AME - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q3 2019 AMETEK Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there’ll be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. Instructions] [Operator

like Vice conference Thank President go sir. now speaker, to you. hand ahead Coleman, Kevin of to would over the your Please I Investor Relations.

Kevin Coleman

us morning call. and conference me Chief Vice Officer; today Chairman you Thank and XXXX Zapico, With and Dave Financial Chief Justin. third quarter Officer. Good for you, President joining and for are Bill AMETEK's earnings Executive thank Executive Burke,

the results were webcasted on released earlier section and This morning website. available later in accessed and on being quarter this market our webcast are call systems, made and today. website. our third archived available Investors be also site our of The AMETEK's is be on will can

detailed which and to risk significantly During on the various intention discussion results any that and in are future uncertainties risks or from based update contained AMETEK’s the forward-looking results that of forward-looking AMETEK our affect revise subject statements. SEC. expectations. uncertainties may of call, course change to obligation factors today’s cause to we the may actual filings disclaims will differ with A is statements, or make any

on made will on acquisition-related to and Act. of finalization adjusted the Tax XXXX this or of XXXX be quarter after-tax excluding XXXX Cuts intangible Jobs related basis, results excluding the and the to call an amortization fourth references gains Any XXXX the impact

and press the this between the can morning Reconciliations our of the found section release announced closing Gatan on measures of GAAP and website. we adjusted Investors in acquisition. our Also be

begin up and to Dave guidance, our shortly year then prepared remarks Bill speak by which will XXXX open today's quarter Our with guidance XXXX and full questions. it call fourth include for Gatan. We'll and Dave updated

meeting the over turn now to Dave. I'll

Dave Zapico

and quarter businesses. Thank performance, exceptional two acquisition operating above and organic morning outstanding another with good strategic everyone. earnings you, expectations, sales the delivered solid of growth, AMETEK Kevin highly

us allowed operational quarter. levels EBITDA, an model, earnings to operating increased of focus diluted Our income the excellence the including growth AMETEK in of and report execution on record share per

generated support our growth cash business providing returns. our strong operating the has flow, Additionally, record model drive shareholder long-term and capital to

our will XXXX. once earnings we for our guidance Given the in again results quarter, raise

the $X.XX X%, to the Organic sales headwind. the sales was financial billion, quarter Total up added foreign quarter. up of were third a compared X%, point highlights currency Now for were one to X%, acquisitions and on XXXX.

margin XXX million. the AMETEK's operating the performance was over expansion. XX.X%. in quarter operating in exceptional, operating in third the XX% increased increased was the an $XXX.X to the EBITDA XX.X%. also points in million margins third margins impact of robust impressive margins in results were of excellent income And the $XXX resulting dilutive to year prior-year quarter record up acquisitions, XX% at quarter quarter, XXXX. quarter operating XXX Reported period. basis income and the EBITDA the up points prior over excluding over Operating were basis

share. share, guidance per XXXX. Earnings third the $X per exceeded in our $X.XX in over quarter quarter same of a to diluted up This range the XX% were comfortably $X.XX

XX% $XXX conversion an quarter. the same generated flow in outstanding resulting million has of business cash the quarter, cash up our in over Additionally, impressive operating in year, last period the

individual the groups. onto Now operating

and $XXX.X contributed point X%, Electronic in acquisitions million, EIG X sales a headwind. currency the quarter last Recent organic quarter. sales the foreign year's First, Group. were X% XX% Instruments third was up over added

XXXX. operating of the points delivered And our excluding XXX quarter the see basis XXX performance expanded third income Analysis basis fantastic dilutive Process the division. particularly across over Aerospace, points record EIG's acquisitions, to with operating to EIG our in solid businesses, growth growth continue We income with in operating again million. strong to impressive and quarter, operating up Reported margins a of $XXX.X Materials impact margins an XX.X%. increased Defense XX%

Electromechanical the more Automation in than quarter organic growth headwinds. by solid Engineered slowing Defense the for performance. Pacific with third being sales offset also & and growth from sales in and Organic offset businesses EMG the quarter, Strong quarter Design in of by The acquisition superb Technologies currency in in Sales performed XXXX. X%, was operating contributions quarter over with up Aerospace the Materials the our same foreign X% grew exceptionally in were continued across our part business. Group well $XXX.X million,

sharply in prior-year performance income period. to outstanding. XX.X%, operating a up Operating increased basis XX% operating increased the margins the was to quarter. $XXX.X income also points up EMG's third million, EMG’s a record record XXX third quarter over the XXXX over

the impact in points EMG the quarter. expanded margin acquisitions, from dilutive Excluding XXX basis

quarter fantastic delivered of the of worldwide. and reflecting and Growth AMETEK of To summarize, our the work results, flexibility colleagues excellent strength the another AMETEK Model

I Before providing quarter. the for for highlights our some updated additional to guidance XXXX, wanted provide

Probe I'd a First, Atom the leader in of The new like Probe increased Probe of cost scope team the CAMECA Tomography lower is EIKOS-UV to the Atom microscope. launch reinforces CAMECA position with at for ease-of-use Atom the at ownership. their congratulate world leadership Tomography. recent

a with which a The of product most delivers range sensitive of across CAMECA's Atom XXXX nanoscale This and new analysis the applications. development applications. EIKOS-UV wide resolutions LEAP imaging for products nanoscale for provides complements research faster system new XD of Probe and structural understanding materials industrial information enabling fastest

to AMETEK's is core technologies success. leading-edge Developing the

We products investment across are continuing to committed our innovation businesses. and solutions in strong drive research, and engineering the our new to of of development levels

R&D success a healthy we investment XXXX, million in of more level of all $XXX our For RD&E, than over index. increase to vitality to invest leads XX% of a This effort expect and XXXX.

the of and the years in from index last three at is excellent sales XX% products measure was solutions a quarter. vitality introduced third Our which over

in service and market We also our to expansion to remain investing committed our support global initiatives. capabilities and sales

products businesses as on this the others. solutions our And in serves excellence, important have Rauland, application of includes and and facility and to Congratulations showcase, newest and Singapore. numerous facility we unveiled center lab in Programmable world, teams of AMETEK our similar partners EDAX, region. which excellence a center centers state-of-the-art This the our September, we from This is other around effort. service for in to ZYGO, customers product Hobson, Taylor Power including

Now another been or It last front. Since highly call, acquired for has short, year acquisition very Gatan. PDT Pacific to touch the our first and two active earnings acquisitions. Technologies, acquisitions, we've successful on I'll these shifting businesses: Design PDT. and briefly on excellent

custom-engineered provider a space defense set liquid platforms. mission-critical is solutions. of and leading are systems current commercial PDT thermal across cooling a aerospace, of used management components and and next-generation Their advanced, broad

given R&D on expertise. PDT excellent management headquartered solutions million. deep with their has PDT Thermal deployed is in our and thermal fit of Systems an complementary acquisition. California approximately sales and million the is $XX Goleta, We $XXX approximately Management business, annual

moving Now acquired technologies, complementary premier we existing with ability brand, our AMETEK's flow capital. instrumentation with to and and drive excellent profitability leading an single-digit improved acquisition highly Gatan Overall, Gatan, largest this week. a is attractive today, Market profitability high AMETEK. the cash mid excellent to on fit tremendous rates, acquisition. to businesses, excellent for which acquisition growth returns

science technology analysis. specimen high-end is business. research on in and and applications. enable So and and life a Their detection preparation, workflows direct a brand little microscopy electron supporting solutions improved for imaging leading Gatan microscopy, the materials more

with The million. Gatan's capabilities expanded analytical California complements market. annual approximately has instrumentation this position headquartered technology approximately deployed acquisition. of nicely AMETEK in offering million is and and Life $XXX sales an in Business, enhanced $XXX and high-end our Sciences business in product the Materials Analysis Pleasanton, on providing We

resulting two on XXXX, This far over on six these acquisitions, nearly years. acquisitions. deployed we of $X.X billion acquisitions when XXXX billion in two $X.X Thus capital approximately the over in last $X.X we deployed billion on deployed follows

with integration level pipeline acquisition of have This remains activity, of capacity our and to success significant Even continue balance acquisition speaks strength discipline this our process. to the full and sheet we our and strategy. acquisition

into and acquisitions of recent embrace cost model, we on management. AMETEK, the including asset elements excellence these operational integrate to the strategy we each them focused growth look for AMETEK of our As

tremendous improvements evidenced implementation continue initiatives. operational through margin operating meaningful our performance, our the this drive businesses of cash generation and expansion As and to efficiency year, our in flow excellence

increased XXXX. million savings now We year target $XX have of to again from in million for full savings operational excellence our $XX

global plays increasingly Our environment. operational an excellence the economic important uncertain given role, strategy

fourth Now to the for quarter. shifting outlook the

expect diluted share, per per results guidance Given range our per quarter, to the strong in $X.XX of share. diluted of earnings to diluted new range guidance $X.XX XX% XXXX's third now earnings be XXXX over in we our up to $X.XX the has from $X.XX previous This share. increased range

share, up expected the with prior $X.XX sales overall to of single to high sales expect year. over year approximately X% of quarter Fourth mid-single digits digits organic to sales per up with mid for to $X.XX be diluted up range We in be X%. to growth are the earnings X% the

third our To summarize, excellent. was quarter performance

managing proven operating to a in and well-positioned given the capability. challenging environment model flexibility are our economic growth We of

turn I then who it the be details to of we'll the take quarter Burke, financial will now your cover to will Bill? some glad Bill over questions. of

Bill Burke

Thank you, Dave.

excellent performance. quarter operating with AMETEK third As noted had strong an Dave

Let expense highlights. quarter me provide last some in the down versus slightly the selling of third financial additional Core year. was quarter

$X.X Third higher on compensation million were expenses year-over-year and quarter administrative expense. up general

we quarter quarter The of from sales of year's year, line third be was expect tax the in down general expenses full rate XX.X%, the rate XXXX. administrative X.X% for approximately and For XX.X%. with effective last to tax

we've as effective in tax estimated negatively be to past, this stated tax our can year full actual expect now we from rates the either XXXX, differ XX.X%. And rate quarterly approximately positively or dramatically For rate.

were in was $XX the quarter in the XX.X% year-to-date. Working in slightly for expenditures from quarter, quarter Capital second the million down the third $XX and XX.X% of year. million this capital

be For of year, sales. capital X.X% the to or continue expect to $XXX approximately about we million full expenditures

the expense quarter. million amortization Depreciation was and in $XX

For approximately per the including $X.XX $XXX intangible share. or to million, amortization continue $XXX be tax expect full amortization to related acquisition we depreciation after diluted of year, million and

businesses very flow. Our of continue generate cash strong levels to

the quarter. was $XXX XX% a over quarter million, year's up million, operating third cash period. record Free over up Third flow flow cash XX% was $XXX same last

income, impressive flow conversion was a percentage in of As free cash XXX% quarter. the an net

XXX% free conversion approximately of full year, the expect For income. we flow net of cash

equivalents XX times. of debt ratio in at $X.XX billion, this a end the and net resulting September the was million, Offsetting debt-to-EBITDA cash Total from quarter the is end $XXX of of of debt billion X.X third of at as $X.XX cash down XXXX.

very quarter be on to we we As Combined, In billion we deploying to the continue quarter, acquisitions. on end of active acquired PDT acquisitions. acquired and Dave we subsequent our third deployed strategic two $X.X the noted, Gatan. these capital the

following our pipeline of credit Our to facilities acquisition. cash existing significant strategy acquisition approximately and remains Gatan we execute available continue with healthy financial flexibility have to the $X.X and billion

our given In the well-positioned and of strategy the to We first nine flows. strong businesses third our excellent sheet through summary, our and balance remain quarter delivered cash year. results in long-term support months excellent the growth

Kevin?

Kevin Coleman

Thank you, Bill.

the Justin, for we please could lines open questions?

Operator

question Instructions] sir. Yes, from [Operator Our D.A. Matt first to come Summerville is Davidson. from going

is line open. Your now

Matt Summerville

couple A of morning. Good Thanks. questions.

maybe order First, AMETEK talk bit segments? you a look and like Dave little for during rates in incoming what total organic the about two the quarter across can

Dave Zapico

orders were Organic if were by They Yeah. positive. EIG X.X%. look quarter. X% Sure, remain the were orders the Matt. Overall, down group, negative solid. up that orders in at And organic I

orders across EMG and down, most medical. Solid automation of business our due process, mainly Asia. to EIG aerospace, portfolio, were

two As which highlighted soft experiencing we're quarter, continued conditions three. into areas we quarter and those in – last

Matt Summerville

space, in Gatan maybe, little of much some healthcare shied bit you but away the the a Rauland instead be businesses. term, Life of then, just acquisition. about and medical more really strong And might haven't other too with Sciences speaking, more done for and the talk opting Historically a

about talk level potentially from that out in maybe cyclicality now a what business? a see why of And we So Life expect now that should maybe and of synergy So standpoint to Sciences? the question. attracted then, business you what you sort of

Dave Zapico

Right, right. Yeah.

of, Analysis they're life Our much, cancer about between so and Life – certainly and a has and a Gatan material become it business then biology, existing split in an we that Science small been it's will haven't with market XX-XX talked but a research presence sciences. unit presence business Materials sciences, they're had Gatan

does mean, it profitability what return AMETEK and market good technology and with But like sizable growth when the with profile. We I life to a it's their we sciences a it's business, existing get capability that. very strong a will grower. high differentiated technology capital. opportunities. think And our there's really It's add fits about it Gatan think So a really mid business. for attractive exposures, on transaction I shareholders single-digit their

the strong It's business business it's staying is have so time. followed management a new the a long intellectual for dependent premier They’re introductions. that. with over team. product brand. XXX business and about on this a brand. a highly It's business And We They we're patents specialized in properties that a premier pleased

So drives on expect new a because fit for is And it very product performing to growth. lot the we're MAD cycle to have introduction can MAD of and think well work going you to I that into AMETEK.

great a to add MAD. it's So

So we're about very excited the acquisition.

Matt Summerville

Thanks.

Dave Zapico

Thanks, Matt.

Operator

from you. next Dray comes question Deane our Thank from And Capital RBC Markets.

open. is now line Your

Deane Dray

Thank you. everyone. Good morning,

Dave Zapico

Good morning, Deane.

Deane Dray

Hey, pick last macro-environment. on about maybe up point Dave your the

but said in point you cash automation in we've did You up and in you a some Asia put flow. pressures short-cycle seen it's this operating challenging But quarter, particular. weakness elsewhere environment, margins with in this is consistent in what and to the sector Asia great

trade then related? automation would terms on seeing you in could bit how in the Is uncertainty side softness that you're So you the expand the what softness? a characterize in And of Asia?

Dave Zapico

Yeah. Sure Deane.

with the question. for down start geography us was I'll by -- Asia

driven down was quarter for us. similar very China, to digits by was Asia so that and two mid-single

the So, really same it trend. was

Our trend. weaken sequentially. It same the not did was automation business

in at to really in a we gas We have up the were did second But we mid-single lot digits and were U.S., of the were and and mid-single Europe other the geographic businesses oil up aerospace time, growth the results in and well business same our with similar and broad-based quarter. digits Europe.

our overall about the three. we to in bit Industrial think is weaker. continue did business the felt didn't portfolio, like And QX our you -- played up weakness quarter little of that Power get in So very weakness Aerospace strong. industrial a showed -- our incremental see it and business But into when QX,

holding incremental and in that's Our businesses of a that are medical well. weakness solid. full And and up we we Industrial rock Asia the And is Process then we business in have have. a our picture automation weakness bit have

Deane Dray

the with played know how yet Thanks. challenging introductions for is XXXX been of October setup way what you're discussions and business certainly visibility operating I the Any what's has environment, with for customers, we've this in seeing. year guidance but forth? next for And comments That so then consistent out? qualitatively giving the product about in not AMETEK the just on your

Dave Zapico

insight start I'll with XXXX. Right. in the

time for and with to the XXXX businesses different the and this work and As which and Deane, markets, guidance not year, you is typical build for of risks going with this a macro. sit that a businesses to than November we're our And down give include as December, going business during and niche overall their to of we're the detailed see know budget our opportunities the review bottom-up will our XXXX are sometimes in plan. teams

you terms in I changing ordering customers there with just order think to outlook for hesitant bit you of and in versus at in environment terms trade tensions of an spend issues patterns what to operating of some need longer-term a giving and giving a this are with. deal kind something

the in in way to thrive will ideally we and put have strategy that our have going work environment. those That's AMETEK driver. the two our in M&A this we it's looking to and environment capability, DNA suited we're OpEx it into planning. of go succeed to current elements and our we're the the XXXX at is But because And

Deane Dray

any on October? And comments

Dave Zapico

And than yes. then back our and to when Yeah, we September a August, July. August was up we were as big October, the of bit looked typically -- get in Yeah, didn't throughout orders get quarter, September. stepped I'll okay September They that. have. they in at in we spike the sometime stronger orders but

it than a muted. still August. bit better was So was It

month a of on normal a right ,so the stair-step QX so lot starting the October quarter then feels the of and So like And quarter. we first first QX. -- better, through plan, had October out

this of a up month we we're trend where got of So last by the the muted quarter, month but it's in stepping bit usually quarter. the

Deane Dray

congratulations on Thank asset. then a And Terrific. you. great That's Gatan.

Dave Zapico

Thank you. feel same the way. Thank Dean. you We

Operator

Thank you. Pokrzywinski Josh And from question our next Stanley. comes Morgan from

open. Your now line is

Josh Pokrzywinski

guys. Hi, good morning,

Dave Zapico

morning. good Josh Hi,

Josh Pokrzywinski

this get organic changed? are that this we AMETEK. that be a on mixing of much about, going you margins of maybe to time that And to how know especially more versus one of kind AMETEK But calls is, specifically maybe customers resilient through the for that's ISM talk you been up worried year. growth? all I of, how evolution the, comes M&A spend folks always whether last down it's maybe have you're guys industrial to kind slowdown. next is the portfolio has time move the David up Can -- the Just from or questions cycle lot exposure compared to CapEx on of, R&D something

Dave Zapico

Josh. slowdown different sure. mean, bit Yeah, I a every is

is to Deane slowdown we perform have is going basing earlier, see I performance we But portfolio are mentioned out. on well. as the that to prior very of continuing what -- not elements have we often So our is work really to

strong is and wins in we're good all and Aerospace, to across that's from. business strong some Aerospace benefit Aerospace Our going segments of to continue that we have

Our well some to we that's for healthcare holding and that up very Analytical us. added Process and instrumentation,

parts commodity we XXXX The around about businesses grew well them. same because XXXX, down around we head XX% right now. businesses were of They're our sales the those XX% are of that At performing our our time, before into downturn. of the businesses,

So induced this that. the but affecting and -- to -- for really there -- start and us. of And prior doesn't it's it And one feel it's behavior like it, is this self downturn it's I'll customer is at trade-related the different. because call

well. And it. think we're to have brings our to with to M&A And excellence the capability. us; in we do very operate and what operational we the well-positioned economy we're it's going whatever And going we're is working driver well

outperform current -- I looking said the in environment. to like we're So, we're before,

Josh Pokrzywinski

in about kind takes, think we any year; been throughout just follow-up. and should third quarter. a How have the any think another related or margins kind blue birds out? pretty of spectacular And I Terrific. may the that in have either to puts helped step-up seasonality And here? kind of progression quarter from the then of Obviously, the

Dave Zapico

it had I we in Right, and reductions, the contribution excellent fantastic, sales. cost price and incremental the Yes, we were overall plant mean margin efficiencies quarter, the performance incremental margin primarily excellent the execution. on excellent had you quarter right. said, had was good we the in

So, way. we plan to executing keep that

we are is core the into and get business of know points basis think kind margin the going We built about into certainly to our think at to that's that margins if don't long-term. every way And built we're model. XX about operational to I we going expansion level. think XX continue -- excellence of that's we our way operating the year

reduction have business pull that levers cost that there's our there's of drivers So, runway margins. in and we and plenty we -- those on

that's how we about think So, it.

Josh Pokrzywinski

the Thanks Great. and for detail congratulations.

Dave Zapico

Josh. thanks, Yes,

Operator

you. comes question Thank Coe from Nigel our Research. next from And Wolfe

line Your open. is now

Nigel Coe

Good Thanks. morning.

Dave Zapico

Good morning Nigel.

Nigel Coe

there. execution towards echo on I'll that this just guidance. on put did want point very to dig heavy great the operating Hey, of business going much kind want Gatan. the be on the so into I Roper QX, usual to And year. really QX skewed comments to would a than margins, level mentioned finer And next more

accretion, of anything in QX? the baking guidance just your baked baking helpful. you're level QX So, for sort of and any, for you that And what if have I'm you're that be would curious into else EBITDA, sales, into

Dave Zapico

Right.

to we're for planning that our to EPS million in level. two over about QX neutral -- earnings of months. months $XX And be the talk have we two we sales forecast own Gatan So, at and about cash those

I business. a lot inventory there's accounts, mean, of in we the have there's purchase --

are charges So, the step-up inventory significant.

the all have deal We costs.

We fact, matter one-time Gatan's per forecast. as charges. was interest front-end loaded And higher expense, a of have QX

think activity same year. that October, lot. QX They've take been we're QX, year's integration to which a really a we're to but So, in and There's it's sales forecasting the team the and last with million push did equal process. you what an through management extended did been through we as And -- when last lot a about is it -- forward the was good. going Gatan quarter-over-quarter; they've $XX of

Nigel Coe

performing thinking we increase they that. past, be But it, that want question for prognosticate et And here those up? if great. I Sorry to you've cetera. want you That's helpful. right or Thanks call to about above X% slightly to done touch I'm just for relative the Spectro, mean put three would now I next Gatan for about How you are way. that Are years, they EPS mean acquisitions the Rauland-Borg, the does [ph], two if And year Josh's and stable? different take did Tell that are look? I on bar? that. on how a businesses

Bill Burke

Yeah.

I like in, acquisitions they're focused, being North well. think they're that the very like end WR, and America the primarily Rauland-Borg performing markets

centricity So current they're clearly helping environment. And model. businesses of in those U.S. our the at/or of the above some us is

Nigel Coe

great. Okay, Bill. you, Thank

Bill Burke

you. Thank

Operator

Thank from you. of Bank And Obin our comes America. Andrew from next question

Your line now open. is

Andrew Obin

Hey, morning. guys. quarter. Great Good

Dave Zapico

Yeah. Good morning, Andrew.

Andrew Obin

Can Just And and the aerospace you we bizjets, a talk what traffic little A, seeing Thanks. composition of your about for important an aftermarket what on slows? as that's aerospace of can as are commercial business I know seeing also, you we are business can specifically, a you about talk And you well? because question. about exposure? bit guys remind us

Dave Zapico

OEM that's parts business about So, and broad-brush, military, third-party that XX% is split spare of XX% come the market. from the commercial, MRO, and aerospace XX% our between proprietary about jet about equally that about and XX% the business

for us, business high aerospace business in strong was the segments. digits. single QX was up the It And all whole in

in was up business commercial Our mid-teens. QX

sales the doing XXX OEM LEAP well. Airbus engines the to are So strong we and the had XXX, GTF platform,

Our up third-party high digits. quarter, MRO business had an single excellent

business – digits. military was Our high up mid-single

business our market both the our teens. international U.S. demand in up programs, general jet spending solid strength radar high fleet missiles, readiness, and to So systems, tied improving was in and

was easier high teens. it at but comp, up And

And in the seeing very your in specific we're sign our was business aftermarket So a had fantastic slowdown. backlogs solid. not the really performance And of very are a a and in we question, our solid to aerospace QX, quarter.

Andrew Obin

is doing Eleanor I quite well. guess

Dave Zapico

orders. Eleanor has fantastic

Andrew Obin

should is the in this my question clearly, did not has you revenue between see think guys that outpace organic rates the quarter, similar growth? can to order last think about follow-up Because, orders And continue Thank you. revenue more directionally continued a your what How What's this relationship for We clearly, the and and quarter. orders. slowed I decision. Just a slowdown to slow. disconnect?

Dave Zapico

there healthy I we have backlog. is, pretty a think, disconnect biggest the

at a business about about some billion $X.XX it's the it our of through quarter, probably and orders backlog business, the of we of but have needing defense we're aerospace conversion and the end So businesses. QX, aerospace provides in And a besides the our visibility quarter, XX% balance defense and opportunities. going some to make the

company the convert operating we're we're on and to And able well, them.

So we are the factories macro but feel with right And global positively cautious, extremely And conditions. our comfortable guide. now. our -- have – executing we given

I very backlog or we that a combine confident it, growing flat if it And opportunities on to and that's to how in So you execute incoming with there's declining bring our together organically. order feel can. orders picture slightly

Andrew Obin

executing very you. is Thank that team the well. clear Very

Dave Zapico

you. Thank

Operator

question our Allison Thank comes you. Fargo. Poliniak from Wells next And from

open. Your now line is

Allison Poliniak

morning. good guys, Hi

Dave Zapico

Good morning, Allison.

Allison Poliniak

up backlog some of, commentary. that on Just or pushback sort any, delays delaying guess, Are of that conversion? that, within following that I backlog you getting

Dave Zapico

really we a give replenishment you there's need. a visibility. they're giving order, month’s with when it a the a month-to-month, six they customer And they're just us purchase or what giving order Yeah, three saw order changing purchase And now in will pattern that typically, quarter.

input. order is there impacting element an are macro of conditions So global our the that

and times is cycle execution really factory our are good. reduced, our But

certainly, with is that turn wasn't a But change able in quickly. environment that to there the on six things very and there we're So months ago. ordering deal

Allison Poliniak

then accelerating acquisitions? just that of up organic the savings, that of step that that? is guys Or because some is that And Great. and you because on the are OpEx of Gatan

Dave Zapico

the for up $X in million months activity. organic we with It's in from increase savings material -- boosted OpEx That Gatan. the -- two savings no million. our the was all tariff savings, $XX There's Yeah. final to

we're We lower it organization. resourcing we from on the world. rate the have finding at savings world-class getting incremental they And it, would, cost products and in in a sourcing thought other than executing a because we're faster places they're

all So that's $XX savings -- up what's the material it's It's savings. to driving the cost million.

Allison Poliniak

Thank Okay. you.

Dave Zapico

you, Thank Allison.

Operator

comes you. Thank Stephens. question from Robert McCarthy next our And from

now open. Your line is

Robert McCarthy

Good morning, everyone. Congratulations on quarter. the

Dave Zapico

Thank you, Rob.

Robert McCarthy

of point overall Gatan stepping Roper's in and of centralization under a among Roper company first cost differentiation. guess, not obviously, disparate but of models, view, various obviously, on kind per its businesses. back, synergies governance I Clearly, very and terms a their big on that's well-run

how expand maybe could biggest quantitatively do the that? leverage, incremental you cost a about margins? can value on color And or the gross expand So, margins? see you bit are opportunity you buckets to Where you little SG&A, fixed where qualitatively think drive of around

Dave Zapico

to the service There's offices, supply there some synergy question, sales internationally. obvious It’s both up for lot sure. a in costs. Sure, what agree the reduce G&A because to benefit eight with and chain and we from of buy-in a Yeah. get with, bigger AMETEK than see team is, typical typical so going to we opportunities, plan we're think the that us. it's management the more to from opportunity deal There's work a a Gatan come with like but opportunity we are But teams. we remote

capital. AMETEK's improve mid-XXs, in working at is to at about This working quarter. There's level capital our and the a about business opportunities overall in XX.X% in XX% the running is is running also working business materials equivalent capital analysis.

shareholders. the it. a cost the going X, from reduce think that be So we'll a add get offices, substantial return to for all We ability synergy and capital on capital our invested it's think XX% synergy and the chain, we return working we in from the year of great supply international excited up, about to the we're

Robert McCarthy

you rate? follow-up What due could growth. as it growth lumpy. Gatan. diligence, the single-digit organic on just point, you just Because fairly own perspective of brief the think And do doing our about one that be in talk on mid I But about think

that product on a is, are aftermarket a business, cycle may concern. be definitely their parcel product branded But seems and more of hit they're rate more of of And be part to cycles very high.

there? managing of how the of about kind bit So little talk growth you sustainability lumpiness and a a would of

Dave Zapico

a OEM; and new enabled is bit they're fantastic developed direct sciences really for them. lumpy. and greater and for technique business microscopy. were the Naturally, vaccines, it's Yes. cameras, called this being -- market -- to CRY technologies. electron drugs they've They is detection they're a technique a degree Right. life the And up but And opened cryo

-- they're a -- it's new good XX% bit lumpy, they long-term and business about but is the demand the of it is in So product a driver, cycles. have really driven only aftermarket, by and

we'll a the with velocity try So to lot. one we're we of of going a bit to business is increase do the of the lumpiness. cycles, deal like the product but And things new

Robert McCarthy

Thank you.

Dave Zapico

you. Thank

Operator

Thank from you. Eastman next Baird. from question our comes Richard And

now open. Your is line

Richard Eastman

good Could what give you and a Yes, sense quarter? of did, just price in net price capture capture morning. the price us

Dave Zapico

much Yes. half XXXX. first had QX the excellent quarter. of an was We like

a we and bit a tariffs points bit achieved less across price X.X%. of inflation impact our was Total more than than entire business. X So little the of

to highly So our we're results differentiated very product nature the speak they pleased with the and of portfolio.

leadership have in uncertain in around the markets times. playing globe, it's these We positions the out itself and niche

Richard Eastman

I'm just by But rate just EMG. -- you just that, curious. automation little X%. could could -- do by a segment little I then mean EMG's growth business And a within please? shift and perhaps through Dave, you Okay. core We bit bit had or softened.

Dave Zapico

could. I Yes,

half about solutions, at and the basically business is and of and so it. look is Engineered automation about is of If already they you automation half other market the the segments got which it solutions, engineered

So solid business. the we in had EMIP growth

and It up down. up mid-single in And digits was overall, automation was was quarter, low I it think the it quarter. the single for digits was up

really, the business well. EMIP is performing So very

have automation our a Management with in you And had other our line thermal we Systems slowdown They mentioned, business. in when in our about a business -- . we solid the in the think business, quarter, that's as there. And business. problem aerospace with

Richard Eastman

Okay. then the strength business And aerospace generated? up? mean where kind of that EMIP I the is is is just the business following

Dave Zapico

for the and mean EMIP, and aerospace medical specialized industrial. our I end markets

that So markets. those was growth across mid-single-digit all

done So well. they really

Richard Eastman

harder maybe that from we're But seeing into of fourth last here XXXX David, don't slowing my just a kind to on it that? outlook that know be any cost question, sales this open? wide usual, plans enough savings the or you is sense sit and here your Where on with whether business, then And as Okay. touch I it to to want going the of we operational line. restructuring at walk take is tighter realignment you quarter today, we side an we're eyes have business look perspective, Or into and plan maybe – of do of kind as the of this or it the and sort sit would excellence cost? into our

Dave Zapico

changing people have see to with budget the to question, Rick. businesses units. can through great you reacting running that businesses. a the that in we And results, we're are I'll operators That's going the process of naturally And point the conditions. business And they're good global go each start our of the with already a

now, this feels Bill feels discussion. like a business-to-business I, And right – a for for – this like and

sense we're what and for fund businesses that So their these down sit what the for act on. makes to budgets, AMETEK projects makes to to and to and they going want to sense with going fund we're understand

And explore right a turns business-to-business and it that's yet, of that if seems weakens and certainly going But in detail part really there it beginning broader into to but if a further. we're We're like it during November option, the alignment, December. decision. not an now,

in and us good that expect core be us our innovation to will a And good, businesses that's will managing and to... we're the our opportunities to at with have going business-to-business we'll that important discussions but I continue our And make and thing attractive costs. healthy invest process, that stronger, it discussion, development, talent opportunities the for during our a budget and come we're is really to

Richard Eastman

be on in that the in would mean, great in is as backlog there aerospace the visibility for given thinking talking and backlog as XXXX? rolling we're of kind of backlog, here you Do I'm your of some of XXXX, given has here is in been business, pricing I contribution price – about XXXX it year? some conversion And in sense forward. next kind your

Dave Zapico

to question, And of offsetting that feeling pricing of the detail we but That's down stay. through a cycles going there. is good is cycles, go or when my cost think through I have going portfolio And and the budget, Rick. pricing in our our is power to up – level is we're inflation tariffs that that something

be exceed I'd did surprised not very So tariffs in if pricing inflation in XXXX.

Richard Eastman

you. Thank good. Very Okay.

Dave Zapico

you. Thank

Operator

from Thank Vertical you. Linzey Brett question from our Research Partners. comes next And

now is line Your open.

Brett Linzey

about I Hi, thinking good back XXXX. year, guys. want morning, to just come to the next

obviously, like think next margins single-digit the can the done, the low run based down on actually decline of context of revenue a some environment Do thinking of the in QX you've organic environment. actions way, that in organic the you deals margins, Just year? but sales a go you that underway either of QX rate, sort or grow is

Dave Zapico

Yes.

have possible. to level But question, Rick's in on. the you level as but the It do margin the has that. margins an order declining the input, won't synergies you you to second question, and we're acquisition it's yes, of up It quarter, – margins get of with think I you if be certainly modestly like see that can a possible. like executing pricing trajectory prior that expand the that

Brett Linzey

performance then Okay, on metals. maybe here in the great. question good another And Obviously, just quarter.

What you the think into look kind visibility value value worked chain. inventory or What's you does -- got know like levels? kind I mid-single the your last chain the I on chain as said of supply up back today? inventory of the cycle backfilled digits.

Dave Zapico

than you the other we in various is know, the Yes. nature business levels The into metals business, business. our of the visibility less that the inventory as customers we do at have that --

still are So, feels aerospace that our solid. and and end medical markets right business now driving

understand at we So, at the closely budget the of look be that there. what's the happening quarter next will during something end to that and

Brett Linzey

to up full that starting indication that no anything are there? things But back or Okay.

Dave Zapico

Up mid-single-digit quarter.

Brett Linzey

Yeah.

there. Okay, I'll it great. Appreciate, leave

Dave Zapico

Thank you.

Operator

from Joe our Thank you. comes Giordano And from Cowen. question next

Your line is open. now

Unidentified Analyst

for in This quarter. Robert Joe. morning. morning. good Hey, Good is in the Congrats

as question Thank year? found are feel specific quarter in end of any in versus are not markets worth that did that head this markets risk kind at next high-level And there year, changes noting? you current changes you a we particular view like your see end into any any this Just you trends guidance. are that But surprising? any you. Or

Dave Zapico

that really process we year, we're before. some budget in very the of because work have aerospace to industrial certainly, Sure. we similar made into to different going now. are with and did understand have felt solid niche feels but But little our I we of a exposures our than weakening It's very bit some all that a through right that. go QX clear we business our businesses next the macro, overall view when have to businesses. And incremental QX, see comment we that the once

Operator

you. from And question our Andrew next from Thank Buscaglia comes Berenberg.

Andrew Buscaglia

a multiple drive And seems Hey guys. Gatan? they comment me your that? Thermo if substantial more -- would paid a what on be think that think just implied I'm Can I little you would below -- bit EBIT/EBITDA you guys price be as little was Fisher synergies bit well. wrong, synergies to And correct I able the to

talk So, paid? of can you And competitive you a there? bit talk the more you've valuation -- just about terms like Just little process how the this a was in bid? about

Dave Zapico

I think Andrew, Yes, you wrong. numbers your have might

now. it EBITDA Thermo We paid XX% and it, business back paid amount same. the for we go about look at the paid about and has than the more the identical you that If

the is lower. So, multiple

Andrew Buscaglia

Telular. could then if to you And Okay. turn

that story Can specifically was see this maybe been be it's part across you're examples you've leveraging to of big you was year with about update supposed -- of going since your an regards where it provide entire that margins, that that? a So, and on Can you business. asset. where a some to give owned to the

Dave Zapico

great process in a other of integration. we're and be AMETEK the should is thought of have that They've a within IoT to Telular where broader come aware the we're that's energy technology very pleased that performing and developed we And to lot some of business. businesses Yes, into well the with process AMETEK taking technology. businesses of a question. specific we've terms applying it with

counting it's for going for well. of we're and going We're It's pleased drivers very So, XXXX. with the team one that very management to them on AMETEK. be

Andrew Buscaglia

you. Thank right. All

Operator

have from a McCarthy Robert Thank from you. And Stephens. we follow-up question

Your line is now open.

Rob McCarthy

But couple episodically, organic went greedy, growth could rates. getting do outlook? the if for the order mind. some I through is cleanups, of of across of you but terms the guess, state we the Sorry the and organic in I Union of segments the Graham, know, don't in first, Scott rates honor growth we where of a and some of

Dave Zapico

thing, this it call through lot Sure already, And in the all. covered but we've of I'll Rob. a go just

bit a be rehash. of a So

quarter. a tonnage growth Spectro and particularly business, and growth, talked Forza, organic delivered the Telular process organic businesses of acquisitions Our again, mid-single-digit Analysis quarter. we excellent had basis, an delivered mid-teens and We on about strong Materials our overall in the Scientific

And the seeing growth they're organic initiatives. results positive from

performed have So for growth was process all well again we all in up organic our businesses. bit of XXXX, expect that exceptionally balanced we businesses the across range. in business. quarter to a mid-single-digit talked about continue strong And our and sales aerospace the They third the

were growth. single-digit sales up high XX%, overall – Our organic driven by high up

contribution from Technologies in of acquisition the So have there. Design Pacific we the

a the quarters, markets. growth XXXX, we they the couple have I'd high and third-party had with OEM of good and to half, was to mid- similar single-digit highlight of growth to of commercial in for And the all very each continue And expect it across a balanced MRO, broad-based. first to quarter our third growth organic businesses, was but

And our businesses. third slightly were Power weakness by incremental now our the they XXXX, flat all in sales, weakness driven by for segment, and roughly down driven industrial our we of in industrial quarter, And expect in organic business. industrial

solutions, solid We across our the up automation improving, solutions they're our engineered and bit, that's industrial quarter. had but engineered offset our in growth in And weakness quarter business. and weakened single-digits quarter. a in for talked what industrial power low power we good, the and automation good a by Again, business about

we all businesses. horn run. for single-digit the organic sales And that's for growth around engineered XXXX, So automation low of expect now our and

Rob McCarthy

and third of And might alluded been kind just but answered, then your is and if organic this it's And how I'm it contribution, so asked much was last the quarter have year? was growth? in pricing much to, expectation how underlying for what your embedded question, sorry

Dave Zapico

Yes.

QX. points I to points – little think for we of about price better similar and a continue expectation – our the than price had two two

Okay.

Operator

the to no to showing now Kevin remarks. I'm for Investor And would questions. Thank I further back call President you. like Relations of Vice Coleman, turn closing

Kevin Coleman

in section and And today. the Thank of a Justin, call a you, webcast of as be the you, thank for website Thank Great. Investors may ametek.com. our our joining reminder, accessed replay everyone, you. at

Operator

concludes ladies and participating. Thank conference gentlemen, you this today's conference. and today's Ladies -- gentlemen, for

may You disconnect. now

AMETEK (AME) 31 Oct 192019 Q3 Earnings call transcript