Good day, ladies and gentlemen. Welcome to the Q2 2019 AMETEK, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-answer session, and instructions will be given at that time. [Operator Instructions] I would now like introduce your host for this conference call, Mr. Kevin Coleman, Vice President, Investor Relations. You may begin.

Great. Thank you, Kevin. Good morning, everyone, and thank you for joining us for AMETEK's second quarter 2019 earnings conference call. With me today are Dave Zapico, Chairman and Chief Executive Officer; and Bill Burke, Executive Vice President and Chief Financial Officer. AMETEK's second quarter results were released earlier this morning and are available on market systems and in the Investors section of our website. This call is also being webcasted, and can be accessed on our website. The webcast will be archived and made available on our site later today. During the course of today's call, we will make 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 the AMETEK's filing with the SEC. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. Also any references made on this call to 2018 or 2019 results will be on an adjusted basis, excluding after-tax, acquisition-related intangible amortization, and excluding the fourth quarter 2018 gain related to the finalization of the impact of the 2017 Tax Cuts and Jobs Act. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section of our website. We'll begin today with prepared remarks by Dave and Bill, and then open up for the questions. I'll now turn the meeting to Dave.

Thank you, Kevin, and good morning, everyone. AMETEK had an excellent second quarter. We exceeded earnings guidance on solid organic sales growth, contributions from acquisitions and exceptional operating performance. In the process, we delivered a record level of sales, EBITDA, operating income and adjusted diluted earnings per share. We also delivered impressive growth in operating cash flow in the quarter. Given the strong results and our outlook for the back half of the year, we have again increased our full year earnings guidance range. These results continue to highlight the strength of the AMETEK Growth Model, and our ability to deliver strong and consistent performance for our shareholders. Now on to the financial highlights for the quarter. Total sales were a record $1.29 billion, up 7% compared to the second quarter of 2018. Organic sales growth was solid at 3%; acquisitions added 5%; and foreign currency was a 1 point headwind. EBITDA in the second quarter was a record $349 million, up 10% over the same period in 2018, and EBITDA margins were excellent at 27%. Operating income was a record at $295.4 million, a 9% increase over the second quarter of 2018. Reported operating income margins were up 60 basis points to 22.9%. And excluding the dilutive impact of acquisitions, operating margins increase an impressive 110 basis points over the prior year period. This exceptional operating performance reflects the strength of our operational excellence initiatives. Earnings were a record $1.05 per diluted share, up 14% over the prior year and exceeding our guidance range of $1 to $1.02 per diluted share. Lastly, operating cash flow was superb in the quarter, up 21% to $246 million. Now on to the individual operating groups. First, the Electronic Instruments Group. EIG second quarter sales were $820.2 million, up 10% over last year's…

Thank you, Dave. As Dave noted AMETEK had an excellent second quarter, capping off the first half of the year with record results. Let me provide some additional financial highlights for the quarter. Core selling expense in the second quarter was roughly in line with last year's second quarter. Second quarter general and administrative expenses were up slightly over the same period in 2018, and as a percentage of sales were 1.4% versus last year's level of 1.5%. The effective tax rate in the quarter was 20.4%, down from last year's second quarter tax rate of 21.9%. For 2019, we now expect our effective tax rate to be approximately 21%, and as we've stated in the past, actual quarterly tax rates can differ dramatically either positively or negatively from this full year estimated rate. Working capital was 18.3% in the second quarter, essentially unchanged from the first quarter. Capital expenditures were $22 million in the quarter and for the full year of 2019 we continue to expect capital expenditures to be approximately $100 million or 1.9% of sales. Depreciation and amortization expense in the quarter was $57 million. For the full year, we continue to expect depreciation and amortization to be approximately $235 million including acquisition-related intangible amortization of approximately $130 million or $0.43 per diluted share. Our businesses continue to generate very strong levels of cash flow. Second quarter operating cash flow was $246 million, up 21% over last year's second quarter, and free cash flow was $224 million, up 20% over last year. As a percentage of net income, free cash flow conversion was 104% and we continue to expect full year free cash flow conversion of approximately 110% of net income. The primary use of our strong free cash flow is to support our acquisition efforts. And as Dave just noted, our pipeline remains healthy, and we have significant financial flexibility to continue our acquisition strategy. Total debt at the end of the second quarter was $2.47 billion, down from $2.63 billion at the end of 2018. Offsetting this debt is cash and cash equivalents of $568 million, resulting in a net debt to EBITDA ratio as of June 30th of 1.4 times. We remain well positioned to support our growth initiatives with approximately $2 billion of cash and existing credit facilities. To conclude, our businesses delivered outstanding performance with high quality results in the second quarter. Our outlook remains positive through the back half of 2019 given our strong balance sheet and excellent cash flows. Kevin?

Great. Thank you, Bill. Kevin, can we please open the lines for questions.

[Operator Instructions] Our first question comes from Matt Summerville with D.A. Davidson.

Thanks. Couple of questions. First, can you give us a little color on where incoming order rates organically were for the total company and by business? And also just given the macro choppiness out there, can you talk about what sort of linearity you saw during the quarter, and what you're seeing thus far in your business in July?

Sure, Matt. In terms of orders, Q2 orders were up 4% and organic orders were flat, a very slightly positive. In our EIG business, the order rates were in line with the organic sales growth in the quarter, and the EMG orders were down a bit. We had some delays in our automation and engineered solution businesses. And we ended the quarter with a near record backlog of $1.7 billion. And in terms of the order patterns and sales patterns during the quarter, they followed a similar trend. We had - May was a bit better than April, and June was a bit better than May, which is very typical for our business, but the growth each month as it stepped up was more subdued than past quarter. So pretty typical, but a little less of a ramp.

And then, maybe as a follow-up, where were you in the quarter on price versus inflation? Thanks.

Sure, Matt. Sure. Q2 was much like the second half of '18, and the first quarter of '19. We had an excellent quarter. We achieved 2 points of price across our entire portfolio. Total inflation, the impact of tariffs was a bit less than 1.5%. So we had a positive spread and we're very pleased with the results. As you know, the results speak to the highly differentiated nature of AMETEK's product portfolio. We have leadership positions in niche markets around the globe, and we really have some focus and determination to make sure we stay in front of a changing global environment. So we're very pleased with the results.

Thank you, David.

Thank you, Matt.

Our next question comes from Nigel Coe with Wolfe Research.

Thanks. Good morning. I thought it maybe a good time to perhaps run through the end markets and the geographies in a bit more detail?

Right. Sure thing, Nigel. First, on our market segment commentary, I'll start with our process businesses. They had another excellent quarter with overall sales up low teens on a percentage basis, driven by mid single-digit organic sales growth, and contributions from the acquisitions of Forza, Telular and Spectro Scientific. As I mentioned in the prepared remarks, the Materials Analysis business had a particularly strong organic growth quarter driven by solid new product introductions and solid demand for their high-end instrumentation, and for all the 29 we continue to expect process organic sales to be up mid single digits. Switch to aerospace, our aerospace and defense businesses delivered another excellent quarter with high single digit organic sales growth. This growth reflects the attractive positions we have across a diverse set of aerospace and different defense platforms. Similar to the first quarter, growth in the second quarter was broad based across our various aerospace markets. We had a notable strength in our commercial OEM and third-party MRO businesses. And given the solid start to the year, we're increasing our expectations for aerospace and now expect mid to high single digit organic sales growth for all of 2019 with balanced growth across each market. Our power and industrial segment, in the second quarter, sales were up low single digits, driven by the contribution from the recent acquisition of Motec. Organic sales were down slightly in the quarter and in line with our expectations. For all of 2019, we continue to expect low to mid single digit organic sales growth given the strength of our backlog and solid order patterns in these businesses. And finally, sales of our automation and engineered solutions businesses were up low single digits for the second quarter against the difficult prior year comp. For all the 2019, we now expect low to mid single digit organic sales growth for automation and engineered solutions, and we are seeing some order delays in certain businesses. So we lowered that automation and engineered solutions segment from mid to low to mid, and we increased our aerospace guide to a bit or so. So I'll just summarize the whole thing, further continue to expect overall full year organic sales growth of 3% to 5%. As I said, we have modestly increased growth forecast for aerospace, while modestly decreasing our growth forecast for automation and engineered solutions. And really no change to process and power and industrial and OEM, but process performed very well in the quarter, and they look strong.

Great. Thanks, David. And maybe if you could just touch on what you've seen in China. Perhaps just address the 3% to 5% organic implies some acceleration in the back half of the year to get to the high end of that range. What gives you confidence that that can accelerate on tougher comps in the back half of the year? Thank you very much.

Yes, sure. Right. Yes, we had overall sales ended up within our guidance range, and organic sales ended up within our guidance range. And at the half year, we were at 4%. So right smack that middle in our guidance. So in terms of geography, we saw some solid growth across Europe and the U.S., and Asia was down mid-single digit. So you really have about 80% of our business up mid single digits, and Asia which is about 18% of our business was down mid single digits. We see in the U.S. where we were up mid single digits, the strongest growth was at process and our aerospace businesses. In Europe, we were up mid single digits. We had broad-based growth in oil and gas, and aerospace had particularly strong quarters. And Asia was down mid single digits, and China was down a bit more than mid single digit. So we had some down a bit more after two plus years of very strong growth, but it's about 7% of our sales, and clearly they are being impacted by the number one and number two economies in the trade war. So we're watching that closely, but given its relative size, it hasn't been too much of a headwind yet.

Thanks, David.

Thank you.

Our next question comes from Josh Pokrzywinski with Morgan Stanley.

Hi. Good morning, guys.

Good morning.

I guess just to follow up on the last question, thinking about some of the end markets that are doing better or ones that we got a little softer. And Dave, I think, is it a fair characterization to say, some of the longer cycle stuff aerospace process is really what gives you the visibility in the guide and the confidence in the second half? And the shorter cycle end markets in automation are, I guess, what's holding you back, but can also turn quickly. Is that a fair characterization as a starting point?

Yes, I'd say that's a fair characterization. In our automation businesses, we're dealing with OEM customers and they delayed placing orders in the quarter. We didn't lose these orders, they are delayed, and they're cautious, but there is a healthy order pipeline. So I would say that's a good characterization with we have strengthen in aerospace and solid with process and some weakness in automation. So that's a good summary.

So I think in the automation space, a lot of folks in that orbit have called out auto and electronics has been kind of the two biggest headwinds. Is that safe to say, it's the same end markets for you guys? Or is there something else that's cropped up within that?

Yes, I would say, it's - we have some motive customers there and that was weaker and there was some factor automation customers that was weaker, and to balance that there were some medical and food industry automation that we're okay with, so -- but those are OEM customers, and the motive and factory automation were the areas that it was a bit light.

Got it. And then just one last one for me. Obviously with the string of acquisitions over the last couple of years, a bit more diversity in the portfolio and some deeper niches, how are those performed or have you even noticed the change in the growth rates or performance as some of the macro has gotten a bit choppier?

Yes. One of the characteristics of the acquisitions we did over the past two years were they were largely U.S.-based, and they've held up very well. So the acquisitions are performing extremely well, and they're meeting their acquisition models and is driving the performance of the company as you can see in the results.

Great. Thanks. I'll leave it there.

Thanks, Josh.

Our next question comes from Andrew Obin with Bank of America.

Good morning, Andrew.

Yes. Good morning. Just a question, did I hear correctly that China was down in the quarter? I apologize if I missed that.

Yes. What we went through, the geographies were up in the U.S., mid single digits, down in Europe, mid single digit - excuse me, up in U.S., up in Europe, mid single digits, down in Asia mid-single digits, and China was down a bit more than Asia.

Right. So the question on China, I'm just wondering, could you just walk us what happened in the quarter in China because my sense was that the Chinese business very nichey, you have a lot of growth initiatives there. And just trying to get a sense when did it turn in the quarter or if you have this granularity on the call?

Yes. China has been very choppy and inconsistent through the balance of this year. We do have - we had very difficult comps that we were running into there. So it was mainly in our automation business where we saw weakness, but it was - in China it was more broad based, a lot of the businesses were down a bit. So, again, it was a difficult comp, and I think they're just dealing with the uncertainty and a trade war, and we've been watching it closely, and it's 7% of our business. And fortunately, we have about 80% of our business growing mid single digit. So it's been inconsistent, that's the best way to describe it, Andrew.

Yes. No, of course. And just a broader question, I think, others have tried to sort of get to the question. If I look at your peers, most of them actually did cut organic growth outlook. If I look at the historical relationship between your revenue growth and industrial production, your guidance does imply that things are different. You did highlight more North American acquisitions over the past couple of years. But could you also talk about the impact of the growth initiatives, because I know Dave, when we meet with AMETEK folks, they're really highlighting, how are you pivoting more to growth. Anyway you can quantify what the growth initiatives doing to cyclicality of the growth profile of AMETEK, that will be terrific? Thank you.

Yes, sure. When I think about our portfolio, we had the U.S.-based acquisitions over the past year, but we also have about 13% of our business now is health care. And our aerospace business is performing well. So those are all things that are driving us right now. And when I look at the -- we definitely have improved our organic growth capability. We're making great progress as you saw when you visited some of our operation. There is -- the teams are excited and we're seeing positive results. But I don't think that, that is very difficult to quantify that. And we will be using the tools and the way we have talked about it is through the cycle we will get a point better of organic growth. So I'm not sure in the current environment. It's pretty -- you can draw a distinction between what we've done in organic growth and the current results.

Terrific. Thank you very much.

Thank you, Andrew.

Our next question comes from Deane Dray with RBC Capital Markets.

Hello, Deane.

Thank you. Good morning, everyone. Hey, maybe we can start with price cost in the quarter. How did that play out in expectations for the second half and what role tariffs had?

Great. Yes, I think, I'll start with the tariffs. And as you know, we're comprised of niche differentiated businesses and we have low CapEx by design. So our model gives us a lot of flexibility in dealing with those situations. And in Q2, the situation played out as we predicted. We had about $0.01 from the direct impact of tariffs and we offset that completely with price. So -- and we're expecting a similar level of activity in the second half of the year. And going back to the price question, Q2 '19 was much like the second half of '18, and the first quarter of '19. We had an excellent quarter. We achieved 2% of price across our entire business, that's both in EIG and EMG. Total inflation and the impact of tariffs added together was a bit less than 1.5%. So, we had a good contribution to margin from our price less total inflation and tariffs and we're very pleased with the results.

It's all great to hear. And then in the verticals and the end markets, did I hear you comment on oil and gas? How did that...

No, we didn't -- yes, we didn't comment. Oil and gas had a particularly strong quarter in Europe, and we include the Middle East in Europe. And when you look at the whole segment, it was up 10% in Q2. So, good strong organic growth in both our upstream and mid and downstream businesses, and we were pleased with the performance.

Good. And then on the opening question, I might have -- with Matt, I might have missed the answer, he asked about how July had looked?

Right. Yes, I don't think - yes, we covered the quarter. We talked about the quarter being -- and increased each month, but it was more subdued for us. And in July, we're right on our plan, so July isn't over, but we're on target. So July feels pretty good.

All good to hear. Thank you.

Thank you, Deane.

Our next question comes from Robert McCarthy with Stephens.

Hello, Rob.

Can you hear me?

Yes.

Thanks for the time, and congratulations on a good quarter. I guess the first question I would have is around your incremental margins. On a core basis, could you talk through that, just excluding acquisition and some of the distortions we might see there?

Right. We're very pleased with our margin performance in the quarter. Our core margins were excellent. The EIG, if you take out the acquisitions, it was up 90 basis points, and EMG, where there wasn't acquisitions was up 120 basis points. So just outstanding margins, outstanding operating performance, and it showed up in the incrementals also. We had core incrementals of about 60%, EIG was about 50% and EMG was about 70%. So excellent operating performance around the world.

Now, definitely, could you speak just stepping back on the performance on the cash cycle and cash generation in more of your aerospace, and while you probably have very little explicit defense exposure. But your aerospace and longer cycle businesses in terms of how you do there, in terms of free cash flow generation conversion or operating cash flow typically, is that below or above the company average?

Yes. The aerospace business is a great cash generator for us. So, I would say, it's - in terms of the various components of working capital, aerospace ends up being a little higher as a percentage of sales because they're dealing with the aftermarket and -- but they are higher margin businesses. So you have higher working capital, but higher margins, and that's characteristic of the aerospace business, and it's been that way for a long time.

Yes, it's nice to have a good cash generation. The final question is just looking at the environment you're seeing right now, obviously went through a kind of a rocky road and kind of the '14 to '16 time frame with deflation, oil and gas kind of contraction, and it led to some challenging organic growth and also some restructuring, right? Do you think we're going to anticipate given what we're seeing right now over the next 12 months to 18 months incremental restructuring from you guys?

At AMETEK, we are in our various businesses. We're always doing some level of restructuring and those are reported in the operating results. In terms of our big restructuring, our realignment activity affected the entire company. Right now we're not seeing that, we're pretty confident around the second half of the year. But if things change, then we're good at doing it, and we have plenty of opportunities to drive cost reduction. So, as I sit here with a solid group of businesses, generating cash flow, margin expansion, with a robust backlog of deals, with a strong balance sheet, I feel very optimistic about AMETEK's performance and being able to outperform the current environment.

Thanks for your time.

Thank you.

Our next question comes from Brett Linzey with Vertical Research.

Hey, good morning, guys.

Good morning, Brett.

Hey, just a question pertaining to some of the recent portfolio moves, if -- and in recent, I mean, you know, 2017, 2018 acquisitions, if we were to drill down and look at the recurring element or the aftermarket element as a percent of sales of those businesses, how does that mix look of those acquired assets versus the legacy portfolio? You're actually mixing up with the stickier revenue base…

Yes, we are mixing up, and when we announced those deals, we address the recurring revenue, you know Telular stands out. It is about two-thirds of the business that's recurring, but many of the businesses like Spectro Scientific was 30%, 40%, and so we're mixing up and the recurring baseline of AMETEK, it was about 20%, but our recent acquisitions have been a bit more than that.

Okay. Great. And then if we continue to see this industrial slowdown, historically you've talked about incrementals on the way up of 30% to 35%. If we flip that script and think about potential downside what type of decremental preservation do you see if we get into an environment where sales are declining modestly? And then I guess a follow-on there, are there any countermeasure plans in place that can help you get a cost relatively quickly if things do turn a little bit south here?

Right. Yes, as you know, we have high contribution margins in our business, very profitable businesses, but we also have excellent operating capability, and we have seasoned general managers that know how to operate both in up cycles and down cycles. And clearly going into a down cycle, we have plenty of opportunities and plenty of projects, and we have the ability to pull those forward, and we're also very good at managing our working capital and generate a lot of cash. So if we get into that environment, it's an environment where we're experienced and we will perform well on a relative basis, but right at this point we're not seeing that.

But based on some of those actions or what's been in motion, I mean do you think you can preserve a decremental margin much less than 30%?

Yes. I think it's definitely, but again when something like that happens, it depends on where it comes from and...

The depth of it.

And the depth of degrowth is a good comment. So we have to look at it. If that happens when it comes, and I'm sure there will be another recession and I'm sure we'll manage our way through very well.

Okay. Great, guys. Thanks.

Thanks, Brent.

Our next question comes from Allison Poliniak with Wells Fargo.

Hi, guys. Good morning.

Good morning, Allison.

Just want to follow along on that operational excellence kind of theme. You did increase your operation excellence savings for 2019. Can you talk with just sort of a natural fallout of where some of these programs ended or ending or is it some acceleration in certain areas?

We're seeing acceleration. I mean the -- at the beginning of the year, we had about $80 million of operational excellence savings, and $60 million of it was from sourcing, and $20 million of it was from other projects that we had. And what we're really seeing is an acceleration on the sourcing side. So our sourcing teams are doing an outstanding job, absolutely outstanding job of dealing with the mitigation of tariffs, and moving us to different regions of the world and delivering incremental savings. So really the incremental savings from sourcing was increased from $60 million to $65 million, and that drove the operational excellence savings increase from $80 million to $85 million. And that savings are in the P&L for 2019 and we saw -- that's a ratable kind of thing, and we saw it ramp up from Q1 to Q2, so we're very confident in the second half of that.

Great. And then I may have missed it, the aerospace increase in growth for that sector. Was there a specific sub segment there or region that's driving that increased growth relative to your expectations?

Yes, we have a -- if you look at the business jet market, the business jet market was up low double digits, and coming off a pretty easy comp, but it's continuing to perform. So the military market, the third-party MRO had a fantastic quarter in the second quarter, the commercial business continued strong, so it was really the entire market that did well. But if you look into the details, the business jet market ticked up and we improved the guidance for that for the year. But the entire aerospace business, we increased mid to high single digits.

Great. Thanks so much.

Thanks, Allison.

Our next question comes from Christopher Glynn with Oppenheimer.

Thank you. Good morning.

Good morning, Chris.

Hey, Dave. So I think you mentioned $2 billion cash and available credit. I think it's the first quarter in a little while you didn't talk about a couple of new bolt-ons, I know. They don't come every quarter, but just an update, is the pipeline still very vibrant?

It is. It is. You know, Chris, we had a record Q4 2018, where we closed three deals and spent about $750 million. And our pipeline is very good, and we're evaluating a number of opportunities. And as you know, it's difficult to predict when they're going to happen in the short-term, but I feel very confident in the long-term and our capability in this area, and have a strong balance sheet. So we're very optimistic that we're going to be able to deploy our free cash flow on acquisitions in the long-term. Right now, we're being disciplined. I mean, we're looking at a lot of properties, and we do deal, we're going to get you return on capital.

Thanks for that. And on the outlook, generally calling for continuity versus the macros clearly weakening, I understand you don't have much distribution, you're much more direct. So that's clearly an advantage you have in the current environment. But are we moving into a phase where backlog conversion picks up to kind of preserve that organic continuity? Just want a little more kind of complexion around that.

Yes, we have a near-record backlog of $1.7 billion, which gives us some confidence in the second half. And if you look into that backlog, there are some opportunities to convert some of it. So that's one of the reasons that we're confident in the guidance in the second half. We're performing well, we got our aerospace growth, our process business is doing well, the U.S. market has done extremely well, and we got a solid backlog and that provides conversion opportunities. So that's the way we're looking at it and we feel good about it.

Okay. Thanks for that.

Thank you.

Our next question comes from Joe Giordano with Cowen.

Hey, guys, good morning.

Hey, Joe.

Hey, Bill, just one quick clarification. The tax rate was a little light in the quarter, anything specific going on there? And I know you gave the full year, but I missed it. What's your view for that?

Full year is now 21%. What we saw in the quarter was about 150 basis points down year-over-year. Benefits from -- excess tax benefits from stock compensation, and as well there was some changes in some state tax laws that help us drive that rate down to 20.4% in the second quarter.

And 21% good forward number to use like out into the model, too?

We're looking at a number that's probably to get to the average of 21% for the year, it's more of 22% in the back half of the year.

I mean more so like a full year going forward like into 2020, is like a 21% a fair number to use?

That's -- we'll be working to get to that level next year.

Okay. So we've kind of got through this a couple of times, asked different ways. As top line starts to slow a bit maybe we're -- we're still in the same organic range, but maybe we're talking more midpoint or lower, and early in the year, maybe we're talking midpoint or higher. Particularly in markets like maybe heavy truck where there is some obvious declines probably coming up, are you like teeing up anything here to take some actions? And along the same lines, your cost out this year really strong sourcing accelerating, what's the opportunity set look like into next year for your cost out broadly?

Right. The opportunity set is very good to -- at all times. As part of our strategic planning process, we go through with all of our business. They have a three-year plan for cost reductions, and involve sourcing some plant consolidations and everything. We have a viable set of projects to pull from. So we really have some opportunities to do that. But when you mention the trucking marker, that business is now less than 2% of sales and the mix...

Definitely, yes.

Yes, we bought Motec earlier in the year and they are in the really good business, and that business is actually growing. So it mutes any decline that we have in the other part of the business. So we have a situation where we've been modifying our portfolio over time, and there we have a good growth. And the camera and the algorithms, software of the vehicles, and really it has changed the outlook for that part of the business. So, you have a little bit of portfolio work that's going on, and we still feel good for the second half. I mean your point is valid maybe for more toward the midpoint and/or the low end and high end, but we're at 4% through the half year, right in the middle of our guide, and we feel confident for the second half of the year.

So, I guess, what I'm getting at -- I know that you're not -- I know that you're looking forward, and you're not sitting on your hands as things start to weaken from a macros perspective. Earlier in the year, orders growing 12% organically, or like last year orders growing 12% organically in the first quarter, and now we're at flat. So how are you just -- I'm guessing like the decisions are somewhat different now. So how are you acting differently than maybe you were a year ago or something like that?

Yes, I just point you to margins. And we really have some seasoned operators in our businesses, and they are reacting to their plan. So when their business has softened, they're adjusting their cost structures. And with our -- you saw excellent core incrementals in the quarter, you saw excellent operating income. On a reported basis, we are up 60 basis points after we did a bunch of dilutive deals. And without the acquisitions, we were at 110 basis points. So I think the AMETEK operational excellence is really working for you, and there is plenty of room to go and a long runway to that.

Great. Thanks, guys.

Thank you.

And I'm not showing any further questions at this time, I'd like to turn the call back over to our host.

Great. Thank you, Kevin, for all your help, and thank you everyone for joining our call today. And as a reminder, a replay of today's webcast will be available on our website shortly. Thank you.

Ladies and gentlemen, that concludes today’s presentation. You may disconnect. And have a wonderful day.+