AME - NYSE

Good day, and thank you for standing by. Welcome to the First Quarter 2026 AMETEK Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kevin Coleman, Vice President, Investor Relations and Treasurer. Kevin, you have the floor.

Thank you, Stacy. Good morning, and welcome to AMETEK's First Quarter 2026 Earnings Conference Call. Joining me today are Dave

Thank you, Kevin, and good morning, everyone. AMETEK delivered an excellent first quarter, highlighted by double-digit sales growth, exceptional orders growth, robust core margin expansion, record EBITDA and a high quality of earnings that exceeded our expectations. We also raised our full year earnings guidance to reflect our first quarter results and the outlook for the balance of the year. Today, we also announced that we signed a definitive agreement to acquire First Aviation Services, an attractive acquisition, which strategically broadens our defense aftermarket capabilities. I'll provide more details on first aviation shortly. Now let me turn to our first quarter financial results. First quarter sales were $1.93 billion, up 11% from the same period in 2025. Organic sales were up 5%. Acquisitions added 5 points with foreign currency tailwind. Orders were outstanding in the quarter with broad-based and meaningful growth across all AMETEK divisions. Overall, orders were a record $2.2 billion, up 23% versus the prior year organic orders were up 22%, leading to a record backlog of $3.87 billion. Operating income in the quarter was $517 million, a 14% increase over the first quarter of 2025. Operating margins were 26.8% in the quarter and core margins were an impressive 27.9%, up a robust 160 basis points versus the prior year. EBITDA in the quarter was a record $620 million, up 11% versus the prior year, with EBITDA margins a strong 32.1%. Our excellent operating performance led to strong cash generation with free cash flow to net income conversion of 107%. Diluted earnings per share were $1.97 and up 13% versus the first quarter of 2025 and above our guidance range of $1.85 to $1.90 per share. Now let me provide some additional details at the operating group level. First, the Electronic Instruments Group. EIG had an excellent first quarter with double-digit sales growth, strong operating performance and a meaningful inflection in orders. EIG sales in the quarter were $1.26 billion, up 11% from last year's first quarter. Organic sales were up 2% and acquisitions added 7 points with foreign currency, the balance of the growth. Organic orders for EIG were up an impressive 25% in the quarter. This growth was broad-based across all EIG divisions and end markets with notable growth within our defense, power, in semiconductor businesses. EIG's first quarter operating income was $376 million, up 6% versus the prior year. Core operating margins were outstanding 31.4%, up 40 basis points from the prior year. The Electromechanical Group also delivered excellent results in the quarter. with continued strong sales and orders growth along with exceptional operating performance leading to sizable core margin expansion. EMG's first quarter sales were a record $664 million, up 13% versus the prior year. Organic sales were again up double digits at 11% with foreign currency at 2-point tailwind. Sales growth was broad-based with our Automation Engineered Solutions and Aerospace and Defense businesses, all delivering excellent growth in the quarter. Additionally, EMG organic orders were again outstanding, up 16% versus the prior year. EMG's operating income in the first quarter was $171 million, up 33% compared to the prior year period. While EMG's first quarter core operating margins were up sharply to 26%, a considerable 410 basis point increase versus the first quarter of 2025. I wanted to take a moment to expand on the strength and breadth of AMETEK's order growth in the quarter. The 22% organic orders growth reflects the ongoing strength within our aerospace and defense markets as well as the continued strong growth across our automation and engineered solutions markets. Importantly, it also reflects a meaningful inflection in orders for our process instrumentation and power businesses in the quarter. As the strong pipeline of opportunities we have been highlighting is translating into substantial orders growth. Contributing to the order strength were several large orders in the quarter, which help fill in our full year sales outlook. These large orders are aligned with attractive market segments, including defense, space, power and semiconductor, all markets where AMETEK is poised to benefit from strong and growing demand. Within defense, we are seeing broad-based strength, including within our -- within missile defense, UAVs and naval applications. The growth in defense budget is being driven by modernization of defense capabilities and the ongoing geopolitical conflicts, creating a strong global growth outlook for defense spending, including from NATO allies. Our Aerospace and Defense businesses was recently selected to provide a range of technologies in support of three UAV programs, one program in the U.S. and two with NATO allies. Products being provided on these programs include ruggedized thermal management systems, power distribution equipment, advanced sensors and embedded computing app solutions. Our EMIP business also provides highly engineered specialized fluid transfer solutions for critical military and defense applications. And in the first quarter saw strong orders growth across many key defense platforms, including in support of nuclear submarines. Within nuclear, we're also seeing strong commercial nuclear demand in orders. AMETEK businesses provide a range of highly specialized products to this market, including fluid transfer solutions, radiation detection equipment and uninterruptible power solutions in support of nuclear power facilities. Switching to space and satellite communications market. Our current micro technique business recently received a sizable order to provide ultraprecision machining solutions and manufacturing services in support of critical RF components used in low earth orbit satellites. Kern's advanced precision machining solutions are targeted for mission-critical applications, which require maximum accuracy, stability and repeatability. And lastly, our Abaco business, a leading provider of ruggedized embedded computing solutions continues to see strong demand with a significant win in the semiconductor capital equipment market. Abaco recently secured an agreement to provide advanced computing technology to support AI-driven demand for advanced semiconductor tools. Abaco's orders were excellent in the quarter, with strong defense orders in addition to strength in the semiconductor market. Overall, the breadth and strength of our orders in the first quarter reflect the continued trust of our customers and our continued delivery of key technology-driven products that meet our customers' most critical needs. Before we move too far off the topic of key programs and our ability to deliver and the most critical and demanding of applications, I want to take a moment to highlight a particularly timely example of our differentiated technology. AMETEK Sensors and Fluid Management Systems, a leader in advanced specialized sensing solutions for the aerospace, defense and space markets provided critical solutions used on the recent ARTEMIS 2 mission that eclipsed the record for the furthest man space mission. Our [ SFMS ] business provided thin-film pressure transducers that supported mission-critical life support infrastructure on the [ ORION ] multipurpose crew vehicle. This application demonstrates our ability to serve even the most demanding of applications and our ongoing commitment to reliability, precision and accuracy. Congratulations to the AMETEK Sensors and Fluid management systems team on this exciting success and also to the four other AMETEK businesses, FMH, UEI, NSI and

Thank you, Dave, and good morning, everyone. As Dave noted, AMETEK delivered an outstanding start to the year, highlighted by excellent orders, sales and earnings growth, robust core margin expansion and strong cash flow generation. . Now let me provide some additional financial highlights for the first quarter. First quarter corporate general and administrative expenses were $30 million or 1.5% of sales. For the full year, we continue to expect corporate general and administrative expenses to be approximately 1.5% of sales. First quarter other operating expenses were $1 million, largely in line with the first quarter of 2025. First quarter interest expense was $21 million, up $2 million from the first quarter of 2025. The effective tax rate in the quarter was 19%. For 2026, we continue to anticipate our effective tax rate to be between 18.5% and 19.5%. As we have stated in the past, actual quarterly tax rates can differ dramatically, either positively or negatively from this full year estimated rate. Capital expenditures in the first quarter were $25 million, and for the full year, we expect capital expenditures to be approximately $160 million or about 2% of sales. Depreciation and amortization expense in the quarter was $105 million. For the full year, we expect depreciation and amortization to be approximately $430 million, including after-tax, acquisition-related intangible amortization of approximately $210 million or $0.91 per diluted share. For the quarter, operating working capital was 17.5%, and a 60 basis point improvement versus 18.1% in last year's first quarter. Operating cash flow was $452 million, up 8% versus the first quarter of 2025. Free cash flow was also up 8% year-over-year to $426 million. Free cash flow conversion was strong at 107% for the quarter. For 2026, we continue to expect free cash flow conversion to be approximately 110% to 115% of net income. Total debt at March 31 was $2.2 million, down from $2.3 billion at the end of 2025. Offsetting this debt is cash and cash equivalents of $481 million. At the end of the first quarter, our gross debt-to-EBITDA ratio was 0.9x, and our net debt-to-EBITDA ratio was 0.7x. We continue to have excellent financial capacity with flexibility to deploy well over $5 billion on growth initiatives and our active acquisition pipeline while retaining an investment-grade credit rating. While acquisitions remain our #1 capital allocation priority for use of our free cash flow, we also seek to provide our shareholders with opportunistic share buybacks and a consistently increasing dividend. In February, we announced a 10% increase in our quarterly cash dividend to $0.34 per share, our seventh consecutive year of 10% plus annual increases in our dividend payout. I would also like to note that we have enhanced our financial reporting this quarter by including AMETEK's gross margin reporting and a related reconciliation on our Investor Relations website, with adjusted gross margin at a strong 51% in the quarter, this enhanced disclosure provides investors with greater visibility into AMETEK's margin performance and additional details to better understand our cost structure, and the underlying drivers of our profitability. Going forward, we will provide an updated gross margin disclosure quarterly on our website. In summary, our businesses had a great start to the year. Our exceptional operating capabilities delivered excellent revenue and earnings growth, robust margin expansion and strong free cash flow conversion. With a proven strategy, significant capital deployment capacity and a strong track record of execution, we are confident in our ability to drive further growth and value creation in 2026. I'll now pass it back to Kevin.

Great. Thank you, Dalip. Stacy, can we please open the line for questions? .

[Operator Instructions] Our first question comes from the line of Deane Dray with RBC Capital Markets.

Dave, you normally, at this point, take us for a tour of the key end markets, but your prepared remarks really covered that well, so I appreciate it. But maybe just -- and you also highlighted the really small exposure to the Middle East. But how about just the rest of the regions and maybe the idea of -- are you seeing anything at the margin in terms of buying hesitancy? You certainly don't see it in the orders, but take us through the regions and any kind of sentiment in terms of macro pressures that you might be seeing?

Sure. I'll start with the performance around the geographies. And we really had balanced growth. U.S. and international markets were both up mid-single digits. The strongest growth was in Asia. In the U.S., we were up mid-single digits, had very strong growth in our A&D and Materials Analysis business. Europe was up low single digits. That's where we had strength and power, strength in our automation businesses, but modest headwinds from the Middle East, we had about, I'd say, $15 million of discrete orders that due to safety reasons and disruptions that didn't ship during the quarter. So that would have ended up a little bit higher, but that occurred. And we have not seen any cancellation in orders from the Middle East. In fact, we're seeing quotations to really rebuild infrastructure, the energy infrastructure. So it's going to be when this thing settles down. In terms of getting back to the geographies, in terms of Asia, Asia was up low double digits, driven by strong China. China was up high teens, and it was driven by our process and power markets. So across the board, it was a balanced growth solid in all geographies really performing well.

Good to hear.

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

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

AMETEK policy is not to comment on market rumors or speculation related to M&A activity. I just go back to what I said before, our pipeline is strong. There is a mix of larger, medium and small technology deals and we're looking to create great deals for our shareholders. We announced the MRO deal today, First Aviation service. We're really happy about that. We have -- as Dalip said, we have significant financial capacity that provides the opportunity to deploy well over $5 billion in capital and still maintain an investment-grade credit rating. And M&A is our top priority for capital deployment. And I mentioned a few quarters ago that that's the way we're going to differentiate our performance over the next few years. So we are really engaged with a lot of different businesses and a lot of different opportunities, and we're going to make good disciplined deals for our shareholders, for sure. And as you know, at AMETEK, acquisitions are the combination of a set of process, well-defined processes, integration is our secret sauce and returns are very important for us.

That's all really good to hear, best of luck.

And for our next question. Our next question comes from Andrew Obin of Bank of America.

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

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

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

Yes, that's a good question. And I'd start with, we're obviously performing very well. We've had strong execution, disciplined operation, and we're gaining momentum across the portfolio. We feel very good about our businesses performing. But there's obviously some ongoing geopolitical uncertainty, and we're remaining prudent with our guidance. We have places in our business, we're laser-focused on material input costs. We believe we're going to be able to offset any inflationary costs with pricing. So we expect to offset inflation, including tariffs with pricing but we feel good. But we're laser focused on changes in the macro. And with our distributed structure, we have business leaders out there close to their customers looking at everything, and we're making sure that we have the right focus on it. So from what we know now, it feels good to us, but we're laser focused on what could be a bigger change. And -- but as I said, we're confident in our guide, and we feel really good about the momentum in the portfolio.

Our next question. The next question comes from Nicole DeBlase with Deutsche Bank.

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

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

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

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

Our next question. The next question comes from Andrew Buscaglia with BNP Paribas.

I wanted to get your take on just kind of what's going on in the world. related to your Aerospace and Defense businesses given the heightened geopolitics. I know you guys have a number of mesh offerings. So it's hard to know in real time what you see going forward. But can you comment on any impact positive or negative to A&D?

Yes. Well, I think what we saw in the quarter, our A&D business continued strong activity, high single-digit growth in the quarter, and the growth was broad-based. All segments continued strong demand with notable strength in our defense markets. And our A&D businesses are very well positioned to benefit from growing demand given our broad portfolio of differentiated technologies. And we now -- we increased our outlook for the year. We increased it to from high single digits to up approximately 10%. And that's what balanced commercial and defense activity. And the way I look at it is, if you look at our 18% of the -- in A&D, about 60% of that is defense and about 40% of that is commercial. Defense is knocking it out of the park. The [ OE ] part of commercial and the business jet market are doing very good. Our M&A -- or MRO businesses that service airlines had an excellent quarter for orders. So the one area that we're watching closely is some of the international markets related to aviation fuel availability and fuel costs. That's a small part of our portfolio, less than 2%. But at the same time, we're watching it. But right now, we don't see -- we have good backlogs, good execution and I think that if we see something, it will come in the flying airlines flying public first, but right now, we're not seeing it. But the key thing is the vast majority of our aerospace portfolio, we're taking our whole portfolio up. And even the part that we're watching closely had a fantastic first quarter.

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

Yes, sure. I'll provide some more details on it, Andrew. And at the high level, our MRO businesses were largely commercial biased. And we were looking for something that really added a defense aspect to it because of the strength in the market, and we're really pleased to find First Aviation services. It's engineering-driven provider of aftermarket services and proprietary parts. The primary markets defense. They also have some business jet and commercial pieces of it, but it's primarily a defense business. They have about 2/3 of our business are on MRO service and they actually have about 1/3 of it is on proprietary parts that we have businesses that have the parts and the services together, we typically do best with them. So they're really into [ PMA ] and [ DER ] approved repairs. They had new capability to us. Rotorcraft and fixed-wing platforms. There are a lot of good military programs. It expands our military -- our MRO capabilities to additional critical systems includes propeller blades, rotor assemblies, landing gear, some advanced electronics. So it's a sizable and growing proprietary aftermarket solutions business, strong engineering capabilities nicely expands our defense MRO and just fits like glove and with our existing MRO capabilities. So we're really excited and getting this business to closing and welcoming the First Aviation team to AMETEK.

Our next question comes from Scott Graham with Seaport Research Partners.

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

Yes. I'll start with the -- I'll finish the walk around the company. I did it for aerospace and defense and covered some of it in my opening remarks, but there's some details still that it's probably you're interested in. I'll start with the Process business. And it was up mid-teens in the first quarter and driven by acquisitions and low single-digit organic growth. And we have a solid pipeline of orders we highlighted during our last earnings call. These translated into broad-based order growth in the quarter, and we remain encouraged by continued momentum and a growing pipeline of opportunities across our process markets. So now for the full year 2026, we're increasing our guide for process. We now expect organic sales for Process segment to be up low to mid-single digits, so increasing it from low to low to mid. We talked about aerospace. We're increasing it from high single digits to approximately 10%. Go into power, next. Power subsegment deliver low single-digit sales growth with strong record level orders. Our power business continues to see strong demand across a growing pipeline of opportunities for power generation, backup power, data center microgrids and power simulation systems. I highlighted one of the new products in the orders received for power simulation systems in my prepared remarks. Looking to 2026, we continue to expect organic sales to be up mid-single digits for that subsegment. And finally, our Automation & Engineered Solutions, excellent quarter, again, with high single-digit organic sales growth, broad-based, both our automation and engineered solutions business and our EMIP business and demand across attractive niche markets remains solid. And we continue to expect organic sales for Automation & Engineered Solutions business to be up mid-single digits. In terms of digging in on the orders, I was trying to -- in my prepared remarks, do that a little bit. We talked about a big order in the semiconductor market from Abaco, we're providing computing solutions. That's -- we talked about the space satellite market that is really doing well with we have specialized machining solutions that can make precision components like no one else. So we're actually building machines, and we're doing some contract manufacturing for the lower orbit satellite systems. I talked a bit about defense and what's going on in defense and our strength in UAVs and our strength in missile defense systems. I talked about the nuclear industry and both on the commercial and the civil and defense very strong for us, and we've got a substantial order for the submarine program. And these are -- these programs are things we're winning because of our technology because, we work with customers. These are highly engineered technologies. There are not a lot of people that can do these things, and we just think we're well positioned for where the world is going. We're in the right places, and we feel really optimistic right now.

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

Our next question comes from Joe Giordano with TD Cowen.

There seems to be emerging concerns that potentially aerospace aftermarket, I guess, on the commercial side is peaking. It doesn't seem like there's real evidence in your business of that. But what are you kind of hearing seeing? And what would you really be looking at to see if something like that was starting to form?

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

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

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

[Operator Instructions] Our next question comes from Nigel Coe with Wolfe Research.

Obviously, a lot grand covered here, but thanks for the question. So the guide increase from mid- to high singles to high singles and the -- obviously, the bump in corporate as well. Is that in the realm of 2 points of sales accretion versus the prior plan? That's how I think about it. And what I'm going with this is twofold. One, the $0.07 increase in the guide, obviously, a nice surprise. But seems like if it is a 2-point increase in sales? And then secondly, with the EIG, I'm just curious, given the order strength and the broad-based nature of the order strength, I'm just wondering how we should think about the second half core growth profile for EIG.

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

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

Yes. I think the -- there's an important risk reward. And you have to make sure what you're buying is -- matches our strategy, matches what we're trying to do and we can add value to it. So we have naturally increased the size of deals over the past 10 years. We're still focused on niche markets. we're still focused on the areas that we're currently operating in. And I think that I plan on continuing to expand a lot. And it's, again, an unblemished record. We've never had a write-off of goodwill. We're very conservative. We're -- we look to get a return on every deal, returns on capital are very, very strong for us. It's part of our basic operating model. That's what we do. Our growth model is to add M&A to our portfolio of niche businesses. We don't have any over-dependency on any one market, any one technology, any one customer. So we just think we have a bulletproof model that's robust, and we'll continue to add acquisitions in no way are we going to do at an acquisition that's the size of AMETEK and no way where we had an acquisition is half the size of AMETEK. So we're still looking at these I'll call them bite-sized deals that are a small percentage of our market capitalization, and we're going to continue to do that. And the environment for us is providing a lot of opportunities for us. So we're assessing a lot of opportunities. We haven't made a decision on any of them, but we're going to pick the ones that we add the most value for our shareholders.

Our next question comes from Julian Mitchell with Barclays.

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

Right. So if you want to dig into margins, Julian, in the first quarter, we had an excellent operating quarter. So our reported margins were up 50 basis points. But our core margins, so we take out acquisitions and we take out FX, they were up 160 basis points, just outstanding. And if you look at both of our groups. EIG had core margins up 40 basis points, driven by excellent productivity and EMG reported core margins up 410 basis points. So they got month productivity plus leverage from the excellent sales growth. If you want to dig into that and say, what were the incrementals on the dollar of sales over the incrementals. Our incrementals were greater than 50% for the company, core incrementals. So when you back out the acquisitions and you back out FX, core incrementals were up 50%, both on the whole company. EIG core incrementals were greater than 50%, and EMG core incrementals were greater than 50%. So really strong. And related to the guide for the year, we're expecting 35% incrementals, and core margins will be up around 50 basis points. So -- and again, I'll go back to -- it's a prudent guide. There's a lot of uncertainty out here related to potential inflation and things like that, we're laser-focused on. So performing extremely well, plan to continue performing very well for the year, and those are the numbers that are outstanding in the quarter. And we plan to continue driving it forward. And we have a track record of being able to navigate through changing conditions, and we're laser-focused on what we think we need to do.

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

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

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

Thanks, everyone, for joining our call today. And as a reminder, a replay of today's webcast can be accessed in the Investors section of ametek.com. Have a great day.