AMETEK, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Ametek third quarter 2021 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Kevin Coleman, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Angie. Good morning, and thank you for joining us for Amatek's third quarter 2021 earnings conference call. With me today are Dave Zepico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. During the course of today's call, we will make forward-looking statements which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risk and uncertainties that may affect our future results is contained in AMETEC's filings with the SEC. AMETEC disclaims any intention or obligation to update or revise any forward-looking statements. Any references made on this call to 2020 or 2021 results will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization and also excluding the gain from the sale of reading alloys in the first quarter of 2020 and the realignment charges taken in the first quarter of 2020. Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website. We'll begin today's call with prepared remarks by Dave and Bill, and then we'll open it up for questions. I'll now turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. Amitek had another outstanding quarter with better than expected sales growth, strong operating performance, and earnings above our expectations. We established records for sales, EBITDA, operating income, and earnings per share in the quarter. Demand remains strong across our diverse set of end markets, leading to robust order growth and a record backlog. While the global supply chain and logistics networks remain challenging, our businesses are doing a tremendous job navigating these issues and delivering results which exceeded our expectations. Given our results in the third quarter and outlook for the fourth quarter, we are again increasing our sales and earnings guidance for the full year. This strong overall performance reflects the exceptional work of all Ametek colleagues, as well as the strength, flexibility, and sustainability of the Grand Ametek growth model. Ametek's proven business model was central to our focus on creating a sustainable future for all stakeholders. We are very proud of the important steps we are taking to further sustainability across Ametek, and last week we published our latest corporate sustainability report to highlight our efforts in this area. This report provides information on our sustainability initiatives, the strong progress we have made, and the commitments we are making to create a better future. I welcome you all to read our latest corporate sustainability report, which is located on our website. Now let me turn to our third quarter results. Third quarter sales were a record $1.44 billion, up 28% over the same period in 2020 and above our expectations. Organic sales growth was 17%, acquisitions added 11 points, and foreign currency was a modest benefit in the quarter. Overall orders in the third quarter were $1.55 billion, an increase of 37% over the prior year period, while organic orders were up an impressive 31% in the quarter. We ended the quarter with a record backlog of $2.62 billion, which is up over $800 million from the start of the year. Third quarter operating income was a record $338 million, a 25% increase over the third quarter of 2020, and operating margins were 23.4%. Excluding the dilutive impact of acquisitions, core operating margins were 24.7%, up 70 basis points versus the third quarter of 2020. EBITDA in the third quarter was a record $415 million, up 25% over the prior year, with EBITDA margins of 28.8%. This outstanding performance led to record earnings of $1.26 per diluted share, up 25% over the third quarter of 2020, and above our guidance range of $1.16 to $1.18. We continue to generate strong levels of cash flow, with third quarter operating cash flow of $307 million, and free cash flow conversion of 109% of net income. Overall, tremendous results in a challenging operating environment. Next, let me provide some additional details at the operating group level. First, the electronic instruments group. Sales for EIG were a record $982 million, up 31% over last year's third quarter. Organic sales were up 15%, acquisitions added 16%, and foreign currency was a modest headwind. While growth remains broad-based, growth was particularly strong across our ultra-precision technologies and our power and industrial businesses. EIG's third quarter operating income was a record $245 million, up 20 percent versus the same quarter last year, and operating margins were 25 percent. Excluding acquisitions, EIG's core margins were excellent at 27.2% in line with prior year margins. The electromechanical group also delivered outstanding sales growth and excellent operating performance. Third quarter sales increased 21% versus the prior year to $459 million. Organic sales were up 20% and currency added one point to growth. Growth remained strong across all of EMG with our automation businesses again delivering notably strong growth in the quarter. EMG's operating income in the quarter was a record $115 million, up a robust 36% compared to the prior year period. EMG's operating margins expanded an exceptional 270 basis points to a record 25%. Now switching to our acquisition strategy. Amitek has had an excellent year with a record level of capital deployment, leading to the acquisition of five highly strategic businesses. Ametek has deployed approximately $1.85 billion on acquisitions thus far this year, reflecting the strength of Ametek's acquisition strategy and our ability to identify and acquire highly strategic companies. Our proven operating capabilities allow us to drive meaningful improvements across our acquired companies, resulting in outstanding returns on capital. Generating strong returns on capital deployed is critical to long-term sustainable growth and an important element of Amitek's strategy. Amitek's strong cash flow generation continues to support our capital deployment strategy. Our acquisition pipeline remains very active. Our M&A teams continue to work diligently, identifying attractive acquisition opportunities, and we expect to remain busy over the coming quarters. We also remain focused on investing back into our businesses to support their organic growth initiatives, including in support of their new product development efforts. In the third quarter, we invested over $75 million in RD&E, and for all of 2021, we now expect to invest approximately $300 million, or approximately 5.5% of sales. Through these investments, our businesses develop unique and highly differentiated solutions They help solve their customers' most complex challenges. One such example is a new product introduction from Ametek Catan. Catan is a leading provider of direct detection technology for electron microscopy, supporting high-end research in materials and life sciences applications. Catan recently introduced the Stella Hybrid Pixel Camera, the only fully integrated hybrid pixel electron detector with the Catan Microscopy Suite. This new product reinforces Catan's leadership position, providing the highest quality TEM diffraction camera, allowing the user to perform 4D stem analysis with rapid speed and high dynamic range. Catan's new camera builds on a long history of disruptive and award-winning technology. In August, the Stella camera was awarded the 2021 Microscopy Today Innovation Award and called one of the 10 game-changing products and methods. I would like to congratulate the team at Catan for the recent launch of the Stella Camera and for the support of important research applications. Now let me touch on the supply chain issues. The global supply chain remains challenging. We see extended lead times for a broad range of materials and components with logistics issues and labor availability adding to the complexity. While these difficulties exist, we exceeded our sales estimates for the quarter and are navigating the challenging environment well, given our agile operating approach. These supply chain issues are leading to higher inflation. However, given our differentiation, we were able to more than offset this inflation with higher pricing, leading to a strong price inflation spread. While we expect these challenges will continue into 2022, we remain well positioned to navigate the issues given the strength and flexibility of the Ametek growth model. Moving to our updated outlook for the remainder of 2021. Given our strong performance in the third quarter and the continued strong orders momentum and record backlog, we have again raised our 2021 sales and earnings guides. For the full year, we now expect overall sales to be up in the low 20% range versus our previous guide of up approximately 20%. Organic sales are now expected to be at low double digits on a percentage basis over 2020 as compared to our previous guide of approximately 10%. Diluted earnings per share for 2021 are now expected to be in the range of $4.76 to $4.78, an increase of approximately 21% over 2020's comparable basis and above our prior guide of $4.62 to $4.68 per diluted share. For the fourth quarter, We anticipate that overall sales will be up in the low 20% range versus last year's fourth quarter. Fourth quarter earnings per annum each year are expected to be between $1.28 to $1.30, up 19% to 20% over last year's fourth quarter. In summary, Emetech's third quarter results were excellent. Our teams continue to execute, and our businesses are performing well. Our performance through a challenging environment shows the resilience and strength of the Emotech growth model. The asset-light nature of our businesses, our leading positions in attractive niche markets, and our world-class workforce will continue to drive long-term sustainable success. The proven nature of the Emotech growth model continues to drive long-term success for all of the Emotech stakeholders. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter. Then we'll be glad to take your questions. No. Thank you, Dave.