AME - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Meg and I will be your conference operator today. At this time, I would like to welcome everyone to the AMETEK, Inc.

Second Quarter Earnings Conference Call. [Operator Instructions]

to conference like to now would turn over the Mr. I Relations Vice President Coleman, and of Kevin Investor Treasurer. ahead. go Please

Kevin Coleman

Thank you, and Call. Meg. us Good Puri, and morning, and thank and Officer; Officer. Second are Zapico, Dalip XXXX Chief today Executive for Vice you Quarter Earnings Financial me Conference President With Executive Dave Chairman Chief AMETEK's for joining

uncertainties actual based will which are statements, to the During on risk from making various be expectations. course cause of today's forward-looking that factors significantly differ and to results call, change may we subject

references excluding adjusted found related the on detailed discussion Reconciliations Investors $X.XX AMETEK's and XXXX to website. and acquisition-related A press an AMETEK obligation a or and amortization million measures forward-looking be affect between quarter may results made basis, our XXXX integration the or Any $XX.X on and of or first with results of disclaims XXXX release charge our in on section after risks contained this update guidance uncertainties intention pretax be will our Medical can or any acquisition. to that tax call the is any adjusted the Paragon or for SEC. share excluding future diluted revise filings in GAAP intangible the in to costs statements.

We'll begin it today's questions. call with for prepared remarks, open and then up we'll

to meeting over the Dave. turn now I'll

David Zapico

volumes. strong operating destocking environment. customer experienced more the we Kevin, you, a our In from morning, in delivered solid good lower-than-expected performance leading and headwinds to inventory quarter, Thank a quarter with continued the everyone. growth sales base, backdrop OEM against results second global subdued of across the AMETEK

temporary the operating the and expansion signs project leading to we flexibility are earnings of delays strength in saw Despite reflecting delivered growth model. performance headwinds, strong robust AMETEK of cautious these quarter, flow core more cash and the customers turning seeing and businesses our in the in we operating spending. Additionally, some margin

We continue more half cautious customer expect to year. and the behavior back the the in inventory destocking of

outlook year. we remainder near-term are successfully confident result, the navigate the for in adjusting of As remain a headwinds. our our ability these to We

in back continue businesses, position strong growth. As strategic deploy we our past, capital expand long-term utilize operational invest balance to done the acquisitions our we and efficiencies, in sheet on continued our focus AMETEK we've to will on for ensure

the me quarter financial from our results. in let Now second in quarter in income the was sales margin Organic XXXX. a same were increase points X% were the in billion, quarter quarter Acquisitions a quarter turn second Sales record was the excellent robust quarter Operating and XXXX. down quarter X%. of operational second added foreign a quarter. period slight the the in -- in over Sales was with up sales $X.XX X currency $XXX to in the the million, AMETEK's headwind. X% performance expansion.

Operating quarter, XX margins from year. were points XX.X% the the prior up basis in

up basis capability impressive reflecting margins XX% quarter. prior impact dilutive with asset-light flow in the quarter million, a record EBITDA in was and our sizable quarter were XX.X%. business operating the was in margins over points XXX EBITDA a from Excluding core excellent, model. Cash the the an $XXX up acquisitions, the year,

our to of guidance versus XX% diluted X% up per performance of the with in up quarter and Operating cash above led flow per $X.XX to cash free cash operating XX% second earnings quarter and XXX%. flow was of $X.XX share. This range of $X.XX million $XXX conversion up free XXXX to the flow share,

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

at strongest & XX% up and XXX in year. Growth flat sales versus were a the margins year. of outstanding and Defense prior the X the and expansion. businesses delivered second were points EIG operating prior strong within sales X% increase quarter. points. with year up margin were Aerospace operating Organic operating quarter was EIG First, EIG the our Electronic million, Instruments billion, was $XXX last acquisitions from $X.XX contributed XX.X%, the Group. performance CAMECA basis income from

very attractive Our number EIG businesses level important excellent benefit high aerospace, growth markets. to and well secular process, their long-term They are increasing across given remain with margins. from operating exposures at a positioned a energy power operating of drivers, to markets

and of In acquisition continues in from X% a record the & to quarter, than to impacts declined Aerospace EMG navigate the the sales to across across million, EMG, engineered offsetting Defense Electromechanical our the the businesses. automation prior $XXX more businesses, a due group businesses. normalization of sales and driven inventory increase growth year, The Engineered by compared our were solutions Paragon Solutions Medical. weakness Organic contributions automation our solid XX%

quarter Acquisitions contributed in with Operating margins XX%. for million, quarter. $XXX was XX% income the income at the XX.X%, were while second core operating margins operating

number of a for customers range crises. inventory noted across chain are excess have supply wide a markets the reducing up during built quarters, OEM we of As

the base While half at believe we remain the year, in will see of approved had demand subdued within levels through current now XXXX. expected end we this conditions of the second to OEM customer

is leading strong to market normalization MedTech position This given across in well very inventory and growth a remains delays businesses, for once shipments. positioned impacting correction inventory leadership the their Paragon number our also complete, near-term medical is of segments. Paragon including OEM orders high-growth Medical,

beyond. drive that growth currently in, Additionally, incremental which new programs we're Paragon won XXXX investing has and in a will

position long-term As quarter, we we to for integration leveraging our noted capabilities meaningful drive are last success. to best improvements proven operational Paragon

be return will profitability. volumes to and following growth the sales business deliver believe outstanding the levered destocking, As we

points are in very growth core operating quarter. and we basis operating with businesses XXX of X% income expansion the our summary, in margin well In

strength continue The of XXX%. flow results. conversion in XX% excellence cash the AMETEK's to the We flow we flow year, operational to is full expect our to cash growth in XXX% And net generate with free operating quarter. strong strategy between for cash free be income and evident

improvements million infrastructure businesses our we global our to drive year, leveraging by continue OpEx savings. efficiency across We And in initiatives. and generate this now expect to $XXX

And to in into back engineering The investments this we largely committed an businesses. in in these and to our invest investing strong a $XX which remain effectiveness and expect and of development quarter. growth, sales reflected is also We research, our XX% focused marketing. million was on incremental index, year, vitality the

financial free for with strong sheet our capacity Additionally, us balance cash and acquisitions. provides flow flexible strategic ample

is Our businesses portfolio acquisition that pipeline and positioned investments AMETEK very continue strategy. to organic highly our our to remain our differentiated opportunities of growth of well expand acquisition strong. both

now to year. digits. the fourth line reduced year be of share with forecast. to some Overall sales proactive the from X% results. $X.XX range quarter our expected With outlook on Now This balance expected and the up customers productivity the year continue as to Diluted and for actions, our through we expected of X% prior to the $X.XX, to to per rate guidance turning first be year. sales our in remainder tax more This second the to impact earnings reduction spending, is versus are last for essentially our half a earnings of year's cautious to reflects prior expected sales a of and adjusting operating of down turning up with sales guidance the earnings are the $X.XX organic X% year, low flat guidance destocking to be $X.XX the full results. with for lower to single sales are expected the in than helped range our offset to half now along project earnings, X% less compared X%

the year. sales overall with to X% digits, the versus earnings of we $X.XX $X.XX be X% For share, quarter, down to up the anticipate range in third mid-single per to prior

are performance second in with operating strong our In business' the quarter. pleased summary, we

and model We demand experienced deliver we have our management remain results. to the in team, operating and and ability exceptional long-term sluggish navigate a confident proven an environment

over it your Puri, we who will Dalip to financial details questions. take turn now cover will of the quarter, then of some be glad I the will to

Dalip Puri

everyone. good and Dave, Thank, morning,

cash to solid expansion As operating with flows. AMETEK a leading Dave quarter noted, performance margin had and outstanding second strong excellent

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

Second $XX second last X.X% quarter with expenses administrative year's general were or in million line of sales, and quarter.

approximately are be and expenses year of For to administrative XXXX, sales. fiscal general expected X.X%

expense interest quarter up following of million, due million balances $XX in the higher Medical $XX second to from quarter December. debt Paragon XXXX was the Second acquisition of

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

between For tax lower to effective now due XXXX, rate and quarter driven rate XX% expect we tax statute to a our by expirations. fourth be XX%,

estimated million, for can full or rate. expenditures differ expect to of As past, $XX we actual quarter capital we negatively or quarterly have approximately positively year the the in from the X% either were in the million sales. about $XXX dramatically, be tax full rates stated Capital expenditures year and second

and expect the was This expense includes after-tax per acquisition-related $XXX $X.XX share. approximately to million. or and $XX $XXX million In amortization amortization we million. intangible XXXX, depreciation Depreciation quarter in be diluted approximately amortization of

million, capital sales. versus quarter in of was the up Operating of working second second the Operating XXXX. XX% XX.X% cash flow quarter $XXX was

XX% free While prior $XXX cash over was up the million, flow year.

net free cash quarter, the of strong XXX% conversion income. a was For flow

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

to have strategic initiatives available of growth support deploy cash on financial acquisitions. with credit facilities capacity billion flexibility and We and our $X.X and to significant

excellent flows. AMETEK delivering quarter summary, solid of cash had with second XXXX, expansion and strong free In robust a margin results

across positions our Kevin? and outstanding navigate to operating growth us with strong leading strategies. on current to deliver attractive positioned sheet and leaves capabilities well the our environment segments balance combined very Our market

Kevin Coleman

please questions? Meg, Great. the open Thank you, lines for can Dalip. we

Operator

Summerville first Davidson. line [Operator Instructions] of Your question from the Matt D.A. comes with

Matt Summerville

of couple questions. A

seemed you ago of destocking Dave, pretty up midyear. a sort the by quarter itself that phenomenon First, wrap would convinced

guess relative to changed? I you So about can little what's ago, bit maybe talk XX days a

starting in and of be follow-up. you by only months we're another are I touch have to the And referenced? confidence end impacted then what some maybe on you markets project businesses this for gives X and then that What delays a of

David Zapico

Yes.

year. changed. now the and the not to as the we to in growth will similar Our has happen talked And year performance that that the the in first of in sales be originally anticipated, as prepared my noted in are outlook we expect year going improvements half the remarks, for second half. sales the we now half operating and in operating our we earlier performance expect about We the and second

So we're we going had anticipated. to the see increases that not

is And about is changed this subset, is points the question, OEM have business reduction we point our which in sales it that to area, of that exposed within engineered points X our tied from results reduction X to in coming where businesses outlook. this a solutions reduction being our Paragon and to destocking. automation talked the destock. roughly from and about we And automation from the X your And X-point of

makes about businesses. outlook X- EIG in across to X-point that So our up our reduction

and expect delays. And wide are of geopolitical given customers range cautious political to bit sales project seeing of lower economic, just being X We impact we're about a factors. a of cumulative short-term more the point due there,

delays. temporary are these feel we But

Our new by we being the expected reduced funnel midpoint. not lower remain point earnings our delayed. Projects sales, $X.XX guide they're being very given guidance pipelines And about at the solid. are -- canceled,

good reflects reflects It Another job the I expected running couple sales take the you it about points. sales. done a decremental that -- company. margin mean, -- lower it decrease, XX% a we've of takes when on really

be mentioned, Dalip will in QX. as And rate lower the tax

change. pleased see with through is the that team we're demand confident the economic I'm positioned how temporary accelerated I'm profit conditions So these managing when to changes. growth

does, AMETEK the your the manage recovery point, will we going our appropriately. inventory adapting to I missed current of the bit corrections timing longer. a And think take we're and we're as to and situation, the business to

And how the as we've really with I XX% team responded decremental said, to volume change. got pleased the

Matt Summerville

definitely the the and ahead Can standpoint a how would comment. decremental typically of you go also I of in of kind the changed from and I kind the think -- it's around expectations the in Thanks, horn the good David. Can some sub -- across probably you do call. verticals? do timing on you have agree businesses

David Zapico

our Sure, single Matt. our the businesses Process energy with up growth business subsegment, for in quarter. process. low were digits I'll solid start largest across businesses with CAMECA and our the Sales our

customers, more about, As just we seen talked prepared turn noted my cautious. in we've as remarks,

expect expect the single our half the be and digits as we to Process second discussed, this versus to low businesses to in year. We continue up flat we prior

I'll businesses, while defense, was business quarter. mid-single move delays Now aerospace aerospace the our and some the that quarter. up commercial shipment and strongest in was Growth digits Defense to in across experienced

For full across for to continue A&D our we organic both businesses. growth high our commercial the year, sales similar strong with growth expect and single-digit business defense

second move I'll Power mid-single businesses. Next, low offset for in single-digit sales being to recent Industrial contributions our organic with in our sales. Power from decrease a quarter overall up Industrial the businesses & & And were digits acquisitions by

of to all flat the are 'XX, kind XXXX. Similar now seeing Industrial macro the to customers our and expect Process delaying same And sales due some organic we uncertainties. of to to and our compared Power for businesses be projects broader for Process of businesses, Industrial our

final were acquisition quarter a were our Sub-segment This the Solutions. sales, Paragon high of Medical. approximately inventory in levels the across & was of sales contributions base. teens customer Automation up due quarter. continued our basis normalization down Organic the percentage And Engineered in segment, from XX% driven the to OEM the they by on

be We expected talked for down expect is mentioned, as in going of Automation the And for the about we Solutions And to the half year. Engineered year. to end in of normalization organic to through digits return that's happen. to to the improvements going businesses growth, the sales Inventory year. just a mid-single as result, not & second see continue as we full we our

So that's the a word, Matt. picture around

Operator

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

Deane Dray

delayed you to Matt. pick of the where off And the would left kind What and customers' Is reasons project Are about here macro? some having of us with and sentiment on spending. Dave could of trouble are cautiousness? it like that degree this Is they kind getting frame you? more way just up election you giving Any characterize they of worries? financing? it kind for color

David Zapico

Yes.

the get typically -- I going chain, of is year. -- And think elections projects. in see to I from taking they're up I approve sign-off longer it's base projects. worlds to combination think U.S., have the And signed a And delays. the further our resulting elections think just I large not even we off. what are see customer X/X think you those the the in this of they're they're These

worst. So rate, related elections some world. It's around it's I the -- the it's inflation, higher financing to the the interest mean higher

So still of combining affect the delaying mean new just things they're pipelines a they're lot some different of very other decisions, is that's thing have than to and strong a bit. downturns we people's I activity. that just

customers. strong think bunch thinking of our or We've So through from downturns. about a don't any past I have these. there's we a been activity been pipeline new

it's feedback the taken financing, although and new projects being not the primary in So some may we're to aren't longer the getting. some maybe that's There in phasing delays canceled. products be get

think honestly bit macro smaller is issue The broader a that's a this it's the issue I OEM bigger issue us. of for destock. But

pandemic, had we typically value we think the chain it engineered the people automation had and to I amounts system. solutions we're then supply businesses our the crisis. dollar are differentiated entire that And selling subsystems to components So smaller and in and

we're specialized, very that's longer inventory and dealing little bought keep we destocking and a they people shipping because just we're when just thought. to their products, taking And process now than a wanted with

Deane Dray

slowing, the customers characterized delay see kind way is it David, things that's first that's of spending because helpful. I of they or do really one approvals. the you in love the you

it's any Does sense here? like that get pretty familiar. from snowballing did quarter increase? Do that's so helpful. the as it would of behaviors you be cadence type monthly progressed, those Any of have And kind

David Zapico

Yes.

both I think typical sales the monthly in cadence our orders and was cadence. monthly

bit incremental saw being definitely, higher otherwise, That quarter a being the the But stairstep highest on, the process second of the month quarter. went as little in occurred. and some third weakness the a month first area. typically project same we So through month quarter we being with the mainly the month than the lowest

Deane Dray

Got it. All right.

when how has on than the biggest by surprise on everywhere. seen or We've not, supplies destocking we question has back one. And longer far, the sciences it chain, anyone period, anything and long to last you're taken thought. Just Anyone that's this than and has it look only Xx this the persisted. do medical with been life more just

-- from How for What's their the scale? that AMETEK their the do of of comparison question is they on was visibility a visibility point And like? just destock. rest of businesses, -- versus You percent fit where their Paragon. what's your they said

David Zapico

because customers their can I customers market, one and to Paragon daily, there's also end think market better is Yes, talk information. they're mainly get you and in talking And visibility. to

everywhere. So seeing the that we're destock happening is really

Just to surgical refresh implantable consumable everybody's devices, delivery systems, implantable single-use orthopedic and manufactures memory, attractive instruments Paragon markets. and really drug devices,

improvements time, that the substantial We is last going well. process very in the At proceeding about this is working this on. efficiency and We're businesses. same talked on quarter

growth substantial combination years of cost program the is really follows out to and destock, leaned market going this structure that sales So in ahead. profit wins the along and and Paragon the the for growth with a provide new efficient

seeing and the programs. another tremendous markets We same have amount destock and of won and part similar business a new similar kind and AMETEK, it's of a Paragon of

So and the those still driving investing in things we're market.

be optimistic take a this step to we're business. for long-term a So very about tremendous our the is back, when generator I you going and think shareholders,

the for they with people from plan have got some the game the long that new are and a AMETEK business but we're are that with about team great working people Paragon and and really take to run, from for things the forward. ready in all management this destock unfortunate a business the talented we're It's doing process, we've

So we're business really perform is long for to going optimistic about term. that how us

Operator

of Truist comes with Securities. Cook question next Jamie line the Your from

Jamie Cook

quarter expectation you the is in quarter I cost what considering be talk is by in question, past environment. down was your price an Nice about of mediocre me what segment XX% my with my margins struck is going above digit. quarter organic the follow-up in question, single can guess And the also first the couple EIG quarters then environment sort to just of the where growth flat it to to growth. and over

So there structural? operating risk What's if What's the to trying unusual is performance there. anything anything some more that the there drive to gets macro. good away this the I'm tough performance, given understand EIG margins, the pricing margins was just like, of goes a difficult? in

David Zapico

Good to both. I'll Jamie, answer questions, them and try

The pricing X.X first talked QX our thing is price, And about in points. pricing quarter. was inflation you X.X the and about our about points in was

had we benefit a So positive from that.

but pricing environment is with the and real the we're a So bit, moderating bit pleased moderating is a that. inflation

was EMG, EMG pretty by and of across little the level heavy products, it And investments. products. portfolio at products new consistent a much We're We market. of got portfolio a was bit in that's a newer XX%. the bit maybe the but fresh in putting driven vitality on across a more We performance, our just differentiated in and it than our portfolio index about talked pretty

them. buying are customers Our

to inflation, environment, our resulting So And investments think said, continue to the are -- year. inflation to we good is throughout ability continue the I leverage moderating. pricing. in that's but of that And general and moderation going as some our

well. change there, performed of very very and kind is of kind very portfolio the very, no and differentiated consistent AMETEK So it's

think driven in similar about first and had We XXX really EIG, quarter. consistent In terms the by year. performance points if -- you basis And margins up of operating product leverage, quarter in performing a continuing good we price a the got excellent we've high was QX. rest that to strongly acquisitions and from the mix. QX see that for cost, And excellent the of

And few because do stay if and in us it's to quarter you I think Industrial good excellent was are our very we comp -- and our business we've past businesses, general, for one there, QX is our got in Power they're years. a margins that going if is a that in in back a high-margin about you and margins well EIG, the have market Process, mean the Aerospace look But difficult positioned. positions. and

part of margins And the talking the they of then EMG just core over business, had about XX%.

because acquisition running medical But our excellent businesses, we So destocking look of both when segments automation in got generating and they're our the they running are there some dilution businesses. at -- well margins. and very

higher EMG lower mainly and an has is think a and revenue EIG a selling because OEM aftermarket margin. the entitlement get to users, a of historically stream they more I to sell bit they end bit customer base, little margin

off anything to So each not see are continuing. And or that other. that. I'm they're I to that those concerned relation in like margins really going fall

question, does So that your answer Jamie?

Jamie Cook

Very helpful. Yes.

Operator

the Your next Jeff Vertical comes from of question Research. with Sprague line

Jeffrey Sprague

dialed Paragon, on here. Just make I right sure just to things want I have

comment about basis. your on a think I AMETEK point right, of a is headwind, total

So or million. $XX that implies million $XX

that about for of of So year. the X%, at? where the basically we're business down X%, Is sort talking being kind we're XX%

David Zapico

Yes, you're is XX% and I'd between XX% Paragon. the say

on. right You're

Jeffrey Sprague

Okay. to EMG, but comps quite actually And the Or of about little similar revenues there? fairly are commentary sequentially, year-over-year just a should a really, you is basis, bit QX? do of are the thinking easy think mean kind we up I see getting step right? a on then

David Zapico

look question. back good And at and when a That's this. step we

to go I'll First, orders.

for orders quarters couple improvements. the Our past small have sequential had of

and like single quarter the quarter. you up sequentially completed, QX go have year you orders low this digits last back So now to the if of QX of recently year, were each

the of feel stabilized. QX. in improvement we're XX% like the we have modest the orders I to QX We in in organic half orders The a half. organically minus first the were a think year, versus going X%. have second had And So minus

When we go really of really because derisk it's and has wanted sales, kind the you to year business it to So the flat. feels stabilized. like

the rate first look in quarter-to-quarter, that have from above half you year line So half the Then first of in a half of sales of split. of you it's in tax out the versus sales even second though in tax and profit the at you the at we look back bit year, benefit a operating the the you operating half have and year the of if movement in little QX, versus year. second profit a of XX-XX a the

XX-XX why And we the that's year really that split derisked second split. we a is think with in XX-XX the traditionally AMETEK half.

of we there. business. benefit seasonality have derisked it's because the to have tax always year in we QX, in seasonality current But and the of rate And still seasonality we QX. and reflect higher as Dalip a our the Now Historically feel year. again, to stay through typical some really the the we the QX way we is than mentioned, environment, going think the we that have balance

Jeffrey Sprague

then rate. we just on tax maybe could touch that And

would up range QX, do move I range? QX. to XX% is in just Or XX% stay XX% But the XX% again jumping that XX%, assuming in bigger XX% know, at imply, we we the you to in back into don't into question XXXX, So XXXX? or off XX% do

Dalip Puri

No, see our in for expect. up but where you tax what we're And our moved sitting, typical done haven't back that's planning XXXX, we Yes. would we XXXX rate. to based it on right. We

Operator

of Graham with comes Scott Seaport Your question from Research. next the line

Scott Graham

project points in and around didn't to was in of spreading the want that there's understand, indicated talked there? I My horn, you reduction vulnerability year, One guidance And delays wondering you sort EIG anything X point cite essentially So into your in sales about the if EMG. just project delays process, to it so you there. power. in was indicated any the delays because I is, you project question in for

David Zapico

well and little it's are activities. there's and it's thing. some power same larger in Power to customers seeing they but have just markets, we're process and -- the should we're it, more is Process delay those and there very -- Power, test but delayed businesses Yes. the said If a I kind cite didn't we and the including bit a mean, of it's and have I sell in and similar positioned segment, I measurement projects, the government multiple

EIG that power. was from is and the which and both change only sales But in of X% of all process --

Scott Graham

that's shift Okay. the guys. defense there? sort quarter you'll that that for I see anything a business Is the because want or maybe of shipments? high-margin that in there push more fourth something you to to out Is quarter? Is to pretty third of discuss

David Zapico

I we kept A&D like digits. think the defense for business, plus side, the for the year, the same, high that No, guide on our single

we up the saw going some still full to year, delays. had was for saying But They're be in commercial and single the good what quarter So going very second same. the is a defense to digits. defense that high and commercial we're be

So there's -- doing very well there.

As said, in you confident that there's segment, feel and in we good A&D our margins segment.

Scott Graham

Xx, squeeze you If in, Dave. of low this I pretty could The leverage just one net it's last for guys.

the out point. give color. little Just you pipeline look us the I a kind deals the of there? or can How this wondering are of at how the sizes pump, assume, primed is darn does pretty Maybe

David Zapico

as cash much And us every business, deals. are have flow period. capital than greater buy think we'll looks deals, $X billion throughout performance the I I in opportunity pipeline mean good. deals larger the are mid-size The of really the generating so smaller couple big just before, big talked that's of a whole And we're for of Yes. years. to we we spectrum. about this there probably as in really differentiate deployment The our size and because

opportunities they to and go a What back tooth. -- discussions cycle, businesses and because ownership have with. going pipeline higher large of now lot that we a they're struggling businesses you on, long have also and laying trying those having see are to we're is their in the there's sell discussions PE-owned of rates, the They're that But their business sponsor slowing really refinance that in environment. and very, they're very at fit businesses a our are there's

going is are having ones. good very to pipeline capital strong our you And the be that we're remember discussions the optimistic is I'm So and allocation clear.

Our first our priority. flow remains acquisitions deploy clear free priority a strategic to that is cash

opportunistic if is poised how our see And next dividend. in act. shown going in like And past, year, priority buybacks. value. consistently the to generate valuation, dislocation a Paragon we're is that's And a see X to priority increasing our we we're modestly we from as we've And third

And Does capital activity leverage lot net with going of our ideally there's change. positioned doesn't So allocation question, that your and Scott? a right a one, now, we're on. answer of

Scott Graham

fully. everything answers It

Operator

comes Your Melius Research. with next the Wertheimer of question from line Rob

Robert Wertheimer

that the about still that driver quarter, biggest of here little you're kind bit understand the but delays and in a the curious. there I aren't I'm talking

a second one customers any project Do And cost there your anything is the on small business. to the is I pretty thought one delay sort any you're given change piece question. answer, the it's that? project check option is I one where of mean downshifting those often nature to is is there easy the And so probably of or dynamics. But of have unlikely, out? around any know pushback just price? total like

David Zapico

was cost, nice of bigger first to good we think, it's And place you're project. small right, project, And a be. a Yes. the of project a I part are question. portion typically your The a with small technology,

a In of terms technology, have differentiated pricing, we're conscious of that value the very we we're and adding.

base seeing features niche it may pipeline They our downturns will with that see is down. activity buy seeing our now. not not our positioned we're most maybe they typically we're less What customer because product, pretty positions our may in the classic change. And good have the mix project, but We're buy you'll in portfolio. and

typically projects smaller in for investment on and a typically priced we lot I of -- the we're portfolio. our value So do think

we're losing uncertainty that think issues, elections just share. -- pipelines we're talked related through I but geopolitical are general that went with and some macro confident about the more to our strong. delays about very of with So Dean, We're not confident the are we we the the the

it's temporary delay. So a

Operator

the with of Your line from comes next Cowen. question Giordano Joe TD

Joseph Giordano

Maybe the charges if talk you could you quarter. about Paragon took last

Now that update those know you're from just you when any might were quarter there any additional do you charges? but another in, expect on seeing And start charges? just that? impact onetime, any I

David Zapico

Yes.

going that's anticipate charge. clear. on I other don't that that our I won't think -- doesn't we don't that Yes, will anticipate change but mind, we now. we mean is be clear another any mean charges activity --

process So so in business, that that improving we're business. of fixing

efficiently does. making AMETEK as it So run as

people and the we solid operational a business, very, excellence, all And on Paragon response across team a project. to working it. the our the people and very have of And a team team of of is talent AMETEK

occur So ongoing year. will and it I balance this through of that's the think

think year, to start next it. you'll of the benefits see I

But the or up project, if continue you X years recall, improve to goes it. as X we

that think you with investing year, have next destock combined improvement from the phase-in. in back to product introductions we're OpEx come expect work some heavily on the with volumes combined the, going because that's So we the the a sizable new I

So but it's be destock now, that business. couldn't the we this we downturn have with unfortunate right happier

Joseph Giordano

And another XQ on question I the ramp. had was

that? on like XQ normal it ramp. there's for usual ramp So the you there anticipating destocking I But considering usually driving in understand than comment more any is what's a look historical. does not Is implies half, for implied especially could the easement that the you cyclicality, the guide guys -- latter are

Dalip Puri

your with disagree of kind conclusion. I Yes.

it we And I think in, what when year. a I tax factor very last to you there's in is that was the QX. think -- pretty a ramp similar have benefit

-- and derisked QX. So we it's

second that as QX. of operating very So little of said, the first the in benefit performance a I in half a is to the you the add And to year performance similar tax half operating year. bit in the

pretty I from we've done what in -- the I it's don't think typical past. So

Operator

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

Andrew Obin

bringing just you levels destocking on think a they better inventory pre-COVID do about to to your inventories pre-COVID how relative Are levels? Just understand to the trying just to going below basis guess be think will pre-COVID history? levels? And think how I going-forward where OEM back about levels to -- are impact versus back to it. inventory, customers, or

David Zapico

Yes.

chains there think some in general, happened of becoming different might back it's lot to regional pre-COVID that a I -- I lot because the because you're more think a there's be and less slightly on and of levels, of getting higher there things But the supply of dependent geopolitical Asia. segments. different market and customers

the might issues other be they're geopolitical to customer across back the it level. pre-COVID on. bit the general, something I at bit believe some for So that be of higher base, They But general going could a a higher. the in trying to statement get

Andrew Obin

versus cover geographies? if you. I Got you maybe we versus it, just I And versus Europe China? missed major seeing What apologize just I but Asia could -- missed are it. America North

David Zapico

growth second had our our saw No, and miss modest a business you A&D the Go both We lower, had actually in saw in businesses, in down Sure, in Andrew. was digit growth a Materials but we quarter, didn't single-digit we declines bit. or division Analysis We it. in Europe the a automation and step low the U.S. Asia. a U.S. low strong single

single Europe was in we pretty process. But China, flat. comps Asia, for a strong difficult business, digit. bit. you look our was automation offset weakness low in by excluding growth were single China down down at China. in was when digits, low up Again, it And Asia,

are So some it's Europe. kind But improvements we of a seeing in flat world.

Operator

Steve Capital next Your Barger comes Markets. with the from KeyBanc question of line

Steve Barger

XXXX,, we're of having are optimism in levered of cycle are a a node but by the lot increases? next leading-edge unit What later to also led strong course, transitions seeing you transitions And more you business? node Dave, devices, hearing volume about some that year. or semiconductor AI-related

David Zapico

Yes.

in right new to was and about it's our levered going was business, think CAMECA semiconductor every they're business and strong of it detection. these our just one systems business, want you had up, that because quarter, to second you're both about CAMECA we're we in now, doing in next-generation think up defect And of like kind fab. growth of But our them. I

smaller have extreme to the with more can EUV, few the And operate also one there, nodes. then we're benefits in the technology of that we UV, businesses from the of business. strong the and Zygo that's transitioning our And

get you the of even to be So defects a tremendously, transitions, to detect see market to was right some now, at what these -- us R&D able activity smaller at though is down the get nodes. of lot there's the to node

But good production. the up, rate product the well the also have we market by picks very -- there to a is portfolio. tied when our then going we're So uniqueness driven the of part of just business our

it terms So good us in next for moving Steve. year, into of feels pretty

Steve Barger

Chinese the Got than an Do manufacturers domestic back stronger exposure have next And year have you do think over And for year? there? for I in been activity past mature half outlook nodes expected. you it. have that in people market and the

David Zapico

next this technology I typically We have healthy of don't do for -- level We year. don't lower year. Chinese has market. products, that resolution sell It's into the been

Operator

of next Wolfe comes Your Research. from with question the Nigel line Coe

Nigel Coe

to I've that here. on Paragon, about details. base million right? the just for few a sure a for $XXX got more of I've Is you got right But of want I ground revenues know 'XX. 'XX. lot about Just $XXX make got I FY million, FY

David Zapico

for 'XX. little higher A bit

Nigel Coe

bit A 'XX. higher for

That's Okay. helpful.

you the sort for down I taking measures to I you do took FY you XX% are know the year, on right to taking? But cost longer the is XX% are stand preserve much XQ in where So of what And mean, this there? measures what now we sort 'XX? charge earnings of tail. accretion

David Zapico

Yes.

I think in cost the a of have on work capacity the plants. we're lot doing excess -- structure. They

solidly couple the that accretion And that we're for right lot year, now. a spending pennies going positioned doing on of going new is expenses for And fourth very right very, now talk product this a quarter. it's also we're related then the to we that things on spending it's Paragon. the there's took and And -- that that on charges about of are you introductions in are work that spending. are importantly, So more non-accruable that some

Nigel Coe

in fourth Couple Yes. pennies quarter. the

said on Okay. you orders, organic decline. That's then And I think X% helpful.

better I Is right the $X.X saw first orders this you think than quarter. I'm X% zone? quarter. billion in the the that's of that in calculating

David Zapico

Yes.

were look If they overall quarter... the up at in you X.X% orders,

Nigel Coe

okay, X.X% that's good...

David Zapico

in were sequential where minus orders improved were and from organically down we we That's X%. in The XX a up orders saw down improvement overall orders in X.X%. saw were QX. Organic QX what we

they're single digits low So up QX. from

definitely So cadence... orders. in the seeing stability And we're

Nigel Coe

issue And a then on quick rate XQ quantification just there? the tax one and any

Dalip Puri

mean we in about QX, our is our we're tax tax in tax QX, the if rate to projecting think to a That rate primarily range as projecting of QX lower expected typical expected seeing tax due play XX% expected now I you effective we're rate rate Nigel, statute out, expirations. the lower Yes. XX%. way we're said,

the that year is provide which of to tax XX% in full $X.XX range to benefit $X.XX to So brings an QX. earnings in per our the rate XX%, expected for share to expected

Operator

Coleman I will now are the turn no for Kevin Please ahead. more Mr. to closing go conference there Since questions, remarks. back over

Kevin Coleman

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

Operator

call. conference concludes This

disconnect. now may You

AMETEK (AME) 1 Aug 242024 Q2 Earnings call transcript