阿美特克 (AME) 2024 Q3 法說會逐字稿

(audio in progress) Third-quarter sales were 1.75% from the same period in 2023.

Organic sales percent.

Acquisitions added 7.5 points and foreign currency was flat.

Overall, orders in the quarter were up 12%.

Book-to-bill was equal to our organic orders were up 2%.

Additionally, we saw solid sequential growth in orders.

We ended the quarter with a strong backlog of 3.44 billion near record levels.

Amtech's operational performance in the third quarter was excellent.

Our disciplined approach to cost management and operational efficiency resulted in strong margins.

Operating income in the quarter was 446 million, a 2% and for your quarter of 2023 million and operating margins were 26.1% in the quarter.

Core margins, excluding the dilutive impact from acquisitions and the impact of foreign currency were very strong at 27.4%, up 40 basis points versus the prior year.

Ebitda in the quarter was $553 million, up 4% versus the prior year, with EBITDA margins an impressive 31.2%.

Cash flow in the third quarter was excellent, with free cash flow of 4% versus the prior year in free cash flow conversion of very strong 100, 35%, reflecting our asset-light business model and operating capability.

This operating performance led to earnings of $1.66 per diluted share, up 1% versus the third quarter of 2023 and above our guidance range of $1.60 to $1.62 per share.

Now let me provide some additional details of the operating group level.

First, the Electronic Instruments Group EIG. continues to perform well.

Strong margin expansion and overall outstanding levels of operating margins, reflecting the quality of our EIG. sales were $1.13 billion, in line with a thorough cost year.

Organic sales were down 2% and acquisitions contributed two points.

Growth remained solid across our aero and defense businesses, while our high end research instrumentation business.

Comerica also saw strong growth in the quarter, we did see some temporary delays in project spending across our EIG. business as we had expected, our new funnel pipeline remains solid and our businesses are very well-positioned across a number of secular growth markets.

The IG operating income was 339 million, up 1%, and operating margins were very strong, 29.9%, up 40 basis points from the prior year.

Yes, were 30.2%, up 70 basis points versus last year's third quarter.

Now switching to the Electromechanical Group, EMG's third-quarter sales were 574 million, up versus the prior year, with organic sales down 3% and acquisitions contributing over 20 points to growth.

Strong growth across our aerospace and defense businesses in the quarter was as expected, weakness within our OEM exposed businesses due to the impact of inventory destocking.

Emg orders were very strong in the quarter, growing 12% organically.

Emg's operating income in the quarter was 2 million, up 3% compared with the prior year period, while EMG's third quarter operating margins were 29 22.9% with excellent core margins of 2016.

Avatech delivered a strong performance in the third quarter, effectively navigating demand headwinds and deliver strong.

We remain focused on executing our growth model and positioning Amitabh for continued long-term while ensuring we deliver strong results in the face of a choppy macro environment.

Now turning to our acquisition strategy.

Strategic acquisitions or a core component of our growth model.

We're committed to deploying our strong cash flow and act and our portfolio and highly attractive market segments.

With that, I'm excited to announce acquisition Vertex visions.

Bertek vision is a leading provider of laser-based projection and inspection systems offering a suite of 2D and 3D laser projectors and advanced measurement solutions powered by their proprietary AI software, Vertex automated systems, enhanced products, improve quality and reduce costs across a range of aerospace, defense and industrial.

Vertex has an excellent strategic fit with our Korea form business, finding us technology offerings and enabling a wider range of automation and inspection capabilities for our customers.

Vertex is headquartered in Waterloo candle and has annual sales are direct approximately 40 million.

Looking at our acquisition pipeline remains robust.

As noted, we have a strong and flexible balance sheet and anticipate remaining active in this area.

Amitabh also remains committed to investing in our businesses to ensure their position for long-term sustainable growth.

In 2024, we are investing an incremental 90 million in growth initiatives and co-development efforts where our teams are focused on developing highly differentiated technologies to help solve our customers' most complex challenges throughout our business, we see countless examples of innovative products and technologies being developed to support our customers and provide them with the advanced differentiated capabilities they need one way we measure the success of our new product development activities as the index, which measures the sales from products introduced over the past three years.

In the third quarter, our vitality index was an outstanding 28% in addition to our internal development activities and also pleased to announce that our chemical business from a leader in micro analytical and metrology instruments recently completed a small technology acquisition of Polygon physics.

Polygon physics specializes in ultra compact ultra low power electron cyclotron readiness technology.

This technology and answers.

Can you give us capabilities in advanced metrology instrumentation and advanced chip manufacturing.

Polygon provides us access to cutting-edge ion source technology and expertise that will help accelerate can because new product development efforts and enhanced our portfolio.

We're excited to welcome the Polygon team Temasek.

Now turning to our outlook for the remainder of the year.

Given our Q3 results, we are raising our earnings guidance for the full year.

We continue to expect overall sales to be up 5% to 7% versus the prior year.

Diluted earnings per share for the year are now expected to be in the range of $6.77 to $6.82, up 67% versus the prior year.

This is an increase from our previous guidance range of $6.70 to $6.80 per diluted share.

For the fourth quarter, we anticipate overall sales to be up mid-single digits, with earnings in the range of $1.81 to it's up 8% to 11% versus the prior year.

In summary, I'm pleased with the team's performance in the quarter and thus far in 2020 for managing through an uncertain macro environment that confident in our ability to navigate these challenges.

Evotec has been very successful over a long period of time or set of highly differentiated niche businesses.

The EBITDA growth model has allowed us to deliver earnings growth throughout different phases of the economic cycle.

The strength of our portfolio, combined with our operational excellence capabilities strategy has allowed us to deliver outstanding results has also allowed us to manage through periods of economic weakness and uncertainty and emerge even stronger with exceptional growth.

We are excited for the future us through some of the financial details of the quarter, and then we'll be glad to take your questions.

Developed.

Thank you, Dave, and good morning, everyone.

As Dave noted, Avatech delivered strong results in the third quarter with excellent operating performance and high free cash flow conversion.

Now let me provide some additional financial highlights.

Third quarter general and administrative expenses were $25 million, essentially unchanged from the prior year as appeals, G&A expense came in at 1.4% of sales, down from 1.5% in last year's third quarter.

For fiscal year 2020 for general and administrative expenses are expected to be approximately 1.5% of sales.

Third-quarter interest expense was $25 million, up from the third quarter of 2023 due to higher debt balances following recent acquisitions.

Third quarter.

Other operating expenses were down 4 million versus the prior period due largely to higher pension income and lower acquisition related due diligence expense in the quarter.

The effective tax rate in the quarter was 18 and up from 17.7% in the third quarter of 2023.

For 2024, we anticipate our effective tax rate to be between 17% and 17.5%, driven by a lower tax rate due to statute expirations.

As we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively from the full year estimated rate of 18.

Capital expenditures in the third quarter were $26 million, back capital expenditures to be approximately 135 million for the full year or about 2% of sales.

Depreciation and amortization expense in the quarter was $90 million.

Full year, we expect depreciation and amortization to be approximately 395 million, including after-tax acquisition-related intangible amortization of approximately 188 million, or 81 per diluted share from operating working capital in the third quarter was 19% of sales.

Cash flow gen third quarter was excellent.

Operating cash flow was 487 million, up 3% versus the third quarter of 2023, while free cash flow was $461 million, up 4% over the prior year.

It was a record third quarter level for both operating and free cash flow generation.

Free cash flow was also outstanding at 135% in the quarter.

For the full year, we now expect free cash flow conversion of approximately 115% to 120% of net income.

During the quarter, we spent 60 million on share repurchases, repurchasing approximately the 371,000 shares of our common stock in the open market.

Additionally, at the end of the quarter, we paid down a maturing 300 million private placement note, total debt at September was 2.34 billion, down to 60 million in the quarter and down approximately 1 billion from the end of 2020.

Offsetting this debt is cash and cash equivalents of $396 million.

At the end of the Third Coast.

Debt to EBITDA ratio was 1.1 times, and our net debt to EBITDA ratio was 0.9 times, significant financial capacity and flexibility with over 2 billion of cash and available credit facilities to support our acquisition strategy and growth initiatives.

In summary, Avatech delivered strong results in the third quarter.

Our operational excellence initiatives and our strategic focus contributed to strong earnings, robust margins and excellent free cash flow, strong balance sheet near record or near record backlog and leadership across our key markets.

We are well positioned for continued long-term growth.

Comes back it out.

Andrew, could we please open the lines for questions?

Certainly as a reminder, to ask a question, please our one one on your telephone and wait for your need to be announced.

To withdraw your question, please press star one again.

one moment, please.

First question comes from the line of Matt Summerville with D.A. Davidson.

Morning, guys.

Morning, Matt.

Could you maybe do a little bit more of a detailed update specifically on what you're seeing in your medical and life sciences fishing end markets across both EIGNEMG. and working some commentary on what you're seeing in those businesses specifically around a destocking?

And then I have a whole sure of the home we saw in terms of the destocking, we saw demand largely in line with expectations in the quarter.

Actually as both our OEM customers and our automation and Paragon businesses continue to work down excess levels of inventory, induce destocking headwinds are going to continue on.

We remain well positioned on a range of attractive programs within both the automation business and the Paragon business in.

And we're really encouraged by the trend in recent order rates from we had of EMG where the maintenance, the maintenance stocking areas was above plus 12 organically.

Again, we had a positive book-to-bill of one two.

And if you just look at the trends there, the trends are heading in the right direction.

So of we stabilize, we saw solid sequential growth in orders, and we're feeling pretty good them.

one is a follow-up.

You mentioned in your prepared remarks on talking about ESG that you're still a little bit of customer tentative this with respect to some delays in that portion of the business.

Can you just talk through maybe which division was impacted by that, which end markets, et cetera?

And if you're able at all the kind of rig Clemson quantified the impact.

Sure.

Yes, I'll do that math on in terms of project delays that we spoke about last quarter.

This quarter played out largely as expected.

Customers remain cautious given the impact of various So economic geopolitical in an election uncertainties.

And these project delays of our specifically in REIG. test and measurement businesses.

And of the key point here is our new opportunity for funnel remains strong, and so things are definitely not any worse.

In fact, the EIG. order trend went from minus 11 organic in Q1 to minus four organic in Q2 to minus two organic in Q three.

So we're feeling pretty good about the O encouraged by the the PA positive trend there.

Got it.

Thanks, David.

Thank you, Matt.

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

Thank you.

Good morning, everyone.

Good morning.

Again, a big could take us through the end markets, geographies and the extent that you can some comments on China, I don't think there's never been more mixed messages, most of the negative, but that each company has got the different views based upon their exposures, but that maybe we can start their effects at Grace of other questions, I have tried to get them on if I forget anything.

Well pulling back to it, first of all, around the horn.

First of of both and I talk about our process business, both overall and for our process businesses declined low single digits in the quarter.

Growth remained solid across our energy businesses that have good quarter in energy and also our highest as we talked about.

Can you also had a very strong growth in the quarter?

And looking ahead, we continue to expect organic sales for our process businesses to be flat to up low single digits for the full year.

Next.

Switching to the aerospace and defense.

Aerospace and defense is about 18% of Amtech, deliver strong performance in the quarter.

Both overall in organic sales were up mid-single digits.

Growth was strongest across our commercial OEM and commercial aftermarket businesses.

On a reminder, we have a good balance between sales and defense, and we have a good balance between OEM products and aftermarket.

And additionally, one, a wide range of applications and not dependent on any one platform.

So we're positioned well to benefit from the long-term growth across these markets.

For the full year, we continue to expect high single digit organic growth for our aerospace and defense businesses.

Next, we'll go to the industrial.

Tom power and industrial businesses were up Mr.

Driven by the contributions of amplifier ESI now recent acquisitions, both of them, organic sales were down low single digit.

We expect organic sales for our Power and Industrial businesses to be down low single digits for the full year.

Then finally, our Automation & Engineered Solutions segment.

Overall sales, there increased in the low 20% range, driven primarily by the contributions of Paragon medical organics, down high single digits due to continued normalization of inventory across our OEM base.

And for the full year, we can continue to expect organic sales to decline mid-single digits.

The headwinds from destocking continue.

Talking about the chips?

Yes, a little bit of mix there.

We have strong growth in Europe and Asia, offset by some declines in the US.

You talked specifically about China.

Our Asia business did well in China was actually up 10%.

We had strong growth in our UPT. or ultra precision technology.

And I haven't tech products are used by our customers in China to improve the manufacturing processes, automate processes, make the environment cleaner, produce entered used to very well positioned, but that market will remain choppy.

And there's been some stimulus.

And that's about the results that we're seeing now aren't aren't from stimulus or just Ramon, no market share wins and making good headway in in the markets.

But it's very difficult to predict what's happening in China.

So it so we'll just wait and see what happens this quarter.

That's really how it is remarkable.

How did it really depends on what your exposures are in China.

You just can't paint at all with the negative brush there?

And just as a quick follow up the context of the stuff, the longer it lasts, just get this impression that it's really our demand as opposed to just an inventory correction.

So it's the year centers you're a reset, let's say, at Paragon or is it still you can see the sell through and that there is really like and inventory work-down coming through?

Just kind of how do you have two dynamics that as a direct question and answer, obviously, of difficult, of course, but we're pretty confident that we're working through it supply chain crisis level of inventory that and we have some math.

You can see when it when we work through that.

And then there's the same kind of growth on the other end of it.

And same thing is happening in the medical space as the automation space.

So so we're seeing the other factor that influences our decision is the new business activity, the pipeline activity, our customers are very active.

We're working on new programs and they are getting delayed.

But there's no there's no program cancellations and there's some uncertainty when they're going to go forward, but were full out working on tremendous this number of opportunities.

So we think it's a it's a destocking issue is not and an overall end demand issue and we think will work through it.

And you can see some starting to happen with the order trends in our business.

Excellent.

Leave it there.

Just a quick shot out.

Has nice free cash flow this quarter.

Thank you.

And thank you, Dan, and thank you.

Team did a great job.

Our next question comes from the line of with Vertical Research Partners.

Hey, thanks.

Good morning, everyone.

Morning, Jeff.

Good morning, David.

I was on a little late, so I don't know if you will note that listed dyslipidemic with your answer to gain.

I don't know if you already specifically Tom, embedded on Paragon, but um, you know, just in terms of the sales trajectory there, if you wouldn't mind from fewer than I would hope.

And then just on just on EMG. overall rates, certainly kind of interesting set of cross currents, right?

Was destocking going on, but orders of 12 organically.

Maybe you could just unpack a little bit more time the moving pieces inside that if you haven't already?

I haven't gone deeper, but I can say that every division and EMG., what does up substantially in order.

So it wasn't the one area.

So it was a across the board, all parts of the MG. or up in order.

So we're really encouraged by that.

Speaking of Paragon on again, it's a single use consumables, surgical instruments business, implantable components and attractive medtech markets with solid growth rates.

And And though we continue to about the future growth opportunities, excellent engineering capability, additive manufacturing capability, many many new program wins will provide upside is get phased in, and the business has really well positioned when the destocking headwinds.

At the same time, we're working on substantial efficiency improvements in the business.

And the team has really do onto an excellent job of doing that because of some difficult things that are going on.

And but that process is proceeding well.

So I'm very pleased.

I mean mail Paragon menace expectations for q three, they had the similar sequential order improvement that we talked about in our other businesses.

And the overall now very pleased with it.

Dave.

And then on sort of the margin recovery plan itself, obviously the restructuring on and so forth.

I guess there's a silver lining in the P&L in the drawdown, right?

Maybe it allows you to accelerate some things on was in the light.

Can.

Can you give us a sense of, um, you know, sort of the likely tailwind into 2025?

As you know, we work through some of these things and arguably sales sorry to kind of stabilized pick back under the new year.

Yes, I think of the scenario you're talking about is something that has a higher likelihood of happening.

But when you talk about 2025, we don't give guidance at this time of the year.

So we're going to stay away from that and talking about next year.

But but of the things that you're pointing to or I mean, it's a tough time.

We're improving the business significantly.

There's some plant closures in there and the we're continuing to fund all the new new new product phases in.

So it is going to be a very, very positive scenario.

And as we move forward with that business.

Great.

Thank you for the insight.

Appreciate it.

Thank you, Jeff.

Our next question comes from the line of Rob Wertheimer with Melius Research.

Could you add a couple of cleanups to AMI both on the destocking?

I mean you guys were clear that destocking should continue through the end of the year.

I think you mentioned that it continues again now, Dave, the orders seem to indicate that we're getting there.

I don't know whether your comment was implied was intended to imply any any continuation of next year we're up.

Yes, I think you mentioned we've definitely stabilized in the last couple of orders were saying quarters.

We're seeing incremental orders growth.

We're encouraged and we're seeing it in AMG. where the destocking was occurring, where we're seeing it in all our businesses.

So that's all positive.

But now that the IS. destock isn't like a switch that is going to and that's going to be we're going to be of a few slowly improve as we get into next year.

You know, that will give you a guidance for next year.

But the whether that you're not, we're going to make money and that's what we're going on on the operations side.

So So my point is there's positive trends now.

We haven't given guidance for next year.

We go through or our standard process with the sitting down with each business on some go through a comprehensive budgeting process.

We look at market conditions and sales opportunities and cost reduction opportunities and decide what investments to fund and the very important of all of this process right now, given all the math, macro geopolitical and unless election uncertainty, because that's why we've held firm on doing on working through our process and giving you a best information we have at the beginning of next year.

Perfect.

Thank you.

And then if I may, on acquisition pipeline in your balance sheet looks great.

Obviously the pipeline is robust.

Are you seeing any similar hesitation to commit among amongst value potential acquirees slowing things down?

Or should we just assume things come unstuck as normal process?

Thank you, Scott.

Yes, that's a good question, actually, question, Robyn and the this is just my subject.

Things are coming on stock period.

We're everybody interest rates and what about our pipeline and and we're talking to our website, I feel like for next year, sometime early, and it feels like things are moving.

And I feel like they're moving an accelerated pace.

Thank you.

Thank you.

Earnings from the line of Scott Graham with Seaport Research Partners.

Hey, John, good morning.

Thanks for taking the question, guys.

Auto is really just a couple of them.

I know you're doing a lot of from investing internally.

The vitality is up to 28% you gave you mentioned that you're really heavily focused on differentiated products.

Could you may be unbundled that a little bit more in, you know, I know vitality that percentage is always a tricky thing is it's a three-year trail, but there is that a number that you think can go even higher and maybe which businesses?

I know that your single traders, I get all that, but, you know, is there anything that's standing out to you in certain business units and we have where can that index go?

Yes, I think we think level for our businesses between 20% and 30% and though and the percent, 28%, and it could go down to the 20 or golf 30, and that's probably the right range.

And it's, as you mentioned, is very distributed across our company.

We're spending incrementally 90 million on projects on their good projects.

They're going to result in the good sales in the future.

In some cases, they're coming in at lower price points.

Still, there's been a good job of cost reductions through the new development process.

And so it's a and you have more fresh up-to-date product line and you're a leader and a niche markets that we're in enables you to justify premium pricing for the new products.

So all feels good fulfills.

It's working well and is part of part of our core.

So what we've you know, you've followed us for a long time whether the market's good markets bad.

We fund the R&D spending consistently, and it's a it's paid off for us in the long run.

And we plan to continue it.

Thank you.

I just maybe wanted to ask something that's a little bit more forward looking to the extent that you can answer it, one of your two very large aerospace customers struggling in various parts of their portfolio and production.

I'm just wondering, does that dampen your potential outlook for 2025 in your aerospace business?

Yes, what we haven't done the detailed working on 2025 and the related to the situation.

We did see some minor delays in the quarter, but we were able to work and we factored in the impact that we know for Q4.

And it's a fluid situation obviously.

But we feel confident in our guide for Q4, our aerospace businesses or have diverse closures across a wide range of platforms, very healthy mix of OEM and aftermarket sales.

There's no overexposure to any single platform or any single customer.

So we're feeling good about that.

And those are strong demand, and we're well positioned to benefit from it.

And we're not selling as much up on the value chain was on what we do well, the technology in the niche markets that we focus on, and we really feel that we're in a good position going forward to hopefully some of the larger customers can work through some of the situations are in.

But we think we have a call property for the rest of this year.

Great.

Thank you.

Thank you, Scott.

Our next question comes from the line of Brett Linzey, windmill drill holes.

Hey, good morning, all over at a Hey, just wanted to come back to the DOEM dynamic and the destock once Morrissey.

You noted some of the internal of exercises are that they're the math, the teams we're doing page that pressure, I guess, is there any way to quantify in revenue dollars are awarded?

Chris said, how much of the pressure on results of this year has been related to OEM destock?

I say that, yes, if you go back to Q2, we talked about it pretty significant because it is significant.

So that reverses less debt.

So clearly not a headwind.

I had one that's not there for next year.

So yes, it was in our automation business and with Paragon destock was substantial.

Okay.

Got it.

And then just delays.

So I think you noted it was various verticals.

I guess what are you hearing from customers in terms of project readiness as might return?

Are you contemplating any catch-up in the fourth quarter as part of the guide?

Or have you slowed that expectation into 2025?

I think our Q4 guide of for our project businesses and EAG. assumes a normal of calendar Q4.

That's pretty strong.

So we'll see a sequential of increase from Q3 to Q4 related to seasonality related to projects in that business.

So it feels like a that there's definitely some year-end spending on.

So that's positive.

Okay, great.

Best of luck.

Thank you.

Our next question comes from the line of Nigel Coe with Wolfe Research.

Thanks.

Good morning, everyone.

I just want to come back to orders and plus 2% organic, I think is what you said some.

So that's that's that's great news signal in the return to growth until the fourth quarter.

Some of that, I'm not mistaken.

So just anything happening in June September than the changed, correct.

Could change that any call-outs?

Was there some aerospace?

So just any color there?

And then maybe on on the back into that, as if we look at the implied organic orders, it seems like there's about $100 million source of there, about 1.1 50 of a slow growth, but no organic.

That's a big number.

So I'm just wondering what the book-to-bill was so Paragon and whether this Bertek positions have influences?

Both.

The first point is of we don't give guidance on orders.

So so I don't know how you got your of your information on the oh two Q. three being a quarter late, but in any event it So was it was the second point was was of backlog build the backlog build?

Yes, I don't have that number in front of us.

That's not something we look at.

It was 3.44 billion for the Company and pretty healthy and is and the orders turn positive.

So I think it's I wouldn't read too much into it is just positive.

We're just encouraged by the positive trends.

And maybe I did occurred earlier than you thought it would end, we think are going to have a good quarter in Q4.

Okay.

Okay.

Maybe maybe I'm just trying to segment and then on Parago on WC.

Um, I think you talked about the setup, but if the he removed you've seen in sales this year inventory through, should we consider that to be sort of one-time in nature and then that will spring back to original plan from 25?

Or do you think it might take a little bit longer to achieve that?

So Nigel, of your question broke up on our end, and we couldn't hear you, but we are located just outside of Paragon inventory and mechanism of reverse base between 25.

Yes, yes.

I mean, is that is that that inventory situation of bench definitely going to improve in 2025 and and hopefully 2025.

And we have a low cost, lower cost.

Sure.

And we also have a lot of new products that is going to take some time.

Is it like I said, you don't throw a switch, but yes, I really think it is going to improve and 25.

Thank you.

Next question comes from the line of Christopher Glynn with us.

Thank you.

Good morning, everybody.

And so but time spent on the E and G orders.

And Dave, you gave the kind of sequential improvement in the year over years for EIG., but wondering if we could go a little further into the, um, you know, sequential 3Q over 2Q orders pattern, IG., maybe anything on book to bill there?

Yes, the book-to-bill for the the whole company or 1.02, and it was above one for both of the group's silicon and give you there.

Okay.

That covers all that.

And then that last quarter you talked about defense delays and you had a couple of mid single digit quarters for A. and D. versus the high single-digit guide.

Is what's the status update on the defense?

And is that something you have factored in pretty strong in the fourth quarter yet at that as we had Q2 and Q3 is a little bit of project timing on that, and we think that's going to reverse.

And there's some good things schedule or that businesses excellent because it's growing the defense business growing, but it is a is project based.

So it's a lumpy, but it's lumpy and headed in the right direction.

So you're looking at the right way.

Great.

Thanks.

Lastly, I'm not sure if it was asked multiple companies coming through there, but at the deal pipeline, just curious, mix suites model, larger actionability, the deal pipeline remains strong.

We're actively looking at a high number of quality deals of we obviously they've got the cash and credit facilities to execute.

The rise by sellers on the pipelines is a variety of deal sizes, and we're very active.

And what I mentioned before feels like things are starting to move a little bit more in that area than they were maybe the last six or nine months.

Great.

Thanks a lot.

As a reminder, ladies and gentlemen, to ask a question, please press star one on your telephone.

Plus again, to ask a question, please press star one on your telephone next line of Andrew Obin with Bank of America.

Good morning.

Can you hear my hand or debt or you look at I appreciate the fact that you don't guide on orders, but just to just checking, if Mike, if I do look on a two year stack and just third quarter of last year organically, it was the easiest comp in the year, sort of, right, it was minus Com and it shows goes to minus two by Q4.

And if I look at Q2 and Q3 on a two year stack for orders, I'm just wondering, is it reasonable to us assume that we've bottomed and by Q4 we could return to growth has just arithmetically.

It would suggest that will probably continue to be, you know, we'll go back to order decline and I know you don't guide it, but we're just getting a lot of questions from investors wonder what is implied for the short-cycle names and what I gather that's macro.

You don't have a specialist your crystal ball.

I appreciate all these things like our crystal ball is no better than anyone else has.

But what we don't look at the two year stack number, so I can't comment on your numbers.

What I can comment is that there's been a healthy sequential increases from Q2 oh three.

So and we also saw the sequential increase from Q1 to Q2.

So along with the two year stack in the year over year, and we gave the organic numbers already the sequential numbers or they were up mid-single digits in the quarter.

So that's a go purging of fact, from our viewpoint, no, really appreciate it.

And just to follow up question on our Dan and it's a different business.

I mean, it's made so a lot more regulation.

But could you just give us an update on the time line of your restructuring?

And obviously amortize playbook is as good as anyone's in the industrial world.

But how do you apply this playbook on timing of the restructuring and things out fast in terms of costs in a regulated environment where you can just move production from one facility to another camp is all subject to regulatory approval.

Can you just what lessons being learned and what has been restructured and been relative to verify?

I'm sure very high expectations.

Thank you.

Yes, it because the environment's regulated and we know that because we have another business in the space that we've moved, remove factories.

So our EMC businesses of sister business, the Paragon.

So we're very experienced with the regulatory environment and our timing is adjusted for it and you have to move slow and do you have to be acute care.

Therefore, when it takes a bit longer living in aerospace business or just like moving at defense business or just like moving our utility business.

So we operate in a lot of regulated markets.

That's really our focus.

We like regulated markets.

This is a new kind of core if you look at our whole portfolio and But you're right, it does.

It does take time and though so on time, really appreciate it.

Thank you.

Our next question comes from the line of Joe Giordano with Cowen.

Good morning.

Ammonia is on the aero You mentioned, Mike, would you take everything into consideration?

I know you're very balanced there, but your Boeing OE. exposure, like are you essentially assuming zero in the fourth quarter?

Or are you still selling to like maybe Tier ones or something where you can still ship?

Yes.

Yes, I think you've got it right.

I mean to the where we have confirmed orders to lower levels of supply chain is zero.

And if there was anything direct, it's removed, got it.

And then I apologize if I missed this and I joined a little bit late, but I'm Paragon.

Did you give us an updated 2024 like revenue number that you said you expect from them or a contribution number?

Now we did that.

We didn't give the number.

The number that we gave last quarter still hold and of Paragon executed in what they thought they did for this quarter is a good quarter for them.

And I will talk about the sequential orders growing impaired onto.

Thank you.

Our next question comes from the line of Jeff Sprague with Vertical Research Partners.

Let me back in just a really quick follow-up.

Dave, can you just give us an update on price and then what you're seeing on price cost spread in the quarter?

And you think that changing any any as we move into Q4 the early part of 25 as a good question, Jeff.

I mean price, it would seem as though we're getting back to more normal patterns in the quarter, we got three points of price of pretty consistent across the portfolio, and we got about 100 basis points of positive spread to the P&L from it.

So I think the days of the high inflation, the higher price are abating.

And I think we're in the normal we own fuel mixture of normal price cost spread where we are always positive by 50 basis points.

And the numbers like 2% to 3%.

Great.

Thanks, Dan.

Our next question comes from the line of Steve Barker with KBC.

Hey, thanks, morning.

Morning, Al, I'll just ask a question on the semi-cap cycle fields like expectations are moderating a bit due to slower recovery in some consumer products.

But I know there's still a lot of around leading edge investments coming through.

I think you're in deep defect detection and more leading edge.

But based on how your portfolio is positioned, can you match or outgrow, however, the equipment market does as the cycle improves?

Yes, I think we can.

I mean, in for example, in the quarter, our semiconductor businesses were up mid-single digits, and that was announced and we had growth and it was driven by the uniqueness of the product portfolio.

And the one thing about our portfolio as we have a lot of laboratory semiconductor stuff that gets worked on during the between the cycles and then the production.

So if it happens, so there's a natural balance in there and we use on large swings either way that kind of compensate and they are not correlated with each other.

So it is a positive market.

I mean, you have some some dynamics with China.

You have some dynamics with G.

We have a product in our chemical developed has very unique in the best in class.

That's where we're selling quite well now.

So yes, we were up mid-single digits, we think will be up mid-single digits for the year and semiconductor and as a percent of our portfolio and though we haven't done the planning for 2025.

But if anything, our that's a market device technology and our technology is getting better.

In fact, that's great mall Act, a small acquisition that we did of Polygon physics was related to an ion source technology, specifically used in EUV manufacturing and gives us some capability in the advanced semiconductor space.

Understood.

And you'll like the cycle itself.

And I know you're very you do have some lab exposure, but for the more high volume production cycle, does it feel like we're yes.

I mean that you read all the industry things out there and it feels like there's a some some inflection points, but then you get some dynamics and the.

Yes, I'm kind of sit back and see what happens on that one.

Got it.

Thanks.

Thank you.

You.

I'll now hand the call back over to Vice President of Investor Relations and Treasurer, Kevin Coleman, for any closing remarks.

Thank you, Andrew, and thanks, everyone, for joining our call today.

As a reminder, a replay of the webcast can be accessed in the Investors section of Amazon.

Have a great day.

Ladies and gentlemen, thank you for participating.

This does conclude today's program, and you may now disconnect.

No.

And okay.