Ladies and gentlemen, thank you for standing by, and welcome to the AMETEK Third Quarter 2021 conference call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Kevin Coleman, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Angie. Good morning and thank you for joining us for AMETEK 's Third Quarter 2021 Earnings Conference Call. With me today are Dave Zapico, Chairman and Chief Executive Officer, and Bill Burke, Executive Vice President and Chief Financial Officer. During the course of today's call, we 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 an 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 2020 -- or 2021 results will be on an adjusted basis, excluding after-tax acquisition related intangible amortization, and also excluding the gain from the sale of Reading Alloys in the first quarter of 2020, and the realignment charges taken in the first quarter of 2020. 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'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 (ph), and good morning, everyone. AMETEK had another outstanding quarter, with better-than-expected sales growth, strong operating performance, and earnings above our expectations. We established records for sales, EBITDA, operating income, and earnings per share in the quarter. Demand remains strong across our diverse set of end markets, leading to robust order growth and a record backlog. While the global supply chain and logistics networks remains challenging, our businesses are doing a tremendous job navigating these issues and delivering results which exceeded our expectations. Given our results in the third quarter and outlook for the fourth quarter, we are again increasing our sales and earnings guidance for the full year. This strong overall performance reflects the exceptional work of all AMETEK colleagues, as well as the strength, flexibility, and sustainability of the Grand AMETEK growth model. AMETEK 's proven business model was central to our focus on creating a sustainable future for all stakeholders. We're very proud of the important steps we are taking to further sustainability across AMETEK. And last week, we published our latest corporate sustainability report to highlight our efforts in this area. This report provides information on our sustainability initiatives, the strong progress we have made, and the commitments we are making to create a better future. I welcome you all to read our latest corporate sustainability report, which is located on our website.

Now, let me turn to our third quarter results. Third quarter sales were a record $1.44 billion, up 28% of the same period in 2020 and above our expectations. Organic sales growth was 17%. Acquisitions added 11 points, and foreign currency was a modest benefit in the quarter. Overall, orders in the third quarter were $1.55 billion, an increase of 37% over the prior-year period. While organic orders were up an impressive 31% in the quarter. We ended the quarter with a record backlog of $2.62 billion, which is up over $800 million from the start of the year. Third quarter operating income was a record $338 million, a 25% increase over the third quarter of 2020, and operating margins were 23.4%. Excluding the dilutive impact of acquisitions, core operating margins were 24.7%, up 70 basis points versus the third quarter of 2020. EBITDA in the third quarter was a record $415 million, up 25% over the prior year, with EBITDA margins of 28.8%. This outstanding performance led to record earnings of $1.26 per diluted share, up 25% over the third quarter of 2020 and above our guidance range of a $1.16 to $1.18. We continue to generate strong levels of cash flow with third quarter operating cash flow of $307 million and free cash flow conversion of 109% of Net Income. Overall, tremendous results in a challenging operating environment. Next, let me provide some additional details of the operating group level. First, the Electronic Instruments Group. Sales for EIG were a record $982 million, up 31% over last year's third quarter. Organic sales were up 15%, acquisitions added 16%, and foreign currency was a modest [indiscernible] While growth remains broad-based, growth was particularly strong across our ultra-precision technologies and our Power and Industrial businesses. EIG third quarter operating income…

Thank you, Dave. As Dave highlighted, AMETEK delivered excellent results in the third quarter, with continued strong sales growth, and orders growth, and outstanding operating performance. Let me provide some additional financial highlights for the quarter. Third quarter, general and administrative expenses were $22.1 million, up $4.8 million from the prior year, largely due to higher compensation expense. As a percentage of total sales, G&A was 1.5% for the quarter unchanged from the prior year. For 2021, general and administrative expenses are expected to be up approximately $18 million driven by higher compensation costs or approximately 1.5% of sales, also unchanged from the prior year. Third quarter, other income and expense was better by approximately $4 million versus last year's third quarter, driven by a $6 million or approximately $0.02 per share gain on the sale of a small product line in the quarter. The gain -- this gain on the sale was more than offset by a higher effective tax rate in the quarter of 19.5%, up from 17.5% in the same quarter last year. For 2021, we now expect our effective tax rate to be between 19.5% and 20%. Actual quarterly tax rates can differ dramatically, either positively or negatively, from this full year estimated rate. Working capital in the quarter was 14.9% of sales down 210 basis points from the 17% reported in the third quarter of 2020, reflecting the excellent work of our businesses in managing working capital. Capital expenditures in the third quarter were $26 million, and we continue to expect capital expenditures to be approximately $120 million for the full year. Depreciation and amortization expense in the third quarter was $75 million. For all of 2021, we expect depreciation and amortization to be approximately $295 million, including after-tax acquisition-related intangible amortization of approximately $138 million or $0.60 per diluted share. We continue to generate strong levels of cash given our asset-light business model and working capital management efforts. In the third quarter, operating cash flow was $307 million and free cash flow was $281 million, with free cash flow conversion 109% of Net Income. Total debt at quarter-end was $2.65 billion, up less than $250 million from the end of 2020, despite having deployed approximately $1.85 billion on acquisitions thus far in 2021. Offsetting this debt was cash and cash equivalents of $359 million. In the quarter end, our gross debt to EBITDA ratio was 1.6 times and our net debt to rate -- EBITDA ratio was 1.4 times. We continue to have excellent financial capacity and flexibility with approximately $2.25 billion of cash and existing credit facilities to support our growth initiatives. To summarize, our businesses drove outstanding results in the third quarter and throughout the first 9 months of 2021. Our Balance Sheet and tremendous cash flow generation have positioned the Company for significant growth in the coming quarters and years. Kevin (ph).

Thank you, Bill (ph). Angie (ph), we're now ready to open up for questions.

[Operator Instructions] Your first question comes from the line of Matt Summerville with DA Davidson. Please proceed with your question.

Thanks. A couple of questions. First, Dave, can you talk about where you were with realized pricing in the third quarter on a year-over-year basis, what the spread looked like? You mentioned that it seemed pretty favorable. And then what your thoughts are in terms of how much price you might need to take in '22?

Sure Matt (ph). In the third quarter, our pricing continued to more than offset inflation. As I said in the prepared remarks, pricing was about 3.5% of sales and inflation was about 2.5% of sales. So we got a spread of about 100 basis points. And we expect in Q4 that'll be similar to Q3 with slightly higher pricing and inflation. And the results speak to the highly differentiated nature of AMETEK 's product portfolio and our leadership position in niche markets around the world. In terms of next year, we haven't done the detailed planning, but a key for me is that we're going to stay out ahead of inflation, and I expect that to be true next year. So we'll stay ahead of inflation with price. Did I answer your question, Matt (ph)?

Yes. Thank you. And then just as a follow-up, if I just look over the last two years, EMG margins have really migrated into a completely different zip code versus where they were at. I know divesting Reading is a component to that. You did some structural cost outs during when -- due to COVID outbreak. Is there still leverage to drive margins higher in that business? Help me think about how we should think about that going forward.

EMG has done a fantastic job in margin development and you mentioned some of the key drivers. We've divested Reading. But fundamentally, we have an automation business that's firing on all cylinders, it's very profitable. We have a thermal management system as part of our defense industry -- defense businesses. It's doing well and has high margin. And we have some part of our [Indiscernible] business that's accelerating. So it is in a new zip-code, but I expect it to stay there and there's still room for margin expansion.

Great. Thank you, Dave (ph).

Thank you, Matt (ph).

Your next question comes from the line of Josh Pokrzywinski with Morgan Stanley, please proceed with your question.

This is actually [Indiscernible] on for Josh. So looking at backlog, where it stands today, how much of that would you call it excess backlog, kind of, based on supply chain issues? And how much should we expect that to contribute to 2022 growth here?

Yeah. We have a record backlog of $2.62 billion and -- I wouldn't categorize as excess. I mentioned in an earlier call that customer behavior is to give you more visibility into future months and quarters because there's so many issues in the supply chain. So you have more visibility, but I would not consider as excess, and I would not view us as not keeping up with demand. So really you have a situation where there's strong underlying demand, its resulting in a higher backlog, it's giving us further insight into 2022, and we feel really good about it.

Got it. And then just a quick follow-up. So what are the biggest inflation and supply-chain issues that we should watch for AMETEK as conditions potentially do start to improve? Is it on the material side, freight, or labor? Just kind of what should we keep our eyes on?

That's a good question. During the quarter, we continue to experience challenges with our supply chain, logistics, inflation, labor availability, and it was one of the more dynamic environments I can recall. And these conditions were a bit worse in Q3 than Q2, and we expect those conditions to persist in the fourth quarter. And I would characterize our overall effort in response to these challenges as outstanding. We're clearly showing the agility necessary to navigate these supply chain disruptions. A key, for my view, is the distributed nature of our business model where we have committed P&L managers running their businesses with their own supply chain teams, which allow them to react quickly to changing conditions. And at the same time, these dedicated business unit teams are working seamlessly with our overall corporate supply chain team that acts with a combined leverage and the authority of all of AMETEK. And this overall approach has been effective for us. I mean, you asked where we had some -- the biggest issues we had. As I mentioned last quarter, it's in semiconductor chip availability. It's an area that's particularly challenging because we use a lot of electronics in our businesses, obviously. And we're using our purchasing leverage to relationships that we build up over decades. Our engineering capability in terms of qualifying second sources in terms of changing designs to solve problems. And we don't expect -- anticipate improvements in the availability of semiconductors until sometime in late 2022. It's a tough environment and -- but we're reacting well to it, and I was very pleased with our teams. And I point to one thing is distributed business model, where we have very experienced P&L leaders making sure that they're going to satisfy their customers and not letting the supply chain get in the way.

That's helpful. Thank you.

Thank you.

Your next question comes from the line of Allison Poliniak with Wells Fargo. Please proceed with your question.

Hi. Good morning.

Hello, Allison (ph), and good morning.

I just want to keep in line with the supply chain because obviously you guys are a bit unique in that you've certainly been managing this quite well. Is there a sense, I mean, organic looks very strong, your organic orders are very strong. Is there any tempering of maybe what growth could have been because of some of these supply chain issues or they're really not impactful to you guys in terms of what that expected growth could be or the volume that you were anticipating this quarter?

That's a good question, Allison (ph), because what we do is we set our plan based on material availability. And we executed that plan extremely well. In fact, we beat our expectations, but we did, at the end of the quarter, I look at it as if the stars aligned, what could we have shipped without some of the material availability issues? And it was about an additional $50 million that shifted out of Q3 to Q4. And I feel like we're going to have the same kind of shift out of Q4 into Q1. So we're able to meet demand, we're able to juggle the schedule. Once we lock into the schedule, we're very good at executing it. But there was about $50 million that slipped out. Now, we're not a big labor business. We have a -- labor is not a big cost driver for us. So labor availability is tough, but we're able to get the products manufactured with the labor available. So your answer is $50 million in an ideal world.

That's helpful, thank you. And then just on the acquisition environment, you obviously deployed a significant amount at the beginning of the year. It sounds like the pipeline as always is pretty active. Any color on, kind of, what you're a little bit more focused on, or what we could see, maybe near-term over the next few months, if the stars align there?

Yes. We are very focused on some deals right now, and I don't know if they're going to happen next month or three months from now, but we're very active over the next few months. I mean, the thing you have to be careful of right now is there's a lot of businesses that are out there and you have to sort through them and find the quality, find the gems within those pipelines. And we're good at that. And I just feel the pipeline remains strong. We're very active on exploring opportunities. As Bill mentioned, we have a meaningful level of financing capacity and strong cash flows. And we also have -- so I think 2022 is going to be a good year for us and we're going to have a tailwind from some of the deals we got done this year. So we're feeling pretty optimistic about what we've got done this year, the quality of businesses that we acquired, and we're feeling good about our pipeline for 2022.

Great. Thank you. I'll pass it along.

Thank you, Allison.

Your next question comes from the line of Deanne Drey with RBC Capital Markets. Please proceed with your question.

Thank you. Good morning, everyone.

Good morning. Deanne (ph).

Hey. Really solid execution this quarter when many of your peers have struggled.

Thank you.

It was interesting on Allison 's (ph) question there we actually had to drag it out of you that there was a 50 million push out on revenues. We've seen that. And also we've seen where that is like a rolling push-out in -- from 4Q into the first quarter, but I like how the fact that wasn't an excuse. You still put-up strong numbers, so congrats there.

Thank you.

A couple of questions. There is this thought here on the supply chain issues for companies like AMETEK that are higher up the value chain, you're not doing raw material conversions. You're more final test and assembly. So it's the components supply might be -- the impact, might be felt later, so that it -- this might become more of an issue for component supply in the coming quarters. We know it's chip-related already, but is there any sense we think it gets worse from here? Again, where you are on the value chain?

Yeah, I don't see it getting worse. As I mentioned, it was worse in Q3 than Q2, but things seem to have stabilized. The comment that I'd make is, it's a good one of your question. And inflation is a concern related to our backlog, but we think it's manageable even with the high-level components. And the first key for me is that you have firm supplier pricing for items in the backlog as much as possible, so you know what your costs are going to be. And then we do have some commodities that we use in various areas, and when possible and we have firm orders, we'll buy forward certain key commodities to locking costs where appropriate. We're using surcharges to handle increases in shipping costs, increases in transportation costs, higher energy costs, etc. We shortened the length of our quotation validity, the valid time our quotations are out there. So items can be repriced if necessary. And then you take into account the higher costs. And when you can and it's necessary, our customers have been fairly receptive to get to get a price increase due to what's happening right now. So I put that all package together and if we're a bit later than some of the component businesses that may be true. But at the same time, we're willing -- running well ahead of inflation with our pricing and we plan to stay there and that's going to be a big part of our budgeting process that we're going through. And to understand what's happening in the market, to understand inflation and with 3.5% of price and 2.5% inflation across our entire businesses, I think we're focused on it, and I think we're doing a good job of it, and I think we'll stay in front of it.

That's really helpful. And you mentioned budgeting process. I'd be interested in hearing how the budgeting process for 2022 might be tempered given these circumstances on the supply chain. Would it be the top line being these rolling push outs? Would it also be margins with the labor issues? Just how does this all change your planning assumptions for 2022? And then maybe if you could just give us a comment on October, that would be helpful also.

Okay. I will talk about the, I guess our preliminary thoughts on 2022 and, you know, Deanne, we operate in niche markets and we have a comprehensive budgeting process that allows us to understand the market dynamics of these niches in a detailed level. And we begin that process later this month and that process is going to inform our guidance for 2022. In terms of the macro setup, we believe the economic recovery continues. We think overall it's a good macro environment for us. We think the mid-cycle recovery continues. We think that we'll start to see longer cycle improvement and our Commercial Aero business, our process industries will continue to recover. We're expecting a stable defense spending environment. In terms of some of the headwinds that you mentioned, the challenges from inflation are going to continue and we're going to have to continue to offset inflation with price. And the supply chain may constrain growth. Mainly in the first half of the year. And as I mentioned before, semiconductor availability is a key issue for us. And we remain the final thing as we remain active in capital deployment with significant Balance Sheet capacity with a primary focus on M&A. So we're really bullish about what we're going to be able to accomplish in 2022 and there's a couple of challenges out there, headwinds, mainly the supply chain that we're actively managed now, but we're still feeling good about 2022.

And comments on October?

The comments on the cadence throughout the quarter in October. September was the strongest month of the quarter. It was also the strongest month of the year-to-date and sale -- in the orders. And sales grew sequentially through the quarter with September being strongest month of the quarter. And October was very solid. It was supported of the trend required to meet our guide for Q4, so we're very pleased with how October turned out, and it showed no slowdown at all.

Really helpful. Thank you.

Thank you, Deanne.

Your next question comes from the line of Andrew Obin with Bank of America.

Good morning. This is David Ridley -Lane on for Andrew. Can you give us some additional color on revenue by end-markets and geographies?

Sure. I mentioned in the prepared remarks that was a broad-based growth and I'll take a walk around the Company, David. And you look at our process businesses, they were up high teens on a percentage basis in the third quarter, and they were driven by low teens or organic sales growth, and the contribution from the acquisition of Magnetrol. And our process businesses continue to see broad-based growth, with particularly strong growth within our ultra-precision technologies businesses as new products and differentiated measurement technologies are really driving solid demand across a wide range of markets, including the semiconductor and optics market. For the full year for process, we now expect to be up low double-digits versus the prior year. Our next major market segment is the aerospace and defense market. And overall, we were up 55% in the third quarter driven by solid organic sales and the contribution from the acquisition of Abaco. Organic sales were up high single-digits on a percentage basis versus the prior year. And solid growth in our commercial aftermarket business and our business ship businesses. Those were the 2 areas of strong growth. And for all of 2021, we now expect mid-single-digit organic sales growth for aerospace to -- and defense businesses. And we expect our defense businesses to be up high single-digits and our commercial businesses to be up low single. So the defense business is still stronger, but it's moderating a bit, and the commercial businesses had a good quarter. Go to the power and industrial market segment next, up nearly 40% in the quarter, driven by mid-20s organic sales growth, so they had a very good quarter. Also, acquisitions from NSI and Crank Software contributed. And for all of 2021, we now expect mid-teens organic growth for our power and industrial…

Perfectly. And then just a quick follow-up, You sort of alluded to it earlier in talking about mid-cycle. This is a pretty strange cycle, so maybe just -- you talk about some of the areas that you are looking for better organic growth in 2022 versus '21. I Imagine there would be some traditional longer-cycle areas like commercial Aero and oil and gas, but also maybe in this particular cycle, things that are tied to patient volumes and that sort of stuff.

Yeah. I mean, it's -- you mentioned 3 of the areas that I think that we're improving, our commercial aerospace business, so we'll definitely improve our oil and gas business. It's only about 5% of AMETEK now, but it was up mid-teens in the quarter. And given where oil and gas prices are, we're beginning to see the signaling of the project business returning in 2022. So we're feeling good about that and in terms of the healthcare business. Healthcare is 15% of AMETEK now, so it's our largest end market vertical. We're up mid-teens in the quarter. We had really solid growth in our rolling business, in our record business, really driven by new products and record. And the electrosurgery business, it picked up for us in Q3, so we were up in the quarter. It wasn't up 15%, it was up high single-digits, and we're benefiting from elective surgeries and things like neurostimulation, cardiac mapping, catheters, all that stuff as people are going back to hospitals getting those procedures done, and we expect that to grow -- this quarter was high single-digit number. We expect that to grow more next year. So you've hit the key issues. Commercial, aerospace, oil and gas, the medical elective surgeries. But I don't think the mid-cycle is done growing yet either, and we're starting to see acceleration in that business across some of our process businesses.

Perfect. Thank you so much and congratulations on the quarter.

Thank you.

[Operator Instructions] Your next question comes from the line of Christopher Glenn with Oppenheimer. Please proceed with your question.

Thanks. Good morning, everybody.

Good morning, Chris.

Hey, Dave. So results really answer a lot of questions in principle. I was actually curious. Any particular areas of share gain or areas of market space creation you want to comment on? You mentioned automation a little bit, just kind of looking to expand on those.

Yeah. I would say that when you can deliver your customers give you more orders. And that's the key issue driving our business right now. And when I look at the automation business, I talked about that earlier, that business is doing extremely well. Because of the broader macro, people want to remove labor from the processes. They don't want to be dependent on labor because in some places you can't hire labor and difficult to maintain. You’re at-capacity now, so there's more automation in both discrete automation and factory automation. We've invested in the right technologies in the last few years, and acquired the right businesses, and we put them together. We have a really compelling value proposition, and we can design customized sub-assemblies that do automation very quickly and efficiently. And that business is doing the right things right now. So we're pretty bullish on the outlook for it. Does that answer your question, Chris (ph)?

I was curious if there are any other particular areas even if more illustrative than moving the top line by themselves because maybe it's in a discrete niche business, but might speak to illustrate the AMETEK growth model,

Right. I think another area that we're starting to see traction in is some of our sustainability solutions. And if you look at our sustainability report, we've done some good work highlighting them. But in the case of greenhouse gas emissions and trying to understand that, we have some instrumentation that's very unique in helping researchers understand the trajectories, In terms of China, the pollution generated from heavy industrial processes requires very durable emissions equipment. That emissions equipment is selling very well for us now in China. So the sustainability solutions will be another thing that we're starting to get our hands around, but it's growing pretty rapidly.

Great. Thanks for the [Indiscernible]

Thank you.

Your next question comes from the line of [Indiscernible] with Wolfe Research. Please proceed with your question.

Hey. Good morning, guys.

Good morning.

Congrats on the awesome quarter. I'm on for Nigel Coe. So really around M&A, do you see any updated thoughts around M&A accretion in fiscal year '22 from your deals this year?

No, I think the -- we had talked about the M&A accretion being about $0.18 from deals this year. And I think that we're still in line to deliver that. And Akhil's businesses that we have acquired, we're very pleased with them and they are -- each of these businesses is going to benefit from custom play book developed for them as part of our integration process. And we'll also benefit from AMETEK 's global footprint. And it's early in the ownership, but so far they're integration nicely and we're very bullish with all the businesses. I think in terms of 2022 I'm going to throw that in the bucket of we're going to go through and analyze everything from the all of our business units with our detailed budgeting process. And once we understand everything, we'll come back and communicate that to you.

Gotcha. And then around EIG sales for the quarter. Do you see that normal seasonal uptick in sales for fourth quarter?

There is a bit of seasonality for EIG in the fourth quarter, so you'll see a bit of that.

All right. Well, that's it from me. Thank you.

Okay, thank you.

Your next question comes from the line of Andrew Shlosh with Vertical Research. Please proceed with your question.

Hey, there. This is Andrew Shlosh on for Jeff Sprague. How are you?

Hi, Andrew.

Just have a couple of quick ones for me, You said the elective surgery business is up high single digits. Do you have a great feel for where electric -- elective procedure volumes are versus 2019?

I can't comment on that right now. I can tell you that the business in the first half of the year was -- it was about flattish for us to down a bit. It picked up in Q3 and that high single-digit range, and we expect further growth from here. And that's probably the best I am going to be able to give you.

No, that makes sense. I apologize if I missed it. Did you give rattle off some of the end-market detail on the research business?

I didn't specifically give the research, is within our process segment. The research business is about 10% of AMETEK. And what you see in that business is it's starting to grow again as people -- industrial research has been strong, but the university research has been impacted by COVID. And people are getting back to the university research environment and is starting to perform -- function normally. And I think the product introduction than we talked about with the Gatan is perfectly targeted at that market. So it's a good market for us. It's not up as much as the AMETEK average, but we're bullish on that market as it begins to heal and they get back to more normal business after COVID.

That's great. Appreciate the color there.

Thank you.

Your next question comes from the line of Steve Barger with KeyBanc Capital Markets, please proceed with your question.

Hey, good morning, guys. It's Ken Newman on for Steve.

Oh, Ken, how are you doing?

Good. How are you?

Good.

I think you had mentioned an increase in the RD&E guidance for the year. I'm curious if you just talk about how much growth was driven by new products in the quarter and any color on where the vitality index has been?

Right. It's a good question, Ken. In the quarter, our vitality index was 24%, so pretty healthy level for us. And as I mentioned last quarter, we increased our spending on R&D and also on the sales and marketing initiatives that we have. And we have a lot of things that we're funding, and we're bullish and optimistic on them. So we're spending about 5.5% of sales. It's a healthy amount for an industrial business, but we think it gives us a couple of things. One is these new sales from -- new product sales, but also. it gives us the ability to raise price because we're investing for our customers and we're going to have the latest products that have the most value for our customers. So the investments that we make, we also link to the pricing capability in our business. So that's an important factor for us.

Okay. And when I think about the impact of shifting sales from out of the third quarter into the next one because of supply chain issues, does that impact the mix of new products coming to market at all or would you still expect any kind of material expansion in that vitality index?

I think 24% is a pretty good level, but I'd like to see it, mid-twenties are probably what we're targeting and I think the -- in terms of new product introductions, to the extent that a new product introduction relies on electronics or semiconductors, it could be delayed, but it's broader than new products. It's across a semiconductor chip availability is the one area in particular that we're very focused on because of the challenges with the constrained supply.

Right. And that kind of Segway’s pretty well into my next -- in my follow-up question. Just on the semiconductor shortage, obviously you've got a very diverse set of businesses that spreads the gamut of computing needs. As we think of the kinds of chips needed for the embedded computer business in Abaco versus your automation business, can you just give us an idea of how much of the semi exposure is toward more of the bleeding edge chips versus the trailing edge?

Yeah, I think the microprocessors and the higher-end chips are the ones that are particularly -- the cheap availability is particularly an issue right now. But we have such a broad-based portfolio of products

and we're using different chips in different businesses so there's really not one chip or one product. It's just an -- it's not in the passive component, it's an active component, and it's in more of the microprocessors. But it affects our EIG business more than EMG. But that's something that we're focused on and we did a great job managing it in Q3. And as I said, we have a lot of people that we're -- have relationships that are over a long period of time. We're using our purchasing leverage and probably most importantly, if our product is not available, we use our engineering capability to qualify second sources, to find alternatives, we set up a group within our Company. It's both our Bangalore engineers and some of our engineers in Europe, and some of our engineers in the U.S. and there's a team that's quickly going through these things when product availability comes through. The one of the things that we've been able to differentiate versus maybe some other people in the market is we have the strong engineering capability that can work on these problems that they come up and solve them quickly.

Good color. Thank you very much.

Thank you.

At this time, there are no further questions. I will now turn the floor back to Kevin Coleman for any additional or closing remarks.

Thank you, Angie (ph). And thank everyone for joining our call today. And as a reminder, a replay of today's webcast may be accessed in the Investors section of ametek.com. Have a great day.

Thank you for participating in today's conference call. You may now disconnect your lines at this time.