AME - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q3 2018 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.

As a reminder, this call is being recorded. pleasure Vice my Relations, of now Mr. is to President introduce Investor It Coleman. Kevin sir. Please go ahead,

Kevin C. Coleman

electronically market Great. and you, third AMETEK's Financial morning. Dave Bill for released call. and Good and in Burke, website. are to Thank not were me third statements. Investors accessed during systems Zapico, later archived joining are you and our on With this the nature on President Executive earlier us site Any be quarter in is considered historical our forward-looking all Chairman thank our Executive and be today. results section website AMETEK for call Officer; morning Vice Officer. the AMETEK's This statements this quarter available Chief and call conference also Andrew. earnings of morning are on by Good are and made The morning, on can that Chief ametek.com. webcast will being and available webcasted be made

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

David A. Zapico

was exceptional delivered of and growth. announced spectacular deployed on We added on And quarter, had flow revolving generated growth, Kevin, lastly, an In while a businesses that as highly cash our the our earnings we operating as free full-year We to increasing we and financial strategic providing and quarter driven two key increase our another morning, metrics. acquisition us $XXX acquisition our expansion quarter, everyone. of operating our results excellent and good record announced earnings level sales across margin billion, robust AMETEK by you, the $X.X growth another we given on significant all Thank again million delivered strength double-digit of execute credit facility pipeline, guidance. flexibility strategy. acquisitions. organic

another the the overall, outstanding quarter, the our AMETEK AMETEK differentiated and team. the entire business nature of excellent strength work So of the of reflecting model, businesses,

sales sales quarter. X% $X.XX Asia highlights. XXXX. at XX% organically. XX.X%. growth EBITDA the Organic in our with quarter. also strong quarter geographically, in remains Europe and quarter neutral strong balanced and margins Growth growing currency X% $XXX growing third This Total segments reportable organic strong to was up to with foreign third the EBITDA with compared across XXXX, the the businesses, acquisitions a our and both Now, the to business with billion, sales million, in X% third X%, X%, up broad-based of was adding third very growth and financial were in U.S. XX%, very over quarter very on XX% the the remains quarter the of again

million, the to up XX% $XXX.X Reported income were quarter over income prior operating margins year. XX.X%. operating points up XXX was Third basis

of points over increased margins third the dilutive impact year. last the by Excluding operating basis quarter from acquisitions, XXX

of $X.XX per over same exceeding share. the XX% share, period our of $X.XX $X.XX last were year, diluted earnings increase guidance quarter per Third an to

operating individual the groups. to turning Now,

up with EIG Electronic recent with Overall X%, quarter X%. the growth sales were acquisitions for $XXX a contributing exceptional the XXXX. the and up million, quarter Organic quarter, Instruments third over First, EIG were had in performance. Group. sales XX% strong operating same great of

was Organic XXXX. our growth quarter. since Foreign acquired headwind Rauland, a growth broad-based We tremendous sales to experienced in very our businesses. in slight process EIG across currency has the across which businesses, saw including strong being remains early growth

XX% XXX another Additionally, EIG our income Ultra basis in Precision at sales growth. the quarter, excellent million, organic prior Operating year's quarter period. with over last margins $XXX.X were Reported year points XX.X%, for quarter. a third operating very Technologies up outstanding strong division over had the was income mid-teens up

points third materials. basis FMH EMG of an XXXX. $XX.X up XX% increase Electromechanical versus had quarter and very remains million, excellent strong, the an up same contributed income of currency was expansion. each to the growth third sales a automation, margins quarter compared margin acquisition operating impact dilutive year. quarter the were quarter the to operating quarter, $XXX.X our expanded EMG in prior and Organic same EMG's year. and prior over the in the across growth million, on key the Sales The margins up including businesses, XX.X%. acquisitions, last and was XX quarter same And sales impact the points year growth Aerospace engineered X% versus X% in basis aerospace sales. X% were had of and of foreign EIG sales impressive no Group with balanced also additional XXX Excluding strong defense, over The an outstanding XXXX.

in tremendous a third So, overall, for performance the quarter. AMETEK

me the tariff the streams let last driving manage Now, were call, some brief help to comments highlighted work situation. on On tariffs. we provide quarter's conference various I

to of which tariffs, are each capture Our to Excellence to these We productivity expected. differentiated of ability continued ability number nature business; deliver progressing tremendous our our us shift very incremental number positions in initiatives confident announced our to and to impact from to each elements, the of offset our efficiency broadly, due our the our number production of doing initiatives Operational and our the AMETEK's as remain these extremely highly More headwinds pricing job managing Operational each mitigate global model. from meaningful a two, Excellence flexibility business one, teams three, ability savings. given captures is capabilities, given: and tariffs. well asset-light and supply proven chain; strength

expect XXXX, total of of OPEX we million all For $XX approximately now savings from our initiatives.

are Telular Telular's enhance minute that include sales purpose-built used of Our approximately flows business assets success of efficiency, are as XX% logistics sales. software security stages. cash connectivity also lower IoT for communication generating by has on their two Their in sustainable, monitor IoT hardware, of providing of significant the from based recurring, strategic a welcome in communication in would said, investing for focused people, our solutions Telular a market-leading AMETEK: provider acquisitions. to critical Telular's long-term wireless a in with a million, XX% still IoT and $XXX I continue model investing annual services. cost are management, to expected sales subscription-based rate, annual remains our and to end-to-end investment like solutions high-growth, solutions at customers. return adoption businesses and our sales to strong real-time, businesses, to proprietary Their on take in to roughly With solutions monitoring new and applications. is grow early Forza. Telular and tank investing

their Telular we capabilities IoT of the see addition leveraging In value AMETEK in the business, tremendous businesses. across other strength to

expertise instrumentation differentiated opportunities core and businesses. in strategy Telular's highly of and our AMETEK measurement markets niche platform an growth opens IoT digital Our our up forms for with domain combined expanded the for attractive

applications. $XXX AMETEK this across where platform expect Chicago, the businesses approximately We important to is U.S. and Telular analyze locations on with and measure other sales across leverage mission-critical this acquisition. variables multiple deployed We support currently in collect, million headquartered we across process

Forza. to shifting Now,

and complex commercial solutions applications. in medical, image specialized designs produces for Forza used and industrial sensors defense,

and end-to-end to design testing supply CMOS combined deep Forza's expertise the solutions their next-generation their in-house customized proven design with sensor expertise in technology, processes, chain produce customers. ability and provide for imaging capability

a these research, in cameras of military speed is for ultra-high and applications. industrial our Research the leader One in business, market use customers scientific medical, Vision

company and on deployed capability million design year, Forza, acquisition. will very businesses in deployment $XXX and acquired we're Telular and balance we this Vision on year. $XX and active. activity strong approximately robust the with and now Forza million have million custom sales. sensor to cameras. million in more acquisition $XX the XXXX This use AMETEK accelerate approximately remain The for which for is capital sheet annual of this we provides capital than management have a deployed additional bandwidth pipeline and opportunities managing acquired five the production capacity a of development our Including have has $XXX high-speed of record pace level Even with thus in Research in approximately of new and sensor sales far a

We're products job this while are delivering a tangible globally into also doing market businesses expanding presence new their initiative. segments. results organic seeing and growth Our from tremendous exciting new

Ultra [Ultra Technologies] of and differentiated for success, precision diverse group Ultra applications. The ultra-precise as optical metrology good Technologies Technology a includes markets they attractive and example Precitech, TMC, Reichert, businesses Our of ZYGO, is products solutions quarter Hobson, Precision sales set of Taylor this (XX:XX:XX) Creaform, growth. (sic) Solartron, mid-teens a delivered a which leading-edge highly division provide Precision end and of organic another Precision division

market-leading product ability while is into to maintaining differentiation, With new market their segments. developing expand the these technology new businesses, key to and providing application

and intuitive and leader a of around like delivers diameter our ultra-precision measures from Taylor products that system. a in in and software designing control a solutions by and PGI sales generated for and high the its XD This system business, X,XXX manufacturers. implementing control, are by recently challenges many range for driving NOVUS system reflects development, and third the faced and the that tremendous Through new our available new is sustained end this PGI industry. for measurement engineers introduced a last are doing of Hobson a instruments products simple package solutions within X.X has was globe the powered are unprecedented new software great and solutions launched precision wide new including businesses most level job contour, years, which the Taylor markets XX%. index, real-time new on measurement display with in growth manufacturing, Our level X.X monitoring more Developing enabling customers. aerospace advanced and optics, component a our The key Metrology a Metrology surface, front. three than effort commonly addressed the it's NOVUS vitality of of The organic measurement. and virtual is this precision quarter, interface the Hobson our In products

outlook year. of the the onto the for Now, remainder

$X.XX first we $X.XX be increase per diluted for the earnings range to outlook from through positive and the Given quarter, an adjusted in quarters our per to outstanding our to of three the increase XXXX's fourth range previous earnings over our expect $X.XX. the an diluted year XX% share, guidance of results is share. $X.XX of of now This

be up for expect sales mid low-double We digits, all sales overall with digits to of XXXX. high-single now to organic up

sales quarter, $X.XX of our over organic positioned up pleased For is world-class the year compared be XX% same the firmly per up XXXX. outstanding overall the XXXX. that up to expected teams to share sales quarter be results. with results to AMETEK fourth last in record with to produced have I'm mid-single with range approximately the of are Earnings thus digits fourth quarter far quarter the year. $X.XX, XX% close very diluted the in XX%, are fourth to the in to

We glad are your some it our details will questions. over quarter. focused of to the now continuing who Bill to four success turn the Burke, executing be future this strategies. the cover on growth of financial take I Then, we'll year's into will Bill? by

William J. Burke

you, Thank Dave.

earnings. quarter As high AMETEK outstanding quality an Dave had highlighted, of third with a

third Let In year's prior financial reform. year's higher year-over-year quarter, in the the due benefits growth. in and X.X%, over XX.X% sales line were expenses The in with for our and me quarter a rate level. costs. with quarter million with third to XX.X% tax were was tax provide line sales, administrative in up rate of up expenses tax XX.X% core XX.X% the were rate $X.X was last quarter, General third expectations. sales due last percentage selling versus of compensation additional of expenses And in core effective the to line year's of expenses The in some year details. selling last reduction as versus was with effective G&A our the

at We XX.X% Working rates estimated up a be or the for And expect actual solid rate Capital rate. very we've dramatically, quarter. third $XX year from in were million the past, quarter, to expenditures full-year this as of XXXX ago. tax was capital stated can quarterly negatively, our from the XX.X%. approximately either differ sales tax positively in XX.X% slightly

to of and full-year expect the business to was asset-light model. continue be We reflecting capital Depreciation million. X.X% million or our approximately sales, expenditures $XX for $XX quarter amortization

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

Third million a million, quarter cash flow and of net operating of solid XXX% very free cash conversion was was record $XXX $XXX flow a income.

end size cash well-positioned announced billion, $XXX paid maturing senior to and $X.XX $XXX quarter the facility In billion performed the facility us acquisitions high-quality expect was XXX% use with Forza. These debt totaling and provided guidance. This growth and again of capital our of and amended and $X.X down exceptionally deployed revolving approximately deployment, million. significant $X.X in our The end million. cash we've the level our billion $X.X facilities our full-year Offsetting existing of our $XXX approximately and notes $XXX million our free XXXX, active income. $XXX growth flexibility the the is to cash approximately of sheet third allowed support cash increases This credit flow Forza, acquisitions of capacity XXXX. of cash in the strong October as deliver credit in been continue with excellent strategy. two We we September maturity bring primary summary, growth was initiatives. quarter, incremental the on front. from still capacity to quarter, conversion to expenditures revolving cumulative date of from credit Telular to the flow approximately Subsequent support XXXX of acquisition facility well million includes have additional financing to with third our support to our million. at through including record very XX We This of Dave our of provides and of strategy. Total our as amended to Telular And balance debt the extends us we upsized mentioned, we of acquisitions to today. the to full-year cash which Kevin? remain our billion we raise businesses with the on this acquisitions and initiatives equivalents support earnings that free Even strong acquisition off net at flows. for in capacity

Kevin C. Coleman

for Bill. could questions? please we you, Andrew, the lines Thank open

Operator

Certainly. Davidson. D. And first question the our from line Matt of comes Summerville with A.

Your line is now open.

Matt J. Summerville

Thank you. A couple of questions.

slowing month First, XXXX? of thoughts at Dave, terms how any willing be any have provide to of even into October, point and the you're you seen semiconductor of your in business And you this in China? high-level in would signs about thinking then,

David A. Zapico

Yeah.

We we're orders October expectations a that. question, got just month. a morning. our plan. with right numbers and first The finished exceeded was It on very the in strong It fact so very bit this happy very,

I'm we're to it's to performing but expecting about the of the market, continue. each position XXXX very and time. November capability that our at during specifics We'll not a XXXX, be this the point semiconductor and seen and to we in speak from December we them. AMETEK specialized meeting And and regard slowdown to terms are very businesses no really that with Chinese we X% have of in hear regarding in to some In well. market, selling semiconductor about of have it's And

view we guidance. we a As budgeting process understand from on is operate before have of niche each giving you markets businesses know, any to of in and these our going variety to what need in a bottoms-up

Matt J. Summerville

you price cost what versus you realized for what and Thanks. And follow-up, the in can guys? my between was about price was spread QX then talk as Dave,

David A. Zapico

of quarter points. our picked bit. Sure. portfolio. QX, spread In saw have across And had an And we X.X%. entire price about achieved terms Matt. We Sure, excellent XX basis in of up about price. was positive about It X.X% inflation we of a total

stay front results. nature to changing The these pleased portfolio, in AMETEK the product speak highly with markets position our a outpacing very the niche sure and of determination we're leadership focus we inflation. pricing economic environment to So in global with make our of and results differentiated

Matt J. Summerville

David. you, Thank

David A. Zapico

Okay.

Operator

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

now line Your open. is

Christopher Glynn

and continued morning, on year. Good congrats Thanks. excellent a

David A. Zapico

Thank you, Chris.

Christopher Glynn

two seems about discreetly deals. other solutions Telular it the different versus Almost communication maybe Curious like space.

not-too-distant those if deals. AME the it adjacencies communication in Zapico of concept with fallen So, me, maybe past. does Dave the wouldn't adjacencies, And gel range other wondering also then the update vision of solutions of strikes have in

David A. Zapico

market very three mid-XXs great a of mean, us. markets. lot revenue that a sizable margin growing differentiated about Yeah. Chris. in see a It's question, for EBITDA, XX% niche years. growth, when It very room we It's expansion. with at business a profitable, It's It's leader look That's boxes recurring It a solutions I we stream. a last secular checks a business. the technology new. good a has for year bit Telular, has

So good we opportunities. cost see very synergy

a broad to AMETEK. Telular's also the concentrated had they've aside provides enables we expand to internationally. IoT of of AMETEK's the businesses. the But Telular, you AMETEK right. new just them with U.S., on is growth good They've It it help so combine businesses deliver capability, also when have that IoT business combined own sensor something much for its opportunities the technology a in business from all else to to when – It Telular We see expand and solutions internationally. growth our really a set avenue capability creates

excited So them. about we're very

Christopher Glynn

Thank you.

David A. Zapico

Chris. Thanks,

Operator

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

open. Your now is line

R. Scott Graham

morning. Good Hi.

David A. Zapico

Good morning, Scott.

R. Scott Graham

in Wanted segment. by ask quarter you the about the organically to orders

David A. Zapico

and X% both Okay. orders orders The mid-single X%. were reported digits. The groups up total were up organic were up

R. Scott Graham

$XX-plus number operating that million. you. I see Got went excellence to Also, up the

David A. Zapico

Yeah.

R. Scott Graham

just talk particularly got is that being functions, operating how hurrying side, you sales includes assume there, operating it's adding little some of stretched bit excellence over things more which excellence also tariffs not you about sales? I the on a broadly, how how but Could the now to

David A. Zapico

Yeah.

Okay.

you point $XX to that's going through million first work really we and working the of and as great Excellence increased The our my had is doing that handling Operational savings our we remarks. initiatives chain from it P&L $XX are and to about come a from for continuing to about speaks tariffs million really capability know, the they're a million cost job million with is, and target teams. supply really $XX prepared And total $XX along the other and it in

Regarding working excellence been are that now the expansion sales the kaizen, traction. good the attributes of businesses I focus commercial growth processes we've leadership leadership the time, a and We seeing initiatives our part improved we're visiting the now. sure around going for and on just some and finished marketing. mean, the Bill and seeing really and It's we're making things proper develop of big on our marketing digital development aftermarket, talent. to the development of our that doing I

So, growth we're the innings comprehensive it's of of early organic really well going It's the and businesses. approach that. in the still improving extremely a to

what's we're going of So on. positive very

R. Scott Graham

one of how So the important because I internally. in is I'd that this very things know that tuck on – just this quickly

salespeople in sort and generate process? giving that them time obviously, as sales of that, on just tuck path, on of of to the is the let's time shrinking of AMETEK the lead four competitors a order you out Could addressing front couple leads really your delivering efficiently of how a beyond of order, do say then things thing. full critical the you just train to spec, the of mentioned is as end sort One that whole things well to an create more kind

David A. Zapico

Yeah.

are be And take we'll their I generating marketing We'll we've follow we're the – way sales to with good of digital properly and that make or more products. marketing leads capability, them we'll our think enhanced that we've they're leads. on the forces return really make on would dollars lead of businesses there We'll our what is our getting sure that leads. our advertising sure all that we'll done our dispositioned. lead up out process generate all we're so make sure

lead of big big have So is a lead follow-up of – we that generation growth. and part the program internal to part accelerate

I'd So a Scott. core say, component what it's of

R. Scott Graham

Thank you. That's great.

David A. Zapico

Thank you.

Operator

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

now is open. Your line

Allison A. Poliniak-Cusic

Hey good guys, morning.

David A. Zapico

Allison. morning, Good

Allison A. Poliniak-Cusic

versus on I Just want to you how Telular. software but know component, you not think gave should mix revenue, the touched sure recurring we about hardware go back to new if this, that? a versus of

David A. Zapico

both The Telular hardware Yeah. solution requires provides software. it – and

and provided and a you where have and subscription. annual software an service, hardware providing situation there's So to are connectivity the you're also

classic the with with of not would business, algorithms SaaS software are and it the business, I a it's has hardware. SaaS analytics software linked but the So and say the the elements and the

time. hardware we're And out because, instrumentation part world So AMETEK very good it's capability were sensors And excited all our IoT businesses that's there something businesses, at. the solution, they expertise. know, degree good really we're our of sensor IoT a but have they doing to fit with technologies, for Telular, of that's you and certain Also, as struggling is is with really about. we're the a what and a adding what the the to best-of-breed those all

both of fit. businesses combination the a wonderful is strategic So

Allison A. Poliniak-Cusic

few, your you on side? in issues I talked Great. guess, where noted are you'd touched the about weak past also know Any on China over nicely. successes the growing (XX:XX:XX). And I there, changes any season, then Asia other over

David A. Zapico

drove No, the higher sales overall the – Allison. mean, that's It growth. situation the the was Asia question, a us Right. was nicely demand related overall a than China It we're the I to great watching closely. China bit And Asia. growth complexity in sales adds side it which quarter. for tariff that of grew the

in businesses manufacturing what do have that are improve a to their lets China. closely well you feet, and our back XX,XXX bullish. about chain. we over take maybe think step if at you very our process teams That's China there we'll operate really, move the but to monitor those and And impact, the value are continue So and and far there's capability no doing capability, businesses it it up

now, but watching seeing right So, we're a not closely. we're it slowdown

Allison A. Poliniak-Cusic

Thanks. That's helpful.

David A. Zapico

Thank you.

Operator

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

now is open. line Your

Deane Dray

Thank Good morning, everyone. you.

David A. Zapico

Good morning, Deane.

Deane Dray

Hey.

last there, Allison's does quarter, than tariff on calibrate you stand what think that you is? could third and update for question us impact Where the follow-up a you fourth said today? and on less Just the quarter. Last $X.XX

David A. Zapico

In Yeah, direct out played $X.XX the we better less with and situation offset a than that tariffs, QX, We a little yeah. Right. had than impact from from expected. we little price.

got it. we So of ahead

We play covered It'll expect out QX. in and we're We'll we about initiatives managing similar be to a have a our feel situation we it little $X.XX largely bit tariffs, impact. higher through but direct with the effectively from it. have

Deane Dray

wrapped Great. last there's where as you work and a to point interesting lot adamant are the And Sox your thinking been has debate and the with at on the citing and That's the we Series so an have fourth gave Red as but World cycle, sector stay cost peak raging baseball data of market this another maybe well. in sentiments nice in And we're Dave, know I quarter, last analogy. you up inning. were we'll cycle pretty price quarter

David A. Zapico

Okay.

Deane Dray

terms where talk as dare – innings see you about Do it you today? are another we in of

David A. Zapico

– home our slowdown the We bottom really I recession team's of up. think in optimistic. it of see so fourth business the we came and looks no mean, I it's the out and the strong.

feels So us. to it good still

Deane Dray

certainly orders That's through October. Okay. coming in in your

last is, Danaher, you on certainly of EPS? any doesn't a all again, it consider? have times, the puts you you group acquisition that's level number as this us us know number just in all come So this a up your of most an And would is strikes It Dover, peers the switched, have is, all would peer fundamentals, when it growth but of idea moving Roper. asked we'll investors that And consider question it's similarly change to then, by Fortive, it just field we a something cash optically there. of playing and leave whether

David A. Zapico

we it. additional not the this it, decided to year, We through And We considered last and Yes. it do we to also year. would talked consider course Deane. investors of

you we what to it and do at long-term we're going lot there we're decided let our That a investors So we'll not we'll to we're evaluate do. that. a to decide year, to we'll be GAAP matter us, and Last opinions proud are and investors of probably do of going and would a year-end. company good what it, time, we're varying because and know

financial very on have statements, we the also saying hear what little are to EPS. adjustments We but our cash investors

So we're at evaluating do not or it we'll like and year-end year. decision it make do last a did it we to

Deane Dray

Great. the Thank but we And be from would we idea, appreciate good that just it's our think perspective it a all color. clear you.

David A. Zapico

Thank you.

is input Your noted.

Operator

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

now Your is open. line

Brett Logan Linzey

Hi. Good morning, all.

David A. Zapico

Morning, Brett.

William J. Burke

Morning, Brett.

Brett Logan Linzey

you you're of the about back or finer elements, recurring more deals you're Just and opportunistic, pipeline. I the think of to of tilt deal seeing size pipeline want point you're types are deals to guess just with is today more you come software a M&A that as or the announcing a the deals looking at, towards on maybe evaluating? this type software-based

David A. Zapico

Yeah.

within and capability with I secular as we since business And found about to calls market, for capability developed the or sensors. IoT a we sensors looking we're with it the companies we companies an were going we IoT And an at think businesses. very some is good that it's at software customers. who ponds capability, developing a good software that for of AMETEK And we've in for we're within And we've deliver weren't AMETEK's more to for a at proposition, tremendous in value going IoT the unique move on capabilities not and our our we And that important as that good software time we of good fishing a a still that prior a in very And to capability adds some think were in many have portfolio. the Telular. But saw great for great excellent our been we we've been about fit we software situation we proprietary been sensors a wanted past. forward And always at changing the either all the the to the AMETEK's business we direction; good engineers center niche and That's software become and a lot now business business. type itself at found wholesale talked the on the Software, were and in return get businesses. XXX close India in of of all could looking businesses. trends fact. our just quite that

So we're looking that. forward on work to getting to

Brett Logan Linzey

great. Okay,

David A. Zapico

another have question, Brett? you Did

Brett Logan Linzey

Yeah.

then chain, buy follow-up – of the more parts AMETEK value a the more I up a to a one mean But chain lot just value chain of color links few markets. on or just maybe price little of served state pre-buying, production inventories increases? in obviously the schedules of of sense in Just any of and terms there. And relative plays the the ahead

David A. Zapico

Yeah, because be customized we from we're best may products. building Yeah. not input to company get that the largely

So purpose-built customer there of requirements. in products of the they're because our ahead isn't a lot terms to buy

right lot that of our see in seeing see we could that that, places not in typically businesses. So And now. don't we it a the we're

the up Customers is money. at we're So, they're and Customers a it. with it looking putting environment. way demand, have keeping that to it's work are healthy their

Brett Logan Linzey

Okay, Thanks. great. along. it I'll pass

David A. Zapico

Brett. Thanks,

William J. Burke

you. Thank

Operator

question next our line with And you. Lynch. of Thank Bank the of Obin Merrill from America comes Andrew

now open. is line Your

Andrew Burris Obin

morning. good Hey,

David A. Zapico

Good morning, Andrew.

Andrew Burris Obin

us how XXXX accretive deals done first in you've it terms is the question the you math could of year, this numbers? that with Just all help to

David A. Zapico

Yeah.

completed acquisition we've add had $X.XX-type last is the the year. to a And end like the more wouldn't if I I think business. required it accounting number, that. all because plans going everyone But something would work pointed and surprised don't at have The next for like lot of that purchase there's for lot we see that of a we accounting and capability first add earnings I a of there's you year. – purchase much haven't of restructuring, point, the I level could do the similar in deal, and in the to year something and a XXXX, point our but doesn't – to a accretion later company the this year they usually we step-ups we like up the a Telular be

Andrew Burris Obin

you. – and sort both one because Could more your of just little another about cyclical seems exposure. terms talk there's remind and backlog defense and we Got questions lot question, a about Thank each aerospace you a in you And outlook, bit of energy could get markets us this seeing of you operating a growth there? of in it what you. leverage and and are lot year,

David A. Zapico

Yeah.

aerospace our solid organic recently strength aerospace balanced growth Aerospace driven aerospace acquired third the Our was aerospace with the from We markets, the across up saw military digit quarter. business And FMH by and and sales on was mid-teens businesses. overall group. our notable growth it contributions high-single commercial – various and in in our

XX% MRO that about may about about and about XX% military, recall XX% commercial, You third-party jet. AMETEK's XX% business

for we So with for well, our good up doing us. with digits, each organic continue commercial mid-single that's and And growth expect all to military be of markets for XXXX, sales aerospace to segment. business across

improve lot now of a the military spending life military and what recent of In a both and spending good with back environment lot was in we're aerospace we changed and we've Airbus the won for ago about U.S. solid years, and a airframes on the its and military, a also feeling F-XX one not from it market international content is we're to general coming years on And wins So with commercial the on couple world, but to our major we're fleet really of business. any very program, it. but dependent well had design market doing programs. important readiness, really the

about In gas to the mid it we In up digits, up XX% the digits of downstream be is upstream to up. digit. AMETEK. mentioned up mid gas, the and to for And And activity. solid business see at one-third U.S., mid are low-double components up oil, terms QX, We're about and and expect international; high-single low about sales picking and international of mid-single two-thirds full mid-single it digits. with now year, was XX% and that also, we of The upstream, downstream. you X% oil $XX oil

and business getting feels just we We feel incrementally positive the the exposure. about solid. see So stronger slowly it

Andrew Burris Obin

energy, peak on follow-up, now? how off we are just a And far just the

David A. Zapico

we're Yeah. We million, million. we about were $XXX and about peak, at were $XXX at – now

million the $XXX from roughly still peak. we're So

Andrew Burris Obin

much. you so Terrific. Thank

David A. Zapico

Thank you.

Operator

question comes the from And with Wolfe our Thank Research. you. line of Nigel next Coe

now open. is Your line

Nigel Coe

morning. Good you. Thank

David A. Zapico

morning. Good

Nigel Coe

earnings GAAP want this just gold in the amortization kind – standard. on GAAP to think this But So $XXX million debate. is I obviously of weigh cash EPS year. you I mean, mentioned

million, next more that million like really $XXX was D&A looks a think $XXX big number. $XXX I number in that of year. It's million becoming XXXX. I I mean, think about

much do economic number more these and deals it's reality. becoming a So, I (XX:XX:XX) larger from disconnected think, deals, you as

cash just what move that we a to for worth, fully but to wanted make clear. very So, it's support EPS,

David A. Zapico

Okay.

Nigel Coe

seen on broad like footprint It areas concern? any very question in concern in you sound got you've first doesn't – a remaining quite You of so of called of you, sales. China, proportion mentioned What semi as areas you large but are in in you there's China, to out any but China? Anyway, slowdown seeing XQ, your China. strong that a Good. pretty any

David A. Zapico

improve very but happen strongly. Obviously, really Chinese the is nervous the to market, Yeah. about for still needs. this are with products in in we're in The businesses their market activity in what's that China continuing situation, our helping at advanced with into production We're people instrumentation the process concern situation. going nuclear the overall economy least business are semiconductor the market, selling efficiencies. And the market, that trade

complexity positive global demand. we're an in adds the definitely it's we're seen we So so overall a impact there, haven't well just it over seeing and overhang but we're market doing closely, but watching far that and the

Nigel Coe

then margins, so I'm that missed are far. the Okay, it And on of that's questions to but going sorry, business? I helpful. EBITDA If Telular, what it a back margins been for there's lot

David A. Zapico

Yeah. They mid-XX% were margins. EBITDA

Nigel Coe

would profile question industrial. growth residential just look of the the and that was And okay. does I this mix one it's EBITDA, in the into How but be, branched today? electronic on final Mid-XX% background markets, business think that and security commercial

David A. Zapico

XX% part business. Yeah. of of is The about Telular residential the

many that in, residential and market and in and is, market mainly the the commercial did generator, to they they've they grown operate flow niche strong nice business a industrial found the ago cash but it. of around was years what the So foundation business has a been

UL The that for stream. well. very in that alarm – the solid the niche a And driver standard carved is the about it's business grow wireless recurring Standard, a out XX%. piece growth piece in – fire X,XXX monitoring there's residential They're that dealers a piece non-industrial approved brands there is that's they path to a also through And going sole an a XX%. is about is results So agnostic little and non-residential business. is good other and any that revenue business have nice and sells to to

of And to that just cash thought So we'll the strong growing to same the well sticky Telular generate flow and relationships customer brings really strategy have the aggressively. that a business piece with same model is very had that strong AMETEK. Telular model. Telular using out that's It's industrial

Nigel Coe

final Great. guidance Thank XQ just one, you. then restructuring? And anticipate does one your any

David A. Zapico

related the at Yeah. Job Not Act] some Reform and finalize Tax know to reform. Jobs the Cuts year-end [Tax you time. there's to accounting Acts that till this we certainly (XX:XX:XX) (sic) I the mean, of – and gives tax

if budgeting then situation, do, that. could we our And but good two time. we're months. process there at going we to that next our planned in there So are anything plans businesses through we'll this realignment, have be looking are for no projects to but a current be want And certainly don't going be at

Nigel Coe

Great. Thanks, David.

David A. Zapico

Yeah.

Operator

with line question Thank Morgan the you. from of Sawyer comes Rice And our next Stanley.

now open. is line Your

Sawyer C. Rice

Good Thanks. Hi. morning.

David A. Zapico

Good morning.

Sawyer C. Rice

supply on on some I'll a early maybe a so to in List XXXX? see at little could to there, as XX%, good Maybe be jumping XXXX, guys job the point? have like update Thanks. managing here of what EPS you for dig if that. done tariffs. maybe let you your then chain us on see far here you cash maybe of go X tariffed the how much any this do And but thoughts impact sentiments Looks can deeper the we do

David A. Zapico

a working I very of on a been situation, It's Sawyer. number Yeah. initiatives. QX. dynamic successful mean, in we're We've

in continue in my QX. I'm the X. a And have confident nature remarks. similar through managing XX% it. place in things List prepared so very our XX% it's List we model we're in to the with effectively portfolio. it's that's to because expect in really going deal we're of tariffs I going dynamic because X of We talked We're And of assuming leverage that situation but impact, to plans unique the We to also go our putting and differentiated about pricing understand from budget that

lot executing that we where product situation want other process a fixed world in right and of product business a of don't We we a investments. well get moving, asset-light lines products have we line an couple our regions And around world. in the we're have are low-cost where of an now. finally, can excellent to supply we that very chain the capability We around the have move stranded model move to have if we

very out a dynamic find don't information able I during comfortable feel give to yet. this. But XXXX want to I So to that December. situation is and very be that our and that related we'll during any manage we're to going November through process,

Sawyer C. Rice

on color additional there the for Thanks the congrats and Great. quarter.

David A. Zapico

Sawyer. you, Thank

William J. Burke

Thanks.

Operator

the Baird. question our of comes line Thank And Richard with from next you. Eastman

open. is now line Your

Richard Eastman

is EMIP prices also a perspective, from provide have good curious the then maybe metals Dave, standpoint? you how there they business? there that's demand demand that's a up, Is the Yes, an to just margins morning. the from could the been concern the business, margin stabilizing, acting update And on and for anything any be what EMIP maybe around seem around is moving line in there. just

David A. Zapico

points as in saw, we an XX business in and Right. business on of There core working is that's the margins. cost But P&L. the we metals you the element where the improvement basis the had EMIP pass of

grow margins. a with bit we're we're strong. even more demand EMIP to I So mean, is in The quarter. very up third than that, able the EMG

We're bit demand optimistic. at EMG. more aerospace, a specialized strong customers at medical in And our are we're up seeing up industrial. We're X% So EMIP. and

peak we're yet, inflationary our business, metals I of we're mentioned, the in in closer. gas, impacts at case – are in and still and to some the oil of the believe but case that. there – recovered And had we're think, you metals, dealing but not there not was we with our I much peak. As

I – $XX had think now the down think $XXX maybe of trough, within million our that and peak. we at million, So I we're was

$XXX are was metals about $XXX the and total million million. So peak

to demand and to go getting some is the back still we're have So that, room strong. but

Richard Eastman

Yeah, And yeah. the back business a second for in just okay. Okay, – then I to aerospace to just double want general.

the kind tracks cycle but way rate, into long demand can with maybe and that in you've that that Is business the to don't XXXX? there the commercial XXXX just Given XXXX know fair I a would one the on at be side at of of digits? of growth at assume best backlogs. good pretty from of guess here and demand got touch Is visibility business, you want look terms backlog rate we backlog and least growth that nature business military to characterize that in – kind XXXX's it to that mid-single

David A. Zapico

Yeah.

performing is the I about a aircraft think back XX% take right you And when and aerospace of business half commercial of our is step well. that and about on exposure, and is the we're market business aftermarket. proprietary very

time. is, The strong. be of period before, most business aircraft. mean, picking kind a there. both said the commercial and looks seem is international jet component. business. for We have the orders it's up an it's and down big We're foreseeable the The picking up business as change I The long military domestic military to military I that on future. market good So business for was of a

business So AMETEK, future. it's the the for lights say, green aerospace I think for for I would foreseeable

Richard Eastman

is last then look look towards AMETEK's or us EIG slanted what EMEA? just And business when in could the you or Around two towards EMEA, at weighted Europe, business remind Okay. you and at questions. EMG you –

David A. Zapico

PMC of saw strong also our and the EMG, business you In you business business, saw our that's doing we component the for the growth and have in EIG the big EMG. thing Analysis strongest Yeah, a it's quarter, I in Dunkermotoren well. Dunkermotoren automation balanced. mean our have we big big, Materials with really in growth very

So AMETEK in of world. Europe, kind as a whole it's the in of microcosm like

we the businesses also France, we in Dunkermotoren have operating have UK, regions, and a and in presences have in capability Germany. manufacturing We those our and EMG and major in for some substantial with Germany instrument in businesses substantial business

proportions about company. really of same the whole it's the So

Richard Eastman

last Okay. Telular, quick sales? question, that do get they market? What And my have – how regarding is any they do OE just to

David A. Zapico

markets sell Yeah, to they variety a customers the... they and end direct-to-market with of in have a

Richard Eastman

Do sell other to they any like vendors? automation OE,

David A. Zapico

They're – their solutions the from end end selling customers. customers. In no, No. They're contracts managing... directly they're to long-term getting

Richard Eastman

Okay.

David A. Zapico

the communication and ...both the software. the services hardware,

different after channel, on and about, network And that companies. those a the XX% Now, are smaller, the residential of regional, about business that independent security dealers. talked goes goes I commercial residential, and X,XXX that's that a to

kind there's the two So, businesses. different two of different channels depending on

Richard Eastman

that the And channels given well? expectation, there's that of mix, good XX-XX there mix, and kind presumably Okay. XX% that CAGR as as pricing in you flexibility sales pricing pretty there well, have

David A. Zapico

AMETEK same business Yeah, Yeah. I'd say. yeah. the It's any as

Richard Eastman

you. Thank good. Very Okay.

David A. Zapico

Thanks, Rick.

Operator

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

open. now is line Your

Joseph Giordano

Hey, guys. Good morning.

David A. Zapico

Joe. Morning,

William J. Burke

morning. Good

Joseph Giordano

I of accelerating, things of here, business are is I guys for, those are least others Yeah, that at and I kind But of Like, the inflections? think kind pretty that have pushed where seeing hard you most as guys inflection negative there growth. something consistent been but been and at you to a are what your the on with a kind can to condolences look about guess – answers. businesses pretty talk because still former you in CPA, (XX:XX:XX). your Dave, the stable gauge you've GAAP would give look of anywhere are death you sensitive you seeing and

if So actions shift bit? be a you? take? start would to And doing couple first little those would started businesses to What you where your are what

David A. Zapico

for I known yeah, Operational capabilities. is AMETEK mean, our Well, Excellence

So getting the a costs it shy if downturn, from front away would we of not in saw and aggressively. we managing

would do. we that what So be would

if small but well. now holding what still be mid demand of that business in the and see to mine we're – mainly certainly, and canary don't it fraction long of was that in motors terms business cost-driven very in the of small, is was we In business, a a a now. used and that's our that group right our businesses coal up there But cycle very

if we front AMETEK's turning we get good that. So But manage see it in we a that's does, now. negative of operators and of We it demand have right costs, seasoned realize don't that team what at.

Joseph Giordano

that acquiring in. start as at bridge can on do and as things Okay. guys you was too a far? sensors bit company IoT straying where financial are be where like metrology, an far into little really getting might And more your what seems then a when this from because good interesting a core are But with with that solution with other recurring good do being weak guys M&A, consider with you you decision? they you Like, come

David A. Zapico

adjacency it about road the adjacencies terms businesses. we think road our maps I build be of near that for in that Yeah, will I of and to that. And this maps are adjacency look business consider Right. those in each

and have that. close best ones So are ones with the adjacencies cognizant always the the you that you we're know least of risk and

So don't we businesses certainly, opportunities we But we'll that of no that expanded for. businesses knowledge maps think there's set or I And an have group adjacency of have set's and opportunity of niche with. buying we be broad expanded. a have affiliation the

you'll So same. think doing more businesses. I the see We're of

recently we've that done of more have deals secular. the Some been

mentioned right actively doing of market really pipeline a that the Some properties good have looking our now. have deals also sheet Bill right some of positions. strong have balance tuck-ins we at we that And And We're more technology-oriented. a enhance done and recently now. lot more earlier, we're a as we've been

Joseph Giordano

And haven't few we that you can the me businesses on think... discussed last then yet? from touch maybe just quick, I

David A. Zapico

sure. Yeah,

Joseph Giordano

...maybe power overall? overall and an as process industrial and

David A. Zapico

go Yeah. (XX:XX) I'll through aerospace – covered process. already we

was digits, had a saw from ZYGO, continues were care XXXX job. strong the see their really, driven business, growth Hobson, high-single quarter. prepared which all by strong educational solutions Precision quarter. fantastic digit key growth. driving our It's and SoundCom Precitech February (XX:XX:XX) sales double-digit And TMC, our in organic growth across process Technologies sales health low-double demand acquisition. and their Taylor markets. businesses the really Rauland acquired in up That communication and contributions also robust to organic Our we my Overall very in strong UPT, has team Ultra in particular mentioned for remarks

So is be for of all up process digits. expect XXXX, our we for mid sales business to organic to high-single now

from growth by high-single if XXXX, businesses. It doing growth their growth precision acquisitions we power, Motec, were targeting includes up very industrial funnels along by And with to well solid expanding job, low excellent and and applications. power automation Dunkermotoren we global mid solid the an and test business. increased we overall And single-digit contributions growth. Instrument the engineered organic Joe. process digit I business to sales from programmable industrial, businesses saw growth, for to our power do digit for saw And the finally, in our for high-single And solutions mid-single good our but growth to continue driven That's organic digits. mid-single we Arizona engineered all and for high-single businesses. and sales be We horn, trends organic quarter. up from go across business So organic automation. digits. and automation XXXX, to benefiting the sales across remains continue in sales of new really continue Kerk digits with to of secular quarter, Haydon expect and our to and recent power automation outlook digits in measurement the solutions in That low-double expect that is around VTI

Joseph Giordano

Thanks.

David A. Zapico

Okay.

Operator

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

open. is Your line now

R. Scott Graham

Hi. just earlier think Bill. in call? said repeat This I is just Bill, for number that a you quick could one you your capacity the

William J. Burke

Yeah.

R. Scott Graham

if sort us of that new the revolver? includes tell And upgraded

William J. Burke

includes revolver Telular does. is It $X.X upgraded It's it and that Forza acquisitions. and and post billion the the

R. Scott Graham

Bill. Thanks, Great. Okay.

William J. Burke

Okay.

Operator

I Thank to to that remarks. the over like Kevin now would back today's you. concludes call question-and-answer And Mr. session. closing turn for Coleman

Kevin C. Coleman

replay Thank a joining the Thanks a ametek.com. you, accessed reminder, section be in Have of Investors for as our day. webcast the may And today. everyone of Andrew. call a great

Operator

Everyone participating thank wonderful all the gentlemen, conference. does for have a conclude and disconnect. This in today's And day. program. Ladies may you you

AMETEK (AME) 1 Nov 182018 Q3 Earnings call transcript