AMETEK, Inc.

Good day, and welcome to the Ametek fourth quarter 2022 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Kevin Coleman, Vice President of Investor Relations and Treasurer. Please go ahead, sir.

Thank you, Rocco. Good morning, and thank you for joining us for Amatek's fourth quarter 2022 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 be making 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 2021 or 22 results or 2023 guidance will be on an adjusted basis, excluding after-tax, acquisition-related, and tangible amortization. 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. I'm very pleased with Ametek's results in the fourth quarter and for all the 2022. Ametek's continued excellent performance reflects the quality of our niche differentiated businesses, the strength of the Ametek growth model, and the expanding impact of our organic growth initiatives, and most importantly, the outstanding efforts of our global employees. Thank you to all Ametek colleagues for your many contributions to our success. We have navigated many challenges over the last few years only to emerge stronger and even better positioned for sustained growth. Our results in the fourth quarter were outstanding. Stronger than expected sales growth and excellent operating performance led to a high quality of earnings which exceeded our expectations in the quarter. We ended the year with a record backlog as demand remained solid across our diverse end markets. Organic growth was again very strong in the quarter as our teams are successfully driving key organic growth initiatives across their businesses and expanding their presence, serving attractive growth markets. Operationally, we're performing exceptionally well and offsetting inflation with price increases, resulting in strong margin expansion. Additionally, cash flow in the quarter was outstanding, providing us the flexibility to invest in our businesses and deploy capital on strategic acquisitions. Now onto the results of the fourth quarter and all of 2022. Fourth quarter sales were $1.63 billion, up 8% over the same period in 2021. Organic sales growth was 9%, acquisitions added two points, and foreign currency was a three-point headwind in the quarter. Orders were solid in the fourth quarter against a challenging comparison resulting in a record backlog of $3.22 billion. Operating income in the quarter was a record, $398 million, a 10% increase over the fourth quarter of 2021. Operating margins were 24.5% in the quarter, up 50 basis points from the prior year. EBITDA in the quarter was a record, $489 million, up 12% over the prior year, and EBITDA margins were an impressive 30.1%. This outstanding operating performance led to record earnings of $1.52 per diluted share, up 11% versus the fourth quarter of 2021, and above our guidance range of $1.45 to $1.47 per share. Now let me provide some additional details of the operating group level. First, the electronic instruments group. The electronic instruments group delivered continued strong sales growth and excellent operating performance. Sales for EIG were a record, $1.16 billion in the quarter, up 10% from the fourth quarter of last year. Organic sales were up 9%, acquisitions added 3%, and foreign currency was a three-point headwind. EIG growth was broad-based with particularly strong growth across our aerospace and defense and ultra-precision technologies businesses in the quarter. EIG's operating income in the fourth quarter was a record, $307 million, up 10% versus the prior year, while EIG margins were a very strong 26.5% in the quarter. The electromechanic group also finished the year with outstanding performance. EMG's fourth quarter sales were $466 million, up 4% versus the prior year, with organic sales growing 8% and foreign currency a three-point headwind. Growth was again broad-based across EMG, with our aerospace and defense businesses leading the growth. EMG's operating income in the fourth quarter was $115 million, up 9% compared to the prior year period. EMG's fourth quarter operating margins were 24.6%, up an impressive 100 basis points versus the prior year. Now for the full year results. Overall performance was outstanding in 2022, establishing annual records for essentially all key financial metrics. Overall sales for the year were $6.15 billion, up 11% from 2021. Organic sales increased 11%, acquisitions added 2%, and foreign currency was a three-point headwind. Operating income for 2022 was $1.5 billion. up 15%, and operating margins were 24.4%, up 80 basis points versus the prior year, while core margins were up an impressive 130 basis points, reflecting our ability to successfully manage inflation and supply chain challenges. EBITDA for the year was $1.83 billion, up 15% from 2021, with EBITDA margins of very strong 29.7%, up 100 basis points from the prior year. Full year earnings were $5.68 per diluted share, up an impressive 17% versus the prior year. Ametek's performance in a challenging operating environment highlights the proven strength and flexibility of the Ametek growth model and our ability to successfully navigate through uncertain economic times. Our businesses continue to leverage the key elements of the Ametek growth model to accelerate global growth develop innovative new products, and identify and execute on operational efficiency improvements. Additionally, our businesses work closely with our corporate development team to manage our acquisition pipeline, resulting in a continued strong deployment of capital on strategic acquisitions. In 2021 and 2022 combined, we deployed over 2.4 billion in capital on eight acquisitions and acquired over 600 million in annual sales. We expect to remain active in 2023 as our deal pipeline remains very strong and our balance sheet provides us significant financial capacity to deploy capital. In addition to our acquisition strategy, we remain committed to investing in organic growth initiatives and are very pleased with the impact these investments are having on Amitek's growth. As I highlighted during our last earnings call, Amitek's portfolio has strategically evolved with increased exposure to higher growth market segments. This portfolio evolution has been driven by our acquisition strategy and by the organic investments we are making in our businesses. In 2023, we expect to invest an incremental $90 million in support of these growth initiatives, including investments across research, development, and engineering, and sales and marketing. One way we measure the success of these investments is through our vitality index. which was an outstanding 27% of sales in 2022. Our increased investments in RD&E continue to yield innovative advanced technology solutions, including within our Zygo business. Zygo, which is based in Middlefield, Connecticut, designs and manufactures advanced optical metrology systems and ultra-precise optical components and assemblies for a diverse set of end markets, including defense, research, and semiconductor. ZYGO partnered with the Lawrence Livermore National Laboratory's National Ignition Facility to provide high-end precision optics in support of their inertial fusion energy testing program, which provides a significant leap forward in the realization of sustainable fusion energy. Achieving these heights of energy production required the use of highly precise optics and scalable manufacturing processes, which were developed in partnership with ZYGO. I want to congratulate the Zygo team for their tremendous contributions, supporting important advancements in research and technology. Lastly, let me briefly touch on the supply chain issues and inflation. While tightness remains in certain areas, we're seeing improvements in the global supply chain and logistics. Additionally, although inflation remains elevated, we are also seeing modest improvements versus levels experienced in 2022. As we look ahead to 2023, we will continue to proactively manage our supply chain and remain confident in our ability to offset inflation with price increases. Now shifting to our outlook for the year ahead. While macroeconomic uncertainties remain, we are confident in the quality of our businesses, the flexibility of the Ametek growth model, and our ability to navigate through these uncertain times. Additionally, given our record backlog and proven operating capability, we are confident in our outlook for 2023. For 2023, we expect both overall and organic sales to be up mid-single digits versus 2022. Saluted earnings per share for the year are expected to be in the range of $5.84 to $6, up 3% to 6% compared to last year's results. For the first quarter, we anticipate overall sales up mid-single digits with adjusted earnings of $1.38 to $1.42, up 4% to 7% versus the prior year. In summary, Ametek's fourth quarter and four-year results were excellent. Our record backlog, the strength and flexibility of the Ametek growth model, and a world-class workforce positioned us nicely for 2023. 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. Bill? Thank you, Dave.