The paragraph outlines the start of the AMETEK Fourth Quarter 2024 Earnings Conference Call. Kevin Coleman, Vice President of Investor Relations and Treasurer, introduces the call and mentions that Dave Zapico, CEO, and Dalip Puri, CFO, are present. Coleman notes that the call will include forward-looking statements subject to change due to risk factors, with details available in AMETEK's SEC filings. He clarifies that 2023 and 2024 financial results will be discussed on an adjusted basis, excluding certain costs and charges. Dave Zapico then begins the prepared remarks, highlighting AMETEK's strong performance in the fourth quarter, with robust margin expansion, significant cashflow generation, strong organic order growth, and double-digit earnings per share growth.

In the quarter, the company achieved record sales, operating income, EBITDA, diluted earnings per share, and cash flows. They repurchased $155 million in shares and announced the acquisition of Kern Microtechnik for approximately €105 million. Despite economic challenges, they delivered strong performance using their operating model. Fourth-quarter sales hit a record $1.76 billion, a 2% increase from 2023, with organic sales down 3%, and acquisitions contributing 5%. Orders increased organically by 4%, ending with a backlog of $3.4 billion. Operating income was a record $469 million, with a 26.6% margin. EBITDA rose to $561 million, with an EBITDA margin of 31.9%. Free cash flow was $498 million, with a 129% conversion rate to net income. Diluted earnings per share were $1.87, exceeding guidance. The paragraph also hints at further details regarding the Electronic Instruments Group.

In the fourth quarter, EIG showed strong performance, achieving record operating income and margins despite a slight decline in sales compared to the previous year. Notably, the Aerospace and Defense segments performed well, although there were some project delays. EMG also had a solid quarter, though sales declined due to challenges in OEM sectors. For the full year 2024, the company recorded increases in sales, operating income, and margins, with significant contributions from Aerospace and Defense, leading to a 7% rise in earnings per share compared to 2023.

In 2024, AMETEK delivered strong financial performance with a 6% increase in free cash flow and a 124% conversion rate of free cash flow to net income. The company successfully navigated a challenging macroeconomic environment and prioritized acquisitions for capital deployment, while also repurchasing $220 million in shares that year. AMETEK acquired Kern Microtechnik, a high-precision machining and optical inspection solutions provider, which aligns well with their Alta Precision Technologies business and expands capabilities in ultra-high precision manufacturing. Looking forward to 2025, AMETEK is considering a strong pipeline of potential acquisitions and has a flexible balance sheet to support strategic investments.

AMETEK is leveraging its strong financial position and disciplined capital deployment to drive long-term value through acquisitions and business investments. In 2024 and 2025, the company is investing significantly in research, development, engineering, sales, and marketing to support organic growth. These initiatives enhance AMETEK's leadership in niche markets and explore new opportunities in adjacent markets. A highlight is CAMECA's innovation with the LEAP 6000XR atom probe microscope, which broadens its market reach by offering enhanced productivity, automation, and analytical capabilities, thereby expanding applications across various materials and industries.

The article discusses AMETEK's cautious yet optimistic outlook for the upcoming year due to ongoing macroeconomic uncertainties. Despite challenges, the company is encouraged by strong orders in the latter half of the previous year, a robust backlog, and leading market positions. For 2025, AMETEK anticipates low single-digit growth in both overall and organic sales compared to 2024, with diluted earnings per share expected to increase by 3% to 5%. The first quarter's sales are projected to be flat year-over-year, with a slight increase in adjusted earnings per share. The company highlights its strong performance in 2024's fourth quarter and credits its differentiated technologies and industry expertise for positioning it well for future growth. AMETEK emphasizes a focus on innovation, operational excellence, and disciplined capital allocation to drive sustained growth and value creation. The paragraph ends with Dalip Puri ready to discuss financial details and guidance for 2025.

In the fourth quarter, general and administrative expenses rose to $28.9 million, increasing by $2.5 million from the previous year. Full-year G&A expenses went up by approximately $5 million, maintaining a ratio of 1.5% of sales, projected to remain the same in 2025. Other operating expenses decreased by $1 million compared to Q4 2023. The effective tax rate dropped to 12.8% for the quarter due to statute expirations, with a yearly rate of 17.3%, aligning with guidance. For 2025, the anticipated tax rate is 19-20%. Capital expenditures amounted to $52 million in Q4 and $127 million annually, expected to rise to $155 million in 2025, or about 2% of sales. Depreciation and amortization were $96 million for the quarter and $383 million annually, with a forecast of $400 million in 2025, including $194 million of acquisition-related amortization. Operating working capital was 16.8% of sales, and the quarter saw record operating cash flow of $550 million and free cash flow of $498 million, showcasing a 129% conversion rate.

The company achieved a record free cash flow of $1.7 billion in 2024, up 6% from the previous year, with a strong full-year free cash flow conversion rate of 124% of net income. They anticipate a free cash flow conversion of about 115% in 2025. The total debt at year-end was reduced by $1.2 billion from 2023, leaving it at $2.1 billion, offset by $374 million in cash and equivalents. They spent $155 million on share repurchases in the fourth quarter, totaling $220 million for the year. After the fourth quarter, €105 million was used to acquire Kern Microtechnik. By the end of 2024, the gross debt to EBITDA ratio was 0.9x, and the net debt to EBITDA ratio was 0.8x. They have $2.5 billion in cash and credit facilities to support acquisitions and growth. Overall, the company had strong operational results, with record earnings, robust margins, and excellent cash flow, positioning them well for future growth amidst trade uncertainties. The text concluded with Kevin Coleman opening the floor to questions, starting with Matt Summerville from D.A. Davidson, who inquired about delays within EIG and OEM destocking in EMG.

The paragraph discusses project delays at ERG and describes similar challenges with destocking impacting OEM-exposed businesses in EMG, particularly in the Automation and Engineered Solutions sub-segment. However, there is improvement in order patterns from some OEM customers, and Paragon experienced strong double-digit order growth. Both Paragon and EIG showed organic order increases, with continued order strength into January. While destocking is not complete, it is easing. Matt Summerville asked about pricing and cost outlook for 2024 and 2025, to which Dave Zapico responded that they aligned price capture with inflation in 2024 and plan to offset increased prices with inflation in 2025, expecting a 1.5% to 2% pricing level. Jeff Sprague then inquires about updates on Paragon, noting solidifying orders as they ended the year.

The paragraph discusses a business in the med tech space that AMETEK acquired, which manufactures surgical instruments and implantable components. Despite going through customer inventory destocking in 2024, the business has seen a significant double-digit increase in order input as some customers begin ordering aggressively. The end demand for surgical and orthopedic procedures remains strong, indicating the inventory is being consumed, and the company is gaining market share with new programs. A combined management team from AMETEK and the legacy Paragon team leads the business, and they are encouraged by sequential order growth. They anticipate closing the year with around $420 million in revenue for Paragon, expecting growth to surpass AMETEK's as the year progresses, particularly in the second half.

In the paragraph, Jeff Sprague inquires about anticipated margin improvements for Paragon following last year's restructuring. Dave Zapico responds that significant improvements are expected in the next 12 months, especially in the second half, surpassing the overall company target of 20-30 basis points. Jamie Cook from Truist Securities then asks about potential pre-buy concerns influencing industrial orders and the overall order growth. Zapico clarifies that the order cadence was typical, with December being the strongest month, and the positive order trend continued into January.

The paragraph discusses the improvement in orders since the middle of the previous year, indicating strong demand from customers. Although there are uncertainties like potential pre-buying due to tariffs, the outlook is positive as these orders transition into sales over time. The year is starting flat, but with the expectation that destocking will decrease, leading to a conservative yet optimistic beginning of the year. There are promising project pipelines, especially for the year 2025, and certain delayed projects are progressing. The A&ES (Advanced & Engineered Solutions) segment has been impacted by OEM destocking, but the automation segment seems to have bottomed out, providing a solid foundation for growth, while the medical technology segment is seeing a reduction in destocking effects.

The paragraph features a discussion about AMETEK's Aerospace and Defense (A&D) business performance and outlook. Dave Zapico talks about the strong performance in the commercial sector, noting growth in Original Equipment (OE) sales in the fourth quarter and profitability from both OE and aftermarket components. He expects mid-single-digit growth for both commercial and defense markets in 2025, with commercial being slightly stronger. Additionally, Rob Wertheimer questions the strong margins despite a soft core environment, to which Zapico attributes the success to AMETEK's operational excellence and effective cost management rather than any specific unusual measures or acquisition improvements.

The paragraph discusses a strong performance in margins and anticipates continued success due to operational excellence and high contribution margin businesses. Rob Wertheimer asks about potential impacts of government policy on future demand for laboratory and scientific instruments. Dave Zapico responds by expressing confidence in laboratory demand, noting international strength. He views the current regulatory environment and the new administration's policies positively, citing regulatory relief, faster project movement, energy development, military spending, and tax incentives as beneficial for their U.S. manufacturing and overall growth.

The paragraph primarily revolves around a discussion between industry analysts and executives concerning the company's current performance and future outlook. The company highlights its flexible asset-light model and significant U.S. manufacturing presence, which offer opportunities as circumstances evolve. Organic growth appears to be improving from a decline in the fourth quarter to a flat rate in the first quarter, with expectations for continued acceleration throughout the year. The guidance considers recent tariff concerns, and the company has plans in place, drawing on strategies from 2017 and 2018 to address potential impacts. Additionally, the discussion touches on how foreign exchange impacts the long-term outlook, particularly given the company's role as a significant U.S. exporter.

The paragraph discusses how the company has successfully implemented a "China for China" manufacturing strategy, allowing them to separate their supply chains from China and potentially do so again if needed. They produce niche, unique products and plan to offset any tariff costs onto customers, similar to past instances. With a significant U.S. manufacturing presence and a flexible, asset-light model, the company feels prepared to handle current economic challenges. Their financial planning does not account for a broader economic downturn due to trade wars, as they assume no demand reduction. They are predominantly a U.S. dollar-centric business and believe they're insulated from foreign exchange volatility due to natural offsets. Following this, a dialogue begins involving Christopher Glynn's question regarding the market size, competition, and interest in a specific business sector.

The paragraph discusses AMETEK's acquisition of Kern, a company known for its submicron level accuracy systems used in various high-precision markets like medical, semiconductor, research, and space. Kern is seen as complementary to AMETEK's existing Precitech business. The acquisition is considered beneficial, expanding AMETEK's capabilities in offering precision solutions and aligning with technological miniaturization trends. Over 70% of Kern's sales are international, despite being based in Germany. Additionally, when asked about potential divestitures, Dave Zapico mentions that AMETEK conducts annual strategic analyses but currently has no significant changes that would impact their guidance.

In the paragraph, the discussion involves a financial earnings call where Nigel Coe from Wolfe Research asks about the organic growth expectations for EMG (Electronic Measurement Group) and EIG (Electronic Instruments Group) for the full year. Dave Zapico responds that EMG is expected to have slightly higher organic growth than EIG, though both are projected to grow in the low single digits. Nigel Coe also inquires about the EMG margins in the fourth quarter, noting they were lighter compared to the strong performance of EIG. Dave Zapico explains that the lighter margins in EMG were due to destocking and reduced automation business, which is usually very profitable. Despite a decrease in core margins, he expresses optimism about future growth opportunities and profitability as destocking ends and the business stabilizes.

The paragraph is part of a discussion between Dave Zapico and Joe Giordano, addressing the performance and expectations for different business segments. Dave Zapico mentions that the automation business is trailing behind the medical sector. In terms of order numbers, organic orders increased by 4% with a book-to-bill ratio of 1.01, excluding foreign exchange impacts. He explains that both the EMG and EIG segments showed positive growth. Regarding specific sectors, Zapico notes that the process business declined slightly in the fourth quarter but expects low single-digit growth in 2025. Meanwhile, the Aerospace and Defense segment is anticipated to grow by mid-single digits, indicating ongoing strength in both Commercial and Defense areas. Lastly, sales in the Power and Industrial sector remained flat in the fourth quarter.

The paragraph discusses the financial performance and future expectations of a company's various business segments. In the RTDS business, focused on power simulation systems, there was significant growth. For 2025, they expect organic sales in the Power and Industrial sectors to remain stable compared to 2024. The Automation and Engineered Solutions business saw a low double-digit increase in sales, largely due to the Paragon acquisition, though organic sales dropped by high single digits due to OEM inventory normalization. However, organic sales are expected to rise by mid-single digits in 2025. An $85 million growth investment for 2025, slightly down from $90 million in 2024, will mainly support research, development, and engineering. The vitality index reached 28% in Q3, and the company is optimistic about new product introductions for 2025 within their target range.

In the article, Dave Zapico discusses the vitality index target range of 20% to 30% as a positive indicator, mentioning that it reached a high of 30% in Q4. This demonstrates effective new product development, contributing to a robust pipeline of new orders. Zapico highlights the importance of tracking this metric over time, which was initially much lower, to ensure customer value and premium pricing through added product features. The discussion also touches upon the Labs business, noting regional differences in performance, with Asia presenting particularly strong growth, potentially influenced by government priorities and channel investments. Robert Mason inquires about the geographic outlook related to the company's 2025 guidance.

In the paragraph, Dave Zapico discusses the company's 2024 performance and expectations for 2025. In 2024, the company experienced strong growth in Europe and Asia, with a decline in the U.S., particularly in its automation business. China was flat for the full year, while Asia showed overall growth. For 2025, the company anticipates balanced growth across all regions, with Europe and Asia continuing to show strength, and the U.S. expected to return to growth. When asked about order momentum, Zapico mentions that order levels are improving, particularly due to destocking in Automation and Engineered Solutions, with med tech customers starting to place orders again. Andrew Buscaglia from BNP Paribas inquires about these developments, and Zapico confirms the positive trends in orders.

In the paragraph, Dave Zapico discusses the company's optimism regarding its business segments. He notes that the automation part has reached its lowest point and is expected to improve, while the process and power businesses are well-positioned despite some delays. Aerospace and Defense remain steady with ongoing strength in both military and commercial markets. The company has generated strong cash flow and is considering both large and small deals for 2025, including a potential expenditure of $5 billion, while maintaining a healthy debt ratio. Zapico expresses confidence in the company's ability to execute deals, be opportunistic with share buybacks, and reward shareholders with increasing dividends, emphasizing the most optimism in mergers and acquisitions.

In the paragraph, Kevin Coleman thanks Andrew and the participants for joining the call and mentions that a replay of the webcast will be available in the Investors section of the ametek.com website. The operator then provides closing remarks.

This summary was generated with AI and may contain some inaccuracies.