group certainly specifically we haven't here we don't

Brett Logan Linzey

Okay. And one then, just follow-up.

of pressure, sort incrementals be You said of XX% the one-time kind of Electromechanical XX%. core would most were in Presumably, EIG. incrementals. pressure

remove a on on they, if core basis. in deal the EIG? you EIG What a in of some core higher were noise basis, much implicitly, So,

David A. Zapico

a over was XX% basis. Yeah, it on core

think was I it XX%.

that. you're So, right on

Brett Logan Linzey

Okay, great. Thanks, guys.

David A. Zapico

Brett. Thanks,

Operator

comes And with our Matt of question line Advisors. Summerville next the from Alembic Global

Your line open. now is

Matt J. Summerville

Thank you.

in where a perhaps not into sort costs, terms were in you so versus material more you raw whether you XXXX? heading inflationary pressures quarter concern of on and XXXX, over quick one were heading have than the pricing any Just input into or of

David A. Zapico

Matt. Sure, Pricing improved the year half in actually first versus us. QX for the of

X.X% So, across entire and about inflation X%. we portfolio, it results total our with balanced was achieved across similar portfolio, in our all was our very And different businesses.

So, we are as know, offset very other to not able costs And increased pleased with some been inflationary that. with have you companies industrial pricing.

concerned in and our trend speak and were results were sure results. business leadership position aspect nature within said very best with marketing we before made we're good, So to what our this have we're with XXXX, migrate it, you the the I AMETEK the that the as better, differentiated prior AMETEK's markets The a to of in see pricing pleased of portfolio and we niche quarter, and all product aware the leaders philosophy And, in. the – will customers in portfolio. generally

have So, expand a best. that. improve, times fully-featured and will the good the often, a And that customers with are markets to lot they'll spend, don't capital And are products. tend buy pricing product, see to when our of as we'll buy customers maybe tough

able continue. to X.X points see pleased are of good fourth will we be to quarter kind price the in for quarter and feel of performance we that So,

Matt J. Summerville

a then, follow-up on backlog. just And

throughout market key has I build to business sort that least, the year. You continued contributors believe you. do expansion been to of backlog What continued, expect in or And build? the QX? you further at end Thank so, either

David A. Zapico

Yeah.

Our in and positive backlog had broad billion was we and I it based. EMG. EIG a mean, record book-to-bill at was $X.X

said longer-cycle businesses, going the to our had or in in out not be the in there So, as current next backlog. some with quarters, ship we necessarily They're quarter. the of they're to going prior quarter

So, see happening. you that's what

You businesses see longer strengthening. our cycle

Matt J. Summerville

Got it. Thanks, David.

David A. Zapico

Sure.

Operator

from the line of question And Christopher our Glynn next Oppenheimer. with comes

line Your now is open.

Christopher Glynn

morning. good Thanks,

David A. Zapico

Hi, Chris.

Christopher Glynn

talked you're just wanted to Hey, gaining areas – about share. you where

distinction share market some could your between gaining you with see of wanted or a if creating to Just applications. actually draw size

David A. Zapico

of doing technologies adjacency I combining our something our and creating Yeah. it we're And mean, is in new other And there work works adjacency doing and our that often markets. Materials our taking like creating on we're markets – and markets with business. some those were Analysis adjacency core with work technologies UPT into some business. technologies,

division of business, atom got that that manufactures for Our our kind the Materials because really where competition, atom no we've only probe Analysis there's be will person probes.

so, also, creating we're our there. doing Creaform take our XD and there's and And market of with some a work market of with We're UPT on a lot creating metrology. a some done the that like expenses. And work missionary time, missionary with the – could our business business,

adding So, is, that's X% happening. markets gains But, to share what general, organic you good see really in and growth.

Christopher Glynn

amount you're of metrology and for And attractive and done fragmentation the of the Okay, fair as consolidation? What ripeness platforms M&A currently you consolidation in out thanks. just step like power up areas terms already. quality, you've in terms the a of pipeline, there I particularly some seeing to think

David A. Zapico

we strategy. about strategic work have XX we to each develops our closely have units Well, M&A of Right. a an acquisition business dedicated and acquisitions with identify our businesses of professionals team who

things So, of AMETEK remain in lot which we for return on have a we metrics. of across and a broad working a find of opportunities lot can disciplined good people our set identify, fits

of it a in a searching pipeline. lot a working deals of areas. and on people So, got we lot need We've for we're big

Christopher Glynn

the for Thanks color. Okay.

David A. Zapico

Thanks, Chris.

Operator

Morgan the question from our And of Stanley. next with Nigel Coe line comes

open. now is line Your

Sawyer C. Rice

Hi, good morning.

to Maybe here news or level on for We've seen on the got EPS a an Nigel. high industry, just, the cash firs, a amortization. EPS You've on some from reporting. EPS question Rice Sawyer around actually excludes that shifting other companies

– there. if know to at Just have wanted you you guys have metric looked or guys any that on if thoughts any that's had something

David A. Zapico

amortization. to a certainly decided do that we it. And the our to and want haven't Yeah. we put out. certainly argument it. We've we made it GAAP to company a the or best so decision be we disadvantage, we time, a within company, But if there's probably a talking reported an a investor have we're same and of it listening no excluded we're time. base calculated but to and do to we about if report and there at don't reporting. GAAP at to we this do so reported we it's bit the it. this We've Even been Being we shops, it EPS numbers – plans acquisitive ourselves within investor way state figured not to would That's at have our this an benefit amortization, to the out not, cash But, point. base at can do

Sawyer C. Rice

Great. one I squeeze And maybe more, here. if then, could in it just

the EMIP you in color and Thanks. on business? backlog, just into terms on maybe in And of phasing that sales. color should we about again, and XQ then, conversion orders XXXX, how have think On the some any through visibility

David A. Zapico

Yeah. our Sure. positive for showed QX, EMIP, were with organic were sequential the for average. better than strong for line sales. to bit also average we're trend. growth – a In EMG strong. in EMIP high-single-digit in projecting year, Orders business EMG Sales continuing mid EMG quarter, the And a the organic for the

normal our with it what's that customers sequential the with So, we're are and growth to very and feels executing happening pleased Very well. back pleased like business. in

Sawyer C. Rice

Thanks.

David A. Zapico

Sure.

Operator

Robert our McCarthy next line of comes question from Stifel. the And with

line now open. is Your

Robert Paul McCarthy

Thanks. quarter. Congratulations, guys, on strong a

David A. Zapico

Robert. you, Thank

Robert Paul McCarthy

as in incremental it around But, your about specialty range? XX% could in dovetailing metals the driver how strength guess, these sort oil certain or and XX% divisions been in your performance markets the fourth expectation, a there? seeing incremental we on a relates margin the already come at on margin has play and the of us there? have into the that give line? state Have margins, then, Has well. more gas, going the and maybe the EMG? quarter probably Was do it we of that been the it to major for previous end bolus rebound been incremental of it Because, I think (XX:XX) some is was and context kind And XXXX? how of we've common seen whether of think about I markets end obviously to questions other of you for

David A. Zapico

mean, our strong see Yeah. we're broad-based continuing there I and orders improvement. to was

lot sales lot our is were orders of a the contribution the of a And margin markets And regions, bullish we're about XX%. of so were margins the So, our business with that. and our about XX%. of incremental to ahead in

strong So ended group performing power up very EIG added that, line, at that's margins we to a we with pricing the how points. basis the level. at the we're And with EMG core think XXX and up

acquisitions are when we're great very get hood, in doing margins really you we great. – look statements, pleased even with So, the it, doing the at financial the under the and with are

very the in margin we're we're of with pricing with So, quarter. our and pleased very power performance pleased some the we saw

Robert Paul McCarthy

of kind timing the specific markets see was I those guess of what to the mix question be have relative oil Kind that whether around end come, metals the and spirit on of of, maybe the is the drilling to into what's and strong – we but and the in seen that incremental gas mix mix? specialty is areas it? going

David A. Zapico

point there metals, one with the a there is metals with inflation. dynamic Yeah,

So, as through inflation pass increases, our that customers. to metals we

point EMG a rate at of organic about was inflation. from XX%, So, you sales that of when metals look the

or So, number. sales be lower incremental you on a it if will want contribution margin,

really a price what business, So, growth seeing, upstream the asking of question high-single-digit in give very you're terms oil we're about. and is much growth back and that in coming EIG, didn't also be seeing And downturn. in really strong. upstream downstream. the And in differentiated niches, We're we're in low-single-digit the the up the in gas may we market

So, markets pricing high it's and business contribution got those margin a gas, strong and about really we're optimistic and are oil the future. we've and in improving

Robert Paul McCarthy

Linzie's – of in from EIG EMG questioning, then, kind Well, obviously, high-XXs And were margins core basis. a was on high-XXs. sounds, comments Brett in the the of it kind the

So, to dynamic talking that speaks about. that you're

So, I nuance. an important think that's

thing ... other The

David A. Zapico

So, to incremental EMG EIG XX%. core XX% was was and be specific,

Robert Paul McCarthy

company, How the the your is et done cetera. pipeline there think strong Math with just And has your fire suit. takes et for about deals do power? the and long how just of line, specing deal, maybe size deals is on deals odds see – more here getting goal never do then, towards larger? strategic it that finally, larger Could kind should over a think given we been to there's given a association shaped fixed cost imperative my the – decile, cetera, something here you we

David A. Zapico

see you're clearly, working to see couple million forward. $XX bigger But acquisitions every acquisition, And announce is is in core are bigger that that the to pipeline. may range, the and deal from predominant the the deals going really us Well, buying businesses going years. in you us a AMETEK $XXX of that thing at, that million good is

to setup a Our at simultaneously, looking to we're of is these out M&A things. four team six of and lot process deals

remains pipeline active. Our

look you we're same or in and Our there's excited mergers and going We're in term, pipeline feel predict going equals busy, the These We of quality we the lot are size businesses, And million be to deals, of we're bigger plenty the time, that. predominant those no the think our revenue but anything deal. but million any value. to are need will transact is do pipeline. we to I when short starting $XXX acquisition don't but They at a think $XXX opportunities stretch breadth very forward. of deals we typical add can't slightly like that ever value say and that $XXX create active. something's to means a at the about by can we a with of would larger deals. million But, lot of

Robert Paul McCarthy

Thanks for your time.

David A. Zapico

you. Thank

Operator

Wells question And Fargo. Allison line our Poliniak from with next of comes the

line now open. Your is

Allison Poliniak-Cusic

guys, Hi, good morning.

David A. Zapico

Allison. Good morning,

Allison Poliniak-Cusic

there's And talk aspects there? portfolio. it your that about going X% should increasing sales of R&D, of we I you Any thoughts Any or guess, changes eyeing where technical appropriate be some amount, more R&D? an that is could Dave, forward? today? Obviously, to you're

David A. Zapico

Yeah.

consistent of X% And time, XX% I period think a the been long appropriate. we've about R&D is over very increased was this year. the and

increase that, business budgets businesses individual you an we're great present strat on and think plans, put those a will we return getting we them. on what's but long-term we're the been consistent more EIG, their critique driving together a EMG, R&D we'll they're that. spend spender way spending And know, and their a the plan, where size and and larger we Certainly, their and bit we've nature during technology than individual our EIG units higher healthy manage as the So, with of their plans during with over happening. really R&D. But the happy they're with

we're have fresh share. up-to-date We and winning products

pleased efforts. a the capability years, in I also very India. we're that added add just with can So, we've past few tremendous R&D our And over

development and forward. there XXX really our markets, capability. in our our know the over augmenting of and engineering applications engineers people products take the the are we of have some And industry, the technology that terms We about capability rock niche product the have of stars in that with

of So, and think spending we business great we niche appropriately. technologies have a great we're

Allison Poliniak-Cusic

Great. the active, industrial to economy color I M&A pipeline, multiples? And you been back just you've then, different that going about been seeing as being the talked changes Any recovers. push-back, Has to guess, any, it there there?

David A. Zapico

been free chasing plenty doubt the mean, flow deals. on the I that. There's similar value of about experiencing And current been the acquisitions Despite we've company. cash will enhance we've is sure. cash very successful pricing this, no Yeah, of what environment, deploying recently. it's our there's that elevated, in to

where on deal. in the disciplined very deals to and when we on – we'll really our So, can do deals we're the we deals return capital find do and And select that parsing return remain robust are a pipeline we'll a the we metrics. focused

have optimistic what and we of So, I the power $X.X with pipeline. really see in billion fire

Allison Poliniak-Cusic

you. Thank Great.

David A. Zapico

Thanks. Sure.

Operator

from Markets. line RBC our Deane next question the of Dray Capital And with comes

now is line open. Your

Jeffrey Reive

Hi, This of Deane on is with Jeff morning. good continue some Reive Dray. to for the M&A multiple. Maybe

considerations fairly are making guys pruning are you multiples for the actions? portfolio given So, any high,

David A. Zapico

with time. We at our and of we're this in the year, ended our half process portfolio first strategic planning the very comfortable

we any on or We Our future organically niche overexposed all weathered to focus diverse to a bit of or through single and looking our years. single over years, set become of three and of a have grow a look don't next we've in couple markets, these want broad, is customer. market past two of the to And and any to acquisitions strategy businesses out niches. downturn bright a the

annually, least it can right at very our decisions portfolio. look But, now, So, comfortable we with our that's at those And entire now, and certainly, right position. change. we're

Jeffrey Reive

Great. but commentary I And qualitative, just XXXX? you setup maybe some for giving know you're any broader into one XXXX provide could more. your guidance, macro not

David A. Zapico

performance feel we about good the markets. with our Sure. I mean, have. We're we happy obviously very

for hear put Our from execution there numbers execution before our excellent, But, and XXXX. we our continue. is we teams expect to to want any out I

Jeffrey Reive

you. Okay. Great. Thank

David A. Zapico

Thank you.

Operator

comes & question Kearney from next line of our (XX:XX) with Company. And the Brett Gabelli

open. now Your is line

Unknown Speaker

Thanks guys. Hi, my taking question. for

David A. Zapico

(XX:XX). Hi, Brett

Unknown Speaker

talk objectives? additions any executive in had the order you've at all and, recent additional was team, there can the kind I you if just your wondering about of within and hires promotions guess, I to contemplated growth achieve

David A. Zapico

There promotions is we're in recent of – a the couple finance world.

Bill talk let I'll them. So, about

William J. Burke

Yeah.

AMETEK. name We He's other companies Puri. have is joining AMETEK, added Treasurer to several prior with to Dalip his been Treasurer large

a we've as and maintain from VP and role one we we had team include of we as here that that the best And disciplines got we as make Nash, divisional have treasury, got Operational as we've acquisitions our years. the culture division And a the great, a Power folk that's Systems our make team. grow strong back-fill is an a number corporate we're adequate businesses, really want of then, through really in Brian our come So, drive who of corporate that was we'll larger, addition our Instruments get a promoted sure from and and to of we're second sure the strong we as to pleased to He's to happy Finance. there. AMETEK there. over background to And support company, and him up augment along long to folks promoting then, group and him help, the part into in of the

course of the to six the strengthening with over pleased very of the months. So, corporate finance last the eight team

Unknown Speaker

Thank Great. you, guys.

David A. Zapico

Thank you.

Operator

And Cowen. the with Joe Giordano of line our question comes next from

Your now line open. is

Joseph Giordano

know I Hey, ramp up year. guys. context next not kind to EMIP here, but to the we're business rates just into want aircraft XXXX – I to appropriate morning. with guidance get of metal going prices and build expected put the Good

move enters connectors? the scenario the year? a next out that in particularly we specialty maybe frame could how mean, of at you that of kind like to EMIP a I kind looking year, of as stuff can some So, of be segment and the metals material business

David A. Zapico

– with at between in we and us XXXX, told good, but that products. EMIP, there really I were the positioned metals we poor. Yeah, the well we're a metals seeing end you market were the market with markets in end And and customers problem our were niche financial see in that time was

some year, market is that that improvement. mid see with a So, And digit really EMIP really saw now was you reflection to growth of high-single business in the distress. really what our with what you

well So, now and we're EMIP. we're we're the very very at with we that a at performing pleased level think

Joseph Giordano

is probably could that It wouldn't fair? go be think that accelerate further insane to rates higher, even that the build as

David A. Zapico

I'm not going comment on to Joe. XXXX,

Joseph Giordano

ago. with I a All the enough. mean, your it you, little more a more Maybe sales and end front looked on channel recently. a looks or end business driving guys, on background the engineering Fair I how can comment of you maybe front bit the how today two right. bit had year versus focus an know

maybe do about the now versus you you feel stepped into that does role? when how that So, How look today?

David A. Zapico

operational feel where good as in and And happening the tools. our we ways distribution to talked after about our prior front we're end call kaizens that wanted getting And business. our about capability. really the our of we're our make really some on I markets. using customer-facing niche in strong as to what's growth channel I capability engineering improve as

all digital We businesses world-class of of up take that on and focus to that have our a marketing level. are bring some them to truly now

of effectiveness sales focusing to on aftermarket business. our opportunities sales force. think a grow our compensation of development there's force leadership side We're there. and on the the have program We involves We that

happening with growth. the the So, front of business what's I'm organic our in very focus improving and pleased on end

Joseph Giordano

Dave. Thanks,

David A. Zapico

you. Thank

Operator

question Baird. with Mason Rob of next the from line our comes And

Your line open. is now

Rob W. Mason

prior broad-based Yes, referenced globally, or good talked least morning. The about commentary, at growth you geographically.

So, gain could year. specifically, and that kind there, of on specifically, half because seemingly you're strength the America the Europe that's into North America, various the drill Asia, I curious know color of lag some And if geographies North look, was which through how the just I some you case. and it seeing down businesses first give maybe

David A. Zapico

Yeah. we an saw this in strength what the quarter excellent That's tremendous really was U.S. because point,

I was quarter. Our improving it trend sequential digits, it up X% and about, was business low-single-digit, last high-single from think actually U.S. was

It So, It in gas. strength military aerospace and strong. was and was oil It we business. It a tremendous across was really the business, was was it saw It was U.S. business. a broad-based was the our metals strength. it board. our

So, line business we're in very digits, That strength. our mid-single pleased up Europe. Dunkermotoren with was in trends. we was In to see Europe, also mentioned recent that. notable I very broad were strong based, and

process in And another business Europe. we've Our been very the was Asia, growth strong in we seeing. digits, continuing quarter, had that high-single great up

very pleased the we're with what across seeing. we're So, geographies,

Rob W. Mason

Okay.

follow-up. one just so, And

the as gone as to it for good that and So, the year-over-year? reference outlook compensation Any as XXXX you year-over-year going to through or in headwind a way has we've what higher shake probably size to compensation out is delta up ratchet well. to made margin see I year think been

David A. Zapico

higher driven by compensation I largely was up XX%, our about in Yeah. and G&A mean, it was expense. QX

be would the best way that to-Bill? So,

William J. Burke

a of kind It's for that. number $XX million

Rob W. Mason

full the For year?

David A. Zapico

For year. the full

Rob W. Mason

Thank Okay. you.

Operator

And I'm showing time. no further questions this at

with closing So, to I'd over Kevin remarks. the Coleman for that, turn call to like back

Kevin C. Coleman

replay a day. accessed great can And Thank today. and of Great. us of Thank a reminder, the you, in ametek.com. be as call Andrew. have And thank section for you, you Investors joining everyone, a today's

Operator

gentlemen, Ladies for thank today's This participating the conference. program. does in you and conclude

wonderful may disconnect. a have all You day. Everyone,

AMETEK (AME) 2 Nov 172017 Q3 Earnings call transcript