Good day, and thank you for standing by. Welcome to AMETEK's First Quarter 2024 Earnings Conference Call. 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 of Investor Relations and Treasurer. Please go ahead.

Thank you, Julia. Good morning, and thank you for joining us for AMETEK's First Quarter 2024 Earnings Conference Call. We today are Dave Zapico, Chairman and Chief Executive Officer; and Dalip Puri, Executive Vice President and Chief Financial Officer. During the course of today's call, we will be making forward-looking statements, which are subject to change based on various risk factors and uncertainties that may cause actual results to differ significantly from expectations. A detailed discussion of the risks and uncertainties that may affect our future results is contained in AMETEK's filings with the SEC. AMETEK disclaims any intention or obligation to update or revise any forward-looking statements. Any references made on this call to 2023 or 2024 results or 2024 guidance will be on an adjusted basis, excluding after-tax acquisition-related intangible amortization and excluding the pretax $29.2 million or $0.10 per diluted share charge in the first quarter for integration costs related to the Paragon Medical acquisition. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section of our website. We'll begin today's call with prepared remarks, and then we'll open the call for questions. I'll now turn the meeting over to Dave.

Thank you, Kevin, and good morning, everyone. AMETEK delivered strong results in the first quarter of 2024 with outstanding operating performance leading to double-digit growth in earnings per share. During the quarter, we established records for sales, operating income and EBITDA, and delivered robust core margin expansion and excellent cash flows. Considering our first quarter results and the positive outlook for the back half of the year, we are increasing our earnings guidance for the full year. AMETEK's continued success is a testament to the strength and resiliency of our growth model, the quality of our businesses, and the outstanding contributions from all AMETEK colleagues. Now let me turn to our first quarter results. Sales in the first quarter were $1.74 billion, up 9% over the same period in 2023. Organic sales were down slightly. Acquisitions added 9 points and foreign currency had a small positive impact. Book-to-bill in the quarter was 0.96, and we ended the quarter with a very strong backlog of $3.46 billion near record levels. AMETEK's operating performance at the start of the year was excellent. Operating income in the quarter was a record $446 million, a 10% increase over the first quarter of 2023. Operating margins were 25.7% in the quarter, up 30 basis points from the prior year. Excluding the dilutive impact from acquisitions, core margins were up a very strong 180 basis points versus the prior year. EBITDA in the quarter was also a record at $542 million, up 13% over the prior year, with EBITDA margins an impressive 31.2%. This outstanding performance led to earnings of $1.64 per diluted share, up 10% versus the first quarter of 2023 and above our guidance range of $1.56 to $1.60. Now let me provide some additional details at the operating group level. First, the Electronic Instruments Group had a strong start to the year with tremendous operating performance leading to record operating margins and impressive margin expansion. Sales for EIG were $1.16 billion in the quarter, up 4% from the first quarter of last year. Organic sales were up 1% and acquisitions added 3 points. Growth in the quarter remained strongest across our Aerospace & Defense and Materials Analysis businesses. EIG's operational execution in the first quarter was superb with strong profit and exceptional operating margin expansion. Operating income was $353 million, up 14% versus the prior year, while EIG operating margins were a record 30.5%, up a robust 280 basis points. This level of operating margin speaks to the quality and leadership positions of our highly differentiated businesses. The Electromechanical Group also delivered solid first quarter operating performance despite the headwinds from inventory normalization impacting some of our EMG businesses. EMG's first quarter sales were a record $579 million, up 21% versus the prior year, driven by contributions from recent acquisitions of Paragon Medical and Bison Engineering. First quarter operating income was $120 million, while core operating income margins were 24.1% in the quarter. Our first quarter results reflect the unique capabilities of our growth model to successfully manage short-term market headwinds and deliver robust margin expansion, outstanding cash flow, and strong double-digit earnings growth. Our businesses remain focused on executing our strategic initiatives and delivering differentiated technology solutions to support our customers' most complex challenges. Our distributed operating structure enables flexibility in responding to market dynamics, while our robust cash flow and balance sheet provide ample support for our acquisition strategy. This acquisition strategy, along with our organic growth initiatives, is expanding AMETEK's presence within high-growth markets. These markets include med tech, clean energy, electrification, and aerospace and defense, and help ensure our diverse portfolio is well positioned to capitalize on these attractive long-term secular growth areas. We remain committed to investing across our businesses to accelerate new product development and expand our sales and marketing efforts. In 2024, we expect to invest an incremental $100 million in growth initiatives, with a sizable portion of this in support of our research, development, and engineering efforts. The effectiveness of these investments is reflected in our vitality index, which was a strong 25% in the first quarter. AMETEK's commitment to invest in R&D and continuously innovate ensures a steady stream of new products that support our customers' critical applications and position us for continued success. I wanted to take a moment to highlight an example of how the elements of the AMETEK growth model work together to deliver exceptional results. AMETEK Zygo, a global leader in the design and manufacture of advanced optical metrology systems and ultraprecise optical components was recently awarded AMETEK's Dr. John H. Lux Award, an annual award provided to the AMETEK business that best exemplifies the commitment to continuous improvement and achievements in operational excellence. As part of its market expansion strategy, Zygo identified an attractive new market segment, virtual and augmented reality applications, as a compelling growth opportunity for their advanced optical metrology systems. This led to Zygo's new product development and commercial teams working closely together to advance their technology capabilities and commercialize a solution to support the highly precise requirements of this application. The success of this work resulted in strong demand and the need for Zygo to meaningfully increase production. Utilizing cross-functional teams and deploying tools like value stream mapping and Lean Six Sigma, they achieved a remarkable threefold increase in production output, allowing them to meet the growing demand for the metrology solution. This achievement highlights the synergy between our new product development, global market expansion, and operational excellence strategies to help identify, develop, and deliver exceptional technology solutions to address an important market need and accelerate growth. Congratulations to the Zygo team for a job well done. Now switching to our acquisition strategy. The acquisitions we completed in 2023 are integrating nicely into AMETEK. We are leveraging our proven integration capabilities and our global infrastructure to help accelerate their growth, drive operational improvements, and deliver strong returns. We are very excited about these acquisitions as they are expanding our market presence in attractive growth markets, including the med tech space through the Paragon Medical acquisition. Paragon Medical, which we acquired in December, is a leading manufacturer of highly engineered medical components and single-use and consumable surgical instruments. Paragon has an outstanding brand, leading innovation and design capabilities, and a strong position serving several high-growth market segments. Our integration efforts are focused on supporting and accelerating this growth while also leveraging AMETEK's infrastructure and operational excellence capabilities to drive efficiency improvements. The integration charge we took in the first quarter will allow us to drive these improvements and better position Paragon for accelerated growth and profitability. Looking ahead, our acquisition pipeline remains robust, and we are actively working on multiple opportunities. We have the balance sheet and financial capacity to deploy meaningful capital on strategic acquisitions. We look forward to delivering continued value to our shareholders through strategic acquisitions and prudent capital deployment. Now turning to our outlook for the remainder of the year. We expect the impact of inventory normalization to continue through the first half of the year with improvements in the second half of the year as we indicated on our last earnings call. As a result, for the full year, we continue to expect overall sales to be up low double digits on a percentage basis with low to mid-single-digit organic sales growth. Diluted earnings per share for the year are now expected to be in the range of $6.74 to $6.86, up 6% to 8% compared to last year's results, an increase from the previous guidance range of $6.70 to $6.85. For the second quarter, we anticipate overall sales to be up mid- to high single digits with earnings of $1.63 to $1.65, up 4% to 5% versus the prior year. In summary, AMETEK delivered a strong first quarter with earnings growth, which exceeded our expectations, driven by exceptional operating performance. We are encouraged by these results and remain confident in our ability to navigate the current environment and benefit from improved sales growth in the back half of 2024. We are confident in the future of AMETEK as our world-class talent and the adaptability of the AMETEK growth model will continue to drive long-term sustainable success for our stakeholders. I will now turn it over to Dalip Puri, who will cover some of the financial details of the quarter. Then we'll be glad to take your questions. Dalip?

Thank you, Dave, and good morning, everyone. As Dave highlighted, AMETEK had a very strong first quarter with record level sales and exceptional operating performance, highlighted by strong core margin expansion and free cash flow conversion. Now let me provide some additional financial highlights for the first quarter. First quarter general and administrative expenses were $26.4 million or 1.5% of sales, in line with last year's first quarter. For fiscal year 2024, general and administrative expenses are expected to be approximately 1.4% of sales. First quarter interest expense was $35 million, up $15 million from the prior year first quarter due to higher debt balances outstanding following the December 2023 acquisition of Paragon Medical. Other operating expenses were down $5 million, primarily due to higher interest income and higher pension income compared to the prior year's first quarter. The effective tax rate was 18.9%, down from 19.5% in the first quarter of 2023. For 2024, we continue to anticipate our effective tax rate to be between 19% and 20%. 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 $28 million, and we continue to expect capital expenditures to be approximately $160 million for the full year or about 2% of sales. Depreciation and amortization expense in the quarter was $98 million. In 2024, we expect depreciation and amortization to be approximately $400 million, including after-tax acquisition-related intangible amortization of approximately $190 million or $0.82 per diluted share. Operating working capital in the first quarter was 18.7% of sales. Operating cash flow was $410 million, up 6% versus the first quarter of 2023, while free cash flow was $383 million, up 4% over the prior year. For the quarter, free cash flow conversion was a strong 123% of net income. For the remainder of 2024, we continue to expect strong free cash flow conversion in the range of 110% and 120% of net income. Total debt at March 31 was $2.9 billion, down from $3.3 billion at the end of 2023. Offsetting this debt, it's cash and cash equivalents of $374 million. At the end of the first quarter, our gross debt-to-EBITDA ratio was 1.3x, and our net debt-to-EBITDA ratio was 1.2x. We continue to have excellent financial capacity and flexibility with approximately $1.8 billion of cash and available credit facilities to support our growth initiatives and our active acquisition pipeline. While acquisitions remain our priority for the use of our free cash flow, we also seek to opportunistically repurchase our shares and provide our shareholders with a consistently increasing dividend. And in February, we announced a 12% increase in our quarterly cash dividend to $0.28 per share, our fifth consecutive year of 10% plus annual increases. In summary, our businesses delivered strong results to start the year with outstanding operating performance, leading to robust core margin expansion and excellent free cash flow.

Thank you, Dalip. Julie, can we please open the lines for questions?

Our first question comes from Deane Dray of RBC.

Can we start off with the usual kind of tour of the end markets and geographies and maybe finish up with just the destocking comments? It just continues to be drawn out, and we're seeing it in all kinds of pockets. So it's not AMETEK-specific in any way. But just kind of what's your refreshed feel on that as well?

Sure, glad to do that all, Deane. I'll start with the walk around the company, and I'll start with our Process business. Overall sales for our Process businesses were roughly flat versus last year and in line with our expectations. Growth remains solid across our energy and semiconductor businesses, and we're really well positioned there to benefit from the sizable project and investment activity within these markets. For the full year, we continue to expect sales for our Process businesses to be up low single digits. Next, I'll switch to Aerospace & Defense, and our A&D businesses had a strong start to the year with approximately 10% organic growth in the quarter. Growth was very solid across both our commercial aerospace and defense segments, and for all of 2024, we continue to expect organic sales for our A&D businesses to be up high single digits on a percentage basis with similar growth across both our commercial aerospace and defense businesses. Next, I'll move to Power. Our Power businesses were up low double digits in the first quarter with contributions from the acquisitions of UEI and Amplifier Research being offset by a low single-digit decrease in organic sales. These recent acquisitions along with the acquisition of RTDS in 2022 expanded our presence within a number of highly attractive market segments, which are expected to benefit from a strong investment cycle, including the expansion of renewable energy and the power grid infrastructure. And for the Power segment, we continue to expect low to mid-single-digit organic sales growth for 2024. And finally, going to the Automation & Engineered Solutions market segment, overall sales for A&ES were up 20% on a percentage basis in the quarter. Growth was up mid-20s in the quarter with contributions from the acquisitions of Paragon Medical and Bison Engineering being offset by a high single-digit decrease in organic sales. As we expected, the impact from the normalization of inventory levels across our OEM customer base continued in the first quarter, and we expect to see a return to growth in the second half of the year consistent with what we had indicated last quarter. And then finally, as a result, we continue to expect organic sales for our automation businesses to be up low single digits, with stronger growth in the back half of the year. So that's the walk around the company. And I think you also asked for what's going on in the various geographies. So get to that too, Deane. The U.S. was down 1% against a pretty difficult comparison, and our strongest growth was in our aerospace and defense businesses. Moving to Europe, we were down 2%, so minus 2% organic with notable growth in parts of our process and parts of our Power businesses offset by weakness in automation. And in Asia, we were up low single digits with strength across our Process businesses. So we had a very good performance in Asia. And digging down into that a little further, China was flat in the quarter, we saw the growth in our parts of our process businesses. So up low single digits in Asia and China was flat.

It's all really help. Go ahead.

Yes. You asked about the destock, Deane. Yes, I think that it's playing out as we had talked about last quarter. I think the destock will continue into the second quarter, but in the second half of the year, we expect that to turn around. So we're watching that closely, and it's really kind of playing out as we thought. I mean, the destock was probably a bit more than we thought it was going to be in Q1, but that may be positive for later in the year because we think the second half of the year is just positive.

Great. And just a quick follow-up on the growth investments. We know this is your playbook. Is there anything unique in terms of how you're deploying that capital? I mean, typically, it's salespeople as a component, but any other kind of wrinkles here you could share?

Yes. It's salespeople, with the largest chunk of it in the engineering, research, development, and engineering. We have a full slate of projects, we have excellent opportunities longer-term, and we're getting after them. So I'm very positive on what's happening in our new product development programs.

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

Can you just address a little bit more Paragon itself, how it's performing and the charge that you took. I don't recall a large charge like this on prior deals, maybe there are smaller ones that you just absorbed but didn't break out, but kind of the nature of what you're trying to accomplish? And is this kind of a one-time deal in this quarter as you kind of bed down the asset?

Yes, that's a great question, Jeff. And it's kind of what you said. I mean we typically absorb the smaller acquisitions as we proceed through the years and quarters. And the last time we did something like this, when we bought, I believe, Zygo, it's a bigger acquisition. And because of the size of the acquisition and because of the opportunities that we see, we wanted to take that integration charge because there are tremendous, tremendous opportunities to improve the business. So it's a one-time nature. It's a larger deal as you know, Paragon was the largest acquisition that we have done. We spent about $1.9 billion. So as we dug into it, as we work with our management team, we got really comfortable with this plan. Quite honestly, there's more opportunities than we thought. We have a good team of both AMETEK and Paragon leaders that are really getting after it now. So I feel really good about the business. The integration is being integrated into AMETEK well, it's very positive around the future. And I think this restructuring is largely going to happen over the next couple of years, and we really see as less than 2-year payback on it. So excellent payback. And we started on that, and we're really positive about what we're doing, and I feel positive about the deal.

Great. And then maybe just switching gears, and I'm sorry if I missed it, I was on a little bit late, but can we just decompose revenue growth in the quarter for the segments, some color on what the organic performance was at the segment level? And if you have any color on price or other elements of revenue. I'm curious...

Yes, if you look at our overall sales were up 9%. That's because both groups. And the organic growth was just down modestly, about 0.5 point. EIG overall sales were plus 4. The organic growth in EIG was plus 1%. EMG overall sales were plus 21% and the organic sales at EMG were minus 4. So you had that defines the group dynamics for revenue.

And maybe just one last one back to this kind of destock question. Just to comment that it was more in Q1 than expected, and I know it's kind of hard to know what your customers are going to do. But just your confidence level that it actually is, in fact, destock and like you have visibility on sell-through being better on the other side? Maybe just kind of address that, if you could?

Yes, the first point is that in looking at AMETEK's first and second halves, we typically have 48% of our revenue and profits in the first half and 52% in the second half, which is consistent with this year. Our second half is not back-end loaded, which gives us confidence. Another observation is that our orders seem to have stabilized. When comparing Q4 '23 to Q3 '23 and then looking at Q1 '24 against Q2 '23, we see low single-digit growth in orders in both quarters, indicating that we have bottomed out and are starting to show some modest improvements. However, we face a tough comparison since Q1 '23 was a strong quarter. Importantly, our customers have indicated that the destocking phase will conclude in the second half of the year, allowing us to return to a positive book-to-bill ratio. Regarding the economic environment, we are monitoring it closely, but we are anticipating modest economic growth for the rest of the year, rather than an acceleration or a recession. We expect modest sales growth each quarter, and comparables will become easier in the second half. This 48% to 52% split between the first and second half aligns closely with our historical averages.

And I'm sorry, did you have a comment on price? I missed it, and I'll see the floor.

That's a good question, Jeff. Pricing continued to more than offset inflation. Pricing was approximately 4% in the quarter and inflation was about 3%. The results speak to the highly differentiated nature of the AMETEK product portfolio and our leadership position in these niche markets around the globe. And for the full year, we do expect their pricing to come in a bit and inflation to come in a bit, but we expect to maintain a positive spread between them.

Our next question comes from the line of Brett Linzey of Mizuho.

Can you discuss how flexible your supply chain configuration is in response to a potentially more aggressive tariff regime and your ability to adapt to different regions if necessary?

Yes, it's a great question. I mean we look at tariffs, and that became a bigger issue back in the 2017 timeframe. And in the quarter, we had a minimal impact from tariffs, and they were completely offset for price. To give you an idea across the whole company, tariffs are only going to cost us about $0.01, or $3 million or $4 million. And what happened there is we've aggressively rebalanced our supply chain. It's largely done. So we're not overexposed to any region of the globe. And we have a strategy where from the U.S., we're largely sourcing from Mexico and other regions of the Americas, and in Europe, we do a lot of sourcing from the Czech Republic and Serbia. In Asia, we do a lot of sourcing from Malaysia. So we've got a nice balance around the world. So I think the hard work that we did over the past few years rebalancing our supply chain is essentially finished, with just a very small bit of work that continues. And we're very well positioned to be able to deal with an increasing tariff regime, specifically with China, in particular, we don't have a real risk there. We do excellent business in China. It's a China kind of strategy is about 9% of our sales. And largely, we source what we sell in China. So we're in a pretty good position in terms of tariffs.

Perfect. And then if you could just provide some color on the tempo or monthly cadence of trends in the quarter and then looking into April?

Yes, it was a fairly typical quarter, with March being the strongest month for both orders and sales. Sales peaked in March, and we are on track for April. We feel confident about our guidance, and while there is some variability, we are not experiencing any additional weakness at this time.

Our next question comes from the line of Scott Graham of Seaport Research Partners.

Really, maybe the first question is about the M&A environment. EBITDAs do seem to have firmed up even though this first quarter, I think most would say industrial land has been a little uneven. Nevertheless, when EBITDA is firm up, that's kind of when I think AMETEK does a lot of striking. And I'm just wondering, are we looking at a year this year that could mirror last year? I mean what does the really near-term pipeline look like, Dave?

Yes, it's very, very difficult to predict the very near term. But Scott, the pipeline remains very strong, and we're actively looking at a number of high-quality deals across a broad set of markets. So we have $1.8 billion of existing cash and credit facilities post-Paragon. We have a balance sheet that would support, if the deals meet our criteria, we could do over $4 billion of deals this year, and that would only take our leverage up to about 2.5x. So we're really in an excellent position. And it's not a balance sheet issue. It's not a cash flow issue. We're performing extremely well. It comes down to finding the right businesses, and we have a good pipeline right now, a very good pipeline. And we really have the opportunity, as you said, we typically have this opportunity to differentiate our performance with the M&A element of our growth strategy with this strong balance sheet and with the strong cash flow position. So in this market, which is a bit choppy, our combination of OpEx and M&A and this proven acquisition strategy, I'm really looking to differentiate our performance with our M&A and our OpEx during the next couple of quarters.

You answered one of Jeff's questions earlier, saying you're expecting sales to be up modestly each quarter. Were you referring to organic for the next 3 quarters?

Yes. This is sequential, Scott.

Okay. So sequentially, you're expecting sales dollars to be up.

Q1 will be a bit higher than Q2, Q3 will be a bit higher than Q2, and Q4 will be a bit higher than Q3.

Okay. And the last one is just sort of back on the orders. I know you do have a pretty significant comp that you're up against when you stack them. What were orders in the quarter in dollars and in organic?

Yes, the orders declined by 8%, and organic orders decreased by 10%. We faced a challenging comparison, and I have been seeing sequentially low single-digit results over the past couple of quarters. If we exclude the comparison, in the first quarter of '23, we had exceptional orders from some project business, particularly EIG. So when we remove that and examine the sequential trends, we feel more confident.

Yes. No, I get it. '22 and '21 were also exceptional organic periods for you.

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

I have a question regarding the Paragon Medical integration costs. What is the expected payback for this restructuring that is now included in the guidance for 2024? Additionally, how much should I factor into 2025?

In 2024, we previously indicated that Paragon would contribute $0.08 to $0.10 to AMETEK's EPS, and that remains unchanged. The $22 million charge we mentioned has a payback period of under two years, with an expected benefit of $70 million at full run rate. We invested about $29 million and anticipate receiving $70 million in benefits, which demonstrates an excellent return. There wasn't much previous focus on this, but we can operate it efficiently. I'm pleased that the management team shares this perspective, and we're committed to making Paragon a standout business operationally. Looking ahead to 2025, we expect to see a notable increase in operating earnings from Paragon, although I'm hesitant to provide specific figures for that year as it's too early for precise predictions. However, the key numbers to keep in mind are our $29 million investment and the potential $70 million benefit at peak run rate, with the project's payback of just under two years. We're confident this represents a solid return for our shareholders.

I apologize, but I think it would be better to discuss this later. I wanted to clarify that the Paragon restructuring was additional because we identified more opportunities. You mentioned that I should have known this was already included but wasn't part of the guidance. I apologize for the confusion.

I believe it's a significant deal, and we have identified many opportunities. It will take us a few years to accomplish this, which is why we've put it forward.

Okay. I'll discuss it with Kevin separately because I need to verify if this $0.10 was included in my calculations or if it's an additional amount. I apologize for the confusion.

Yes. I don't know what you have in your numbers, Andrew. I don't really look at them, but I can tell you that we're expecting to get $0.08 to $0.10 of benefit from Paragon, and this restructuring doesn't change that.

Got you. That makes sense. Regarding revenue, you provided a clear explanation that the destock was the main driver. I think you guided for low double-digit revenue in the first quarter, but it looks like it might be slightly below that. So you mentioned it's due to destock being pulled forward, correct?

Yes.

Our next question comes from the line of Christopher Glynn of Oppenheimer & Co. Inc.

Dave, I was curious just to go into the top a little bit of the long-term multi-year secular trends where you see an impact. It occurs to me maybe the Power business could be on your leading edge with energy transition and electrification. But curious your comments in general on the kind of secular trends, and in particular, what you're seeing as kind of street level evidence on reshoring type trends.

Yes. When I consider the long-term growth drivers, particularly in the semiconductor market, we are approaching a point where these projects will begin to translate into business for us in the West. There is significant project work in semiconductors and in the Power market, which is driven by both renewables and investments in the power grid. Our RTDS and power instrumentation businesses are well-positioned to benefit from these trends. Additionally, our Aerospace & Defense sector performed exceptionally well this quarter, and both Airbus and Boeing have substantial backlogs in the commercial market. We are also well-positioned in defense, which is seeing continued strength. Overall, I am optimistic about the future, especially with the increase in fiscal stimulus in the U.S., although it will take time for these measures to take effect. In the long term, I believe we are in favorable positions to succeed.

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

This is Dan on for Joe. Sorry, I know destocking and bottoming of orders within automation has been discussed a few times. So just a quick follow-up. This is obviously something a lot of companies have been struggling with in the past few quarters. But some have also been talking about changing their internal processes to gain more visibility of end market and end users. Is there anything that you guys have done, potentially more frequent conversations or reaching out to like end market users to better understand their demand going forward? Anything you've changed recently?

I can't identify anything to change. If you look back at our previous discussions, we accurately predicted the situation. We mentioned that during the first half of the year, sales outpaced orders, resulting in a book-to-bill ratio slightly below one. We also talked about a reduction in inventory during that time and anticipated a positive shift in the second half, which we expressed prior to this quarter. We maintain a solid communication system with our field teams, but there are always opportunities for improvement, and we actively pursue those to enhance our operations. However, I believe the insights we receive from the field are reliable, and we are attentive to them. That said, there is always potential for improvement, and we consistently seek ways to enhance our processes.

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

David, I just want to come back to the order math. I think you said down 8% and then down 10% organic.

Right.

We've got about 9 points of contribution from Paragon in our numbers. So just wondering what am I missing, I've expected that there would be significant contribution from Paragon in the order numbers. So just help me out with that math, please.

We had 9% acquisition growth, and the contributions from Paragon are part of that acquisition and not organic growth.

Okay. But then the orders, 8% organic too, that makes sense. Was there no material impact from Paragon there?

Yes. With Paragon, we saw a large backlog in orders during Q4. In Q1, there was a timing issue because Paragon is experiencing the same destocking as the EMG business. This has impacted the orders. In the medical market, both our EMG business and Paragon are facing similar destocking challenges. When we look at medical procedures, they are all growing in the mid- to high single digits, but medical device OEMs are reducing their inventory levels to correct their stocks. This is widely communicated, and we are tracking the procedures, which are growing. We believe this destocking will continue through the first half of the year.

Okay. Does that impact the full year forecast? I think we've got close to $5 million of sales for Paragon, does that destock impact that outlook?

Yes. I think for the year, when we bought Paragon, it was a little less than $500 million. And the first year, we talked about the mid-single-digit growth. So that's still exactly what we have in our model. So we think that we get out of this year, and we think it will be a double-digit grower over the next couple of years, but the Paragon model from the viewpoint of what we had going into the year and what it is now is pretty much identical.

Okay. And then just, sorry, a follow-up on the $29 million. Is that all restructuring? Or is there some inventory and accounting breakdown?

Yes. I'd say the vast majority of it was restructuring, and there was a small part of it that were other integration costs. But the vast majority...

And does some of that come into 2Q as well? Do we think about that into 2Q?

Yes. We began this effort in Q1, and as I mentioned, we realized all the benefits at that time. The restructuring was completed in Q1, so I don't anticipate another restructuring charge in Q2. It's a one-time charge. We made a significant acquisition in the Zygo business and took similar steps to become comfortable with our direction. We might incur another charge with Paragon in the future if we see additional opportunities for improvement. For now, this is a one-time charge aimed at significantly enhancing the operational capability of that business, and the returns I mentioned to you are quite favorable.

I am showing no further questions at this time. I would now like to turn it back to Kevin Coleman, Vice President of Investor Relations and Treasurer, for closing remarks.

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

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.