AMETEK Inc ($AME) Q4 2025 Earnings Call

Thank you, Kevin, and good morning, everyone. AMETEK completed a strong year with excellent results in the fourth quarter, highlighted by double-digit growth in sales, orders, and operating profit, robust core margin expansion, strong cash flow growth, and earnings per share ahead of our expectations. In the quarter, we established records for sales, orders, operating income, EBITDA, diluted earnings per share, operating cash flow, and free cash flow. We also ended the quarter with a record backlog. And today, we announced the acquisition of LKC Technologies, an attractive technology acquisition which broadens our MedTech exposure. I'll provide more details on LKC shortly. Now, let me turn to our fourth quarter results. Fourth quarter sales were a record $2 billion, up 13% from the same period in 2024. Organic sales were up 5%. Acquisitions added seven points in the quarter. And foreign currency was a 1-point tailwind. Orders were very strong in the quarter with overall orders up 18% to a record $2 billion, and organic orders up 7% versus the prior year, leading to a record backlog of $3.58 billion. Sales and orders growth consistently improved throughout the year, with the fourth quarter growth the strongest of the year. AMETEK delivered excellent operating results in the quarter. Operating income was a record $523 million, a 12% increase over the fourth quarter of 2024. Operating margins were 26.2% in the quarter. Core margins were an impressive 27.6% up 100 basis points. EBITDA in the quarter was a record $618 million, up 10% versus the prior year, and EBITDA margins a strong 30.9%. Our excellent operating performance led to strong cash generation with free cash flow a record $527 million in the quarter up 6% versus last year's fourth quarter and free cash flow to net income conversion of 132%. Diluted earnings per share were a record $2.01 up 7% versus the fourth quarter 2024 and above our guidance range of $1.90 to $1.95 per share. Adjusting for an abnormally low tax rate in last year's fourth quarter diluted earnings per share would have increased 11% in the quarter on a 5% increase in organic sales reflecting strong incremental margins. Now, let me provide some additional details at the operating group level. First, the electronic instruments group. EIG delivered excellent operating performance in the fourth quarter with record sales and operating profit along with impressive core margin expansion. EIG sales were $1.37 billion up 13% from last year's fourth quarter. Organic sales were up 2% acquisitions added 10 points foreign currency was a one point tailwind. We were encouraged by the organic sales growth in the quarter and the steady improvement in EIG growth rates throughout 2025. EIG's fourth quarter operating income was a record $413.7 million up 7% versus the prior year. Core operating margins were a robust 32.3% up 50 basis points from the prior year. The electromechanical group completed an outstanding year with very strong broad-based growth and excellent operating performance in the fourth quarter. EMG's fourth quarter sales were $629 million, up 15% versus the prior year. Organic sales were up an impressive 14% and foreign currency was a 1-point tailwind. Sales growth was strong across all EMG divisions with each growing double-digits organically in the quarter. EMG's operating income in the fourth quarter was $142.5 million, up a sizable 28% compared to the prior year period. While EMG's fourth quarter operating margins were 22.7% up 240 basis points versus the fourth quarter of 2024. Now for the full year results. AMETEK delivered excellent overall results in 2025, establishing annual records for sales, operating income, operating margin, EBITDA, and diluted earnings per share. Overall sales for the year were $7.4 billion, up 7% from 2024. Operating income for 2025 was $1.94 billion, up 7%, and operating margins were 26.2% up 10 basis points from the prior year period. While core margins were up a very strong 80 basis points. EBITDA for the year was $2.33 billion, up 7%, with EBITDA margins at a very strong 31.5%. Full year 2025 earnings were $7.43 per diluted share, up 9% versus the prior year. We also delivered strong cash flows in 2025, providing us with a significant capital to deploy on strategic acquisitions with three cash flow and net income conversion of 113%. I'm very proud of our performance in 2025. Our businesses successfully navigated through sluggish industrial markets and ongoing macroeconomic uncertainty and delivered excellent results. Thank you to all AMETEK colleagues for your outstanding contributions and hard work in delivering on our commitments to our customers and shareholders. AMETEK is well-positioned for continued long-term success given your efforts. Now I'll turn into acquisitions and capital deployment. In 2025, we completed the acquisitions of Ferro Technologies and Creaform Technik for approximately $1 billion acquiring approximately $400 million in annual sales. The integration of both businesses is going well as they integrate the AMETEK growth model into their businesses. Now switching to our most recent acquisition, LKC Technologies. LKC is a leading provider of innovative technologies that enable effective diagnosis and management of ophthalmic conditions. Their advanced technology solutions help doctors test and monitor eye health and are designed to detect early signs of diabetic retinopathy and other serious eye conditions that can lead to vision loss. The combination of LKC with our ultra-precision technologies business provides attractive market expansion opportunities and creates a broader ophthalmic portfolio. LKC was privately held and headquartered in Germantown, Maryland. I'm excited to welcome all LKC Technologies colleagues to the AMETEK family. With our robust balance sheet, strong cash flows, and disciplined approach to capital deployment, AMETEK is well-positioned to continue driving long-term value through our acquisition strategy. We are encouraged by our strong pipeline of high-quality acquisition candidates, and our significant financial capacity provides us with the flexibility to deploy over $5 billion in capital while maintaining an investment grade credit rating. Our top priority for capital deployment remains acquisitions. While our strong cash flow provides us with the flexibility to opportunistically repurchase shares and pay a consistently increasing dividend. We also continue to focus on ensuring AMETEK is strategically positioned for long-term sustainable growth through continued investments back into our business. These investments have strengthened our leadership position within our niche markets, helped open up new growth markets, and attractive adjacencies, and accelerated our new product development and technology innovation. For all of 2025, we invested an incremental $90 million in support of these growth initiatives, with the majority of these going into our research, development, engineering, sales and marketing, and digital initiatives. And in 2026, we expect to invest an incremental $100 million. We're seeing great results from these investments. In the fourth quarter, our vitality index, which measures sales of new products introduced over the last 3 years, was an outstanding 30%. This is an impressive result and reflects the great work of our businesses and colleagues. I wanted to highlight a couple of examples of how our businesses are leveraging their technology innovation efforts and broad product portfolios to help strategically expand their presence within attractive market segments. The first business is AMETEK Spectro. Spectro is a leading provider of advanced analytical instrumentation for use in critical, industrial, environmental, research, and academia applications. Spectro's products and solutions provide highly accurate, reliable, and efficient elemental analysis. Spectro has recently introduced a new product family of elemental analysis instruments, broadening their technology, product capabilities, and market reach. These new products, the SpectroMAX and the X-Sort, have seen outstanding demand as rapidly rising commodity prices have increased the importance of precise and accurate metals analysis within a wide range of applications. We are also seeing growing demand across our defense businesses, in particular within our European defense businesses, as our differentiated technology capabilities and product portfolio are well positioned to benefit from the expanding defense spending in the region. Our defense businesses provide a wide range of ruggedized, high-performance solutions for a diverse set of mission-critical defense applications, and we continue to win content on new programs given our strong design and engineering capabilities. To share a few examples, AMETEK's Rotron and Air Technology businesses are providing advanced cooling solutions for use on a number of European air defense systems. Our Abaco business is providing integrated high-performance computing systems for European aircraft and communication platforms. And our power and data systems businesses is supplying power generation systems for a number of UAV platforms. Great work by our businesses in developing the critical products and technologies needed by our customers. Now shifting to our outlook for the year ahead. For 2026, we expect overall sales to be up mid-to-high single digits on a percentage basis with organic sales expected to increase low to mid-single digits versus the prior year. Diluted earnings per share for the year are expected to be in the range of $7.87 to $8.07 up 6 to 9% compared to last year's results. For the first quarter we anticipate overall sales to be up approximately 10% versus the prior year's first quarter with adjusted earnings of $1.90 to $1.95 per share up 6 to 9% versus the prior year. To summarize AMETEK delivered a strong finish to the year with excellent performance in the fourth quarter reflecting the strength of our portfolio and our ability to execute our growth strategy. We enter 2026 with a record backlog and solid momentum given the strong sales and orders growth we saw in the second half of 2025. Our differentiated technologies and deep industry expertise continue to position us well in attractive niche markets. Additionally, we have significant capital to deploy on strategic acquisitions and a track record of delivering strong returns on capital. Lastly, our proven operating capabilities allow us to deliver strong incremental margins and manage through economic or geopolitical uncertainties. With a focus on innovation operational excellence and disciplined capital allocation we're confident in our ability to drive continued growth and create long-term value for our shareholders in 2026 and beyond. I will now turn it over to Dalla Perry who will cover some of the financial details of the quarter then we'll be glad to take your questions. Dalla?

Sure. It's about 21% of our business now, the broader health care exposure. If you look at the health across both groups, Paragon and Rowan driving the results. They were up low double digits in Q4. So, that was a very good quarter, up low double digits, and for the full year '25, they were up high single digits. And we're thinking for '26, it will be up mid-single digits. So, our initial guide is mid-single digits. More challenging comps, but still very healthy businesses and performing well. What's the follow-up, Matt?

For the fourth quarter of '25, we had a positive price cost spread. So, our pricing offset both inflation and tariffs. So, you know, we think that that is going to be what's going to happen in '26. So, for the full year '26, we're confident we can offset inflation and the existing known tariffs. So, we're getting, you know, we have highly differentiated businesses, AMETEK product portfolio, leadership in niche markets around the globe. And these are mission-critical products. And the pricing is not going backwards. It's going to stick. The vast majority of it is, you know, price increases, not just kind of offsets. So, we had a good pricing situation. As I mentioned in my prepared remarks, we have a refreshed product portfolio. 30% vitality mission-critical products. So, we really have done this for quite a while and don't see any change. So, I think we'll be positive when you take into account inflation and tariffs for the year.

Thank you, Matt.

Morning, Dean.

Sure, Dean. The process businesses, I'll start there. Overall sales for our process businesses were up mid-teens in the fourth quarter, driven by the contribution from recent acquisitions. So, we acquired the Ferro business, the Kern business, and we bring those in. They're at lower margins and, you know, we're improving them as we go. But, that group grew low single digits organically in that quarter. So, that's the first time we saw a low single digit organic growth in process. We're pretty happy with that. We saw continued improvements throughout the whole year. You know, as I said, they're the most positive in the fourth quarter. We're encouraged by that finish to the year, and we talked about before, we see a very strong pipeline of growing opportunities in our broader process and analytical instrumentation markets. For the full year 2026, we expect organic sales for our process segment to be up low single digits. Talk about our aerospace and defense businesses. They completed an outstanding year with low double-digit growth in both overall and organic sales in the quarter. Similar to the full year, growth was broad-based. Strongest orders, strongest growth across our commercial OE and aftermarket businesses in the quarter. Our businesses are well-positioned with strong and expanding content on a wide variety of aerospace and defense platforms. And looking ahead, we expect another strong year, high single-digit organic growth in 2026, and really balanced across both our commercial and defense businesses. Jumping next to our power business, delivered solid growth in the quarter. Both overall and organic sales were up mid-single digits. Growth in the quarter was strongest within our RTDS and power instruments businesses. Driven by global grid modernization and applications supporting the data center buildout. Talked a little bit of in the last meeting, we have applications in the power generation, backup power, microgrids, power system simulation services, all supporting the broader data center ecosystem and delivering power to the ecosystem. Looking ahead to 2026, we expect organic sales for our power businesses to be up mid-single digits. And finally, our automation and engineered solutions businesses delivered another outstanding quarter with low double-digit overall and organic sales growth. Growth was again broad-based across our automation and engineered solutions businesses, with our Paragon Medical businesses delivering the strongest growth. For 2026, we expect sales for our automation and engineered solutions businesses to be up mid-single digits organically. And I think you asked about the geography also, Dean. Yes.

Yeah, we had you know, both US and international sales were up mid-single digits. So, it's kind of good strength across the board and in the US we were up mid-single digits driven by strength in our automation and engineered solutions business. And Europe we were up low single digits driven by strength in aerospace and our automation businesses. And Asia was up 10%. We were very pleased that China was up low double digits for us. Driven by our process, power, and automation businesses and again Asia was up 10. If we take China out of Asia, Asia was up high single digits. So Asia was pretty much strong across the board. So pretty good performance geographically across the board.

It's in the same ballpark. It's with our long cycle businesses, aerospace, defense business, with our process businesses. Some of those are multi-year. But there's plenty for us to ship near term. So we're pretty optimistic about the order pipelines. We had good orders throughout the quarter. December was the strongest quarter. December was the strongest record quarter for us in one month. And we also started the year strong. So, you know, orders are good. You know, there's again the backlog is, you know, with our multiple industries, it's a little bit difficult, but you're right, it's between that 30% and 50% number. But we're in good shape and it's feeling good with the strength.

Thank you, Dean.

Morning, Andrew.

Yeah, if you go back to the beginning of 2025, we actually had negative organic growth in the first couple of quarters in our process businesses. And those improved. So, we were actually positive in Q4. So, we were pretty pleased with the performance of EIG turning positive in Q4 on the back of the process business performance. If I look at 2026, you know, we have our overall sales I already mentioned in the prepared remarks is up mid-high single digits with organic up low to mid single digits. And we think both of our businesses will have low to mid single digit organic growth. So, both EIG and EMG overall will be up mid to high single digits and both will have organic growth of low to mid single digits.

No, I think that as I mentioned in the prepared remarks, every division within EMG had double-digit growth in sales. So, there's really a lot of strength there. I mean, you're going to get some tougher comps next year. But we're performing well. We have strong execution, disciplined operations, we're gaining momentum in the portfolio. EMG recovered nicely. Automation and medtech are solid. A&D remains strong with good backlogs. So, I think what you might be seeing there is the guide's a little bit prudent or this early in the year. But we feel good about EMG in 2026.

Thank you, Andrew.

Good morning, Brett.

No, I think it seems like we've, you know, there's a lot of macroeconomic things we're dealing with and uncertainties and they're related to the broader deglobalization. But, I think all that stuff happened in 2025 and I think we're more of a more normalized, feels like it's more normalized now where you don't have buy ahead, you don't have things like that and it feels more normal than it did in 2025 at the beginning of 2026.

Yeah, we're not giving a specific target, but what we will say is in the fourth quarter as I mentioned to Matt, we offset price offset inflation plus tariffs plus about 50 basis points. So, it was very strong. And I expect a similar kind of performance next year. That's our target. So, there's and our different businesses are at different levels of inflation, there's dynamics, but we have a strong history of because of the product portfolio and special place in the value chain we have with our customers and being able to offset price offset inflation and tariffs with price. So, that's going to continue.

Thank you.

Hello, Andrew.

Good question. Remember everybody, it's a designs and develops advanced 3D

Metrology and digital reality solutions. These include product families like measurement arms, laser scanners, laser trackers, integrated process and analytics software. And it's an excellent strategic fit with our Creaform business. So we have a business that's complementary to it and complements our metrology capabilities. So we acquired the business and we think we can add meaningful value to Faro. So along with the elimination of the public company cost and the integration in the AMETEK global infrastructure, we think there's a tremendous amount of synergy. So we acquired the business for about 2.7 times and we feel that the cost synergies will allow us to more than double EBITDA margins from the current mid-teens level to a 30% level and achieve a 10% return on invested capital by year three. And that was the plan going in and it's still, we're more confident than ever we're going to be able to do that. We have made moves on integrating the business. We formed two business units. One's more of the metrology business unit and one's more of the digital reality business. So those are people coming from legacy AMETEK and Faro in both businesses. And that's going extremely well. You'll see in the press release we put out, we have some one-time charges with that. It was about $17.6 million, I believe. So that's allowing us to get the kinds of improvements that we're getting in the business and that's why there's quite a big gap between our core margins that I mentioned and the reported margins. You got the, along with being a less profitable business, and we're doing some work on improving the business. But I'm very bullish with the business. I mean, there's a great coverage throughout the world. We didn't have overlap in capability. Really complementary and the team is extremely motivated. So the AMETEK leadership style is having a positive effect on Faro. So we're very pleased with it.

Yeah. If you go back and listen to our last couple of conference calls, we were feeling better through the quarters, too. We could see momentum building. And it seems to continue to build. And we've had a fantastic pipeline of opportunities and more of those are starting to happen. And yes, you had three years of negative PMI prints and I think it's changing. Feels good for us. And then we got the positive segments that we talked about. And we got the power business now is well positioned and is going to benefit from the build out of power capacity. The process business is seeing steady improvements and we're managing a strong pipeline. The future project activity remains extremely healthy. You look at a little bit of macro uncertainty around the broader decarbonization, but at the same time conditions remain constructive. Interest rate policies are positive. M&A environment looks favorable. The industrial renaissance across the west should also help us offset any kind of drag from the tariffs. So yeah, we're growing our business and we're feeling pretty good right now. So you never know if it's long-lasting, but right now it feels solid and we're certainly being prudent with our guide because something like you mentioned happens and it weakens later in the year, but we don't see it right now.

Thank you, Andrew.

No, I think Jamie, I'll take the margin question first. I mean, we're firing on all cylinders in terms of margins. If you look at our core operating margins, we're up 100 basis points in the quarter. So if you back out all the things you mentioned, they're very strong. Both groups, EIG was up 50 basis points. EMG on a core margin was up 310. And if you look at incrementals, core incrementals were 45% in Q4. So that's very strong. And for 26, we've been a little more conservative. We're saying 35% reported incremental margins and 30 basis points of margin expansion. So 30 basis points of margin expansion, which is pretty typical for us going into each year and we think we can get 35% incrementals. And that'll be a little bit less than we got in 25, but it's more prudent. We're feeling good about it. There shouldn't be any surprises. With a business like ours, where we have 31% EBITDA, every time we acquire businesses, they're coming in at a lower profit margin. So yeah, that's why we try to give the core margins and we communicate them. And we go through it all and you have to think about it. But if we add a business that has a lot lower margins, like Faro had essentially 15% EBITDA margin. So there's going to be initial dilution, but we have a tremendous capability of bringing those margins up and the best way to look at that long-term is return on capital. You have to look at our balance sheet, it doesn't lie. We have between a 12 and 13% return on capital. And that's how we know we're creating value for our shareholders.

I think so, it really is. And then you talked about M&A and we're excited about the businesses we got done because we really can add a lot of value to Faro and Kern. But we really have the opportunity to differentiate our performance with M&A in the next year or two. Because with our ability to operate businesses, our discipline, and really a key change in the pipeline. We have a strong pipeline of deals right now. And as Dallas said, we have a balance sheet ready to act, ready to put to work. And the pipeline remains strong. We're actively looking at a number of high-quality deals. We could spend $5 billion and still maintain our investment-grade credit rating. So the team is active, and we're excited. And this is really going to be a way for us to differentiate our performance over the next couple of years.

You.

Hi, Nicole.

Right. China's a little different for us. I mean, we have first of all, we have a fantastic team over there. We have just great long-term Ametek employees over there. They do a great job of managing it. And we have products that are used by our customers in China to improve their manufacturing processes, high-value manufacturing processes. We have products that they use to automate their processes. We have products that make their environment cleaner. We have process products that help them build out their nuclear power infrastructure. We have products that help them test their electric vehicle industry. So a lot of our products are really suited to our customer base. So it's the overall market, the overall country, I think you're seeing some deflation. I think you're still having a real estate hangover. But in the places that we're playing, we still have strong positions and we're being conservative on how we're looking at that business. But it was good to see the change and you can get a low double digit growth driven by our process businesses, our power businesses, and our automation businesses all firing on all cylinders in China.

Yeah, the pipeline has always been strong, but I think right now the pipeline is filled with a good mix of normal quality deals and larger deals. So I think there's probably more larger deals than have been in our pipeline in a while. And larger deals, we're not looking to buy a business that's our size or even half our size or even a quarter of our size. I mean, we don't think you add value that way. But there's a good bunch of businesses there that are of good chunky sizes for us. So as we get bigger, we've expanded the types of businesses we're looking at and we're very pleased. I mean, we're very disciplined. So what looks good today may not happen tomorrow because we're not going to overpay. But at the same time, if we buy a business, we're going to get the returns on capital. And we're optimistic. We're working very hard. We have a great team in M&A. We have about 11 people dedicated to M&A. Very few companies in the industrial world have the dedicated people to it. And all of our operators are also involved. So we have a good process. It's well-defined processes. The processes that work on deal sourcing, deal modeling, diligence, integration. And I think the secret sauce of AMETEK is we have very strong business operators well ingrained in the AMETEK culture, well ingrained in the AMETEK business system, providing ownership for the delivery of financial metrics for each individual deal. So we learn something new from every deal. We're experienced at it, but we're humble, and we learn something new from every deal, and we share the knowledge, and it just makes us better.

Thank you, Nicole.

Yeah, I think in Q1 specifically, we got overall sales at 10%, and you got FARO in there that's running at a lower margin, pretty sizable deal running at a lower margin. So if you just look at Q1 and you look at the year-on-year increase in sales and you apply a mid-20s contribution margin to it, you'll get it'll work out to our guide. I mean, I think below-the-line items essentially offset and we're getting mid-20s on the contribution margin on the incremental business and that'll be right in line with what we did. Yeah, Chris, if you adjust for the acquisitions and look at core margins, we do expect Q1 margins to expand like we guided for the full year in that same ballpark.

Yeah, I'll start with Paragon. Paragon is already at EBITDA margins that are now in line with AMETEK. So it's a very positive work by the people that are doing work on that business. Very happy with them. But there's more room to go. So I think there's a whole next leg of margin improvement in Paragon that are just going to occur over the next 12 to 18 months and it's going to occur incrementally. We do things incrementally at low risk and that's going to happen. And then with Faro, yeah, we're kind of in the beginning stages of it and you saw some pretty heavy restructuring done early in the year. We're still doing some organizational work. There's international infrastructure that we haven't dealt with yet in terms of duplication. So I think you'll see some benefits from Paragon this year and Faro's going to prove, but it's going to take us a couple of years to get it to 30. And it's going to be in some chunky improvements, but it's going to take us a couple years to get it there.

Thank you.

Right, Julian. Maybe good morning.

I think it was pretty broad-based. I mean, we had the fourth quarter, we had organic orders of 7% as you said. Both groups were up. So EIG and EMG. So it was broad-based and that was a similar pattern from Q3 and the book to bill of AMETEK was 1.02 and it was pretty broad-based.

Oh, yeah. But I think what you see is the EMG businesses picked up first and the EIG businesses, the process part of the EIG businesses, are following later. And that's a typical pattern that we've had throughout history. So there's sometime during 2026 when we think the EIG, the process part of the EIG, is really going to inflect positive and historically, we've had great contribution margins when that happens. But that's how it's happening. EMG happens first, EIG happens later. We look at aerospace, it's been strong all along. And you look at that separately.

That I would, I don't know what's going to happen exactly because we're looking a long way out, but I think if you get into the second half of the year, EIG organics could be stronger and EMG organics could have tougher comps.

Morning, Joe.

I can see that. I mean it was we grew low single digits in Q4 and we guided low single digits for the year. So Q4 was the first quarter process added positive low single digits. We're being a bit prudent, but one quarter does not make a year.

I think in that segment what you see is the semiconductor business is positive and the instrumentation sold the metals businesses are positive and the rolling business that we talked about earlier is positive. So a lot of things are positive and the places that are the oil and gas and the research are a little bit less than those positive segments.

Yeah. Yeah, it's really a technology deal and we're not disclosing terms. We have an agreement that we're not disclosing terms. It's a smaller deal. It's a technology deal and it's a really interesting business. They're a leading provider of advanced eye care testing instruments and optometrists are trying to find the initial signs of diabetic retinopathy and they're doing that with structural testing. And they're testing your eye. They're looking at your eye. They're trying to see things, but this is an actual electrical response. And it's not a portable device. There was a technique that you used to do the test. The test was expensive. It was very large piece of equipment. But their innovation was to make it a really portable instrument. And it's really going to help a lot of people and it's a technique that's growing rapidly, small but growing rapidly. And most of the sales are in the US and there's about 60 employees near DC in Germantown, Maryland. And it fits right into our record business. Our ultra precision technology business has a business that sells this type of equipment. It's just an additional product line. So we're really happy about it. It's adjacent technology. It broadens our portfolio. It lets us leverage our channels and leverage their channels. And this business has a recurring revenue of nearly 40% from these tests from these sensor strips that are placed on the eye. So it's really good technology. We're pleased with it and we're not going to disclose the terms though. It's a smaller deal, technology deal.

Thank you, Joe.

Yeah, I think seasonally EMG's usually a little bit lower in Q4 than the other quarters because of some dynamics in the business. But I don't think there's any reason that we won't be operating at that level and I think we did operate at that level in the third quarter. Yeah, if you go back a couple of years like you stated, we were probably mid-20s, right, before the Paragon acquisition. And now if you look at where we are, we've kind of retracted back maybe 60% and I think we're on track to hit those mid-20 margins in 2026 in EMG and grow further from there.

Thank you.

Yeah, 30% is a good number, Scott. We're very pleased with that. There are some data center sales in that. We talked about in the last call that we've reconfigured some of our products for that market that were sold to the defense market. Those are certainly contributing to that. But there's just the engineering capability of the company is unquestioned and they're really developing some good things. Our customers are very pleased with them and with the uptick and it makes us feel confident going into a strengthening market that we got the right products that you need. But it's really bottom up as you know. So it's all our businesses and we're not telling a business to develop this or develop that. It's organic and there's just very viable product development plans, technology road maps and we're optimistic about what we've done with our products and our technology.

Yeah, we'd love to do a deal in the defense industry but that doesn't stop where we have fully developed product lines and the business cases for what we have and I mentioned the Abaco business and the computing area. I mentioned air technology. I mentioned our Rowtron business and the advanced cooling. I mentioned our power business selling power systems to UAVs. So we're really competitive and that business is doing very well. So we don't need an acquisition to continue growing and we actually have a little our aerospace and defense business is about 18% of sales. We have a little more defense sales than the commercial sales. So we're in a pretty good position there. Legacy centers on aircraft selling to both commercial and defense aircraft to some of the more lately some of the modern more things we've done in recent years. So it's pretty wide range. It's the same strategy. We're focused on niche technology, things we're really good at. And we have plenty of people knocking on our door. And as I mentioned, the European starting to focus on their own defense and their own protection. Definitely creating opportunities for us.

Thank you.

Yeah, well, I think the most important thing is we bought a very good business. And if you remember when we bought it, that was in the middle of a D stock and people were worried about it. We weren't worried because we knew we got a good business. We knew we had a good team. And the consumable surgical instruments that they manufacture are good recurring revenue. They're a leader in implantable components. So we bought a good business. And we bought a business that quite honestly was under managed on the operations side. So we've done a lot of good work to improve that operations. Combined it with one of our businesses who has a great capability in another part of this market. So similar to the Faro model, we bought a business in a market we knew. We have some capability. We restructured the business to be more focused on customers, more focused on understanding the P&L. And then we're bringing AMETEK's global capabilities to it. So it's a playbook that we apply quite often and Paragon's going to lead the way, but Faro's right behind him.

Yep. Thank you.

I do. And there's always time for you, Rob. So we'll always squeeze you in. So yeah, I think that in the research area, what you really saw in the US was there's a little bit of during the dog days, there was a little bit of dysfunction and that's righted itself. So and a lot of areas of research that we happen to be particularly biased to. There's a lot of nuclear research going on. In the materials area, there's a lot of research going on to find new materials to replace other materials with rare earth metals. There's a lot of research going on there. So in our Ametek business, there's high-end research going into nuclear. And the other thing that caused us some problems in 2025, which has gone away, was when the tariffs originally were put in place, they caused substantial pricing disconnects for us and our customers. And now we've worked through that. So as long as tariffs stay in about the same range, then that won't be an issue. So I do think that we have the potential to grow our research business in 2026 as an answer to your question.

Thank you.