Welcome to the AMETEK Third Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw from the question queue, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Kevin Coleman, Vice President of Investor Relations and Treasurer. Please go ahead. Thank you, Kate. Good morning, and thank you for joining us for AMETEK's Third Quarter 2022 Earnings Conference Call. With me today are Dave Zapico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. During the course of today's call, we'll 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 risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. Any references made on this call to 2021 or 2022 results will be on an adjusted basis, excluding after-tax acquisition related and intangible amortization. Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor 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. AMETEK delivered record results in the third quarter, with stronger than expected sales growth and outstanding operational execution, leading to earnings above our expectations. Operationally, our businesses are performing exceptionally well and successfully offsetting inflation with price increases, resulting in impressive margin expansion. We are also seeing continued strong and broad-based demand across our diversified niche markets, leading to impressive organic order growth and a record backlog of $3.2 billion. This morning, we announced the acquisition of two excellent businesses, Navitar and RTDS Technologies, expanding our presence in high-end precision optics and in testing solutions for the electric power grid and renewable energy applications. I will provide more details on these acquisitions shortly. Given our results in the third quarter and outlook for the fourth quarter, we are again increasing our earnings guidance for the full year. Now, let me turn to our third quarter results. Third quarter sales were a record $1.55 billion, up 8% over the same period in 2021. Organic sales were up 11%. Acquisitions added 1%, and foreign currency was an approximate 4% headwind in the quarter. Demand also remained solid across our niche markets, with organic orders growing 9% in the quarter, while book-to-bill was 1.07, our ninth consecutive quarter of positive book-to-bill. Backlog at quarter end was a record $3.2 billion, up approximately $1.4 billion from the end of 2020. Operating income in the quarter was a record $385 million, a 14% increase over the third quarter of 2021, while operating margins were 24.8% in the quarter, up a robust 140 basis points from the prior year, with strong margin expansion in each operating group. Our ability to drive meaningful margin expansion despite the inflationary environment reflects the differentiation of our technology solutions and our flexible operating model. EBITDA in the quarter was also a record of $463 million, up 12% over the prior year, with EBITDA margin is a record 29.8%. This outstanding performance led to a record of earnings of $1.45 per diluted share, up 15% versus the third quarter of 2021, and above our guidance range of $1.36-$1.38. Now, let me provide some additional details at the operating group level. First, the Electronic Instruments Group. The Electronic Instruments Group delivered excellent operating performance with continued strong and broad-based growth. Sales for our Electronic Instruments Group were $1.05 billion in the quarter, up 7% from the third quarter of last year. Organic sales were up 10%, with a one-point contribution from acquisitions being more than offset by an approximate three-point foreign currency headwind. Growth was again broad-based across our EIG businesses, with particularly strong growth within our Rauland, TMC/Precitech, and Thermal Process Management businesses. Third quarter operating income was $272.7 million, up 11% versus the prior year, and operating margins were 25.9% in the quarter, up 90 basis points from the prior year. The performance of our Electromechanical Group in the quarter was exceptional, with excellent sales growth and record operating results. EMG's third quarter sales were a record $497.7 million, up 8% versus the prior year, with organic sales growing 13% in the quarter and foreign currency a four-point headwind. Growth was very broad-based across all of our EMG businesses. EMG's operating income in the third quarter was a record $136.5 million, up 19% compared to the prior year period. EMG's third quarter operating margins were a record 27.4%, up an impressive 240 basis points versus the prior year. Overall, our businesses delivered outstanding performance in the third quarter, allowing us to manage an uncertain macro environment, meaningfully expand margins, and drive earnings ahead of our expectations. Now switching to our acquisition strategy. We are very pleased to announce the acquisition of two highly strategic businesses. Navitar and RTDS Technologies are both excellent businesses and highly strategic acquisitions for AMETEK, expanding our presence within attractive secular growth markets. Now let me take a moment to provide additional color on both these acquisitions, starting with Navitar. Navitar is a leading provider of optical solutions for critical applications across several markets, including medical and life sciences research, machine vision and robotics, semiconductor, and industrial automation. Their comprehensive suite of high-precision custom optical solutions includes fully integrated imaging systems, sensors, cameras, optics, and software. Navitar is an excellent strategic and complementary fit with our Zygo business unit, as their technical capabilities around cameras and optical systems further expand Zygo's product offering. Additionally, Navitar is a high-growth business well positioned to benefit from the growth in demand for precision optical solutions across attractive growth markets. Navitar was privately held and is based in Rochester, New York. Now switching to RTDS Technologies. RTDS provides real-time digital simulation systems used by utilities and research and educational institutions in the development and testing of the electric power grid and renewable energy applications. Their simulation solutions allow engineers to rapidly prototype, verify, and test the performance of the electric grid, power instruments, and networks in a closed-loop system to help accelerate product development life cycles and decrease testing costs. RTDS's simulation solutions are playing a key role in the modernization of the electric grid infrastructure, as well as supporting secular growth drivers, including renewable energy, distributed power generation, and energy storage. The acquisition of RTDS broadens our power instruments business' testing and simulation capabilities while expanding our exposure to the renewable energy space. RTDS is privately held and based in Winnipeg, Canada. We are very excited to welcome the Navitar and RTDS teams to the AMETEK family. We deployed approximately $430 million on these acquisitions, acquiring approximately $100 million in annual sales. Over the past two years, we deployed more than $2.4 billion in capital and acquisitions and acquired eight businesses. Our acquisition pipeline remains solid. We have a strong balance sheet and significant financial capacity and look to remain active in deploying capital on strategic acquisitions. In addition to the recent acquisitions, we continue to focus on ensuring AMETEK is strategically positioned for long-term sustainable growth. Our businesses are driving broader adoption of our organic growth initiatives, including growth kaizens, digitalization, and new product development. This includes making strategic growth investments across our businesses to help support and accelerate growth. For all of 2022, we now expect to invest approximately $110 million in support of these growth initiatives. We are seeing great results from these efforts over both the short term and long term. In the third quarter, sales from new products introduced over the last three years was 27%, a record level for our vitality index, reflecting the great work of our teams. These efforts have helped lead to double-digit organic sales growth in each of the past six quarters. Now turning to the outlook for the remainder of the year. While we remain cautious in the short term, given the dynamic macro environment, we are highly confident in the quality of our businesses and our ability to manage through these challenging times. Given our strong third quarter results and outlook for the balance of the year, we are again increasing our sales and earnings guidance. For the full year, we now expect overall and organic sales to be up approximately 10% versus our prior guidance of up high single digits. Diluted earnings per share for the year are now expected to be in the range of $5.61-$5.63, up 16% compared to 2021. This is an increase from our previous guidance range of $5.46-$5.54 per diluted share. For the fourth quarter, overall sales are expected to be up mid-single digits compared to the same period last year, and fourth quarter earnings are expected to be in the range of $1.45-$1.47 per diluted share, up 6%-7% versus the prior year. To summarize, AMETEK had another excellent quarter. We delivered record performance, strong orders and sales growth, robust margin expansion, increased our earnings guidance for the year, and acquired two strategic businesses. The strength of the AMETEK growth model and our talented global workforce is evident in our results thus far this year and will continue to allow us to operate at a high level through challenging market conditions. We remain well-positioned for continued long-term growth. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter. We will be glad to take your questions. Bill? Thank you, Dave. As Dave highlighted, AMETEK delivered outstanding results in the third quarter, with strong sales and orders growth, excellent operating performance, and a high quality of earnings. Let me provide some additional financial highlights for the quarter. Third quarter general and administrative expenses were $24.7 million, up $3 million from the prior year due to higher compensation expense in the quarter. For the full year, general and administrative expenses are expected to be up modestly from 2021 levels and approximately 1.5% of sales versus 1.6% of sales in 2021. The effective tax rate in the third quarter was 19%, down from 19.5% in the third quarter of 2021. For 2022, we anticipate our effective tax rate to be approximately 19%. As we've stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively from this full year estimated rate. Capital expenditures in the third quarter were $28 million, and we expect capital expenditures to be approximately $130 million for the full year, or about 2% of sales. Depreciation and amortization expense in the quarter was $76 million. For the full year, we expect depreciation and amortization to be approximately $310 million, including after-tax acquisition-related intangible amortization of approximately $148 million or $0.64 per diluted share. For the quarter, operating working capital was 18.4% of sales. We generated strong levels of cash flow in the quarter. Operating cash flow was $327 million, up 7% versus the third quarter of 2021. Free cash flow was $299 million in the third quarter, up 6% from the prior year, and free cash flow to net income conversion was 100%. Total debt ended the third quarter at $2.36 billion, down from $2.54 billion at the end of 2021. Offsetting this debt is cash and cash equivalents of $310 million. At the end of the third quarter, gross debt-to-EBITDA ratio was 1.3 x, and our net debt to EBITDA ratio was 1.1 x. As Dave noted, we've been active on the acquisition front. During the third quarter, we acquired Navitar, and subsequent to the end of the third quarter, we acquired RTDS Technologies. Combined, we deployed approximately $430 million on these two acquisitions. We remain very well-positioned to deploy additional capital given the strength of our balance sheet and strong cash flows. We have no material debt maturities due until 2024 and modest levels of leverage. We continue to have excellent financial capacity and a strong balance sheet. Following our two recent acquisitions, we still have over $2 billion of cash and existing credit facilities to support our growth initiatives. In summary, our business has performed exceptionally well in the third quarter and through the first nine months of 2022. Our outlook for the remainder of the year remains positive given our strong financial position, our proven growth model, and world-class workforce. Kevin? Thank you, Bill. Operator, could we please open the lines for questions? We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star then two. Our first question is from Matt Summerville of D.A. Davidson. Please go ahead. Thanks, morning. Dave. Morning, Matt. Maybe could you talk a little bit about the organic performance you saw by geographic region and what, if anything, for lack of a better word, your canary type of businesses might be telling you about the macro environment, and then I have a follow-up. Okay, yeah. Regarding the geographic storyline, it was really strong, broad-based growth across all geographies and a very balanced growth. I mean, the U.S. was up about 11%. We had broad-based growth there. Notable performance in our process and automation businesses. The U.S. was the strongest, up 11%. Europe was up 9%. Notable strength in process in our aerospace business. Asia was up 9%. Notable strength in our process businesses. No canaries in the coal mine for us. Orders are strong, sales are strong geographically and all regions showed a solid broad-based growth, very balanced. Got it. Dave, could you maybe comment a little bit on what your price realization was in the third quarter, what your price cost sort of ratio looked like, and how we should be thinking about incremental price actions for 2023? Thank you. Yeah. In the third quarter, our price continued to more than offset inflation, and the pricing was very consistent across our portfolio. Pricing was about 6% and inflation was about 5%. So we had a positive spread of approximately 100 basis points. We expect a similar price inflation spread for Q4 of 100 basis points. The results speak to the highly differentiated nature of our product portfolio and our leadership position in niches. In terms of you know next year, really not ready to talk about pricing and inflation next year. I will say that you know we do expect that we will be able to offset inflation with price in 2023 from a philosophy and an operating capability. We're gonna refrain from discussing 2023 until we get to go through our bottoms-up reviews with each of our businesses. There's no reason to think it's not gonna be positive next year, but we don't have the data yet. I'm gonna hold off on that one. Really good performance on pricing in Q3, and we expect it to continue in Q4. Answer your question, Matt? Very good. Thanks, David. Sure. Yes, it did. Thank you very much. The next question is from Allison Poliniak of Wells Fargo. Please go ahead. Hi. Good morning. Good morning, Allison. Dave, you talked a little bit, you know, certainly some caution out there. Your orders are really strong. Just maybe give your perspective of this cycle. Maybe more importantly, how you think, you know, AMETEK's relative position is entering maybe a next downturn prior to relative past cycles. Just any thoughts there? Those are great questions. I mean, I think you know, in terms of AMETEK, I think you know, our underlying demand remains strong. As I answered you know, Matt's question, we're not seeing weakness yet. It's really broad-based. Our organic orders are strong. They were up 9%. It was both groups had positive organic growth. Both groups were strong. We're growing at healthy growth rates in all major regions of the world, as I just went through. So we feel good about that. We ended the quarter with a record backlog. That is really good. You know, you talk about 2023, I think our portfolio is in much better shape to as we're going forward. Because if you think about what's happened, we've continued to shift our portfolio to exposures in attractive growth markets. Growth markets like automation, healthcare, power. You know, this recent acquisition is more renewables. The market shifts are attractive for us. Our technology, our differentiation is stronger than it was six or seven years ago. We see that playing out in our organic growth in both relative and absolute performance. In the big picture, we've incrementally improved our portfolio without sacrificing a couple years of growth to do it, and have delivered in exceptional way along the path. You know, I'll give you some examples. Our healthcare portfolio, it was about 10% six years ago, now it's 15%. Aerospace and defense, it was low double digits, part of the business about six or seven years ago, now it's high teens. Our automation business went from about 7% to 12%. Good improvements in all those areas as a percentage of our total portfolio. On the flip side, more cyclical businesses like our oil and gas and metals, they were more than 20% of sales six years ago. Right now, combined, these sales are about 8%. We feel good about the portfolio, and it's performing now. We think it's gonna perform in any kind of economic environment that we run into. Great. That's helpful. Just on the acquisitions, I know you said at least Navitar high growth. Could you maybe give a little bit more color on are the growth of these acquisitions sort of in line with AMETEK a little better? Just any color on the margin performance relative to AMETEK's core. Thanks. Right. I think both acquisitions are gonna grow in the, you know, high single digit to low double digit range. They're both good growers. Both acquisitions are very profitable businesses. The blended multiple was about 11x. Both very profitable growing businesses and a fair price paid. You know, we're excited to have each of these companies. Each fit perfectly with our acquisition strategy. They're leaders in niche markets. Each has very strong technology differentiation, position that are backed by excellent engineering capabilities. They expand our presence in attractive growth markets. Navitar is in the high growth optical solutions and life sciences, machine vision, robotics. RTDS is really well positioned to benefit from the modernization in electrical power grid and the investments being made there with excellent exposure to the remote renewables market. We've been working on these businesses for a good period of time, and I'm just really glad to have them in the portfolio. Great. Thanks so much. Okay. Thank you. The next question is from Deane Dray of RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone. Good morning, Deane. Hey, we touched on it a bit so far in the earlier questions, but maybe just more methodically take us through the key end markets. Sounded like process, aero were strong. Can you just kinda go from the strongest to the weakest, and we'll take it from there. Thanks. Sure, Dean, I'd be glad to do that. The strongest was process. They had the strongest growth in the third quarter. Organic sales up low teens on a percentage basis. The growth is really broad-based, and as I said in my prepared remarks, it was particularly strong growth across our Rauland Healthcare business, TMC/Precitech, and our Thermal Process Management businesses. For all of 2022, we now expect organic sales for our process businesses to be up approximately 10%. The segment that grew second fastest was our automation and engineered solutions. Very strong third quarter with organic sales up low double digits. A balanced growth across both automation and engineered solutions. For that sub-segment, we now expect organic sales to be up approximately 10%, up from high single digits, up to 10% for the full year, with similar growth across each segment. Then I take you to the power and industrial business. Up mid-single digits on a percentage basis in the quarter. We saw a notable strength across our power instruments and programmable power business. We now expect that sub-segment to grow 10% also. We raised that from high single digits to 10%. Then I'll talk about the aerospace and defense business. Organic sales for our aerospace and defense businesses were up mid-single digits in the third quarter. Commercial sales were really strong, up mid-teens in the quarter, driven by strong underlying demand across the industry. Commercial OE, aftermarket, and business jet all grew nicely. The strongest were aftermarket and business jet. Defense sales were up low single digits in the quarter. For the full year, we expect organic sales for A&D to be up high single digits on a percentage basis with our commercial aerospace business to grow to be stronger than the defense growth. That's a walk around the company, Dean. That's fabulous. How about just the idea of any changes at the margin in customer buying behavior? You know, in some cases we've seen as supply chains are normalizing a bit, lead times come in a bit. They don't have to give you the bigger orders just to get in line. Is there any kind of change there? Maybe share with us the cadence of the quarter in terms of orders. Right. I'll start with the cadence. We had strong orders in each month, with the strongest being September. We had a very strong September. For that matter, our October results are consistent with our outlook, showing a solid performance. You have a good question about the underlying orders. You know, the way I think about it, we'll certainly be running into more difficult comparisons for order input in the coming quarters. We do expect our orders to moderate due to the fact that our customers placed orders early due to supply chain dynamics. We believe that the return to more normalized ordering patterns. But even with these factors, I expect our backlog to be in an excellent position as we enter 2023. That's real helpful. Thank you. Yep, no problem. The next question is from Josh Pokrzywinski at Morgan Stanley. Please go ahead. Hi. Good morning, guys. Morning, Josh. Morning. Dave, I want to follow up on Deane last question and then your last comment about backlog. You know, with supply chain starting to improve and really some of this, you know, kind of extra backlog really being more supply side driven than anything else, what would you say is sort of the amount of backlog you think you could convert next year? I guess, you know, how should we think about, you know, the timeframe for getting from where we are today, maybe down to more typical levels? 'Cause the entire business isn't long cycle, just, you know, kind of pockets of it. No, no, that's a good question. You know, one way that I think about it may help you. If you go back a few years, you know, our annual sales were about 30% in backlog. That was a typical year for us. We had about 30% of annual sales in backlog. Right now, we have a little more than 50% of annual sales in backlog. There's a 20% difference there. You know, that's why I think we have solid visibility and that's in place because of the ordering patterns of our customers has changed, and we've had really strong order input, and we had to protect our customers with inventory because of the supply chain crisis. You know, the increase of backlog went from about 30% of annual sales to 50% of annual sales. That's the kind of way I think about it, if that helps you. That is helpful. I guess, how fungible should we think of backlog? Let's say, you know, book-to-bill starts to trend well below one for, you know, for a couple quarters between comps and maybe a little bit of a demand slowdown. Are you guys able to pull that in sort of in real time, or does that have, you know, specific dates associated with it where you can't really pull it in as much? Yeah, Josh, I'd say as you look at the backlog we have, I mean, almost all of it could be shipped. You know, there'll be a small portion of it that will flip over into 2024, but when you look at what's coming due over the next 12 months, well, really, if you look at it, 15 months to get you through the balance of 2023, there's a large portion of it, the great majority of it will ship in the next year. Got it. That's helpful. I'll leave it there. Thanks, guys. Thank you. The next question is from Nigel Coe of Wolfe Research. Please go ahead. Thanks. Good morning, everyone. Thanks for the question. Just going back to the acquisitions. I'm guessing these are more North American-centric acquisitions, so just wondering if there's a globalization sort of angle to this. Just wanna confirm some numbers. It sounds like these are high 30% EBITDA margin, combined. Is there any difference between the two acquisitions, or would you say they're quite consistent across that, across the both of them? Can they go even higher than that? I mean, are there any sort of easy synergies from supply chain, et cetera, that can actually move the needle on those margins? Yeah, you're right about the profitability. They're high profitability businesses. Navitar is maybe has a little higher growth rate and a little lower profitability than RTDS. It has higher profitability and still has a healthy growth rate, but maybe slower than Navitar's. We, you know, there's a normal amount of synergy for us in these deals. They're both private businesses and, you know, there's, you know, excellent opportunities for us to improve the cost and revenue generation capabilities of the business. You know, there is a globalization theme. The RTDS is more globalized already than Navitar, but both of them will benefit from AMETEK's global scale. Good insight on your part. Oh, that's great. My follow on is really digging into the EMG margins, which were pretty exceptional. Yeah. Did a disproportionate amount of price cost land in EMG or are we seeing some mixed impact from commercial aerospace aftermarket? Any details there would be great. Yeah. I mean, the EMG's performance was excellent in a quarter. As you mentioned, they had record margins of 27.4%. The biggest factor when you look at it is our higher margin businesses are growing faster in the quarter in particular. EMG's pretty much doing what AMETEK continues to do, moving up the differentiation curve with their product portfolio. You know, we exited some of the lower margin consumer businesses over time, so they're really good book of business as we go forward up the differentiation curve, and they're getting better pricing because of that. In terms of pricing, it was really broad-based across all of AMETEK. It wasn't, EIG and EMG were similar in terms of price. It's really, you know, if you wanna think about it, this is a certain mix effect because the higher margin businesses grew faster in the quarter. Very clear. Thanks, David. Thank you. The next question is from Scott Graham of Loop Capital Markets. Please go ahead. Hey, good morning, Dave, Bill, Kevin. Good morning, Scott. I wanted to talk a little bit more about the backlog, piggyback onto Josh's question. That, you know, Bill, you indicated, I think it was Bill, that, 15 months is kind of like the shippable. Are you also saying that customers can't push that back, that these are sort of contracted shipment dates? What's the dynamic look like there? Yeah. The reason I took the 15 months was to get us to the end of next year. That's really the point I was making there. You know, you always have to work with your customers on push outs or pull-ins. I think the point I was trying to make is that much of that backlog is due and shippable next year, and we'll work through it. As Dave said, it's only half of next year's shipments. We're gonna continue to book orders and be able to ship against those. Okay. When you say you talk with customers about this, you know, there is a chance that some of these things could be pushed out a quarter or two. Yes. Yeah. Okay. Yeah. Like any, it's typical business. I mean, there, it's a firm backlog backed by firm POs, but we work with our customers on both pull-ins and push outs, and inevitably, that happens, you know, every quarter. Got it. Thank you. My other question is around acquisitions. You know, two deals. It's been quiet, you know, this year at least. You know, maybe is this a situation where, you know, hope springs eternal? Are you starting to see bid-ask spreads close in to a point where, you know, there might be an acceleration, or was this just, you know, something that a couple of deals? I'm asking the question 'cause it's two, it's not one, right? Right. Right. Right. What does that mean for, like, the next six months, do you think? Yeah. I you know, when I look at our backlog and deals and potential deals, I feel very optimistic that over the next you know, say 12 months, we're gonna be able to deploy our free cash flow and acquisitions. The pipeline is very, very strong. We're working with quite a few businesses right now and you know, actively exploring some exciting opportunities. Can we have the financing to do it? I mean, the pricing is starting to come in on deals now, and our relative position versus some other competitive buying like private equity is improved. I'm looking. I'm pretty optimistic about deals for 2023, and our backlog is gonna support it and our balance sheet supports it. Our strong cash flow is supported. It's gonna be a big part of the future AMETEK story. You're saying, Dave, you're confident that over the next 12 months, you can deploy 100% of your free cash flow on deals? Yeah, I believe that to be true. Great. Thank you. Again, if you have a question, please press star then one. The next question is from Rob Wertheimer of Melius Research. Please go ahead. Hi. Thanks. Hey, Rob. You know, my question's on Navitar. I don't know if you can expand on the niches they participate in. The reason for the question is just there's some, you know, very large changes in the way the world's working with reshoring, with, you know, investment in battery factories and semiconductor factories in North America and so on. I'm wondering about that historical growth rate, future growth rate and, you know, where they really attack and whether that's helped by some of the ongoing investment. Right. Yeah, I think some of the reshoring is gonna help them. I mean, their largest market segment is in the medical and life sciences area, where they've had very successful penetration in the optics used in various types of microscopes. They're also their optics are very good, and they're in a lot of machine vision and robotics applications. They sell to some big name semiconductor companies at the high end of the market. We just think the combination of this business with our Zygo business, that's a premier optical business, just puts it together and gives us some additional tools to go to our customers with. It's very optimistic on the future and very low risk deal for us. Okay, great. If I may, could I ask the same sort of question on RTDS with some of the upcoming changes to power grids? Maybe that's. Yeah. A longer term situation, but I don't know if you're seeing opportunity and inflection there. We are. It's. I think we got this business at the right time because as people put renewable energy on the grid, and you know whether it's a wind farm or you know a field of solar panels or you know in the electrification, they have you know charging devices for electric vehicles. Each one of those things that they add to the grid is not you know simple. There has to be a lot of analysis done, and they have to understand the impact of what they're adding to the grid. At the same time, there's a lot of investment in the grid. Some of the Infrastructure Act is putting investment in the grid. You know RTDS is really used to help simulate and modernize the grid. They have a high market share, and they're used by all the utilities to understand what's gonna happen with modernizing their electric grid. They're really, really well positioned for the future, and they have an excellent team of technical people. We're optimistic on what that business can do with under AMETEK. Great. Thank you for the answers. Okay. The next question is from Andrew Obin of Bank of America. Please go ahead. Hey, guys. Good morning. Can you hear me? Morning. Yeah. Morning, Andrew. Hey, just a question on RTDS. As you guys move into more software, you know, I know some of your peers as they were making a transition, you know, you try to apply the business system, but, you know, how do you fit something like churn into your framework into optimizing the business? You know, clearly you have an amazing playbook for integrating assets and taking the margins up. How do you apply your playbook to, you know, a more digital asset- Yeah. ... like RTDS, and what adjustments have you had to make? Because that seems very interesting. Thank you. Yeah. In the case of RTDS, it's like many AMETEK businesses. It's a combination of hardware and then software to operate the business. It's really not different, and it's not a software-only business because the pricing has been very high, and we couldn't get a good return on it. To your point, we don't see the synergy that will add to the businesses. At the same time, software is very important to AMETEK. It's in these combined systems, very complex hardware systems and these software, and that's our specialty. RTDS fits right into that. No, that's a great way to get smart on software. Yeah. Another question for you. Are there any businesses where AMETEK has added capacity or has plans to add capacity given what's happening out there? Just to follow up on some of the questions were asked before. We're bringing on a lot of capacity in low cost regions. During this year, I mean, we've expanded our facilities in Mexico. We expanded our facility in Serbia. We expanded our facility in Malaysia. We have more in the works, but those were all put in place this year to add additional capacity. We're dealing with our volume in low cost regions, and it provides a synergy and local market access for us. We've been investing heavily in low cost production manufacturing. Malaysia is becoming a good facility for us. Again, Eastern Europe, Serbia, and Mexico for the U.S. We have these regional hubs that we're building up, and it's very successful for us. We've put a lot of capacity in place this year. Thank you so much. Okay. The next question is from Christopher Glynn of Oppenheimer. Please go ahead. Thanks. Good morning, Dave, Bill, Kevin. Good morning. Good morning, Chris. Hey, was curious about the vitality index at 27%, a record level. I think that ties into some of the discussion on the EMG margins. Is there a level you think of as a mature level of vitality for the business? I don't mean that as a negative, but you know, you've got a entrenched market for a lot of your products, and- Right. ... just kinda curious how you're thinking about that. Yeah. The first thing is, you know, not only is the vitality index, it helps us with our pricing because we're continually adding new features and benefits to our products and our customers, and it enables us to garner a higher price because of the engineering investment that we're making. Very consistent engineering investment over 5% over many years. We first started tracking the vitality, it was in the mid-teens, and over the past 10 or 15 years, it got into the 20s and the mid-20s. Now I'm just very pleased with 27% vitality. Clearly our new product development process is working. We're developing products our customers wanna buy. At 27% of sales for our end markets, we think that's a really good number. In general, I put a range around it. I think between 20% and 30% is a very good number for AMETEK. Again, the vitality helps not only from new products, having fresh new products that you can win share with, but it also helps with pricing, realized pricing. Great. Thanks. I just wanna go into the process markets a little bit. It's, you called out some of your brands. I'm curious if you're seeing any particular inflection, certain end markets or applications really stepping out, you know, whether it's leaning towards capacity investments or maybe modernizations. Yeah. I would say you know strong across the board in process, but the healthcare space and the energy space were two areas that stood out in the quarter. Then with TMC/Precitech, it's just a precision technology where we're doing things that other people can't do and orders have been high for multiple quarters, and now the sales are catching up. Great. Thanks for the call. Thank you, Chris. The next question is from Joseph Giordano of Cowen. Please go ahead. Hi, Joe. Hey, guys. Good morning. This is Tristan in for Joe. Thanks for taking the question. I guess I'd like to go back to Allison's question a little bit and maybe ask it a little bit differently. If we were to have an industrial recession, the likes of 2016, for example, how do you think your current portfolio would fare versus your portfolio six years ago? Just trying to get a sense of the magnitude there. Thank you. Yeah. I mean, it's difficult to understand the specifics until you're in a recession because they're all different. As I said, I think our portfolio has been improved dramatically. I think that you know, when you think about all the other things that I mentioned, you know, we would stay in front of inflation with pricing. I think in 2023, as the supply chain shortages abate, we believe our working capital will decrease to more normalized level. In the vertical markets, I'm gonna wait and see what we learn from our businesses, but we do expect our longer cycle businesses to be strong in both A&D and energy. We do expect to have a historically strong backlog as when we enter 2023. You know, in terms of a recession playbook, let's say we do see slowing and we start to see a recession, we'll react and manage our business appropriately as we have done in the past. We think we have a proven model that works well in both up markets and down markets. The most recent example of this was during the COVID-driven recession in 2020. If you look at how we performed through that, despite the weakness in sales during the time, our margins actually grew 80 basis points and adjusted operating margins were only 17%. So we've got the capability to manage in both up cycles and down cycles. You know, I believe that the next recession will be no different whenever it comes. Awesome. That's all I have. Thank you. Okay. This concludes our question- and- answer session. I would like to turn the conference back over to Kevin Coleman for closing remarks. Great. Thank you again, Operator. Thank you everyone for joining us for our conference call. As a reminder, a replay of today's webcast can be accessed in the investor section of ametek.com. Have a great day. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.