Good day, and welcome to the AMETEK Fourth 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 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then 1 on any touchtone phone. To withdraw your question, please press Star then 2. 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, sir. Thank you, Rocco. Good morning, and thank you for joining us for AMETEK's fourth quarter 2022 earnings conference call. With me today are David Zapico, Chairman and Chief Executive Officer, and William J. Burke, Executive Vice President and Chief Financial Officer. During the course of today's call, we will 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 or 2023 guidance will be on an adjusted basis, excluding after-tax acquisition-related 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. Good morning, everyone. I'm very pleased with AMETEK's results in the fourth quarter and for all of 2022. AMETEK's continued excellent performance reflects the quality of our niche differentiated businesses, the strength of the AMETEK growth model, and the expanding impact of our organic growth initiatives, and most importantly, the outstanding efforts of our global employees. Thank you to all AMETEK colleagues for your many contributions to our success. We have navigated many challenges over the last few years, only to emerge stronger and even better positioned for sustained growth. Our results in the fourth quarter were outstanding. Stronger-than-expected sales growth and excellent operating performance led to a high quality of earnings, which exceeded our expectations in the quarter. We ended the year with a record backlog as demand remained solid across our diverse end markets. Organic growth was again very strong in the quarter as our teams are successfully driving key organic growth initiatives across their businesses and expanding their presence, serving attractive growth markets. Operationally, we're performing exceptionally well and offsetting inflation with price increases, resulting in strong margin expansion. Additionally, cash flow in the quarter was outstanding, providing us the flexibility to invest in our businesses and deploy capital on strategic acquisitions. Now on to the results of the fourth quarter and all of 2022. Fourth quarter sales were $1.63 billion, up 8% over the same period in 2021. Organic sales growth was 9%, acquisitions added 2 points, and foreign currency was a 3-point headwind in the quarter. Orders were solid in the fourth quarter against a challenging comparison, resulting in a record backlog of $3.22 billion. Operating income in the quarter was a record $398 million, a 10% increase over the fourth quarter of 2021. Operating margins were 24.5% in the quarter, up 50 basis points from the prior year. EBITDA in the quarter was a record $489 million, up 12% over the prior year. EBITDA margins were an impressive 30.1%. This outstanding operating performance led to record earnings of $1.52 per diluted share, up 11% versus the fourth quarter of 2021, and above our guidance range of $1.45-$1.47 per share. Let me provide some additional details at the operating group level. First, the Electronic Instruments Group. The Electronic Instruments Group delivered continued strong sales growth and excellent operating performance. Sales for EIG were a record $1.16 billion in the quarter, up 10% from the fourth quarter of last year. Organic sales were up 9%, acquisitions added 3%, and foreign currency was a 3-point headwind. EIG growth was broad-based, with particularly strong growth across our aerospace and defense and Ultra Precision Technologies businesses in the quarter. EIG's operating income in the fourth quarter was a record $307 million, up 10% versus the prior year, while EIG margins were a very strong 26.5% in the quarter. The Electromechanical Group also finished the year with outstanding performance. EMG's fourth quarter sales were $466 million, up 4% versus the prior year, with organic sales growing 8% and foreign currency a 3-point headwind. Growth was again broad-based across EMG, with our aerospace and defense businesses leading the growth. EMG's operating income in the fourth quarter was $115 million, up 9% compared to the prior year period. EMG's fourth quarter operating margins were 24.6%, up an impressive 100 basis points versus the prior year. For the full year results. Overall performance was outstanding in 2022, establishing annual records for essentially all key financial metrics. Overall sales for the year were $6.15 billion, up 11% from 2021. Organic sales increased 11%, acquisitions added 2%, and foreign currency was a 3-point headwind. Operating income for 2022 was $1.5 billion, up 15%, and operating margins were 24.4%, up 80 basis points versus the prior year, while core margins were up an impressive 130 basis points, reflecting our abilities to successfully manage inflation and supply chain challenges. EBITDA for the year was $1.83 billion, up 15% from 2021, with EBITDA margins a very strong 29.7%, up 100 basis points from the prior year. Full year earnings were $5.68 per diluted share, up an impressive 17% versus the prior year. AMETEK's performance in a challenging operating environment highlights the proven strength and flexibility of the AMETEK growth model and our ability to successfully navigate through uncertain economic times. Our businesses continue to leverage the key elements of the AMETEK growth model to accelerate global growth, develop innovative new products, and identify and execute on operational efficiency improvements. Additionally, our businesses work closely with our corporate development team to manage our acquisition pipeline, resulting in a continued strong deployment of capital on strategic acquisitions. In 2021 and 2022 combined, we deployed over $2.4 billion in capital on eight acquisitions and acquired over $600 million in annual sales. We expect to remain active in 2023 as our deal pipeline remains very strong and our balance sheet provides us significant financial capacity to deploy capital. In addition to our acquisition strategy, we remain committed to investing in organic growth initiatives and are very pleased with the impact these investments are having on AMETEK's growth. As I highlighted during our last earnings call, AMETEK's portfolio has strategically evolved with increased exposure to higher growth market segments. This portfolio evolution has been driven by our acquisition strategy and by the organic investments we're making in our businesses. In 2023, we expect to invest an incremental $90 million in support of these growth initiatives, including investments across research, development, and engineering and sales and marketing. One way we measure the success of these investments is through our Vitality Index, which was an outstanding 27% of sales in 2022. Our increased investments in RD&E continue to yield innovative advanced technology solutions, including within our Zygo business. Zygo, which is based in Middlefield, Connecticut, designs and manufactures advanced optical metrology systems and ultra-precise optical components and assemblies for a diverse set of end markets, including defense, research, and semiconductor. Zygo partnered with the Lawrence Livermore National Laboratory National Ignition Facility to provide high-end precision optics in support of their inertial fusion energy testing program, which provides a significant leap forward in the realization of sustainable fusion energy. Achieving these heights of energy production required the use of highly precise optics and scalable manufacturing processes, which were developed in partnership with Zygo. I want to congratulate the Zygo team for their tremendous contributions, supporting important advancements in research and technology. Lastly, let me briefly touch on the supply chain issues and inflation. While tightness remains in certain areas, we're seeing improvements in the global supply chain and logistics. Additionally, although inflation remains elevated, we are also seeing modest improvements versus levels experienced in 2022. As we look ahead to 2023, we will continue to proactively manage our supply chain and remain confident in our ability to offset inflation with price increases. Shifting to our outlook for the year ahead. While macroeconomic uncertainties remain, we are confident in the quality of our businesses, the flexibility of the AMETEK growth model, and our ability to navigate through these uncertain times. Given our record backlog and proven operating capability, we are confident in our outlook for 2023. For 2023, we expect both overall and organic sales to be up mid-single digits versus 2022. Diluted earnings per share for the year are expected to be in the range of $5.84-$6.00, up 3%-6% compared to last year's results. For the first quarter, we anticipate overall sales up mid-single digits with adjusted earnings of $1.38 to $1.42, up 4% to 7% versus the prior year. AMETEK's fourth quarter and full year results were excellent. Our record backlog, the strength and flexibility of the AMETEK growth model, and a world-class workforce position us nicely for 2023. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter, we'll be glad to take your questions. Bill? Thank you, Dave. As Dave highlighted, AMETEK had a very strong fourth quarter to complete an outstanding year. In the quarter, we delivered record level operating performance and a high quality of earnings. Let me provide some additional financial highlights for the fourth quarter and for the full year, along with some additional guidance for 2023. Fourth quarter general and administrative expenses were essentially flat versus the prior year. For the full year, general and administrative expenses were up $6 million, driven largely by higher compensation costs, and as a percentage of sales were 1.5% versus 1.6% of sales in 2021. For 2023, general and administrative expenses are expected to be up modestly versus 2022 levels and remain at approximately 1.5% of sales. The effective tax rate in the fourth quarter was 18.9%, up from 17% in the fourth quarter of 2021. For 2023, we anticipate our effective tax rate to be between 19% and 20%. 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 were $58 million in the fourth quarter and $139 million for the full year. Capital expenditures in 2023 are expected to be approximately $140 million or about 2% of sales. Depreciation and amortization expense in the quarter was $89 million, and for the full year was $320 million. In 2023, we expect depreciation and amortization to be approximately $325 million, including after-tax acquisition-related intangible amortization of approximately $154 million or $0.66 per diluted share. For the quarter, operating working capital was 18.9% of sales. Cash flow in the fourth quarter was excellent, with operating cash flow of $385 million, up 37% versus the fourth quarter of 2021. Free cash flow was also up 37% to $327 million in the quarter, while free cash flow conversion was 106% of net income. Total debt at year-end was $2.39 billion, down from $2.54 billion at the end of 2021. Offsetting this debt is cash and cash equivalents of $345 million. During the fourth quarter, we deployed approximately $240 million on the acquisition of RTDS Technologies. Gross debt to EBITDA ratio at year-end was 1.2x, and our net debt to EBITDA ratio was 1.1x. As Dave noted, we remain active on the acquisition front with a solid pipeline of acquisition candidates. Given our strong cash flow and modest levels of leverage, we are well positioned to deploy additional capital. We have approximately $2.3 billion of cash and existing credit facilities to support our growth initiatives. In summary, our businesses performed exceptionally well in the fourth quarter and throughout all of 2022, delivering strong growth and a high quality of earnings in a challenging operating environment. AMETEK is well positioned for 2023, given our strong financial position, our proven growth model, and our world-class workforce. Kevin? Thank you, Bill. Rocco, could we please open the lines for questions? Absolutely. As a reminder, ladies and gentlemen, if you'd like to ask a question, please press star then one. To remove yourself from queue, please press star then two. Today's first question comes from Allison Poliniak with Wells Fargo. Please go ahead. Hi. Good morning. Good morning, Allison. Can we turn organic investments, the $90 million, if I recall, I think that's a step down from what you did in 2022? Just any color there, is it just some conservative nature just given the uncertainty out there, or are there unusual projects in 2022? Just any thoughts on that side? Yeah, that's it's to start out the year and there's a potential to do more and the $90 million was a good number. It's incremental, keep in mind, incremental over what we've done in 2022. It's incremental, and we're making healthy investments in R&D. RD&E is up double digits for the year and healthy investments for sales and marketing. We think the $90 million is appropriate and obviously that can be flexed up or down if required. Great. A lot of concern certainly out there about potentially some weakness showing up in H2. Just any thoughts on your end, what you're seeing in terms of that? Or is there anything concerning or popping out that kinda has you a bit worried as we enter the back half of 2023 and into 2024? Not really. I mean, the obviously our growth is slowing., record backlogs and, we're executing very well. We're getting the price and, it still feels good to us. It feels strong and good. When you get out to the second half of 2023, I mean, it's, there's less visibility because you're further out. Our backlog is at a record level. It's usually at about 30% of annual sales, and right now it's running at about 50% of annual sales. We feel really good and, we don't see a slowdown yet. Perfect. Thank you. Okay. Thank you, Allison. Our next question today comes from Deane Dray Thank you. Good morning, everyone. Good morning, Deane. Hey, was hoping you'd take us through the key end markets, and then also on the regional updates. It's been interesting. Maybe people got too negative on Europe, so love to know how Europe did, and then China reopening, how does that. Right. impact you all? Sure. Deane, I'll start with your second question, the geographical outlook. Strong broad-based growth across most geographies. Our Asia region was flat on China headwinds. To your point, our fastest-growing market was Europe. Europe was up 12% with notable strength in both our process and aerospace defense markets. We had a really strong performance in the U.S., up 10% organically. Broad-based strength, notable strength in our process businesses. In Asia, as I said, it was flat with notable strength in aerospace and defense and process. China was down for us, low double digits in the quarter on a difficult prior comp and the impact of the zero-COVID policy., Asia, we think that the China situation is gonna turn around as the reopening occurs, and we're pretty optimistic for it in the second half. That's the picture in Q4. Really strong broad-based growth. Strongest Europe, second U.S. Most of Asia was really good, in China, there was some weakness. The second question was in the market segments summary. I'll take a walk around the company. In our process area, our overall process businesses, they were up high single digits in the quarter. Organic sales were up 10%. We also had the contributions from the acquisition of Navitar, and it was offset by foreign currency headwinds. As we saw throughout last year, growth across our process businesses was particularly broad-based, but it was particularly strong in our Ultra Precision Technologies businesses in the quarter. As we look ahead to 2023, we expect organic sales for process businesses to be up mid-single digits for the year. Next, I'll talk about aerospace and defense. Our aerospace and defense businesses had a very strong finish to the year, with overall and organic sales up mid-teens. That was the strongest growth rate of the year for aerospace and defense. Our commercial businesses led the growth in the quarter. We had sales of high teens on a% basis in the commercial business, and defense was also strong in the quarter, growing low double digits. For all of 2023, we expect organic sales for our aerospace and defense businesses to be up mid to high single digits, with commercial aerospace growth expected to be modestly stronger than defense growth. I'll next go to power and industrial. Overall sales for our power and industrial businesses were up high single digits in the fourth quarter, driven by mid-single digit organic growth and the contributions from the acquisition of RTDS. Growth in the quarter was particularly strong across our Programmable Power business. For all of 2023, we expect organic sales for our power and industrial business to be up mid-single digits, with similar growth across both the power and industrial segments. Finally, I'll talk about our Automation and Engineered Solutions market segment. Overall sales were up low single digits in the fourth quarter with very solid mid-single digit organic sales growth. They had some currency headwind in that segment. I was very pleased with the overall growth and the performance of Automation and Engineered Solutions in 2022. They're continuing to expand exposures in attractive niche markets. In particular, our engineered medical components business saw strong growth in the quarter. In 2023, we expect organic sales for our automation and engineered solutions businesses to be up mid-single digits, with similar growth expected across both our automation and engineered solutions business. That's a walk around the company. Deane, do you have any more questions? Yeah. Just as a follow-up, just how would you characterize the pace of orders industrial demand, the size of orders? Is there just with respect to how normalization might be happening for AMETEK's businesses? That's a great question, Deane Dray. Our overall orders were up 1.5% in the quarter. The overall demand environment, as I answered Allison Poliniak's questions, feels really solid. We had our 10th straight positive book-to-bill quarter, and we ended with an all-time record backlog, as I mentioned in the prepared remarks. This level of backlog, as I said, was 50% of our annual sales, well above the normal level of 30, and it's up 78% from the end of 2020. We're in a really strong position as we enter 2023. To your question on some of the nuances, if you'll recall, over the last couple of earnings calls, we highlighted a couple of dynamics that would impact our order growth. The first was the difficult comparisons we're facing because those orders have been strong for an extended period of time. To give some context, over the prior 9 quarters, our orders grew over 20% a quarter. It's been sizable and sustained. That helped build the backlog. The second dynamic we highlighted was the expectation of customers to return to more normalized ordering patterns now that the supply chain is improving., we started to see that dynamic play out in the fourth quarter. Overall, we're comfortable with our order levels in Q4. After starting off in january we just finished January, we had another solid orders month ahead of our expectations and solidly up from January 2022 order levels. Again, we're feeling pretty good with the strong backlog, and our orders are hanging in there. We think that we're in looking at a pretty good year. That's all really helpful. Thank you. Okay. Thank you, Deane. Our next question today comes from Brett Linzey with Mizuho. Please go ahead. Hey, good morning, all. Good morning, Brett. Hey, I just wanted to come back to inventories., some of your peers have been talking about some elevated inventory in some of the OEM channels. Just curious what you're seeing there in some of your served businesses, served markets, and if there's any area of concern there. Yeah, the first point I'd like to make is that when you're looking at customer inventories, a lot of our products are customized and they're high-value products. We don't really have a lot of distributor stocking issues to worry about. That's particularly true in EIG. In EMG, there's more of an OEM feel of the customer base, and that's where you're seeing a bit of the customer ordering patterns normalize., overall, we think we've got a good handle on it and we feel pretty good about where we're at. Yes. Okay, that's great. just shifting to the 2023 outlook. I was hoping maybe you could put a finer point on just the underlying assumptions., how much price do you expect versus volume? Then anything specific on the quarterly phasing. I mean, do you think you get growth in both the first half, second half, or as you work down the backlog, does it begin to decline there in the second half? Yeah, great question. I mean, with our budget model, we pretty much have a traditional first quarter, so it's not really second half biased, and we think we'll grow in each of the quarters of the year. In terms of pricing in our budget model, we have about 4 points of price, and we assume that we have about 3 and a half points of inflation. We're gonna offset price and inflation by about 50 basis points. Now, that's down a bit from 2022, where we had about 6 points of price and we offset about 5 points of inflation. It's the guide for the entire year, and we're being a bit conservative now, and we'll probably start out a little better than that, but that's our plan for 2023. Also, in 2023, I mean, in addition to staying in front of inflation with price, we think supply chain shortages are gonna abate and we believe our working capital levels will decrease to more normalized levels. A very healthy 110%-115% conversion to net income on the free cash flow. We also think that, in terms of vertical markets, we do expect our longer cycle aerospace and defense businesses to be a bit stronger than the balance of the portfolio. When I went through the market segment commentary, and Deane, it was a little bit higher. It was, had a mid to high outlook. We think that's gonna be true, and that was accelerating as each quarter of 2022 really., I... , we expect the both of our groups to grow mid-single digits. We talked about the historically strong backlog., that's some assumptions that went into our budget. Do you have any other questions, Brett? no, that's it. Great quarter and appreciate all the insight. Thank you, Brett. Thank you. Our next question today is Scott Graham from Loop Capital Markets. Please go ahead. Hey, good morning, all. Really congrats on that Zygo. That's a pretty big deal. Yeah. That's really, really interesting. We're really helping. That team there did a great job, and it's working on fusion energy is a great thing and it just shows our capability. Yeah, for sure. Thank you. The orders, Dave, you said up 1.5 in the quarter. Was that organic? Can you also tell us the split by segment? Yeah. I That was overall orders. Organic was down minus 2. Overall orders were up 1.5, organic was minus 2. Both segments were about at that same one book-to-bill. It wasn't a distinct difference between the segments. As I said, our overall demand environment feels solid., tenth straight quarter of book-to-bill. We have a strong backlog and as we have this dynamic of customers returning to more normalized ordering patterns we have a strong backlog, so I feel pretty good about it. Okay. Great. Thank you. Based on your answer to the prior question, is it possible then that sales volumes could sort of flatten out in the second half of the year and your growth organic is essentially all price? Is that what you're thinking cadence-wise? I don't think in the second half of the year. I mean, we're gonna have some healthy price, but I think it's gonna actually increase a bit in the second half., if you, if you think about our order rates, we have that mid-single digit sales growth forecasted. We think we're gonna grow orders also. Orders are gonna grow a little bit less than sales as our forecast, but they're gonna grow. Really by the end of the year our backlog is still gonna be at elevated levels. It'll be down a bit, but at elevated levels historically., we clearly don't... With our strong backlog, which will provide a buffer if there is some kind of downturn, we don't see it right now, our orders will be up. We'll just be up a little less than sales. Again, at the end of 2023, we'll have historically elevated levels of backlog, similar to now. Yep. Great. Hey, thank you. Thank you, Scott. Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star then one. Our next question comes from Matt Sumerville with D.A. Davidson. Please go ahead. Hi, good morning. This is Will Jellison on for Matthew Summerville today. Hello, good morning. I was curious about your recent acquisitions of Navitar and RTDS and just about your first observations with those, with those companies as part of the AMETEK portfolio. How did things unfold relative to expectations, and how are things going with bringing them into the fold? Yeah, they're going very well. I mean, Bill and I have met with both of the acquisition integration teams and really positive. Just to recap a little bit, RTDS provides real-time power simulations used by utilities and very strategic acquisition that broadens our power instruments businesses with differentiated testing and measurement and simulation capabilities. It's a, it's attractive position and high growth market. Really good team. I mean, just experts in the field and it's kind of fun interacting with them. They're really adopting AMETEK, and feel good about that one. Same with Navitar. Navitar is in some good growth markets. The optics market is doing quite well with us. , and even in the semiconductor space where they play, their main customer is one that's very differentiated and has unique capabilities. That along with life sciences, along with the machine vision, there's a very good outlook there. That business is a little bit different. It's being integrated into our Zygo business. It has new capability for Zygo, a much needed capacity for Zygo, and the integration is going very well. Great. Thank you. As a follow-up, staying on the theme of M&A, you mentioned your pipeline is very strong at this juncture. I'm curious about what your observations are in the market overall with respect to the level of competition for assets and where multiples seem to be moving in your observation. Right. Yeah, I think with the interest rates increasing and with money not as free as it was, is actually an advantage to us., we have a good pipeline and a good balance sheet, and we remain very active with a solid pipeline of deals. The valuations have come in a bit. Of course, we're looking at some quality assets though, so they're still a bit elevated from historical levels, but no doubt they've come in. Important for us in our pipeline, we have a very disciplined acquisition process. These deals are gonna meet our traditional financial hurdles, which is primarily a return on invested capital of 10% by the third year of ownership. These are important thresholds for us as we want to ensure we're providing a strong level of returns on the capital we deploy for our shareholders. That's been a hallmark of AMETEK's acquisition program for a long period of time. We do this all with cash and debt, don't use equity. There's a bigger pipeline right now than there's been historically because when there's less less money around the system to bid up deals. We feel pretty good with where we're at. If we do something, and I believe we will be talking to you about deals in the near future, they're gonna meet all of our traditional hurdles. We're committed to have investment-grade credit rating, and we got plenty of about $2.3 billion of capital and financing capacity available. In this environment, discipline is gonna be a key word. It's always been for AMETEK, but it'll be very key in terms of executing our forward-looking M&A strategy. That's great. Thank you for taking my questions. Yeah. Okay. Our next question today comes from Andrew Obin with Bank of America Merrill Lynch. Please go ahead. Hi, this is David Ridley-Lane on for Andrew Obin. Hi, David. Morning., how much of the one-time cost around supply chain disruptions last year, the higher freight costs, the spot buys and electronics, all those things fall off in 2023? I guess I'm wondering how is this a meaningful tailwind in kind of your forecast? Yeah, I think that what you're gonna see, there's still an elevated level of inflation,. At the same time, some of the one-time distributor purchase of inventory are gonna go away. There's gonna be some natural tailwinds for us in terms of margins. We expect that working in the P&L in our budget model, our productivity slash cost savings of about $110 million. We think it'll be substantial. That's where we're starting out the year, but we think there's maybe even some upside to that. It's largely related to there's a couple of opposing forces. You're dealing with inflation and some costs of things are still going up. At the same time, some of the supply chain issues are working the other way, especially the higher prices that we paid on a one-time basis to some of the electronics distributors to continue shipping product. Got it. then you have been adding capacity through 2022. I guess in the capex what's kind of growth versus maintenance or whatever framework you wanna use to discuss kind of how you're thinking about capacity additions here in 2022? We added a lot of capacity in 2022. We brought some low-cost region facilities online. We've talked about that. For 2023, we expect our capital expenditures to be flat., a little bit more than 2% of sales as we've done historically., it's a good balance between growth CapEx, maintenance CapEx, and CapEx funding cost reduction. Good. If I could get one more in, what is your expected EPS contribution from Navitar and RTDS? Yeah, I'm not gonna break out the deals, but they'll be slightly accretive. Thank you very much. Okay. Thank you, David. Our next question today comes from Joe Giordano with Cowen. Please go ahead. Hey, guys. You mentioned customers kind of getting normalized on their behavior and their ordering patterns. Like, can you maybe give a little bit finer point on that and, like, what you're seeing and are actual things getting pushed out or are they just ordering more real time? Yeah, I if you think about it from the customer's view, they've kind of got trained by the pandemic to order things early. now most companies are getting, including AMETEK, is getting back to being able to deliver in lead time. In fact, that's part of the reason that we grew our businesses at a faster rate during the pandemic period. We were able to ship and deliver, and we had the inventory buffer. What's happening is, as customers normalize their buying patterns, they don't have to order early anymore. That's what's really happening I think across the broader supply chain, and we're seeing that. That's the main normalization that we're talking about. What -- when you mentioned the M&A pipeline looks good, how do you think about timing of execution just given the macro here, given it looks like industrial is getting light, is getting weaker, and are you relying on trailing 12 results that might be different than forward 12 for companies that you're looking at?, how does it impact your desire to be actionable right now given where we are in the business cycle? , AMETEK has historically bought through both up cycles and down cycles. Sometime you can get your best deals during a down cycle. You have to be cognizant of what the forward-looking EBITDA is, not really the trailing, but the forward. It's something that we've been keenly aware of for years. We're focused on it. Thanks, guys. Thank you, Joe. Our next question today comes from Robert Mason at Baird. Please go ahead. Yes. Good morning. Good morning. Hi, Dave. Good morning. Good morning. Dave, I was gonna see if you could drill into the process segment a little more. You called out Ultra Precision. Right ..., with relative stronger growth. Does that carry forward into 2023 just in terms of what leads that part of the business? Then just maybe higher level, any way to cut the mix of what that process segment that sells into more of an R&D function Right ... versus more of a production environment? Right. Yeah, that's a good way to think about it, and I'll try to put some more color into that. I mean, if you look at 2022, what stood out was our healthcare component. Our healthcare component is a big part of process. Across all of AMETEK, it's about 15% of sales, but it's a big part of process. I'll give you an idea. in Q4, our Rauland business was up 20% organically. They're really doing a good job in that market as hospital spending has been fantastic for us, and people are putting in new systems post-pandemic. The semiconductor market is about 6% of sales, and the vast majority of that is in process. The semiconductor market was up high single digits in the Q4. We think, in 2023, there'll be a a slight downtick there. That'll be up low to mid, but still growing because we have a lot of applications in research and also in areas that are continuing to grow. We're in the right places in semiconductor. You got healthcare, you got semiconductor, you got the research market where we've had with our CAMECA business, just every lab in the world has to have one of our atom probes. Every lab in the world has to have some of our SIMS products. Their backlog is really good, and they're doing well. You got the oil, old traditional oil and gas part of process., that's doing very well. In Q4, it was up high single digits. For all of 2022, it was up low double digits. For 2023, we expect + high single digits., process is doing very well. We think it's gonna continue in the future. Excellent. That's very helpful. Just as a follow-up, could you speak to how you think the incrementals will look for EIG versus EMG, in 2023? They were, EMG was certainly very strong in 2022, but, just how do those look going forward comparatively? A good question., in terms of incrementals, in both groups, I think the core incrementals will be up 30%-35%. I think the core and reported margins will be up 30 to 40 basis points. We really think we have a clear line of sight to grow margins again, and it'll be healthy incrementals, and then we'll be able to increase our core margins as we go forward. Very good. Thank you. Thank you, Rob. Our next question today comes from Steve Barger at KeyBanc Capital Markets. Please go ahead. Hey, good morning, guys. Hello, Steve. , some automation and robotics OEMs have recently talked about distribution channel bottlenecks being a hindrance to growth. Can you just talk about what you're seeing in that market, both near term and expectations for how that market grows in the future? For 2023, I think that business will be up mid-single digits, and both our automation and our engineered solutions will be up mid-single digits. I think that's, we're selling to mainly OEM customers there, so you're gonna have a bit of the effect of the ordering patterns, the change in ordering patterns there, but we have a really healthy backlog., it's really what we talked about. Customers are changing ordering patterns. We're really good at delivery, so we're meeting our customer commitments, so they're now ordering at normal lead time. You'll see a little bit of the order, corrections that we talked about in Q4 continuing, but we still have a record backlog and, all the comments that I made hold for, that part of the business also. Got it. Thanks. Obviously semiconductor demand has been under pressure, especially on the memory side. Right. You just said you're in the right places to grow. Yeah. Does that mean you're supplying the makers of tools that go to Foundry and Logic, or just how will you grow this year? Yeah ... in the context of what's a pretty tough memory sector? Right. Right. It's pretty tough. Again, we grew mid-teens in 2022, so that growth for 2023 is up low to mid. It's a substantial- Yeah ... decline, but we're still growing. The reason we're growing, the key application areas, at our CAMECA business, they're really involved in semiconductor research and development and staying ahead and getting the next generation, and we have some tools that are must-haves for the semiconductor market and really strong backlogs and orders are continuing well. The second area is we're in the EUV optics area for- Got it. ... use in semiconductor fabrication. The EUV market is kinda separate from the memory market and really strong. Those two areas are a good part of our semiconductor business and they're really strong, and that's why we think we'll still be able to grow low to mid-single digits in an environment where you have some of the headwinds. That's great detail. Thank you. Okay. Thank you, Steve. Ladies and gentlemen, this concludes our question and answer session. I'd like to turn the conference back over to Kevin Coleman for any closing remarks. Great. Thank you again, Rocco, thank you everyone for joining us for our conference call. As a reminder, a replay of today's webcast can be accessed in the investors section of ametek.com. Have a great day. Thank you. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.