Earnings call transcript Q2 2023

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Operator

Good day and thank you for standing by. Welcome to the AMETEK Second Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Kevin Coleman, Vice President of Investor Relations and Treasurer. Please go ahead.

Kevin Coleman

you conference us call. thank quarter AMETEK's and earnings XXXX morning for for joining second Good

President Officer. Joining and and Vice Chief today Executive Chief me are Officer; Bill Dave Burke, Zapico, Chairman and Financial Executive

that be forward-looking risks During the call, uncertainties affect various in are expectations. today's may differ course and on detailed intention references an and after excluding that acquisition-related update made to based of factors press actual A statements any results or the significantly be adjusted results be or change intangible to Any future call we subject tax, risk is between on which GAAP our filings our will in AMETEK's of amortization. uncertainties SEC. making this can the and forward-looking may release disclaims discussion will AMETEK website. to our Investors measures cause XXXX from statements. and contained to to and with the on obligation on of found or adjusted XXXX basis, revise or results Reconciliations any guidance section XXXX

I'll We'll turn to remarks call with questions. and meeting Dave and the we'll today's open up Dave. for by then over it begin Bill prepared now

Dave Zapico

of operating for Thank and share expectations. exceptional strong records second ahead margins, quarter, and In everyone. sales execution established you, marked the operating we sales, growth, AMETEK and our morning, performance earnings Kevin results EBITDA. record by good quarter, achieved in the income, outstanding per operational

record quarter a with also the backlog. ended We

growth Considering results remainder strong year. our benefits of the dedicated of guidance of are efforts results our importantly, growth again outstanding we the earnings AMETEK year, for positive from initiatives the niche and our quality increasing colleagues. the most businesses. for continued outlook our the outstanding differentiated quarter full strength The from the and, second the the AMETEK's reflect our organic model,

results. second me turn quarter our to let Now

the was foreign same sales period Acquisitions up points and X% was sales X%. X $X.XX were over added currency growth Organic flat. in quarter quarter Second billion, XXXX. the in

quarter consecutive our XXth book-to-bill in of second book-to-bill. the Our ratio positive was X.XX, quarter

quarter the was up while As backlog over or end and billion income the billion with quarter Operating in the XX% a ended XX.X% Operating were A second the at impressive up EBITDA a in was of the year, million. of an from result, over up $XXX margins increase million from the were the the of $XXX $X.XX $X.X XX% a XXXX from in prior prior margins record also a XX% XXXX. we up of EBITDA the quarter quarter $XXX record XXXX. XXX basis million, impressive quarter, record year. points end XX.X%.

to of above earnings versus guidance to of of This and operating per $X.XX $X.XX record performance range $X.XX XXXX second diluted up share, led the quarter XX% per share. our

Now the level. group let provide me some operating additional details of

with our EIG's acquisitions operating balance of expansion. and Ultra sales last X% Instruments First, the tremendous from of year. growth was $X.XX margin great each were Electronic our very Group Organic Group. strong the divisions, the excellent across performance. growth. and The in were operating growth second had with quarter, strong was the particularly quarter businesses. Technologies Sales EIG billion Electronic the accounting the second growth profit Precision a and quarter EIG for growth widespread in a with in XX% up for and sales up sales with of performance strong Aerospace quarter Instruments impressive Defense

XX% up X% strong a Electromechanical the quarter. in and also quarter second the million prior million were year. Group up the Operating performance prior excellent driven points delivered prior at operating EMG's were was sales were margins year. was XXX the Engineering, operating quarter operating year, $XXX points versus XX.X%, robust income XX% XXX million acquisition up basis the the sales EMG's versus while in Bison margins up XX.X%, excellent basis a prior versus year second by organic EMG's quarter The growth to the roughly income the $XXX up operating record $XXX in sales year, quarter. from the compared with of prior flat period.

EMG's While sizable up exclude was operating basis core we're margins acquisition points. XXX a dilution,

second outstanding XXXX. achieved quarter AMETEK Overall, performance in of the

we to continued AMETEK's results -- attractiveness speak the operating end addition, In diversity the strong execution markets our of serve. and strong

with attractive drivers. investments aligned Our strategic our niche businesses Through segments organic continued secular and in in acquisitions, market and market segments. are growth our presence hold leading growth strong we niches positions expanding

positioned As energy, a such clean health reinsuring. are long-term benefit manufacturing and care meaningful investments and the our from businesses areas to electrification, efficiency as well result, with solutions, differentiated in

to our investments. with markets, addition seen our success has and alignment great AMETEK strong organic initiatives from In growth growth

marketing broadening as million needs and deliver as For our $XXX research initiatives expanding tailored commercial and over our excellence next-generation the largely engineering products all across These we of are well XXXX, meet incremental and development our customers. and to efforts. of on AMETEK's consistently focused on businesses spend expect innovative development growth sales, teams investments unique our research, engineering investments. to

accomplishments. While highlight there company, are numerous to I their examples the our Abaco unit across outstanding business for wanted

Innovation provider was given defense Demand computing recent at a Abaco the Abaco aerospace, provider for strong, best design embedded is capabilities. as ruggedized of for thermal solutions Abaco leading awarded a PCBAs solutions specialized remains the high-performance systems for the and with overall management of advanced leading recently and such position deep machine applications technology applications. commercial processing provides GPU industrial off-the-shelf Awards. also graphics with required signal radar customers and Technology and Abaco autonomous processing a for computing advanced capabilities and the reconnaissance, in systems. latest surveillance intelligence, This AI-focused security next-generation introduced with as integrated learning our computing Accelerator graphics technology. car

our initiatives with from and many are market market pivotal continued growth and long-term organic in benefit high driving demand businesses growing investments the growth. addition the other to and power leadership positioned exposures overall in well for Abaco, for of attractive These position We our computing growth, strategy. company In to success recognize analytics. driving coupled organic role sustainable the growth

deployment capital acquisition strategy. and our to switching Now

quarters, we acquisition to the businesses RTDS Over is businesses: deployed well these and attractive on integrating and of their positioned the last $XXX Bison very million Navitar, nicely approximately opportunities each on of is markets. into Engineering. three Each capitalize three AMETEK growth in

positioned future. objectives. that capitalize and a and in flow sheet Our our support our remains and robust are very are value-creating align opportunities with strong number pursue the our teams of strategy leveraging significant strong growth we managing our capacity, acquisition committed balance acquisitions opportunities. and well pipeline remains a internal to acquisition M&A cash With businesses strategic AMETEK financial actively on to to

turning to year. remainder Now, our of the outlook for the

we the the While these strong first half again the for we results are caution in macroeconomic outlook to earnings to navigate the through year, short confident in warrant uncertainties and positive in term, our upon challenges and deliver strong remainder ability environment guidance. are results. our continue our Building of increasing

year, the $X.XX full from be now diluted of last up expect expected high our mid-single year year's sales range organic the to to the mid- to overall share with earnings sales single to per in X% expected are increase up This share. of compared XX% $X.XX to be an is per previous for results. $X.XX, to digits guidance For range we up digits. to $X.XX Diluted be to

earnings $X.XX to sales be $X.XX up share, versus AMETEK's third to For mid-single of up second with anticipate year. we digits, overall to quarter, the excellent. per In X% quarter results the prior were summary, adjusted X%

of niche solutions growing cater markets. The attractive and Our differentiated our businesses to while diverse growth, of remains from continued mid- and higher initiatives portfolio technology to levels deliver aligned that long-cycle excellent markets. organic our growth performance, yielded benefiting implementation with has

challenging, actively value. to capital drive deploying model Our the strong while increased business us and with environments flows asset-light provide shareholder cash to flexibility navigate

who a As firmly will remains over will details questions. AMETEK of to turn deliver glad we'll Bill? financial take growth. the Bill positioned of to be cover the long-term Then some now it your result, quarter. sustainable to I Burke,

William Burke

Thank you, Dave.

record strong had highlighted, of and a operating earnings. very a high performance second AMETEK quarter with level Dave As quality

quarter. highlights me the provide Now financial some let additional second for

versus $XX.X essentially year and as quarter. expenses unchanged general the quarter X.X% second from were in year's percentage a administrative were X.X% Second and of sales million, prior last

and in to sales line to G&A last general expected XXXX, For year's are level. of with expenses sales, X.X% be approximately administrative

other $X XXXX. versus quarter a The headwind the in was income tax the pension income lower in to and of XX.X%, XX.X% million expense quarter. from rate was second largely the prior Second quarter slightly period effective due down the

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

full the million. reflecting to business to million were year expenditures $XX of Capital and in X% be expenditures approximately about quarter Depreciation the expect the capital our million continue amortization $XXX $XX for was in quarter we or expense asset-light model. second sales, and

we amortization meaningfully quarter full capital year. after-tax, year, the was For quarter in of expect Operating and including the or approximately $XXX diluted working acquisition-related second amortization XX% Cash up in $X.XX million prior approximately of the per $XXX intangible sales. million, flow was to from depreciation share. be the

flow the cash in gross and quarter. XX June Free XXX% Operating at free $X.X $XXX X.Xx. for net we down cash cash the of the billion second cash end full debt-to-EBITDA was cash Offsetting the XX% up million, of flow end prior the equivalents from debt up at XX% to quarter, approximately and year, $XXX and of our flow year this was Total the from billion, conversion. quarter million, was income At to ratio our from conversion cash is of was debt X.Xx free net XX% And $X.X XXXX. was was the second ratio debt-to-EBITDA flow XXXX. continue expect $XXX million.

excellent with growth cash have credit to existing to our initiatives. and $X.X continue approximately We capacity support billion facilities financial of

a of quality our to margin in robust growth, strong businesses delivered XXXX. summary, achieved results exceptional earnings. second expansion We and quarter In continue of high the sales deliver

record year. back Our backlog us positions segments, well attractive have half the the and in of success leading positioned continued market outstanding operating for across capabilities

Kevin?

Kevin Coleman

please the Bill. can Benny, you, we Thank for questions? open lines

Operator

of first from line the sure. [Operator Wells right, Our All of Instructions] is Fargo. Poliniak Allison question

Allison Poliniak

talk longer about, trends headwinds maybe order term could since know given kind talk Anything that any book-to-bill you maybe strong been talked you then? being outcome to Could you're but short-term in you're you've very there? see of the more the just about here obviously, is starting to that to you of I to of seeing looks sort -- uncertainties concerning positive but some

Dave Zapico

still straight feels question. Great $X.XX environment book-to-bill an of record positive and billion. with had all-time overall the XXth demand solid. The We of ended quarter

really So it in that's and great. our book-to-bill both was positive groups; X.XX was so

our XX% levels. normal Our of sales backlog is annual historical well above over and

XX%. of level about historical normal So

as So we're we strong a in XXXX. throughout position proceed

that dynamics of in couple highlighted last earnings you If the couple impact recall order calls, would growth. of we a

difficult are first The comparisons.

If of you in over time, look in 'XX, XXXX period extended our we fact, all organic averaged -- XX% an at and growth.

against. have that we we're So comps difficult up running some

return And more and improving now lead getting positive for customers book-to-bill dynamic give to our highlighted, times to this were play But are it ordering or the is patterns. deal that chain where the to the out. record we of positioned a expectation supply situation with dynamic us second We seeing is normal to confidence to remainder back and early and well and the back normal, had ordering our year. getting we're normalized backlog

Allison Poliniak

clearly low here. leverage, And

of active. seeing Can terms a executing, great anything holding give You're I on still would what's some not it about valuations of this back? us still, it Is maybe pretty at been color interest. pipeline is talked it just point? of in sort You say, you

there helpful. any be Just would color

Dave Zapico

Yes.

actively will pipeline And across Our remains as deals markets. high-quality broad of we're strong we a remain at looking a very set disciplined. and of always, our number

couple quarters and an -- sheet are close in we the going So at really to that busy. of level of full aspect predict our sometimes our really we elevated broadly, but performance well have quarter it deals with opportunity positioned force to and be with hard to the And half you growth of happen or is they're more balance discipline backlog elevated is working the to in going over what the can't backlog next on of M&A a at we are what an We're differentiate year. we're the at and strong the extremely active strategy. the back but years, expect it very

Operator

D.A. Our next from question Summerville Davidson Matt of from Company. & comes line the

Matt Summerville

if of divisions, areas you you could balance the your saw that for the go respect maybe just what to the horn, those of the and QX do year? the ahead kind in you with and David, the how around for organic businesses, will, expectations informs

Dave Zapico

our and with the single for up from start quarter glad high businesses, digits market organic growth and Matt. to, Process with across businesses. the solid included recent in mentioned be driven notably business I'd sales divisions Ultra mid-single-digit Technologies segment largest and and acquisition as overall in remains prepared segment, delivered I'll and that metrology our were process growth contributions process our Navitar. -- of remarks, of each Growth Precision by optics our our the high-end strong

We businesses perform the a Rauland we of growth and also that extremely continues our quarters solid mentioned med to well. grew couple tech across ago business

So for to businesses, Process full growth year, the we solid. mid-single-digit organic the expect continue very for

of pre-pandemic across particularly businesses it given Defense. strong growth businesses. the the increase was digits sales aftermarket driving and In double both really aerospace the to our we were across Aerospace basis. reflective demand strong and versus XXXX. defense MRO quarter, for strong percentage levels, to up services. a full And our in subsegments on strong the low overall strong double year was very a of now basis growth and all expect returns low sales Growth for A&D. The remains products travel and air performance very the percentage as digits And in on in quarter, organic

our increased businesses. our for Defense and outlook Aerospace we So

to were Moving which mid-single-digit RTDS growth expect measurement fueled and overall power. strongest Power contributions up sales year, was well. growth And and quarter. on full performed by Organic businesses. continue Power for Industrial power to organic the acquisition test the in growth the organic sales from & programmable we extremely the second sales our quarter mid-single-digit in percentage and was our that business, for a basis really has in And Industrial, mid-teens the

noted with of talked sales And I were OEM Allison, Overall contributions in in finally, mid-single is our we about and our business. significant mid-single-digit up businesses levels Automation from the normalization and previously And being as acquisition. our digits, the organic question most & Bison is my across in Solutions. the sales offset automation decline Engineered impact inventory by continuing to

our horn Solutions our year, the low That's -- on we for sales across business Automation full with For & expected growth around digits stronger organic single that. across up EMIP the the now expect to businesses. be Engineered

Matt Summerville

organically bit if can to And in maybe little then with normalization on you maybe automation. And comment just maybe point, to your this how period, feel last this -- respect you normalization long last what switch bit, gears you're a may rate of incoming could an little you and to a just color give of both from order terms seeing, geographic standpoint. then

Dave Zapico

glad Yes, I'd to. be

to our quarters. life The for In terms steepest, going bottom with of places customers. customers, last the end going inventory probably what there think automation a very the the is And couple interesting. end this is automation have year. of we with as It's business, the markets of I medical correction to technology our it's where near are science

of lot on right our area now. have memory COVID Also the positioned weak test in is been especially semiconductors, a We equipment.

and that correcting half. serves is think response. really going business what markets But I coiled the the that second it's in the -- end the So is to correct

in upward fashion. an So

of kind positioned increase saw very impacting OEM businesses and our because really business well we significantly automation but but It's in we're manage So that, coming. operating through our well. we're to this guidance

Our productivity nicely. progressing are programs

segment. margin As our is we and I performing visibility business acquisitions accelerating. It's well. have A&D highest very recent good are the inflation, mentioned, Price the

performance -- story broad-based question. was around Now growth mid-single on segments. a moving feel had the good businesses. notable up strength Asia really And and process process strength AMETEK broad-based digits, was strength X U.S. defense to saw was The in with across positive really digits. up process. strong about in notable single high notable with points I your power our businesses. with there our next We We all and up strength really, geographical aerospace and too. in Europe

Operator

line the from of Deane comes question RBC next Capital Our of Dray Markets.

Deane Dray

backlog flow. gone I the website; didn't already. so, questions. got thank up We've recap quarter first having complement appreciate cash in you the lot that shout-out on with to the that I free don't I your the start see in the of that gives website you. we but and First, through really timing know, good a pager quarter for Listen, one and

and you in be normalization Maybe Is to for go this releasing an time. that we're a start and any buffer in seems is there for everywhere not on Bill, it be you very as you an things Just closer just all. opportunity? seeing opportunity? this normalize, to disruptive Is that would from just bit inventory to case

William Burke

something our very second the But starts businesses are pivoting the the are our supply to happen that's backlogs. customers given our reducing move as now businesses through on. And all that work chain, the think to half and much We inventories. through extensive normalize, we as things Absolutely protect see right focused way I you'll our to year. that of our did

Deane Dray

looking price pricing on was in Good. for. That the timing were new commentary products kind quarter? carryover the contribution and we some from benefit cost, And any of maybe

Dave Zapico

Yes.

the issue to On more second quarter, inflation. continued the offset than in we price

was and basis Our of about gave pricing points. approximately was inflation us X% spread positive X%. a And XXX about that

there. solid costs have in offset that in AMETEK's So other speak the visibility results We're really like there and But product performance nature logistics, of I and decreasing under by commodities seeing costs highly we good to with and control the wages travel. feel some portfolio. differentiated

Deane Dray

new products? Great

Dave Zapico

Yes.

New is solid sales our products were of vitality a quarter. index. XX%

customers products. good markets. buying new our is our And new really at happening our what's So are products

the significant things and Day X. good of mentioned and feel have but business these introductions while across product run-type not And home the going introduction word a that. across the is so on. are swings our But And business, spread really we the I lot good about out development we Abaco

Deane Dray

of to lots doubles. Hall get singles of the with Fame and can You

Dave Zapico

strategy. AMETEK's That's right. That's

Operator

line Inc. of Company comes of & Christopher question Oppenheimer next from the Glynn Our

Christopher Glynn

to So pitch about dive and that talking Dave, for many into power last you AME high Wondering businesses. we if analytics demand out Abaco, closed reacting your could computing like there. that on other dilution

Dave Zapico

lot businesses, talking where we're technology, that there were instrumentation lab, and in in measurements now field. Yes. Spectro other AI process we're talking done them there's businesses, When our lot bringing algorithms I'm the our it a field. of technologies we're in in about work the previously where in And to business of I'm we're what's to of for doing were a about in there's some in smart lab some putting that that doing example, happening, Scientific doing especially the technology improve the

So and good that's all predictive Analytics. have that our with Spectro really around that's maintenance programs we

So we're really on that. positive

you data think of If businesses, about materials a -- is of our that our from there some analysis we're taking amount tremendous materials analysis.

showing highlighting we're that measurement and ways our our users technologies, the And in unique technology.

So situation is intensity of power, the graphics a we're the kind the where you doing art. of what of graphics have state

maintenance, So areas to around a users really, computational to businesses, trends trends the would of we that be environment, predictive the our across actionable trends highlight. data and with field is around around have in I'd provide the power the moving the the and intelligence couple research analytical our measurements take the

Christopher Glynn

could junctures. raise It's reaching inflecting inflection very yours or is interesting. any And And area, kind I be market. if the peak more an of defense be then elaborate. anything Aero might curious But I question you that might think particular you defense did think the about one areas about higher?

Dave Zapico

we about market talked and Defense commercial is low but market, outlook. in Demand and strong Yes. it both our I for commercial peak. have the defense double-digit outlook year, the market but Aerospace have both not On the

the commercial I we A&D, to and Abaco positioned both not and defense defense really in with of strong things But we're are well and about played market talked that. clearly So have peaked. of some the sides

Operator

of Brett next from And comes line of question Instructions] our the [Operator Mizuho. Linzey

Brett Linzey

versus orders. was things changes Just related between from how hoping able And wanted glean the any of the to might track back to July. to CapEx more throughout anything orders in there some be the quarter, view or come project I mix notable on OpEx provide you is to purchases? for context preliminary

Dave Zapico

would the And part it's the of more OEM that end glean, thing that versus I I'll user. answer Yes, second -- first.

OEMs our have and where business as between to the end parts are customer, the the have back is activities, OEMs in order more normalizing. and So place of we product the if we OEM inventory the get normalized

side really On of the still not end end that strong. at business, we're seeing all demand the user remains and

the we solid in Regarding had first throughout month, QX. we -- progressed how to your regarding question -- orders the

orders typical, quarter. of ramp higher the As each month

the June you So was And entire when we adjust as close the notably, when month highest order you acquisition, an for backlog input. quarter. the because book of acquisitions

we the highest second So highest last to like cumulus of we month couple And the booking years. look couple if booking take that out. the or last years, of the

strong. really was June So

we it's July, a with substantially. dug to was it's guidance half level certainly So we're line that -- last night growth haven't telling up and we're to just our in at into the and communicating close in of terms really increase we're second the here that but point it where of very deep the for

Brett Linzey

just to shifting over pricing. then And

you do are not of you of on any the we destock hold line your you there's can do there? concessions? price think price, businesses there think through As work in if areas the this grow normalization Or some it, maybe dynamic,

Dave Zapico

a go-forward but pricing. going basis, moderate And the keep I going We're there's vast majority. of retain we're majority basis small inflation XXX on bit to to just Yes, to be point the amount a going a expect spread. to retain of to the giveback. going We're that vast

what's real feel we good control the analysis about So price. out and playing with and the

certainly a to going is not and price the retain we'll giveback. So big be

Operator

question Bank next comes Our Andrew Obin line of of from America. the of

David Ridley-Lane

I'm wondering David see in Or sort out Ridley-Lane of playing in normalization that guidance the second a I for XXXX begin on Andrew Obin. backlog. revenue ending of directionally backlog. more if half? the year story? for there's of that I understand you this guess going This the what's to is is embedded

Dave Zapico

Yes.

year. and calls, with comparison the in outpace of in sales moderate we've year done expect the of historically mentioned to But what it a high last the will in to backlog I do our be couple we'll the past. As impact half orders in end I second the

as the progress impact will modest it be So a second through the half year. we of

David Ridley-Lane

right, I'm imply to expected? margins doing versus of then going been to math expectations better XX% what's guidance kind core you of prior And improving, seems incremental XX%. been if What's than the about XX%

Dave Zapico

has XX%. in core incrementals -- healthy performance Margin of we great. And been the Yes. second really fact, in quarter, had

XXX correct and So company if for we because on bit outlook outstanding. healthy basis is the number. the up points year probably of it the both incrementals has we're your you're and look in -- Anchor, for similar you a year, full level, higher at And performance been both good our think groups at is the incrementals a be will XX% and reported

Operator

next question the Giordano Our from comes Cowen. of Joe line of

Unidentified Analyst

there's there's of Giordano. in [indiscernible] specifically I forward, have biotech you industry for any on hearing terms some any in on and to slowdown that provide from the like some side, can any pressure medical end area. the if any color some in on people slowdowns color are is who This because customer markets like been other if check on just pressure that on wanted specific guys in you Joe we're looking

Dave Zapico

in that the life customers mentioned tech overall and up medical our we the in not are mid-teens. some the of world and inventory seeing our destock of our of piece QX, terms that's med But I impact are business. including that were in and guidance. automation of automation we sciences business, overall included

significant a year. very in the quarter full the for and really our So medical growth business for strong AMETEK performance strong and components and second in engineered

Operator

turn questions at point. now to not the I this other see I for Kevin any do like conference Coleman So, closing remarks. back would to

Kevin Coleman

in help of ametek.com. of call section webcast replay can a Thank as a a Have you, for joining your and you thank today. us And Benny, our today's all conference Investors accessed reminder, day. be for the great for

Operator

concludes you. conference This you Thank call. today's Thank participating. for

may disconnect. You now

AMETEK (AME) 1 Aug 232023 Q2 Earnings call transcript