AMETEK INC/ Q1 FY2025 earnings call

• AMETEK had a strong start to 2025 with robust margin expansion, strong free cash flow, and earnings above expectations. Orders were strong with overall orders up 8% and organic orders up 3%. - Operating income was $455 million, up 2% from Q1 2024; operating margins 26.3%, up 60 basis points. EBITDA was $559 million, up 3%, with EBITDA margins 32.2%. - Continues to expect to invest an incremental $85 million in 2025 in support of initiatives, with key investments in R&D and engineering. - Highlighted new product introductions like Gatan's EDAX Elite Ultra system and Vision Research's Phantom KT-series cameras. - Strategic acquisitions remain top capital deployment priority, with a $1.25 billion share repurchase authorization.

Electronic Instruments Group (EIG): Sales were $1.14 billion, down 1% from Q1 2024. Organic sales down 2%, acquisitions added 2 points, foreign currency a 1-point headwind. Operating income was $354.1 million, operating margins 31%, up 50 basis points. Electronic Motion Group (EMG): Sales were a record $588.3 million, up 2% vs prior year, organic sales up 2%. Operating income was $128.7 million, up 7% compared to prior year period. Operating margins were 21.9%, up 120 basis points from Q1 2024.

• For 2025, expects full year sales to be up low single digits compared to 2024. - Expects diluted earnings per share to be in the range of $7.02 to $7.18, up 3% to 5% compared to 2024. - Continues to expect to invest $85 million in 2025 in support of global and market expansion and technology innovation strategies.

• Uncertainty around trade policy and its implications, including government trade policies and tariffs. - China market was down about 10% in Q1. - Risks related to country-to-country dynamics in relation to the 125% retaliatory tariffs imposed by China on the U.S., including potential delays in shipments of higher-end instrumentation and optics products to China which are difficult to predict near term.

Q: Could you provide more detail on Paragon Medical and medical-related businesses?

A: Paragon is a business acquired over a year ago. After a period of destocking, they've been executing a multiyear improvement plan. Orders in the quarter were very encouraging with Paragon leading OEM automation and med tech OEM businesses with orders greater than 25% growth.

Q: Speak more broadly across AMETEK as to order cadence and price realization?

A: Overall orders were up 8% in the quarter, organic orders up 3%. March was the strongest month for orders in the year. Price realization covered all inflationary costs in Q1.

Q: Positioning within geographies and verticals?

A: Positive growth in the U.S. offset by modest declines internationally. China market down about 10%, Asia excluding China roughly flat. Process business organic sales declined low single digits, aerospace and defense had strong start with organic sales up mid-single digits, power business organic sales up low single digits, Automation and Engineered Solutions organic sales down low single but with strong orders.

Q: Size of China sourcing as a percent of COGS and tariff mitigation?

A: Estimated annual tariff impact direct to tariffs is about $100 million. Fairly limited exposure to 145% tariffs on China imports to the U.S. due to proactive sourcing shifts; bulk from recent acquisitions. Mexico exposure very low. Concerns with $70 million in Q2 related to 125% retaliatory tariffs with limited predictability near term.

Q: Margin trajectory for EMG, especially Paragon?

A: Expect upside in Paragon margins in the second half of 2025 as they continue working through improvement plans and gain volume.

Q: M&A and share repurchases outlook?

A: Have a robust pipeline for M&A, very active in the pipeline despite uncertain trade environment. Have a $1.25 billion share repurchase authorization and are well positioned to deploy capital on both strategic acquisitions and opportunistic share purchases.

Q: Research exposure and impact?

A: Total research exposure is about 10% of sales, international, relatively modest with some delays for government customers.

Q: Manufacturing footprint adjustments and CapEx spending?

A: Board is pleased with past efforts to reduce China supply chain risk. Constantly acquiring businesses and working on exiting those with China exposure. CapEx spending plan remains unchanged with aggressive digital programs and software investments ongoing.

Q: OEM inventory and destocking in Automation Engineered Solutions?

A: Destocking is working through, with U.S. mostly finished and some still occurring in Europe. Expect destocking to be completed by end of 2025 with strong orders in Q1 driving this.

Q: Aerospace and Defense performance and outlook?

A: Aerospace business grew mid-single digits in Q1, expecting mid-single digit growth for the year with balanced growth across Commercial and Defense segments. Aftermarket business strong due to slower fleet retirements and older planes flying.

Q: Acquisitions in uncertain environment?

A: Deals have some delays due to uncertainty, but have a strong pipeline and are well positioned to acquire businesses and act on share repurchases.

Q: Prebuys and inventory purchases related to tariffs?

A: Customized products mean prebuys were not significant. Operators in distributed model make inventory decisions based on what makes sense for their businesses.

Q: Backlog conversion and concentration?

A: Backlog at high levels with some delays due to tariffs. Concentration in areas like A&D and Paragon Medical within the backlog.