AMETEK(AME) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Results AMETEK reported strong Q2 2024 results, with sales up 5% to $1.73 billion and adjusted diluted EPS of $1.66 Q2 2024 Consolidated Financial Highlights Consolidated financial highlights for Q2 2024, including sales, operating income, and cash flow Q2 2024 Consolidated Financial Highlights (YoY Change) | Metric | Q2 2024 Value | YoY Change | | :----------------------- | :------------ | :--------- | | Sales | $1.73 billion | +5% | | Operating Income | $447.5 million | +7% | | Operating Margins | 25.8% | +40 bps | | Operating Cash Flow | $381.4 million | +14% | | GAAP Diluted EPS | $1.45 | - | | Adjusted Diluted EPS | $1.66 | +6% | | Free Cash Flow | $360.0 million | +17% | | Free Cash Flow Conversion | 107% | +12% | - AMETEK achieved strong operating performance with outstanding core margin expansion, record operating income and EBITDA, and earnings growth exceeding expectations, alongside excellent cash flows[2] Electronic Instruments Group (EIG) Performance EIG delivered strong Q2 2024 performance with increased sales and robust margin expansion EIG Q2 2024 Performance (YoY Change) | Metric | Q2 2024 Value | YoY Change | | :-------------------- | :------------ | :--------- | | Sales | $1.15 billion | +2% | | Operating Income | $349.9 million | +14% | | Operating Income Margins | 30.3% | +320 bps | - EIG delivered strong results with excellent operating performance, leading to outstanding profit growth and robust margin expansion, positioning its businesses well across diverse market segments[3] Electromechanical Group (EMG) Performance EMG faced inventory normalization headwinds but achieved solid operating performance with sequential margin gains EMG Q2 2024 Performance (YoY Change) | Metric | Q2 2024 Value | YoY Change | | :-------------------- | :------------ | :--------- | | Sales | $581.2 million | +14% | | Operating Income | $123.1 million | - | | Operating Income Margins | 21.2% | - | - EMG experienced headwinds from inventory normalization across its OEM customer base but delivered solid operating performance with sequential margins improving 50 basis points versus the first quarter's adjusted margins[5] 2024 Business Outlook and Guidance AMETEK adjusted full-year 2024 sales and earnings guidance due to inventory normalization and customer caution Full Year 2024 Guidance AMETEK's updated full-year 2024 guidance reflects anticipated sales and adjusted diluted EPS ranges - The company expects inventory normalization within its OEM customer base to continue through the balance of 2024, with customers becoming more cautious, leading to some short-term delays in project spending[6] Full Year 2024 Guidance (YoY Change) | Metric | Range | YoY Change | | :-------------------- | :---------------- | :--------- | | Overall Sales | Up 5% to 7% | +5% to +7% | | Adjusted Diluted EPS | $6.70 to $6.80 | +5% to +7% | Third Quarter 2024 Guidance AMETEK's specific guidance for Q3 2024 includes expected sales growth and adjusted diluted EPS Third Quarter 2024 Guidance (YoY Change) | Metric | Range | YoY Change | | :-------------------- | :---------------- | :--------- | | Overall Sales | Up mid-single digits | - | | Adjusted Diluted EPS | $1.60 to $1.62 | -1% to -2% | Company Information Overview of AMETEK as a global industrial technology solutions provider, detailing its growth model and financial objectives About AMETEK AMETEK is a global industrial technology solutions provider, driven by a strategic growth model and financial objectives - AMETEK is a leading global provider of industrial technology solutions, serving diverse niche markets with annual sales of approximately $7.0 billion[9] - The AMETEK Growth Model integrates Four Growth Strategies: Operational Excellence, New Product Development, Global and Market Expansion, and Strategic Acquisitions, with a disciplined focus on cash generation and capital deployment[9][10] - AMETEK's objective is double-digit percentage growth in earnings per share over the business cycle and a superior return on total capital[10] Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with AMETEK's forward-looking statements - Statements regarding future events and financial performance are forward-looking and subject to various factors and uncertainties, including risks related to acquisitions, international operations, supply chain disruptions, new product development, raw material prices, government regulations, competition, liquidity, and general economic conditions[11] - AMETEK disclaims any intention or obligation to update or revise any forward-looking statements[11] Investor Relations Contact Contact information for investor inquiries is provided, directing stakeholders to the Vice President of Investor Relations - For investor inquiries, contact Kevin Coleman, Vice President, Investor Relations and Treasurer, at kevin.coleman@ametek.com or Phone: 610.889.5247[12] Financial Statements and Reconciliations AMETEK's unaudited consolidated financial statements, including income, segment information, balance sheet, and GAAP to non-GAAP reconciliations Consolidated Statement of Income AMETEK's unaudited consolidated statement of income details revenues, expenses, and net income for specified periods Consolidated Statement of Income (Unaudited, In thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales (in thousands) | $1,734,834 | $1,646,111 | $3,471,014 | $3,243,228 | | Cost of sales (in thousands) | 1,110,425 | 1,053,190 | 2,255,106 | 2,075,715 | | Selling, general and administrative (in thousands) | 176,895 | 174,130 | 351,178 | 343,181 | | Total operating expenses (in thousands) | 1,287,320 | 1,227,320 | 2,606,284 | 2,418,896 | | Operating income (in thousands) | 447,514 | 418,791 | 864,730 | 824,332 | | Interest expense (in thousands) | (30,590) | (18,723) | (65,844) | (39,292) | | Other (expense) income, net (in thousands) | 86 | (3,684) | (547) | (9,057) | | Income before income taxes (in thousands) | 417,010 | 396,384 | 798,339 | 775,983 | | Provision for income taxes (in thousands) | 79,327 | 72,142 | 149,713 | 146,029 | | Net income (in thousands) | $337,683 | $324,242 | $648,626 | $629,954 | | Diluted earnings per share | $1.45 | $1.40 | $2.79 | $2.72 | | Basic earnings per share | $1.46 | $1.41 | $2.80 | $2.74 | | Weighted average common shares outstanding: Diluted shares (in thousands) | 232,304 | 231,261 | 232,170 | 231,245 | | Weighted average common shares outstanding: Basic shares (in thousands) | 231,437 | 230,478 | 231,267 | 230,302 | | Dividends per share | $0.28 | $0.25 | $0.56 | $0.50 | Information by Business Segment AMETEK's net sales and operating income are broken down by Electronic Instruments and Electromechanical segments Information by Business Segment (Unaudited, In thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net sales (in thousands): | | | | | | Electronic Instruments (in thousands) | $1,153,613 | $1,134,646 | $2,310,392 | $2,251,893 | | Electromechanical (in thousands) | 581,221 | 511,465 | 1,160,622 | 991,335 | | Consolidated net sales (in thousands) | $1,734,834 | $1,646,111 | $3,471,014 | $3,243,228 | | Operating income (in thousands): | | | | | | Segment operating income: Electronic Instruments (in thousands) | $349,857 | $307,052 | $702,797 | $616,799 | | Segment operating income: Electromechanical (in thousands) | 123,102 | 136,215 | 213,793 | 256,719 | | Total segment operating income (in thousands) | 472,959 | 443,267 | 916,590 | 873,518 | | Corporate administrative expenses (in thousands) | (25,445) | (24,476) | (51,860) | (49,186) | | Consolidated operating income (in thousands) | $447,514 | $418,791 | $864,730 | $824,332 | Condensed Consolidated Balance Sheet AMETEK's condensed consolidated balance sheet details assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheet (In thousands) | Metric | June 30, 2024 (Unaudited, in thousands) | December 31, 2023 (in thousands) | | :----------------------------------------------------------------- | :------------------------ | :------------------ | | ASSETS | | | | Current assets: Cash and cash equivalents (in thousands) | $396,573 | $409,804 | | Current assets: Receivables, net (in thousands) | 976,442 | 1,012,932 | | Current assets: Inventories, net (in thousands) | 1,101,719 | 1,132,471 | | Current assets: Other current assets (in thousands) | 292,510 | 269,461 | | Total current assets (in thousands) | 2,767,244 | 2,824,668 | | Property, plant and equipment, net (in thousands) | 861,577 | 891,293 | | Right of use asset, net (in thousands) | 217,469 | 229,723 | | Goodwill (in thousands) | 6,453,513 | 6,447,629 | | Other intangibles, investments and other assets (in thousands) | 4,496,063 | 4,630,220 | | Total assets (in thousands) | $14,795,866 | $15,023,533 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Current liabilities: Short-term borrowings and current portion of long-term debt, net (in thousands) | $827,967 | $1,417,915 | | Current liabilities: Accounts payable and accruals (in thousands) | 1,375,080 | 1,464,658 | | Total current liabilities (in thousands) | 2,203,047 | 2,882,573 | | Long-term debt, net (in thousands) | 1,823,410 | 1,895,432 | | Deferred income taxes and other long-term liabilities (in thousands) | 1,517,005 | 1,515,337 | | Stockholders' equity (in thousands) | 9,252,404 | 8,730,191 | | Total liabilities and stockholders' equity (in thousands) | $14,795,866 | $15,023,533 | Reconciliations of GAAP to Non-GAAP Financial Measures Reconciliations of GAAP to non-GAAP financial measures, including diluted EPS, cash flow, and forecasted EPS Reconciliation of Diluted EPS (GAAP to Non-GAAP) (In thousands, except per share amounts) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :-------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Diluted earnings per share (GAAP) | $1.45 | $1.40 | | Pretax amortization of acquisition-related intangible assets | 0.27 | 0.22 | | Income tax benefit on amortization of acquisition-related intangible assets | (0.06) | (0.05) | | Adjusted Diluted earnings per share (Non-GAAP) | $1.66 | $1.57 | Reconciliation of Cash Flow (GAAP to Non-GAAP) (In thousands) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | | :-------------------------------------------------------------------------- | :------------------------------- | :------------------------------- | | Cash provided by operating activities (GAAP) | $381,435 | $335,247 | | Deduct: Capital expenditures | (21,416) | (27,829) | | Free cash flow (Non-GAAP) | $360,019 | $307,418 | | Free Cash Flow Conversion (Free cash flow divided by net income) | 107% | 95% | Forecasted Diluted EPS (GAAP to Non-GAAP) (In thousands, except per share amounts) | Metric | Three Months Ended September 30, 2024 (Low) | Three Months Ended September 30, 2024 (High) | Year Ended December 31, 2024 (Low) | Year Ended December 31, 2024 (High) | | :-------------------------------------------------------------------------- | :------------------------------------------ | :------------------------------------------- | :--------------------------------- | :--------------------------------- | | Diluted earnings per share (GAAP) | $1.39 | $1.41 | $5.78 | $5.88 | | Paragon integration costs | — | — | 0.13 | 0.13 | | Income tax benefit on Paragon integration costs | — | — | (0.03) | (0.03) | | Pretax amortization of acquisition-related intangible assets | 0.27 | 0.27 | 1.08 | 1.08 | | Income tax benefit on amortization of acquisition-related intangible assets | (0.06) | (0.06) | (0.26) | (0.26) | | Adjusted Diluted earnings per share (Non-GAAP) | $1.60 | $1.62 | $6.70 | $6.80 | Use of Non-GAAP Financial Information The rationale for using non-GAAP financial measures is explained, highlighting their utility for investors - The company supplements GAAP financial statements with non-GAAP information to provide investors with greater insight, increased transparency, and a more comprehensive understanding of management's financial and operational decision-making[20] - Non-GAAP measures help investors better understand long-term profitability trends, facilitate comparisons to prior and future periods, and to peers, when reconciled to comparable GAAP measures[21]