AME Earnings Call

StacyGood day and thank you for standing by. Welcome to the First Quarter 2026 Ametek Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kevin Coleman, Vice President, Investor Relations and Treasurer. Kevin, you have the floor.

Kevin ColemanThank you, Stacy. Good morning and welcome to AMETEK's First Quarter 2026 Earnings Conference Call. Joining me today are David Zapico, Chairman and Chief Executive Officer, and Dalip Puri, 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 historical results will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization and excluding acquisition-related cost. Reconciliations between GAAP and adjusted measures can be found in our press release and on the investor section of our website.

Kevin ColemanWe'll begin today's call with prepared remarks, and then we'll open up the call for questions. And I'll turn the meeting over to David.

David ZapicoThank you, Kevin, and good morning, everyone. Ametek delivered an excellent first quarter highlighted by double-digit sales growth, exceptional orders growth, robust core margin expansion, record EBITDA, and a high quality of earnings that exceeded our expectations. We also raised our full-year earnings guidance to reflect our first quarter results and the outlook for the balance of the year. Today, we also announced we signed a definitive agreement to acquire First Aviation Services, an attractive acquisition which strategically broadens our defense aftermarket capabilities. I will provide more details on First Aviation shortly.

David ZapicoNow let me turn to our first quarter financial results. First quarter sales were $1.93 billion, up 11% from the same period in 2025. Organic sales were up 5%. Acquisitions added 5 points with foreign currency, a tailwind.

David ZapicoOrders were outstanding in the quarter with broad-based and meaningful growth across all Ametek divisions. Overall orders were a record $2.2 billion, up 23% versus the prior year, and organic orders were up 22%, leading to a record backlog of $3.87 billion.

David ZapicoOperating income in the quarter was $517 million, a 14% increase over the first quarter of 2025. Operating margins were 26.8%, In the quarter, and core margins were an impressive 27.9%, up a robust 160 basis points versus the prior year.

David ZapicoEBITDA in the quarter was a record $620 million, up 11% versus the prior year, with EBITDA margins a strong 32.1%. Our excellent operating performance led to strong cash generation with free cash flow to net income conversion of 107%.

David ZapicoDiluted earnings per share were $1.97, up 13% versus the first quarter of 2025 and above our guidance range of $1.85 to $1.90 per share.

David ZapicoNow let me provide some additional details at the operating group level.

David ZapicoFirst, the Electronic Instruments Group. EIG had an excellent first quarter with double-digit sales growth, strong operating performance, and a meaningful inflection in orders. EIG sales in the quarter were $1.26 billion, up 11% from last year's first quarter. Organic sales were up 2% and acquisitions added 7 points, with foreign currency the balance of the growth. Organic orders for EIG were up an impressive 25% in the quarter. This growth was broad-based across all EIG divisions and end markets with notable growth within our defense, power, and semiconductor businesses.

David ZapicoEIG's first quarter operating income was $376 million, up 6% versus the prior year. Core operating margins were an outstanding 31.4%. Up 40 basis points from the prior year.

David ZapicoThe Electromechanical Group also delivered excellent results in the quarter with continued strong sales and orders growth along with exceptional operating performance, leading to sizable core margin expansion. EMG's first quarter sales were a record $664 million, up 13% versus the prior year. Organic sales were again up double digits at 11% with foreign currency a 2-point tailwind. Sales growth was broad-based with our Automation Engineered Solutions and Aerospace and Defense businesses all delivering excellent growth in the quarter. Additionally, EMG organic orders were again outstanding, up 16% versus the prior year.

David ZapicoEMG's operating income in the first quarter was $171 million, up 33% compared to the prior year period, while EMG's first quarter core operating margins were up sharply to 26%, a considerable 410 basis point increase versus the first quarter of 2025.

David ZapicoI wanted to take a moment to expand on the strength— and breadth of AMETEK's order growth in the quarter. The 22% organic orders growth reflects the ongoing strength within our aerospace and defense markets as well as the continued strong growth across our automation and engineer solution markets. Importantly, it also reflects a meaningful inflection in orders for our process instrumentation and power businesses in the quarter as the strong pipeline of opportunities we have been highlighting is translating into substantial orders growth.

David ZapicoContributing to the order strength were several large orders in the quarter, which help fill in our full-year sales outlook. These large orders are aligned with attractive market segments including defense, space, power, and semiconductor, all markets where Ametek is poised to benefit from strong and growing demand. Within defense, we are seeing broad-based strength, including within our— within missile defense, UAVs, and naval applications. The growth in defense budgets is being driven by modernization of defense capabilities and the ongoing geopolitical conflicts, creating a strong global growth outlook for defense spending, including from NATO allies. Our aerospace and defense businesses was recently selected to provide a range of technologies in support of 3 UAV programs. One program in the US and two with NATO allies. Products being provided on these programs include ruggedized thermal management systems, power distribution equipment, advanced sensors, and embedded computing solutions.

David ZapicoOur EMIP business also provides highly engineered specialized fluid transfer solutions for critical military and defense applications.. And in the first quarter saw strong order growth across many key defense platforms, including in support of nuclear submarines. Within nuclear, we're also seeing strong commercial nuclear demand and orders. Ametek businesses provide a range of highly specialized products to this market, including fluid transfer solutions, radiation detection equipment, and uninterruptible power solutions. In support of nuclear power facilities.

David ZapicoSwitching to space and satellite communications market, our Kern Microtechnik business recently received a sizable order to provide ultra-precision machining solutions and manufacturing services in support of critical RF components used in low-Earth orbit satellites. Kern's advanced precision machining solutions are targeted for mission-critical applications, which require maximum accuracy, stability, and repeatability. And lastly, our Abaco business, a leading provider of ruggedized embedded computing solutions, continues to see strong demand with a significant win in the semiconductor capital equipment market. Abaco recently secured an agreement to provide advanced computing technology to support AI-driven demand for advanced semiconductor tools. Abaco's orders were excellent in the quarter with strong defense orders in addition to strength in the semiconductor market.

David ZapicoOverall, the breadth and strength of our orders in the first quarter reflect the continued trust of our customers and our continued delivery of key technology-driven products that meet our customers' most critical needs.

David ZapicoBefore we move too far off the topic of key programs and our ability to deliver in the most critical and demanding of applications, I want to take a moment to highlight a particularly timely example of our differentiated technology. AMETEK Sensors and Fluid Management Systems, a leader in advanced specialized sensing solutions for the aerospace, defense, and space markets, provided critical solutions used on the recent Artemis II mission that eclipsed the record for the furthest manned space mission. Our SFMS business provided thin-film pressure transducers that supported mission-critical life support infrastructure on the Orion Multipurpose Crew Vehicle. This application demonstrates our ability to serve even the most demanding of applications and our ongoing commitment to reliability, precision, and accuracy. Congratulations to the AMETEK Sensors and Fluid Management Systems team on this exciting success, and also to the 4 other AMETEK businesses: FMH, UEI, NSI, and Zygo Pixelink that also supported the Artemis platform with specialized technology.

David ZapicoNow turning to acquisitions and capital deployment. With our robust balance sheet, strong cash flows, and disciplined approach to capital deployment, AMETEK is well positioned to continue driving long-term value through our disciplined acquisition strategy. We are managing a very strong pipeline of acquisition opportunities across a wide range of deal sizes and markets and are encouraged by the strong pipeline of high-quality acquisition candidates.

David ZapicoAs Dalip will touch on, our significant financial capacity provides the opportunity to deploy well over $5 billion in capital while maintaining an investment-grade credit rating. Our top priority for capital deployment remains acquisitions,, and we expect to remain active in this area.

David ZapicoWe were pleased to announce this morning that we've signed a definitive agreement to acquire First Aviation Services, a leading provider of defense and aviation MRO services as well as proprietary part design and manufacturing. The combination of First Aviation with Ametek's MRO business will provide attractive market expansion opportunities and additional scale for our A&D aftermarket businesses. First Aviation is privately held and has 6 U.S.-based centers of excellence. They have approximately $80 million in annual sales, and the acquisition is subject to customary closing conditions, including regulatory approvals. Alongside this acquisition and capital deployment strategy, we continue to invest in our businesses to ensure Ametek is strategically positioned for long-term sustainable growth. For 2026, we continue to expect to invest an incremental $100 million to support our growth initiatives, with the majority of this investment going into R&D and sales and marketing initiatives.

David ZapicoThese investments continue to deliver excellent returns. In the first quarter, our Vitality Index, which measures sales of new products introduced over the last 3 years, was an outstanding 25%. Now we'll take a moment to highlight an example of an exciting new product from our RTDS Technologies business. RTDS is a leader in real-time digital simulation of power systems, infrastructure, and hardware testing in the loop.

David ZapicoTheir real-time electromagnetic transient simulators enable detailed studies of power systems, allowing engineers to anticipate system and device behaviors that threaten the stability, resilience, and performance of the power grid. RTDS recently updated their simulator platform with new features, including a data center module and an updated workflow that provides more accurate representations of third-party power solutions. This innovation helps data center operators model the power electronics required for key components, such as the uninterruptible power supply systems and the variable frequency drives used in power and cooling systems. This new product led to two new notable orders in the first quarter in support of data center testing applications from large power equipment providers. Congratulations to the RTDS Technologies team on this exciting new product development.

David ZapicoI would like to take a moment to discuss the conflict in the Middle East and how AMETEK is navigating this evolving dynamic. Ametek has only a small sales exposure to the region with approximately 2% of sales into the Middle East. Most of that small exposure is within our EIG process subsegment and is tied to energy markets. We do not expect a meaningful direct impact on Ametek given this small exposure. However, like everyone, we are not immune to the broader macroeconomic uncertainty. We're continuing to monitor developments in the region, especially for impacts on the energy market and potential spillover effects. With all that said, I am confident that AMETEK will continue to navigate this period of increased uncertainty based on the flexibility and durability of our operating model and our proven track record of performing well in challenging environments.

David ZapicoNow shifting to our outlook for the balance of the year. For 2026, we now expect overall sales to be up high single digits on a percentage basis, with organic sales now expected to increase mid-single digits versus the prior year. With the strong results from the first quarter, diluted earnings per share for the year are now expected to be in the range of $7.94 to $8.14, up 7 to 10% compared to last year's results. This is an increase from our prior full-year guide of $7.87 to $8.07 per diluted share.

David ZapicoFor the second quarter, we anticipate overall sales to be up high single digits on a percentage basis with adjusted earnings of $1.96 to $2 per share, up 10 to 12% versus the prior year.

David ZapicoTo summarize, Ametek delivered an excellent first quarter. Our outstanding results reflect the strength of our portfolio and the resilience of our operating model. Our businesses are aligned with attractive secular growth trends and are well diversified across end markets, customers, technologies, and geographies. We are leaders in niche markets where our differentiated technology solutions play a mission-critical role in our customers' most demanding applications. Our highly engineered products are designed into applications governed by strict regulatory and compliance requirements, creating high switching costs. We primarily serve customers in long-cycle industries with long asset lifespans, resulting in a low obsolescence risk. Taken together, these advantages position AMETEK for sustained long-term success and we see significant opportunities for continued value creation. Our culture is deeply ingrained across the organization.

David ZapicoOur competitive positions are strong and continuing to expand. Our operating model is durable, flexible, and scalable. Finally, we are supported by an experienced and proven team that has consistently performed through a wide range of market conditions.

David ZapicoI will now turn it over to Dalip Puri, who will cover some of the financial details of the quarter, then we will be glad to take your questions. Dalip.

Dalip PuriThank you, David, and good morning, everyone. As David noted, AMETEK delivered an outstanding start to the year highlighted by excellent orders, sales, and earnings growth, robust core margin expansion, and strong cash flow generation. Now let me provide some additional financial highlights for the first quarter. First quarter corporate general and administrative expenses were $30 million. Or 1.5% of sales. For the full year, we continue to expect corporate general and administrative expenses to be approximately 1.5% of sales. First quarter other operating expenses were $1 million, largely in line with the first quarter of 2025. First quarter interest expense was $21 million, up $2 million from the first quarter of 2025. The effective tax rate in the quarter was 19%. For 2026, we continue to anticipate our effective tax rate to be between 18.5% and 19.5%. As we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively, from this full-year estimated rate.

Dalip PuriCapital expenditures in the first quarter were $25 million. And for the full year, we expect capital expenditures to be approximately $160 million or about 2% of sales. Depreciation and amortization expense in the quarter was $105 million. For the full year, we expect depreciation and amortization to be approximately $430 million, including after-tax acquisition-related intangible amortization of approximately $210 million or $0.91 per diluted share. For the quarter, operating working capital was 17.5%, a 60 basis point improvement versus 18.1% in last year's first quarter. Operating cash flow was $452 million, up 8% versus the first quarter of 2025. Free cash flow was also up 8% year over year to $426 million. Free cash flow conversion was strong at 107% for the quarter. For 2026, we continue to expect free cash flow conversion to be approximately 110% to 115% of net income. Total debt at March 31st was $2.2 billion, down from $2.3 billion at the end of 2025.

Dalip PuriOffsetting this debt is cash and cash equivalents of $481 million. At the end of the first quarter, our gross debt-to-EBITDA ratio was 0.9 times and our net debt-to-EBITDA ratio was 0.7 times. We continue to have excellent financial capacity with flexibility to deploy well over $5 billion on growth initiatives and our active acquisition pipeline while retaining an investment-grade credit rating. While acquisitions remain our number one capital allocation priority for use of our free cash flow, we also seek to provide our shareholders with opportunistic share buybacks and a consistently increasing dividend. In February, we announced a 10% increase in our quarterly cash dividend to 34 cents per share, our 7th consecutive year of 10%+ annual increases in our dividend payout. I would also like to note that we have enhanced our financial reporting this quarter by including AMETEK's gross margin reporting and a related reconciliation on our investor relations website.

Dalip PuriWith adjusted gross margin at a strong 51% in the quarter, this enhanced disclosure provides investors with greater visibility into AMETEK's margin performance and additional details to better understand our cost structure and the underlying drivers of our profitability. Going forward, we will provide an updated gross margin disclosure quarterly on our website. In summary, our businesses had a great start to the year. Our exceptional operating capabilities delivered excellent revenue and earnings growth, robust margin expansion, and strong free cash flow conversion. With a proven strategy, significant capital deployment capacity, and a strong track record of execution, we are confident in our ability to drive further growth and value creation in 2026. I'll now pass it back to Kevin.

Kevin ColemanGreat. Thank you, Dalip. Stacy, could we please open the line for questions?

StacyThank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster.

StacyOur first question comes from the line of Deane Dray with RBC Capital Markets. Deane, you have the floor.

Deane DrayThank you. Good morning, everyone.

David ZapicoGood morning, Deane.

Deane DrayHey, David, you normally at this point take us for a tour of the key end markets, but your prepared remarks really covered that well, so I appreciate it.

Deane DrayJust— and you also highlighted the, uh, really small exposure to the Middle East, but how about just the rest of the regions? And maybe the idea of, uh, are you seeing anything at the margin in terms of buying hesitancy? Certainly don't see it in the orders, but take us through the end, uh, the, the regions and any kind of, uh, sentiment in terms of macro pressures that you might be seeing.

David ZapicoSure. Yeah, I'll start with the performance around the geographies. And we really had balanced growth. U.S. and international markets were both up mid-single digits. The strongest growth was in Asia. In the U.S., we were up mid-single digits, had very strong growth in our A&D and materials analysis business. Europe was up low single digits. That's where we had, you know, strength in power, strength in our automation businesses, but modest headwinds from the Middle East. We had about, I'd say, $15 million of discrete orders that, you know, due to safety reasons and disruptions that didn't ship during the quarter. So that would have ended up a little bit higher, but that occurred. We have not seen any cancellation in orders from the Middle East. In fact, we're seeing, you know, quotations to really, you know, rebuild infrastructure, the energy infrastructure. So it's going to be when this thing settles down.

David ZapicoIn terms of getting back to the geographies and in terms of Asia, Asia was up low double digits driven by strong China. China was up high teens. And it was driven by our process and power markets. So, you know, across the board, you know, it was balanced growth, solid, and all geographies really performing well.

Deane DrayAll good to hear. Good to hear.

David ZapicoAnd we're not seeing any cancellations or delays or anything at all. In fact, March was an all-time record of any quarter for orders at Ametek. So it's strong. It feels extremely good. And April's not over yet, but I just looked at it and it's on target for another good month. So we're full steam ahead.

Deane DrayGreat to hear. Now, just a follow-up question, and you are likely limited in what you can say. There were some unconfirmed media reports about a potential sizable deal you all are looking at. And David, I don't often see your name in the Wall Street Journal, But this is an asset we're familiar with, but the size would be bigger than what you typically do. We know you have that capacity, but just implications on a larger deal for Ametek, you know, was it— would it box you out of doing bolt-on deals over, you know, kind of the near term? But yeah, whatever you can share with us would be helpful. There's a lot of interest.

David ZapicoYeah, Ametek policy is not to comment on market rumors or speculation related to M&A activity.

David ZapicoYou know, I just go back to what I said before. Our pipeline is strong. There is a mix of larger, medium, and small technology deals, and we're looking to create great deals for our shareholders.

David ZapicoWe announced the MRO deal today, First Aviation Services. We're really happy about that. You know, we have— as Dalip said, we have significant financial capacity that provides the opportunity to deploy well over $5 billion in capital and still maintain an investment-grade credit rating. And M&A is our top priority for capital deployment. And I mentioned a few quarters ago that that's the way we're going to differentiate our performance over the next few years. So we are really engaged with a lot of different businesses and a lot of different opportunities. And we're going to make good, disciplined deals for our shareholders for sure. And as you know, at Ametek, acquisitions are the culmination of a set of processes, well-defined processes. Integration is our secret sauce, and returns are very important for us.

Deane DrayThat's all really good to hear. Best of luck.

Dalip PuriThank you.

David ZapicoThank you.

StacyStand by for our next question. Our next question comes from Andrew Obin of Bank of America. Andrew, go ahead with your question.

Andrew ObinYeah, good morning.

David ZapicoGood morning, Andrew.

Andrew ObinYou know, pretty sporty growth in orders. Just a question. You know, you highlighted large orders, and, you know, I appreciate that, you know, maybe some of them, you know, fairly lumpy. But do you get a sense that there is any pull forward from second quarter in terms of orders and there's going to be something unusually weak about second quarter orders given the strength in Q1?

David ZapicoYeah, I don't think there was much pull ahead at all. In fact, if you go back and look at my last couple of calls, we were signaling that this was going to happen. And what you really saw is continued strength in our EMG businesses and EIG businesses just popped. And we were talking about them usually following EMG about 6 months or 9 months and just happens. So I don't know, some of the orders that we've got are for shipments to fill out the year, but I don't see any kind of pull forward or any kind of slowdown. That doesn't mean that we're going to have a 25%, 23% orders in the next quarter, but the markets for us, we've created a business that's in niche markets where technology is really, really needed. For key infrastructure, for key technologies, for key mission-critical platforms. And we're just in the right place and we're feeling good about the business.

Andrew ObinAnd David, how do you think about, you know, given your order cadence, your top line outlook, you know, is fairly conservative as it always is. You know, that's what Ametek does. But what are you thinking about sort of risk, consumer risk and just overall macro risk in the second quarter. You said orders are good, but any red or yellow flags that you're seeing in your end markets so far, quarter to date? And are you adjusting, you know, the behavior in business units, any sort of business plans to maybe prepare for some turbulence? Thank you.

David ZapicoYeah, yeah, that's a good question. And yeah, I'd start with We're obviously performing very well. We've got strong execution, disciplined operation, and we're gaining momentum across the portfolio. Um, we feel very good about our businesses performing, but there's obviously some ongoing geopolitical uncertainty, and we're remaining prudent with our guidance. Um, you know, we have places in our business where we're laser-focused on material input costs. We believe we're going to be able to offset any inflationary costs with pricing. So we expect to offset inflation, including tariffs, with pricing.

David ZapicoBut we feel good. But we're laser-focused on changes in the macro. And, you know, with our distributed structure, we have business leaders out there close to their customers looking at everything, and we're making sure that we have the the right focus on it. So from what we know now, you know, it feels good to us, but we're laser-focused on what could be a bigger change. And— but as I said, we're confident in our guide and we feel really good about the momentum in the portfolio.

David ZapicoThank you. Thank you, Andrew.

StacyStandby for our next question.

StacyThe next question comes from Nicole DeBlase with Deutsche Bank. Nicole, go ahead.

Nicole DeBlaseYeah, thanks for the question and good morning, David, and the whole team.

David ZapicoGood morning.

Nicole DeBlaseGood morning. I guess maybe just kind of piggybacking on the questions that were asked about orders already. Sorry to dive into this further, David, but just on the large orders, I think you mentioned that there were a few that came in during the quarter, but you're basically saying that you don't think that this order result should be viewed as one-time. So does that mean that the large— if we look at your pipeline of large order activity activity, it's similarly strong and you expect to book further large orders as we move forward?

David ZapicoYeah, I would expect the bookings to continue to reflect some larger orders. And, you know, I think that what we're seeing is, you know, we had a period where the industrial economy at, you know, below 50 PMIs for an extended period of time. That's changing. We were signaling that's changing. And our EMG business picked up, and historically EIG has picked up 6 or 9 months later. And we said that the last couple of quarters, and it's just happening like we thought it would. And EIG is just beginning to pick up. So I think the order strength will continue, but I wanted to highlight some of the orders that— some were lumpy, and I wanted to highlight them. Both to let people understand the areas that we're in and they're great technology and also to understand some of that is for shipments throughout the rest of the year.

Nicole DeBlaseGot it. Okay, clear. And then I just wanted to spend a little bit of time on the medical end market. I don't think that was mentioned a whole lot in the prepared remarks. David, could you just talk a little bit about what you're seeing there?

David ZapicoYeah, I mean, it's about a little over 20% of our exposure and in Q1 we had a great quarter. It was up low double digits. And once again, it was led by Paragon. Paragon is just performing extremely well. And for that full year, there's some tougher comps than the rest of the year. So we have the full year, we expect mid-single digits largely due to the comps. And but, you know, we have other business in there like our Reichert business. It also had a very good quarter. So Paragon and Reichert led us, and the strength in Paragon continuing is notable.

Nicole DeBlaseThank you. I'll pass it on.

David ZapicoThank you.

StacyStandby for our next question.

StacyThe next question comes from Andrew Buscaglia with BNP Paribas. Andrew, go ahead with your question.

Andrew BuscagliaHey, good morning. Excuse me. Good morning, everyone.

David ZapicoGood morning, Andrew.

Andrew BuscagliaI wanted to get your take on, you know, just kind of what's going on in the world related to your aerospace and defense businesses given the heightened geopolitics? I know you guys have a number of niche offerings, so it's hard to know in real time what you see going forward, but can you comment on any impact, positive or negative, to A&D?

David ZapicoYeah. Well, I think what we saw in the quarter, our A&D business continued strong activity, high single-digit growth in the quarter. And the growth was broad-based, all segments continued strong demand with notable strength in our defense markets. And our A&D businesses are very well positioned to benefit from growing demand given our broad portfolio of differentiated technologies. And we now— we increased our outlook for the year. We increased it to— from high single digits to up approximately 10%. And that's what balanced commercial and defense activity. And the way I look at it is if you look at our 18% of the— in A&D, about 60% of that is defense and about 40% of that's commercial. Defense is knocking it out of the park. The OE part of commercial and the business jet market are doing very good. Our M&A— our MRO businesses that service airlines, had an excellent quarter for orders. So the one area that we're watching closely is some of the international markets related to aviation fuel availability and fuel costs.

David ZapicoThat's a small part of our portfolio, you know, less than 2%. But at the same time, we're watching it, but right now we don't see— we have good backlogs, good execution, and, you know, I think that if we see something, it'll come in the— the flying, you know, airlines, the flying public first, but right now we're not seeing it. But the key thing is the vast majority of our aerospace portfolio, we're taking our whole portfolio up, and even the part that we're watching closely had a fantastic first quarter.

Andrew BuscagliaYeah, good to hear. Yeah, you know, along those lines, you know, you make an acquisition in the quarter, First Aviation on the MRO side, which is interesting. I didn't see— did you disclose the price you paid or deal price? And then is there any other details? I think I saw $80 million in revenue, but any other details you can disclose on that?

David ZapicoYeah, sure. I'll provide some more details on that, Andrew. And at the high level, our MRO businesses were largely commercial biased, and we were looking for something that really added a defense aspect to it because of the strength in the market. Really pleased to find First Aviation Services. It's an engineering-driven provider of aftermarket services and proprietary parts. Their primary market is defense. They also have some business jet and commercial pieces of it, but it's primarily a defense business. You know, they have about two-thirds of their business are on MRO service, and they actually have about one-third of it is on proprietary parts You know, we have businesses that have, you know, the parts and the services together. We typically do best with them. So they're really into PMA and DER-approved repairs.

David ZapicoYou know, they add new capability to us, rotorcraft and fixed-wing platforms. There are a lot of good military programs. Expands our military— our MRO capabilities to additional critical systems. Includes propeller blades, rotor assemblies, landing gear, some advanced electronics. So it's a sizable and growing proprietary aftermarket solutions business. Strong engineering capabilities. Nicely expands our defense MRO and just fits like a glove. With our existing MRO capabilities. So we're really excited in getting this business to closing and welcoming the First Aviation team to AMETEK.

Kevin ColemanThank you.

StacyOur next question comes from Scott Graham with Seaport Research Partners. Scott, go ahead with your question.

Scott GrahamHey, good morning.

David ZapicoGood, good.

Scott GrahamCongratulations on the quarter. David, could you continue the matrix as you just did for A&D with that first quarter organic and full year for process, power, and automation? And then secondarily, I don't know if this is possible to do this, but would you be able to maybe carve out some of the larger projects that were in the orders and maybe tell us what, you know, sort of maybe the trend line for bookings was, you know, on that basis.

David ZapicoYeah. Yeah, I'll start with the— I'll finish the walk around the company. I did it for Aerospace and Defense and covered some of it in my opening remarks, but there's some details still that probably you're interested in. I'll start with the Process business, and it was up mid-teens. In the first quarter and driven by acquisitions and low single-digit organic growth. And we have a solid pipeline of orders. We highlighted it during our last earnings call. These translated into broad-based orders growth in the quarter, and we remain encouraged by continued momentum and a growing pipeline of opportunities across our process markets. So now for the full year 2026, we're increasing our guide for process. We now expect organic sales for process segment to be up low to mid-single digits. So increasing it from low to— to low to mid. We talked about aerospace. We're increasing it from high single digits to approximately 10%.

David ZapicoGoing to power next. Power subsegment delivered low single-digit sales growth with strong record-level orders. Power business continues to see strong demand across a growing pipeline of opportunities for power generation, backup power, data center microgrids, and power simulation systems. I highlighted one of the new products and the orders received for power simulation systems in my prepared remarks. Looking to 2026, we continue to expect organic sales to be up mid-single digits for that subsegment. And finally, our Automation and Engineered Solutions, excellent quarter again with high single-digit organic sales growth. Broad-based, both our Automation and Engineered Solutions business and our EMIP business and demand across attractive niche markets remains solid. And we continue to expect organic sales for Automation and Engineered Solutions business to be up mid-single digits. In terms of digging in on the orders, I was trying to, in my prepared remarks, do that a little bit.

David ZapicoWe talked about, you know, a big order in the semiconductor market from Abaco. We're providing computing solutions. That's—. We talked about the space satellite market that is really doing well. We have specialized machining solutions that can make precision components like no one else. So we're actually building machines and we're— doing some contract manufacturing for the low Earth orbit satellite systems. I talked a bit about defense and, you know, what's going on in defense and our strength in UAVs and our strength in missile defense systems. I talked about the nuclear industry and both on the commercial and the civil and defense, very strong for us, and we got a substantial order for the submarine program. And, you know, these are— you know, these programs are things we're winning because of our technology, because we work with customers. These are highly engineered technologies. There are not a lot of people that can do these things, and we just think we're well positioned for where the world's going.

David ZapicoWe're in the right places, and we feel really optimistic right now.

Dalip PuriAnd if I could just add, in terms of the order strength, as we said, it was broad-based, and Yes, there were some large orders in the aerospace and defense area, but every subsegment saw double-digit organic orders growth, and every division was up at least 5%. And automation was very strong. And really in process, our metrology and material analysis businesses also saw really strong order growth. So it was really broad-based, and it really wasn't any— it wasn't driven by lumpiness in orders in certain areas.

Scott GrahamThanks a lot.

StacyOur next question comes from Joe Giordano with TD Cowen. Joe, go ahead with your question.

Joe GiordanoHey, good morning, guys. Uh, there seems to be emerging concerns that potentially aerospace aftermarket, I guess on the commercial side, is peaking. Um, it doesn't seem like there's any— there's real evidence in your business of that, but what are you kind of hearing, seeing, and what would you really be looking at to see if something like that was starting to form.

David ZapicoYeah, as I mentioned before, that's the— third-party aftermarket's the smallest part of our MRO businesses, and, you know, we watch it very closely, and we have some specialized capability, and the US is extremely strong right now. We're involved in some retrofit programs that are driving the business, so there may be a bit of a— countermarket there. And in Europe, you know, Europe and Asia, the MRO, you know, if there's a place that turns down, it'll probably be that area, so we're watching that closely. But again, this is less than 2% of our sales, and the fact is we had an incredibly strong first quarter. The order rates are continuing to have strength, but as the conflict goes on in the Gulf and there's a bit of a shortage in aviation fuel. We think it'll— the weakness may show up first in Asia, second in Europe, and the U.S. seems pretty insulated right now, but it'll be last. But, you know, that can all change in a week.

David ZapicoSo, you know, we're making the call the best we can, and right now we feel good. And if we think there's any downside, it's extremely modest.

Joe GiordanoAnd then I was interested, you mentioned Abaco, the ruggedized computers into semiconductors. I tend to think of that more as like defense-oriented field applications. Can you talk about like where, what they're, what you guys are doing there on semis and how that business is fitting in?

David ZapicoYeah, so, you know, Abaco makes, you know, advanced computing solutions. And when you have the most precision applications that have to work in the most durable environments,— you'll use the Abaco equipment. And along with the needs and the data explosion in defense right now, where everybody has more data to process and RF systems and things like that, it's a great demand driver. Abaco also has a business where, you know, we're selling that technology to the semiconductor market. So really in the quarter there was a semiconductor tool manufacturer that's using the semiconductor tool manufacturers dealing with a ramp-up in demand from AI and everything that's going on in the semiconductor market, and they're using the Abaco computing technology to control their tool. So we were pleased to book that order in the quarter.

Joe GiordanoThank you.

David ZapicoThank you, Joe.

StacyAs a reminder, to ask a question, you'll need to press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

StacyOur next question comes from Nigel Coe with Wolfe Research. Nigel, go ahead with your question.

Nigel CoeThanks. Good morning. Obviously a lot of ground covered here, but thanks for the question. So the guide increase, you know, from mid-to-high singles to high singles and the— obviously the bump in the core growth as well. In the realm of 2 points of sales accretion versus the prior plan, that's how I think about it. And where I'm going with this is twofold. One, the 7-cent increase in the guide, obviously a nice surprise, but seems light if it is a 2-point increase in sales. And then secondly, with the EIG, I'm just curious, given the order strength and the broad-based nature of the order strength, I'm just wondering how we should think about the second half core growth profile for EIG?

David ZapicoYeah, the first point is probably an increase more like 1.5, and it was really driven by process and Aero. So that kind of, you know, puts that in the bucket. And really, I go back to my, you know, original comments. It's a conservative guide. We have a strong start to the year, excellent execution, orders were outstanding. But then you have the geopolitical uncertainty and we balanced it all and we're very confident in our guide. We think it's prudent to do what we did.

Nigel CoeOkay. No, it certainly does seem conservative. And then maybe going back to Deane's question at the front end around, obviously, you don't speculate on press rumors. But I'm just curious, you know, AMETEK has evolved from doing a lot of bolt-on deals to much larger deals under your leadership. I'm just wondering, you know, how you view the risk-reward of larger deals versus small bolt-ons. I'll leave it open like that.

David ZapicoYeah, I think there's an important risk-reward, and you have to make sure what you're buying matches our strategy. Matches what we're trying to do and we can add value to it. So we've naturally increased the size of deals over the past 10 years. We're still focused on niche markets. We're still focused on the areas that we're currently operating in and, you know, I think that, you know, I plan on continuing to expand a lot and, you know, it's— We've got an unblemished record. We've never had a write-off of goodwill. We're very conservative. We look to get a return on every deal. Returns on capital are very, very strong for us.

David ZapicoIt's part of our basic operating model. That's what we do. Our growth model is to add M&A to our portfolio of niche businesses. We don't have any over-dependency on any one market, any one technology. Any one customer. So we just think we have a bulletproof model that's robust and we'll continue to add acquisitions. And no way are we going to do an acquisition that's the size of Ametek. And no way will we add an acquisition that's half the size of Ametek. So we're still looking at these, you know, I'll call them bite-sized deals that are a small percentage of our market capitalization. And we're going to continue to do that. And the environment for us is providing a lot of opportunities for us. So we're assessing a lot of opportunities. We haven't made a decision on any of them, but we're going to pick the ones that we add the most value for our shareholders.

Nigel CoeGot it.

David ZapicoOkay.

Nigel CoeThanks, David. Appreciate that.

StacyOur next question comes from Julian Mitchell. With Barclays. Julian, go ahead with your question.

Julian MitchellHi. Thanks. Good morning. Maybe just moving away from the top line for a second, looking at operating leverage and kind of incremental margins. Is the sort of guide based off a steady improvement year on year in operating leverage as you go through 2026? You know, just wanted to clarify that. And if you see any movement in kind of price net of cost within the year moving around.

David ZapicoRight. So, so if you want to dig into margins, Julian, you know, in the first quarter, we had an excellent operating quarter. So our reported margins were up 50 basis points, but our core margins— so we take out acquisitions and we take out FX— they were up 160 basis points. They were just outstanding. And if you look at both of our groups, EIG had core margins up 40 basis points, driven by excellent productivity. And EMG reported core margins up 410 basis points. So they got excellent productivity plus leverage from the excellent sales growth. If you want to dig into that and say, what were the incrementals, you know, on a dollar of sales, what were the incrementals? Our incrementals were greater than 50% for the company, core incrementals. So when you back out the acquisitions and you back out FX, core incrementals were up 50% both on the whole company. EIG core incrementals were greater than 50% and EMG core incrementals were greater than 50%.

David ZapicoSo really strong. And, you know, related to the guide for the year, we're expecting 35% incrementals and core margins will be up around 50 basis points. So, you know, and again, I'll go back to it's a prudent guide. There's a lot of uncertainty out here related to, you know, potential inflation and things like that we're laser-focused on. So performing extremely well and they continue performing very well for the year. And those are the numbers and they're outstanding in the quarter. And we plan to continue driving it forward. And we have a track record of being able to navigate through changing conditions. And we're laser-focused on what we think we need to do.

Julian MitchellThat's very helpful. Thank you. And then just to circle back to the EMG segment and the top line outlook there. So as you noted earlier, you know, for medical specifically, you've got tough comps later in the year. And the overall EMG segment, the comps get very tough sales in the second half. But at the same time, your orders are growing double-digit organic still. So just wondered, sort of, are you kind of baking in like a mid-single-digit exit rate on organic growth for EMG just because of the comps? Is that the right way to look at it?

David ZapicoYeah, you're in the ballpark. You're in the ballpark. That's the way I look at it.

Julian MitchellGreat. Thank you.

David ZapicoThank you.

StacyThis concludes the question and answer session. I would now like to turn the call back over to Kevin Coleman for closing remarks.

Kevin ColemanThanks everyone for joining our call today, and as a reminder, a replay of today's webcast can be accessed in the investor section of AMETEK.com. Have a great day.

StacyThank you for your participation in today's conference. This does conclude the program. You may now disconnect.