Q & A Highlights

Q: Dave, I was hoping you could take us through your typical end market and regional data points and color. As you do that, we're seeing a number of the industrial companies reporting this quarter some significant positive inflection in the non-data center part of the industrial economy. We're really in this two-speed economy, but I would love to hear whether you're seeing some data. Color like that. We saw it with the ISM. So as you take us through the end markets and regions, anything that you could add there would be great. Thanks. A: (David Zapico, Chairman and CEO) We saw strength across all major regions, with the US and Asia up low double-digits and Europe up mid-single-digits. In terms of end markets, our process businesses were up high-teens, aerospace and defense saw mid-teens organic growth, and automation and engineering solutions were up mid-teens. We believe we are in the beginning stages of a multi-year infrastructure build-out, driven by AI, power grid expansion, defense modernization, and the commercial aerospace supercycle. We are diversified across multiple thematic growth drivers and not dependent on any single one.

Q: Can you maybe talk about the build you're seeing in your backlog and how the duration in your backlog, i.e. Visibility, compares now to maybe the longer-term Ametek historical average? A: (David Zapico, Chairman and CEO) Our backlog is now $4.11 billion, up about 21% from the end of the year, with a positive book-to-bill of 1.12 in the quarter. About 80% of that backlog will ship within the next 12 months. The second half of the year is filling in very nicely, and we are starting to fill in 2027. Our customers are placing orders for our customized, unique products related to the infrastructure build-out, which provides strong visibility.

Q: Maybe we could just start with double-clicking a little bit on orders, really strong result there. Anything notable with respect to like large or lumpy orders? Just trying to think about the sustainability of the strength that you guys have seen in order growth into the second-half. And maybe, Dave, if you're willing to share anything about what you've seen in the month of July, that would be helpful, too. A: (David Zapico, Chairman and CEO) Orders were excellent in the quarter, up 28% overall and 25% organically. June was the strongest month for orders in the quarter at an all-time record, and July orders were also very good. While there is a bit of a lumpy nature to orders, the underlying capital spend by our customers is driven by a multi-year investment infrastructure build-out. We are locked into these opportunities with our pedigree, regulatory mandates, and security priorities, making the growth portable.

Q: Just in terms of the end markets, I mean, just in the quarter, where did you see the most acceleration and then did any of the markets maybe come in below expectations? I know it sounded like everything was pretty strong. A: (David Zapico, Chairman and CEO) Everything was pretty strong, but the two standout markets were semiconductors in EIG and medtech in EMG, where Paragon had an outstanding quarter. Paragon is a great example of the Ametek growth model in action. We utilized the pandemic-driven downturn to accelerate integration activities and absorb friction when volume was low. Now that volume is back, we are getting excellent leverage on growth, with new product wins phasing in and capturing outsized margin expansion.

Q: The core margin expansion of 110 basis points was pretty impressive. Certainly, the organic was part of that, but what were the other features there? Was it mix and if so, which businesses or otherwise? A: (David Zapico, Chairman and CEO) We had an excellent operating quarter with strong incrementals of about 40% in both groups. EMG core margins were up 290 basis points, driven by Paragon's new products phasing in with a leaned-out cost structure. We also increased our enterprise-wide productivity target to $160 million this year, and we had positive price, more than offsetting inflation and tariffs. These factors combined to drive the strong core margin expansion.

Q: I was also hoping you could maybe update us on Indicor. You've had the company sort of in tow here waiting for the closure of the deal and have you identified maybe some new synergies? Is there excitement a little bit higher across those 10 business units? A: (David Zapico, Chairman and CEO) We are progressing well through the integration and regulatory approval process and continue to expect the acquisition to close in the second half of the year. We are getting more confident in the 10-12% cost synergy target. We have confirmed opportunities in global sourcing, international sales and service facilities, and global shared services. The Indicor businesses have a higher profitable recurring revenue stream of 50% of revenue, and we are highly confident the proven Ametek growth model will add significant value.

Q: You had highlighted the UAV opportunity, and I was just curious if you could provide a little bit more color on how activity in that market has trended. And how you're seeing the scope of opportunities continue to expand. Are there any particular size class of UAV that Ametec is best positioned for and do you see any opportunities in other domains beyond unmanned aerial? A: (David Zapico, Chairman and CEO) There is tremendous opportunity in UAVs. We recently won three new UAV programsone US-based and two with NATO allies. We provide fuel sensing, lightweight power distribution, and cooling for electronics in these systems. Beyond UAVs, we are also well positioned in advanced computing with our Abaco business and cooling systems with our Rotron and PDT businesses. Defense modernization is a non-discretionary area where we have established pedigree and are well positioned to execute.

Q: Just maybe a question on this ramp. Where does capacity utilization stand today? I think CapEx guidance is up 22% year-over-year from '25. How much of the $160 million is growth CapEx? A: (David Zapico, Chairman and CEO) Growth CapEx is probably about two-thirds of the $160 million. We are largely an IP-driven business with a return on tangible capital of about 100%, so we don't have a lot of fixed assets. We have added capacity in multiple US plants, Serbia, and Mexico, and are doing more work in Poland. We are not at capacity limits, and we have the flexibility to ramp up and down easily. We are operating very efficiently, as evidenced by reduced working capital and over

For the complete transcript of the earnings call, please refer to the full earnings call transcript .