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spk09: Ladies and gentlemen, thank you for standing by, and welcome to the fourth quarter 2021 Amatek, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker 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. If you require any further assistance, please press star 0. It is now my pleasure to introduce Kevin Coleman, Vice President of Investor Relations and Treasurer.
spk03: Thank you, Andrew. Good morning, and thank you for joining us for AMETEC's fourth 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 and tangible amortization, and also excluding the gain from the sale of Reading Alloys in the first quarter of 2020 and the reliance charge 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 open up for questions. I'll now turn the meeting over to Dave.
spk06: Thank you, Kevin, and good morning, everyone. Ametek concluded 2021 with an excellent fourth quarter. Stronger than expected sales growth and outstanding operating performance resulted in robust profit and earnings growth. Demand remains strong and broad-based across our end markets, leading to superb order growth and a record backlog as we enter 2022. We are integrating six recent acquisitions into the Ametek growth model and are well positioned to deploy capital on additional acquisitions given our excellent cash flow generation and strong balance sheet. We asked a lot of our teams in 2021 as the pandemic and supply chain tightness led to disruption and uncertainty. As always, our colleagues stepped up to these challenges and delivered tremendous results. Thank you to all Ametek colleagues for your hard work and tremendous contributions to our success. Now let me turn to the fourth quarter results. Fourth quarter sales were a record $1.50 billion, up 25% over the same period in 2020 and above our expectation. Organic sales growth was 17%, Acquisitions added nine points and foreign currency was a one-point headwind in the quarter. Overall orders in the fourth quarter were $1.61 billion, an increase of 26% over the prior year period, while organic orders were up an impressive 22% in the quarter. We ended the quarter with a record backlog of $2.73 billion, which is up over 50% from the start of the year, driven by strong underlying orders across our businesses plus the contributions from acquisitions. Fourth quarter operating income was a record, $361 million, up 21% versus the fourth quarter of 2020, and operating margins were 24%. Excluding the dilutive impact of acquisitions, core operating margins were 25.8%, up a very strong 90 basis points versus the fourth quarter of 2020. EBITDA in the fourth quarter was $437 million, up 21% over the prior year, and EBITDA margins were 29.1%. This operating performance led to record earnings of $1.37 per diluted share, up 27% over the fourth quarter of 2020, and above our guidance range of $1.28 to $1.30. Our record performance in the fourth quarter speaks to the strength of the Ametek growth model, and our ability to drive strong growth throughout economic cycles. While the pandemic impacted results in 2020, we have quickly recovered and are now running well above pre-pandemic levels. For example, Amitek's fourth quarter 2021 sales were 15% higher than our sales in the fourth quarter of 2019, prior to the start of the pandemic, while core operating margins were up 300 basis points and earnings were up 27% versus the fourth quarter of 2019. Now let me provide some additional details at the operating group level. First, the electronic instruments group. Sales for EIG were a record, $1.06 billion, up 29% compared to last year's fourth quarter. Organic sales were up 17%, acquisitions added 13%, and foreign currency was a one-point headwind. Growth remains strong and broad-based across EIG, with particularly strong growth on our Gatan and Kamika businesses. EIG's fourth quarter operating income was a record $280 million, up 18% versus the same quarter last year, and operating margins were 26.4%. Excluding the dilutive impact of acquisitions, EIG's core margins were excellent at 29.3%. up 50 basis points from the fourth quarter of 2020. The electric and mechanical group also delivered outstanding sales growth and excellent operating performance. Fourth quarter sales for EMG were $447 million, up 18% versus the prior year driven by broad-based organic sales growth. Our automation businesses saw continued strong demand across a wide range of end markets. EMG's operating income in the fourth quarter was $105 million, up 32% compared to the prior year. EMG's operating margins expanded an exceptional 260 basis points to 23.6%. Now for the full year results. Overall performance was outstanding in 2021, establishing annual records for essentially all key financial metrics. Overall sales for the year were $5.5 billion, up 22% from 2020. Organic sales increased 15%, acquisitions added 7%, and foreign currency a modest tailwind. Overall orders were up 40% versus the prior year, with 26% organic orders growth leading to a record backlog and providing us solid visibility as we look ahead to 2022. Operating income for 2021 was $1.3 billion, up 22%, and operating margins were 23.6%, with core margins up 110 basis points versus the prior year. EBITDA for the year was $1.6 billion, up 20% from 2020. And full-year 2021 earnings were $4.85 per diluted year, up 23% versus the prior year. In addition to the excellent financial results in 2021, we also positioned Ametek for long-term success by continuing to invest in our businesses to support their organic growth initiatives. One important initiative is new product development as we look to further expand our differentiated technology solutions and attractive growth markets. In 2021, we invested $300 million in research, development, and engineering, or approximately 5.5% of sales. This level of investment was up 22% over 2021. One way we measure the success of new product development efforts is through our Vitality Index, which reflects the level of sales from products introduced over the past three years. In the fourth quarter, our Vitality Index was a very strong 25%. These investments are driving outstanding innovation, including a growing number of important solutions in support of our customers' sustainability initiatives. We're supporting the development and expansion of renewable energy solutions, providing important technologies used to monitor, measure, and reduce greenhouse gas emissions, assisting scientists in their understanding of the impacts of climate change, and supporting the development and testing of electric vehicles. To name just a few of the important applications Ametek plays a key role in supporting. We are expanding our research, development, and engineering investments and expect to invest approximately $340 million, or 5.5% of sales, in RD&E in 2022. This is a 13% increase over 2021 RD&E spend. We are also deploying our capital on strategic acquisitions, adding to our portfolio of market-leading industrial technology businesses and driving excellent returns for our shareholders. We had a record year of capital deployment in 2021, deploying approximately $2 billion on the acquisition of six businesses. Our latest acquisition, AlphaSense, was completed in the fourth quarter. AlphaSense develops and manufactures gas and particulate sensors for use in environmental health and safety and air quality applications. Their sensors are used in both fixed and portable systems to detect a variety of gases, including oxygen, volatile organic compounds, and harmful toxic gases. AlphaSense's sensor projects and Technologies are highly complementary with our MOCOM business and provide our sensor offering serving and broaden our sensor offering, serving critical health, safety, and environmental applications. AlphaSense is based in Essex, UK and has annual sales of approximately $30 million. Our acquisition pipeline remains active. Our M&A teams continue to work diligently and we expect to remain very busy in 2022. As our results reflect, our businesses are doing an excellent job managing the ongoing operational challenges caused by the pandemic. Ametek's flexible, agile operating structure, including our global supply chain capabilities, provide us the ability to quickly adjust and react to challenges. These supply chain issues are leading to higher inflation. However, we are able to more than offset this inflation with higher pricing given our differentiated product offering. Overall, the operating environment remains similar to what we experienced during the third quarter, with extended lead times for a broad range of materials and components, along with logistics and labor availability issues. We remain focused in the short term on managing our supply chain and ensuring we can safely operate our factories, while also continuing to drive long-term operational excellence initiatives across our businesses. Moving to our outlook for 2022. We remain cautious in the short term given ongoing COVID-19 and supply chain challenges. However, we are confident in the strength of our businesses and our ability to manage through these uncertain times. For the full year, we expect overall sales to be up approximately 10% with organic sales up mid to high single digits versus 2021. Diluted earnings per share for the year are expected to be in the range of $5.30 to $5.42, up 9% to 12% compared to 2021. For the first quarter, overall sales are expected to be up approximately 20% compared to the same period last year. And first quarter earnings are expected to be in the range of $1.24 to $1.28 per diluted share, up 16% to 20% versus the prior year. In summary, I would like to thank all of our employees for their tremendous efforts this past year. Ametek's fourth quarter and full year results were excellent and reflective of the resilience and strength of our workforce and the Ametek growth model. Our strong orders and record backlog position us nicely for 2022, and we look forward to the new year and continuing to build on the momentum gained in 2021. I will now turn it over to Bill Burke, who will cover some of the financial details, and then we'll be glad to take your questions. Bill? Thank you, Dave.
spk04: As Dave highlighted, Ametek had an impressive finish to 2021 with outstanding operating performance leading to better than expected results in the fourth quarter. Let me provide some additional financial highlights for the quarter and the full year, as well as some additional guidance for 2022. Fourth quarter general and administrative expenses were $23.7 million, up $6 million in the prior year, largely due to higher compensation expense. For the full year, general and administrative expenses were up $19 million, also driven largely by higher compensation costs. For 2022, general and administrative expenses are expected to be roughly in line with 2021 levels and approximately 1.4 percent of sales. The effective tax rate in the fourth quarter was 17 percent, down from 20.1 percent in the fourth quarter of 2020. The lower tax rate was due to return to provision adjustments. For 2022, we anticipate our effective tax rate to be between 19 and 20 percent. And as we've stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full-year estimated rate. Working capital in the quarter was excellent at 15.2 percent of sales. This reflects the strong work from our teams in managing working capital. We have also strategically added inventory in certain areas to help address the longer lead times we were experiencing across the supply chain. Capital expenditures were $43 million in the fourth quarter and $111 million for the full year. Capital expenditures in 2022 are expected to be approximately $125 million or about 2% of sales. Depreciation and amortization expense in the quarter was $78 million and for the full year was $292 million. In 2022, we expect depreciation and amortization to be approximately $320 million, including after-tax acquisition-related intangible amortization of approximately $150 million, or 64 cents per diluted share. We continue to generate strong levels of cash given our asset-light business model and working capital management efforts. Operating cash flow was $282 million in the fourth quarter and $1.16 billion for the full year. Free cash flow was $238 million in the quarter and $1.05 billion, or 106% in net income, for the full year. Total debt at the year end was $2.54 billion, up only $131 million from the end of 2020, despite having deployed approximately $2 billion on acquisitions in 2021. Despite the record level of capital deployment, our gross debt to EBITDA ratio declined from 1.8 times at the end of 2020 to 1.5 times at the end of 2021, a testament to the strength of our operating model. Offsetting this debt was cash and cash equivalents of $347 million. We remain very well positioned to deploy additional capital given the strength of our balance sheet and strong free cash flow. We have approximately $2.3 billion of cash and existing credit facilities to support our growth initiatives. In summary, our businesses performed exceptionally well in the fourth quarter and throughout the year, delivering a high quality of earnings in a very challenging environment. Our outlook for 2022 remains positive given our strong financial position, our proven growth model, and our world-class workforce.
spk03: Kevin? Thank you, Bill. Andrew, could we please open the lines for questions?
spk09: Certainly. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. And our first question comes from the line of Allison Polinak with Wells Fargo.
spk00: Hi, good morning.
spk06: Good morning, Allison.
spk00: So great orders, backlog numbers. I would just like to get maybe a little bit more color, you know, in terms of how this backlog might be looking differently than historical. You know, I think we've talked about duration extending a little bit. Is that still happening? Are you seeing any orders sort of getting pushed to the right because your customers, maybe there are labor issues? Just any color on how that's sort of evolving, you know, over the past year for you.
spk06: Yeah, I mean, the orders have been very strong and I think it reflects organic growth initiatives and also the recovery of the economy. We're doing very well. If you look at our portfolio, the one aspect of it that hasn't fully recovered is really our aerospace and defense business and our oil and gas businesses. The rest of the portfolio, their mid-cycle businesses are doing incredibly well. I'd call out our automation business, which is doing extremely well. call out our process businesses, which has really got momentum. But it's across the board. And on top of that, it was, you know, for the quarter, the way the quarter played out, it was each month of the quarter got better. And on orders, December was the highest month we had in the whole year. So we ended on strength and, you know, we have a very healthy backlog and, you know, The one thing I mentioned a few calls ago is I think our customers, because of some supply chain challenges across all the market, are giving us a look into what their demand patterns are. So we're seeing orders earlier, but that doesn't take away from the strength that we're feeling in the business.
spk00: Great. No, that's helpful. And then nice investment or dollars being allocated towards investment this year. I know you talked to some high-level thoughts there. Any specific verticals that maybe you're more focused on than others? I know you highlighted a few product capabilities. Just any color there?
spk06: Yeah, I think we're making broad-based growth investments, and we're getting tremendous return from our engineering investment. And it's across the board. You understand the way we manage our portfolio, but the sustainability opportunities for us are growing, and we're investing them. This year we'll put about $110 million of incremental growth investments in our business. So that's on top of last year's incremental investments. And those are in RD&E and sales and marketing. But fundamentally, we see opportunities, and we're going to invest an additional $110 million, and we're going to keep the momentum going.
spk00: Great. Thanks so much. I'll pass it along.
spk06: Thank you, Allison.
spk09: Thank you. And our next question comes from the line of Dean Dre with RBC Capital Markets.
spk13: Thank you. Good morning, everyone. Good morning, Dean. Hey, it's very impressive giving the understanding of how tough these supply chain issues are, inflation, labor shortages and everything, and you're still able to deliver these numbers because a lot of your peers are struggling here. Thank you, Dean. Look, and I know it's lots and lots of hard work. Your business mix tends to have a bit more of what I'll call medium technology that has microprocessors, chips, and we're seeing companies that are saying, look, that's the biggest choke point for them, but we're not hearing that from you. What is it about either your mix or your dual supply? You've done something very well here. given what your exposures might have been. So maybe kind of help us there.
spk06: Yeah, I'll try to give you some more color there. I mean, everything that you said is true, and we're experiencing the same challenges everyone is with supply chain, logistics, labor availability, and the Omicron variant certainly added a lot before the quarter in Q1. But our overall response to these challenges has been outstanding, and You know, I think the first point is our distributed business model, where we have committed P&L managers running their business units with their own supply chain teams, which allows them to react quickly to changing conditions. And at the same time we have these business teams, we have a corporate centralized supply chain team that acts with all the combined leverage and authority of Ametek. And these teams work seamlessly together, and this overall approach has been extremely effective for us. As I mentioned in the last quarter and this quarter, it's directly what you said. Semiconductor chip availability, we have a lot of shortages, but that's the biggest area. That's the one that's the most challenging. We're going at that a few ways. We're using our leverage of Ametek. We have relationships built up over a long period of time with the supply base. Our engineering capability is second to none. We use it to qualify second sources find alternatives, do redesigns. And we've also taken a team of people across the company. Some of them are based in our Bangalore engineering office. Some of them are based in Germany. Some of them are based in the U.S. And that team is available to quickly help our business units for shortages and find alternatives. And that's working quite well. So we don't really improve anticipate improvements in availability of semiconductor gyps to the second half of 22 at the earliest, and it's certainly a challenge. But I think we've had an effective response to it for the reasons that I just mentioned.
spk13: That's great. I really appreciate that additional color. And maybe if you could just take us through your key end markets for updates there and regions, if you could. Sure.
spk06: I'll start with the process business. The process overall sales were up 20%, low 20% in the quarter, driven by strong organic sales growth and the contributions from the acquisitions of Magnetrol and AlphaSense. Organic sales were up high teens for process. Materials analysis businesses show the strongest growth. They were driven by, as I said in my prepared remarks, Gatan and Kamika. The businesses have leading positions, providing high-end instrumentation into life sciences and semiconductor markets. And looking ahead for process, we expect organic sales for our process businesses to be up mid to high single digits for the full year. Now I'll switch to aerospace. Overall sales for our aerospace and defense businesses were up over 40% in the fourth quarter driven by the acquisition of Abaco and mid single digit organic sales growth. Our commercial businesses led the growth in the quarter driven by strong aftermarket and business jet growth. While our defense businesses were down slightly in the quarter due to some shipment delays, it still had another strong year. Shifting to 2020, while we remain cautious about the pace of the commercial aerospace recovery, we're still well positioned to benefit from the recovery given our attractive positions and a diverse set of commercial and business jet platforms. So over 22, we expect mid-single-digit organic sales growth for our aerospace and defense businesses, with both defense and commercial expected to be at mid-single digits. And I'll go to our power and industrial market segment next. Overall sales for power and industrial were up over 25% in the fourth quarter, a very good fourth quarter driven by mid-teens organic sales growth and the contributions from the acquisition of NSIMI. And for all of 22, We expect power and industrial to be up mid-single digits with similar growth across our power and industrial segments. And finally, our automation and engineering solutions, both overall and organic growth for automation and engineering solutions were up low 20% in the quarter. Automation businesses delivered outstanding growth in the quarter and full year with continued solid demand across their end markets. And in 2022, we expect organic sales for automation and engineering solutions to be up mid to high single digits with similar growth across our automation and engineering solutions. So if you look at the big picture, our process and automation and engineering solutions market segments are going to be up mid to high single digits, and aerospace and power industrial will be up mid single digits. That's real helpful. Thank you. Thank you, Dean.
spk09: Thank you. And our next question comes from the line of Jeffrey Spray with Vertical Research.
spk11: Hey, guys. It's Andrew Smosh on for Jeff. How are you?
spk07: Hello, Andrew.
spk11: Good, good. Thanks for taking the question. You know, firstly on price costs, you know, do you kind of have a view on the cadence, if at all, any improvement of price costs throughout the year? I mean, what's your view there?
spk06: Throughout 2021 or 2022?
spk11: 2022. Yeah. Yeah.
spk06: For some context, we had for 2021, we had about three and a half percent of price and inflation, total inflation in our business was in the mid twos. And for next year, we're expecting inflation to take up a bit. So instead of the three and a half, maybe three and a half to four, excuse me, we're expecting our pricing to pick up a bit. to 3.5% to 4% and inflation 3% to 3.5%. So we'll see a, we budgeted a 50 basis point spread for a positive price inflation spread. And, you know, we see it a bit higher in Q1, and we're expecting it to level off after that. But at the end of the day, it's about, price is about 3.5% to 4% for 2022. And the results speak to the highly differentiated nature of Amatek's product portfolio. That's the way we're able to get price in excess of inflation. In our business, we have leadership positions in our niche markets around the globe. Does that answer your question?
spk11: Absolutely. No, that's great, Collar. The only other one I had, you know, just on margins for 2022, I mean, I think it's fair to assume some pretty modest expansion, I mean, given just what you just said on price-cost, but would you say it's accurate? I know you don't want to get into business with guiding margins for the full year.
spk06: Yeah, I'd say that I think we're going to have another good margin year. I think core operating margins will be up in that 30 to 40 basis point range, and I think core and reported incrementals will be in that 30% range. I mean, in the In Q4, we had really healthy margins. Our core incrementals, our reported incrementals are 21%. But when you back out the acquisitions, we had healthy core incrementals of 32%. And I think that's going to continue into 2022. So I'm pretty bullish about the things that we're doing on cost management and improvement in the cost structure.
spk11: Great. Thanks for the call, and I'll pass it on.
spk06: Thank you.
spk09: Thank you. And our next question comes from the line of Scott Graham with Loop Capital Markets. Hey, good morning, Dave, Bill, Kevin.
spk12: How are you? Good morning. Hey, Dave, would you mind giving us a split of organic orders by segment?
spk06: Sure. For the quarter? If you look at Q4, our organic order for the total company, we're up 22%. And EIG orders were up 21%, and EMG orders were up 23%. So really strong growth across both groups of the company, and the book-to-bill was 1.07.
spk12: Right, and that's actually a perfect dovetail to my next question. You know, over the years, you know, through acquisitions and just, you know, streamlining and investments, you know, the EMG segment has really caught up a lot to EIG in terms of organic growth profile. So I'm wondering, how does that work in, you know, what you're looking at in acquisitions? Is it, you know, is it more equal? And it's not going to be equally split because I know, you know, EIG is a lot larger segment than EMG. But I mean, are you spending a lot of time in both segments on deals?
spk06: Absolutely. Absolutely, Scott. I mean, we love to put More M&A to our EMG segment and specifically in our automation businesses. We're just knocking it out of the park there, and we made some good acquisitions in the past years and coupled that with some really good organic growth and an excellent engineering capability. In fact, we did a really small acquisition in 2021 to add some robotic capability to that business, but that's an area. We also like our thermal management system business. commercial and defense business, but we have a good leadership position, and we're looking hard there. So EMG is getting looked at very hardly in terms of M&A, and their past performance has been fantastic.
spk12: That's great. Thank you. Just if I could squeeze this one last one in, it's an easy one. You know, the research markets, as you know, hard to always study the trends in those markets from a outside the four walls of Ametek. How is research going for you? Are you being aided by, you know, sort of the reopenings? How are your investments working? That's a pretty important market for you. How is it going there?
spk06: Now, research is about 10% of our sales in the process group, and you're right, it's an important market for us. And what we saw mainly in the beginning of 2021 is the – The industrial research market was very good, but the universities took time to pick up because of the impacts of the pandemic. And what you're seeing right now is I highlighted in my talk the Catan business, and that's more life sciences research. And they're doing extremely well. And other parts of that business or the research market are picking up nicely. So it's not going to be as big of a growth driver because of the nature of the funding. but we're clearly transitioning from a more difficult funding environment during and at the start of the pandemic to a better funding environment at this stage of the pandemic where I'd say all aspects of the research market are getting back to business.
spk09: Got it. Thank you.
spk06: Thank you, Scott.
spk09: Thank you. And our next question comes from the line of Rob Wartheimer with Malleus Research. Howdy. Good morning, everybody.
spk07: Good morning, Rob. So you managed through a really, really choppy 4Q, you know, better than many and admirably. And I guess the question is going to be on the short term, how does it feel now versus then? I don't know, you know, what you can say on underlying indicators on Omicron, whether that's crested or not, and whether you feel you've conquered some of the difficulties out there, whether, you know, whether it gets better or worse. And I'll just put the other one in there now. Just on long-term runway, it seems like there's a ton of momentum in automation and semiconductors. Maybe that's evident in your backlog a little bit. I don't know how far out your visibility goes on projects and bidding and quoting and just what your feel for those end markets is throughout the year. Thank you.
spk06: Great questions, Rob. I mean, the first one is the Omicron variant, I believe – We have a lot of statistics we look at outside the world, and we also have our own internal statistics for Ametek. And it looks like the peak infections are cresting. So I think the last two weeks we were down a bit, and we had the highest level of infections prior to that. So, you know, it's clearly the same things that are happening outside of Ametek or happening inside of Ametek, but we're doing a pretty good job of managing through it. But it does cause absenteeism, and it does cause labor availability, and it's a challenge every day when something changes to manage through that. So that's clearly, you know, that's part of the issue we're dealing with with Q1, and our guide range is a little bit broader because of that, but our people are doing a fantastic job. When you talk about the long-term and runway and automation and semiconductors, we're seeing that, and if you think, I talked a little about the automation market, and and how we've done past acquisitions to acquire pieces of the automation motion control sub-assemblies that we've now put together, and we're very capable of quickly develop custom designs for our customers. We're kind of unique in that capability, and we're winning a lot there. And I think that's going to continue. And when you look at the semiconductor market, really solid growth in Q4, but it's continuing. And we're competing in two parts of that market. We work in the research market, and I mentioned our Kameka business did very well. That business is benefiting from the research side of semiconductors. And then you've got some new technology that are going into the ramp and chick production. And some of the new technology uses something called EUV optics. And our Zygo business is an expert in that, and there's only a couple people in the world that are an expert in that. So we're benefiting from the transition to EUV optics in the semiconductor industry, and that trend is just getting started. So I'm not saying there's going to be some ups and downs as we go forward, but we're really well positioned in both automation and semiconductors as we look forward.
spk07: Thanks for the teaching there. I appreciate it. Thank you.
spk06: Thank you.
spk09: Thank you. And our next question comes from the line of Andrew Buscala with Berenberg.
spk08: Morning, guys.
spk06: Hello, Andrew.
spk08: Can you talk a little bit more broadly regionally? And specifically, I'm looking for maybe some context around China, just given it seems like there's some increased risk there, maybe not direct risk, but indirect impact from a number of things, supply chain risk and component shortages, et cetera.
spk06: Yeah, sure. I'll talk to that. The first point is I'll give a whole geographical look at our business first. Q4 was a strong, broad-based growth across all geographies. In the U.S., we were up 15th and notable strength in our automation businesses. In Europe, we were up mid-30s. So we bounced back nicely there, and we had notable strength in both our automation and process businesses. And in Asia, we were up 4%. and notable strength in process and automation there also. So broad-based firing on all cylinders. Your point is a good one. You know, the reaction to COVID is handled differently in parts of the world. So you can have, you know, semiconductor plants are being shut down or, you know, blocking access to certain countries at times. And we've been managing through that at the start of the pandemic. But in particular, you asked about China. And we were up 2% in China. very solid because we had a really strong comparison and we had a really strong year. So a notable strength in Zygo, a notable strength in Process, and China is strong for us, has been strong all year, and it put in a strong quarter. So as the outlook, we see for our types of businesses in our niche markets where we're competing, solid competition. pipeline of growth in China continuing.
spk08: Okay. Yeah, that's helpful. Um, you know, and maybe one last one with, um, you know, commercial aerospace that I was strong, um, as I see that really strong growth exiting the year. Um, and I might've asked this question every other quarter for like the past two years, but what, what is kind of your sense with this re uh, demand building for like a reopening, uh, in the back half of the years, is there, is it kind of more of the same?
spk06: Yeah, I think we're seeing some strength in our commercial businesses for sure. They were up low double digits in the quarter, driven by aftermarket and business jet. But we're being cautious for the year because of the pandemic's impact on travel and different impacts in different parts of the world. And we think we're still going to have a good year. We're going to be up mid-single digits. We're ready for that market to inflect upwards. It might happen in the second half of this year, but it might be 2023 also. We're not sure.
spk08: Is that aftermarket typically a leading indicator for you guys when that starts to pick up?
spk06: I think you see two things. I mean, the aftermarket is a leading indicator, and the industry went through a hard shutdown, and now it's recovering, and we're seeing good aftermarket. And business jets are a function of people deciding to travel differently. and good position in both of those and seeing strong demand.
spk08: Okay, thank you.
spk06: Thank you.
spk09: Thank you. And our next question comes from the line of Nigel Coe with Wolf Research.
spk05: Hey, good morning, everybody. This is Brian on for Nigel.
spk06: Hey, Brian.
spk05: Hey, so maybe just the growth investment, the $110 million, any more color on where that's going, like within R&D and engineering, just any specific kind of initiatives or new products?
spk06: Yeah, I'll start with the money first. We're putting about $40 million into increased R&D, and we're putting about $70 million into increased sales and marketing. And on the R&D side... it's across a wide range of platforms. We're not dependent on any one platform, and our business leaders put forth where they want to spend our incremental growth investments. So it's spread out amongst good opportunities across our business. And in terms of the sales and marketing, we're doing a lot of work on e-commerce, on digitization, and those are investments that will pay off very quickly and and they're already providing return for us because we sell to our customers different now through the pandemic, and we're expanding on our capability in that area.
spk05: Great. Thanks for that. And then when I think about the bridge into 22, outside of kind of the price-cost dynamics and this growth investment, is there anything else to be thinking about at the margin? And then also just kind of, on a similar note, do you expect kind of normal seasonality to hold? Because some of your peers are kind of talking about a tale of two halves as far as depressed margins in the first half, but it just feels like you're navigating the supply chain better, so you might not see that same dynamic. Thanks.
spk06: Yeah, I think with our budget increases sequentially each quarter, which is typical of an Ametek budget, but we're seeing strong growth in Q1, so your point's taken. When I look at our budget Just based on simple economics, we've guided to be up about 10%, and that's about $500 million. And if you apply a 30% to 35% contribution margin on that increase, you'll get a number that's in the range of the guidance that we gave you. Now, in that number, there's a lot of new investments. There's cost savings. There's acquisitions that we did last year. There's some headwinds with below-the-line type things, taxes, shares, a little bit higher interest costs. But when you bake the cake and you put it all together, it's a pretty simple picture. Sales are up 10%. That's about $500 million, and we're going to get a 30% to 35% contribution margin on it. So it's pretty clear from that perspective.
spk09: Got it. Thanks.
spk06: Yep. Thank you.
spk09: Thank you. And our next question comes from the line of Joe Giordano with Cowan. Hey, good morning, guys.
spk02: Good morning, Joe. Yeah, apologies if I ask questions that have already been asked or answered. It's been a bit of a busy one this morning. But on the order side, I mean, obviously really strong, and it has been so. Like, what's your view on book to bill as the year progresses? And I know you're less susceptible to this than others, but, like, how – the early ordering kind of like, what are you seeing as, is there any kind of like inventory at, at customers or like, you know, ordering so far in advance that it could set up like a vacuum at some point? Like how are you kind of thinking about your customer order pattern?
spk06: Yeah. I mean, we have customized products, so I don't think that people are investing in, in, uh, you know, we're not going to run into a distributor problem or things like that. But at the same time, we've talked about our, our customers, uh, being aware of the supply chain issues and giving us increased visibility and placing orders on us to go out to the future. We're seeing that in our backlog and at some point that may roll over, but right now it looks very strong. We mentioned in the prior remarks before you got on that our organic orders were up 26% and it was both strong in EIG and EMG. EIG orders organically were up it was a similar spread across the businesses. So, um, you know, we are, uh, I think the, uh, the month of January was, was strong and it was, uh, you know, it, it supports our guide, but the, the orders rates have not changed into January.
spk02: Okay. Interesting. Yeah. Maybe. And again, if you, um, you may have answered this, but did you give the core, The core incremental X like M&A dilution for EIG in 4Q.
spk06: Yeah, we did talk about the – it was 32% core for the whole company, and it was reported 21. So we really had a good performance core.
spk04: It was up 50 basis points margins X acquisitions in EIG.
spk06: Yeah, EIG was up 50 basis points X acquisitions, and I – Our EMG business was up 260, or 230, so it was good. The margins across the board were good for the company. You look at EIG, you look at EMG, there's some acquisitions that depress EIGs, but the incrementals were 32% for the whole company. The EIG core incrementals were 33%, and the EMG core incrementals were 38%. You have the reported incrementals for EIG are a little bit lower because of the acquisitions, but really strong core incremental margins across the company.
spk02: I agree. Thanks, guys.
spk06: Thank you.
spk09: Thank you. And our next question comes from the line of Rob Mason with Baird. Yeah, good morning, guys. Thanks for taking the question.
spk01: Sure, good morning, Rob.
spk10: Just maybe to stick on the topic around acquisitions, you're – I'm just curious what the – I could probably do this math at some point, but just what did the acquisitions contribute to earnings in 21, and what's the component in the bridge in 22 in terms of EPS?
spk06: I believe it was 16% in the bridge for EPS for 22, and I believe it was about the same for 21, so – But that 16 cents is included in the economics of the budgets that I talked about just a few minutes ago.
spk10: Sure, sure. And, Dave, I mean, you noted it was a very busy year for you.
spk06: Hey, Rob, Kevin just told me I said 16 cents is actually 18 cents. So it's 18 cents in 2022, and it happened to be 18 cents in 2021. So it's 18 cents for both of them. Okay, understand.
spk10: As you mentioned, a very busy year on the acquisition front, and I'm just curious, you know, integration-wise with all the challenges around supply chain, has that helped or hurt you in terms of your ability to integrate that? Has it forced you to move a little bit faster on the supply chain front?
spk06: Yeah, I think it's forced us to move faster in getting the Amatek culture installed and getting the Ametek processes installed. So there's, you know, the differences are obvious, and we're working with teams, and integration in Ametek is going very well. And, you know, it's early in the ownership, and we usually take it slower, but the environment has made us go faster, and they're integrating nicely into the company. And, you know, the benefits of our distributed operating models, we can take on a bunch of deals like that and be able to integrate them all. And they're fantastic businesses. I mean, they each fit perfectly with our acquisition strategy. They're leaders in niche markets. Each have strong differentiated technology positions, and they're expanding our presence in attractive markets. So the acquisitions are going very well, and myself and Bill and the group presidents have been spending a lot of time on them.
spk10: Yep. Yep. And just one last one, just to follow on there, you know, Abaco was your, your largest one, largest one ever, I think. And, you know, I noticed a nine digit order recently. I'm just, you know, within a business like that, what, what does an order like that or when I should say, you know, what would that ship over what timeframe would something like that ship?
spk06: It could be years. It really could be years. And you specifically with Abaco, I mean, the, That team there is really talented, and we're into the high 90% of the integration, and it's a high-quality management team. In terms of the org structure, we've combined it with our Ametek Aerospace PDS business unit. So when we looked at this business, we think there's a lot of synergy. So we formed one division, and we now have a seasoned Ametek P&L leader running the division along with a seasoned Ametek CFO and along with a seasoned Ametek HR person. So we've installed some people there to help them, you know, Abaco understand the Ametek culture. And at the same time, we're learning a lot from Abaco also because they have a lot of talent. So I think this combination over the long run is going to be good for both businesses and it's going to drive sales and cost synergy for both the Ametek PDS business and Abaco.
spk10: Excellent, excellent. I'll pass it back. Thank you.
spk06: Thank you, Rob.
spk09: Thank you. I'm shown no further questions. I will now turn the call back over to Vice President of Investor Relations and Treasurer, Kevin Coleman, for any closing remarks.
spk03: Thank you again, Andrew, and thank you, everyone, for joining our call today. And as a reminder, a replay of today's webcast may be accessed in the Investor section of amatech.com. Have a great day.
spk09: This concludes today's conference call. Thank you for participating and you may now disconnect.
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