AMETEK, Inc.

Good day and welcome to the AMETEC third quarter 2023 earnings conference call. At this time, all participants are in a 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 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Coleman, Vice President of Investor Relations and Treasurer. Please go ahead.

Thank you, Abigail. Good morning, and thank you for joining us for Amatek's third quarter 2023 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 2022 or 2023 results or to 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 Investors 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 delivered excellent results in the third quarter, highlighted by outstanding operational execution, superb margin expansion, strong cash flows, and earnings ahead of our expectations. In the quarter, we established records for operating income, operating margins, earnings per share, EBITDA, and cash flows. Given these strong results, and Araloc for the balance of the year, we have again increased our earnings guidance for the full year. We have also been very active on the acquisition front. During the third quarter, we completed the acquisition of United Electronic Industries and subsequent to the end of the third quarter, we acquired Amplifier Research. Today, we also announced the signing of a definitive purchase agreement to acquire Paragon Medical, a highly attractive acquisition which broadens our exposure in the medical technology space. I will provide more details on these acquisitions shortly. Now let me turn to our third quarter results. Third quarter sales were $1.62 billion, up 5% over the same period in 2022. Organic sales growth was flat. Acquisitions added four points in the quarter, and foreign currency added one point. Book to bill in the quarter was 0.96. We ended the quarter with a very strong backlog of $3.4 billion near record levels and down a modest 2% sequentially. Our backlog is up 5% from last year's third quarter and up 23% or $640 million from the end of 2021. Amitek's operating performance in the third quarter was exceptional. Operating income in the quarter was a record $438 million, a 14% increase over the third quarter of 2022. Operating margins were a record 27% in the quarter, up a sizable 220 basis points from the prior year. EBITDA in the quarter was also a record at $511 million, up 10% over the prior year. with EBITDA margins in the press of 31.5%. Operating cash flow was up 45% in the quarter to a record $473 million. This outstanding performance led to record earnings of $1.64 per diluted share, up 13% versus the third quarter of 2022, and above our guidance range of $1.56 to $1.58. Now let me provide some additional details at the operating group level. First, the electronic instruments group. The electronic instruments group delivered impressive operating performance with continued strong and broad-based sales growth. Sales for EIG were $1.14 billion in the quarter, up 8% from the third quarter of last year. Organic sales were up 3.5%, Acquisitions added 3.5% and foreign currency added a point. EIG's organic sales growth remains broad-based, reflects our leading position across attractive market segments and the impact of our organic growth initiatives. Growth in the quarter was particularly strong across our aerospace and defense businesses, as well as in our Zygo, Spectro, and Kameka businesses. Third quarter operating income was a record $335 million, up 23% versus the prior year, and operating margins were a record 29.5% in the quarter, up an impressive 360 basis points from the prior year. Tremendous work by our EIG businesses in the third quarter. The electromechanical group also delivered solid operating performance in the quarter, despite the impact of normalization of inventory levels across our OEM customer base. EMG's third quarter sales were $487 million, down 2% versus the prior year, with organic sales down 8% in the quarter. Acquisitions added four points, and foreign currency added two points. EMG's operating income in the quarter was $128 million. down 7% compared to the prior year period, while EMG's third quarter operating margins were a very solid 26.2%. Our performance in the third quarter, and thus far in 2023, reflects the unique value inherent in the Emetech growth model. Our differentiated businesses are aligned with diverse and attractive growth markets, while our organic growth initiatives continue to position us for long-term sustainable growth. Our distributed operating structure provides our businesses with the ability to execute their growth strategy and the flexibility to react quickly to changing market conditions. And our asset late business model and strong operational execution drive outstanding cash flow generation, which we redeploy on value-enhancing acquisitions. This strong cash flow and our robust balance sheet are key differentiators for Amitek in this higher interest rate environment. Now switching to our acquisition strategy. As noted, we have been very active managing a strong pipeline of acquisition opportunities. We are pleased to welcome our most recent acquisitions, United Electronic Industries and Amplifier Research, and pleased that we have signed a definitive agreement to acquire Paragon Medical. I will provide some more color on each of these businesses starting with Paragon Medical. Paragon Medical is a leading manufacturer of highly engineered medical components and instruments serving applications including orthopedics, minimally invasive surgery, robotic surgery, and drug delivery solutions. Paragon's broad product portfolio of single-use and implantable components are sold to a diverse blue-chip customer base of leading medical device OEMs. Paragon is an excellent acquisition for MedTech. It expands our presence in the MedTech space and provides us with access to attractive new market segments with strong growth rates. We are acquiring Paragon in an all-cash transaction valued at approximately $1.9 billion. Paragon has annual sales of approximately $500 million and is headquartered in Pearson, Indiana. The closing of the acquisition is subject to customary closing conditions, including applicable regulatory approvals. Now switching to United Electronic Industries or UEI, which we acquired in August. UEI is a leading provider of ruggedized test, measurement, simulation, and control solutions. UEI's custom products cater to diverse data acquisition needs from hardware-in-the-loop testing to aircraft simulators and automated testing systems in mission-critical applications. With a strong presence in the defense, aerospace, nuclear power generation, and semiconductor, UEI nicely complements Ametek's Power Systems and Instruments Division, significantly expanding our data acquisition capabilities. UEI has annual sales of approximately $35 million and is based in Norwood, Massachusetts. Next, Amplifier Research is a leading provider of innovative RF and microwave solutions. Its equipment is used for electromagnetic compatibility testing within the defense, industrial, automotive, medical, and communications sectors. Amplifier Research is an outstanding strategic acquisition and complementary fit with our existing compliance test solutions business. Their technical capabilities broaden our RF instrumentation and testing portfolio. Amplifier Research is a growing business well-positioned to benefit from the growth and demand for electric vehicle research, development, and testing. Amplifier Research is based in Satterton, PA, and has annual sales of approximately $60 million. Our acquisition pipeline remains very solid. We have a strong balance sheet and significant financial capacity and look to remain active in deploying capital in the coming quarters. Ametek also remains committed to investing in our businesses to help position them for long-term sustainable organic growth. In 2023, we plan to invest approximately $100 million in these growth initiatives, including our new product development efforts, where our businesses continue to develop highly differentiated technologies to help solve our customers' most complex challenges. In the quarter, our Vitality Index, which measures sales from products introduced over the prior three years, was a healthy 26%. As a complement to our internal new product development efforts, our Ortec business recently acquired a small technology company, InnoRid, to help broaden their technology capabilities in the radiation detection market. InnoRID boasts cutting-edge technology expertise and an exceptional product development team known for their innovative solutions, having developed specialized artificial intelligence algorithms for radiation detection in a range of nuclear security, research, health, and medical applications. Now turning to our outlook for the remainder of the year. With strong performance in the third quarter and a positive outlook for the remainder of the year, we are once again raising our earnings guidance. For the full year, we continue to expect overall sales to be up mid to high single digits, and we continue to expect organic sales to be up mid single digits. Diluted earnings per share for the year are now expected to be in the range of $6.31 to $6.33, up approximately 11% compared to last year's results. This is an increase from our previous guidance range of $6.18 to $6.26 per diluted share. For the fourth quarter, we anticipate overall sales to be up single digits with adjusted earnings of $1.61 to $1.63 per share, up 6% to 7% versus the prior year. In summary, Emetech's third quarter results for 2023 were outstanding, with strong growth across our long cycle businesses, record operating performance, and strong acquisition activity. Our businesses continue to excel, driven by our differentiated technology solutions serving diverse and growing markets. Our asset-light business model and strong cash flows provide us with the flexibility to navigate challenging economic environments while actively deploying capital to enhance shareholder value. Amitek remains firmly positioned for long-term sustainable growth. 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.