Earnings Call Transcript
AMETEK INC/ (AME)
Earnings Call Transcript - AME Q1 2023
Operator, Operator
Good day and thank you for standing by. Welcome to the AMETEK’s First Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to Kevin Coleman, Vice President of Investor Relations and Treasurer. Please go ahead.
Kevin Coleman, Vice President of Investor Relations and Treasurer
Thank you, Chris. Good morning and thank you for joining us for AMETEK’s first quarter 2023 earnings conference call. With me today are Dave Zapico, Chairman and Chief Executive Officer; and Bill Burke, Executive Vice President and Chief Financial Officer. During the course of today’s call, we will 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 risk 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 2022 or 2023 results or 2023 guidance will be on an adjusted basis, excluding after-tax, acquisition-related intangible amortization. Reconciliations between GAAP and adjusted measures can be found in our press release and on the Investors section of our website. We'll begin today's call with prepared remarks by Dave and Bill, and then we'll open it up for questions. I'll now turn the meeting over to Dave.
Dave Zapico, Chairman and Chief Executive Officer
Thank you, Kevin, and good morning, everyone. AMETEK had an excellent start to 2023 with outstanding results in the first quarter. Continued solid demand across our diverse set of end markets led to strong sales, growth, and another record backlog. Our businesses delivered tremendous operating performance with record operating profit and robust margin expansion in the quarter. Additionally, we generated record cash flows and reported a portion of that cash flow on our first acquisition of the year, Bison Gear & Engineering. Given these results and the outlook for the remainder of 2023, we are increasing our sales earnings guidance for the full year. Now let me turn to our first quarter results. First quarter sales were $1.6 million up 10% over the same period in 2022. Organic sales growth was excellent at 9%. Acquisitions added 2 points while foreign currency was a slight headwind. AMETEK’s continued strong organic sales growth reflects its success of our organic growth initiatives and our leadership positions across diverse and attractive niche markets. Demand also remains solid with overall orders growing 6% in the quarter. Organic orders were up low single digits on a percentage basis against the difficult prior year comparison. Book-to-bill was 1.13 in the quarter for our 11th consecutive quarter of positive book-to-bill. We ended the quarter with a record backlog of $3.4 billion, an increase of over $200 million from the end of 2022. As noted, AMETEK’s operating performance in the first quarter was exceptional. Operating income in the quarter was a record $405.5 million, a 15% increase over the first quarter of 2022. Operating margins were a record 25.4% in the quarter, up 120 basis points from the prior year. Core operating margins, which exclude acquisition dilution and the gain from our facility sale in the first quarter of 2022, were up an impressive 180 basis points with strong core margin expansion in each group. EBITDA in the quarter was $482 million, up 11% over the prior year, and EBITDA margins were 30.2%. This outstanding margin expansion is a testament to the strength of our operating model, a differentiation of our businesses, and the great work of our teams. This tremendous operating performance led to a high quality of earnings with diluted earnings per share of $1.49, up 12% versus the prior first quarter of 2022 and above our guidance range of $1.38 to $1.42 per share. Now let me provide some additional details at the operating group level. First, the electronic instruments group (EIG) delivered excellent sales growth and operating performance with sales up 13% versus the prior year to $1.12 billion. Organic sales were up 11%, acquisitions added three percentage points, with foreign currency being a slight headwind in the quarter. This strong organic sales growth is broad-based across our businesses and geographies, with growth particularly strong across our aerospace and defense businesses in the quarter. EIG’s operating profit was impressive, resulting in a record operating profit in the quarter. Operating income was $309.7 million, up 27% versus the prior year, while EIG margins were 27.7%, up a robust 290 basis points from the prior year. The Electromechanical Group also delivered excellent results in the quarter with solid organic sales growth and strong operating performance. EMG's first quarter sales were $479.9 million, up 2% versus the prior year, with organic sales growing 4% in the quarter and foreign currency a 2-point headwind. Growth was notably strong across our Aerospace & Defense businesses in the quarter. EMG's operating income in the first quarter was $120.5 million, and operating margins were 25.1%. On a core basis, excluding acquisition dilution and the gain from a facility sale in the first quarter of 2022, EMG margins were up 50 basis points versus last year's first quarter. So overall, tremendous performance by our businesses and all AMETEK colleagues. All elements of the AMETEK growth model, operational excellence, global and market expansion, new product development, and strategic acquisitions are working well. These strategies allow us to quickly react to changing market conditions, invest in our businesses for long-term growth, and deploy our capital on value-enhancing acquisitions. Now switching to our capital deployment and acquisition strategy. The primary focus for our strong cash flow remains strategic acquisitions. We are managing an active pipeline of attractive acquisition candidates, and we have a strong balance sheet and significant financial capacity to support this strategy. I'm excited to announce our most recent acquisition, Bison Gear & Engineering. Bison is an excellent strategic fit with AMETEK's automation businesses, helping expand our presence within this attractive secular growth market. Bison is a leading provider of customized motion control solutions for use across a wide range of high-precision applications within the automation, food and beverage, power, and transportation markets. Bison's portfolio of linear and motion control technology is highly complementary with existing technologies, providing an expanded product offering that enables wider and deeper market participation in attractive markets and applications, including growing electrification requirements. Bison is based in St. Charles, Illinois, and has annual sales of approximately $80 million. In addition to our acquisition strategy, we remain focused on ensuring sustainable growth by investing in organic growth initiatives. This includes making strategic growth investments and driving broader adoption of growth initiatives, digitalization, and new product development. For all of 2023, we now expect to invest approximately $100 million in support of these growth initiatives, including investments in research, development and engineering, and sales and marketing. One way we celebrate and recognize the great work of our businesses' new product development efforts is through the AMETEK Innovation Award. This award is provided annually to the AMETEK business that best demonstrates breakthrough innovation in new technology driving expanded organic growth opportunities. The most recent innovation award winner was our Creaform business for developing its innovative new handheld 3D metrology solution, PL3. Creaform, based in Levy, Canada, is a leading provider of 3D portable and automated measurement technologies for applications such as reverse engineering, quality control, product development, and non-destructive testing. The introduction of PL3 further expands the breadth of Creaform's metrology offering and makes high-end 3D scanning accessible to professionals and small enterprises, opening up a new attractive market segment. In addition to the PL3, Creaform also recently added a new scanner to their HandySCAN 3D platform, the HandySCAN BLACK Alete Limited. The latest addition to Creaform's flagship metrology-grade 3D scanners sets a new industry standard for handheld devices. I would like to extend my congratulations to the entire Creaform team for their innovative new products and ongoing efforts to push the boundaries in metrology. Now turning to our outlook for the remainder of the year. We remain cautious in the short term due to uncertainties in the macroeconomic environment. However, given the strength of the AMETEK growth model and our proven operational capabilities, we are confident in our ability to manage through these challenges. The company's record backlog and leadership positions across attractive mid and long-cycle markets position us well for continued strong growth. Given our strong first quarter results and outlook for the balance of the year, we are increasing our sales and earnings guidance. For the full year, we now expect overall sales to be up mid-to-high single digits versus our prior guidance of up mid-single digits, with organic sales expected to be up mid-single digits. Diluted earnings per share for the year are now expected to be in the range of $5.96 to $6.10, up 5% to 7% compared to last year's results. This is an increase from our previous guidance range of $5.84 to $6 per diluted share. For the second quarter, we anticipate overall sales to be up mid to high-single digits with earnings of $1.49 to $1.51 per share, up 8% to 9% versus the prior year. In summary, AMETEK had an excellent first quarter. We delivered strong orders and sales growth, robust margin expansion, a record backlog, record cash flows, and increased our earnings guidance for the year. The company's differentiated technology solutions, market-leading positions in attractive markets, and proven operating capabilities have allowed us to navigate through challenging economic cycles. Additionally, AMETEK's strong cash flows and robust balance sheet provide us meaningful flexibility to deploy capital to drive shareholder value. We remain well positioned for continued long-term growth. I will now turn it over to Bill Burke, who will cover some of the financial details of the quarter, then we will be glad to take your questions.
William Burke, Executive Vice President and Chief Financial Officer
Thank you, Dave. As Dave noted, AMETEK had an outstanding first quarter, positioning us well to start the year. We delivered record-level operating performance and a high quality of earnings in the quarter. Let me provide some additional financial highlights. First quarter general and administrative expenses were $24.7 million, up $5 million from the prior year due to higher compensation expenses, as well as the return to more normal levels of discretionary spending. For 2023, general and administrative expenses are expected to be up modestly versus 2022 levels and approximately 1.4% of sales, below 2022's level of 1.5 percent of sales. Other income and expense was a headwind of $8 million in the quarter, due largely to lower pension income and higher due diligence costs. The effective tax rate in the first quarter was 19.5% versus 19% in the first quarter of 2022. For 2023, we continue to anticipate our effective tax rate to be between 19% and 20%. And as we 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 $20 million, and we expect capital expenditures to be approximately $150 million for the full year, or about 2% of sales. Depreciation and amortization expense in the quarter was $82 million. For the full year, we expect depreciation and amortization to be approximately $335 million, including after-tax, acquisition-related intangible amortization of approximately $157 million, or $0.58 per diluted share. Operating working capital in the first quarter was 19.2% of sales. Cash flow was outstanding in the quarter, showing a sizable growth versus the prior year. Operating cash flow was a record $370 million, up 92% versus the first quarter of 2022. Free cash flow was also a record of $367 million, up 110% over the prior year, while free cash flow conversion was a very strong 120% of net income. Total debt at March 31st was $2.25 billion, down from $2.4 billion at the end of 2022. Offsetting this debt is cash and cash equivalents of $400 million. Our gross debt-to-EBITDA ratio at the end of the first quarter was 1.1 times, and our net debt-to-EBITDA ratio was 0.9 times. During the first quarter, we acquired Bison Gear and Engineering, and we remain very well positioned to deploy additional capital, given the strength of our balance sheet and strong cash flows. We have significant financial capacity, with approximately $2.6 billion of cash in existing credit facilities to support our growth initiatives. In summary, our business has delivered exceptional results to start the year with strong organic sales growth, robust margin expansion, and high-quality earnings.
Kevin Coleman, Vice President of Investor Relations and Treasurer
Thank you, Bill. Chris, could we please open the lines for questions?
Operator, Operator
Thank you. Our first question comes from Matt Summerville of D.A. Davidson & Company. Your line is now open.
Matt Summerville, Analyst
Thanks, good morning. A couple of questions. Dave, can you remind us what you consider to be your canary-like businesses and how they may be informing your go-forward view on the environment? Obviously, you sound pretty positive this morning. And then I have a follow-up.
Dave Zapico, Chairman and Chief Executive Officer
Yes, Matt, we primarily operate mid and long-cycle businesses, so we don't have any short-cycle indicators. Previously, our cost-driven motors business in the floor-care market served as our indicator, but that's no longer part of our portfolio. Currently, we see solid strength across our offerings, and there are no indicators emerging at this time.
Matt Summerville, Analyst
Just a follow-up, Dave, can you talk about where you were in Q1 with respect to price-cost, what that's going to look like, and the magnitude of absolute realization you expect in 2023 versus 2022? Thank you.
Dave Zapico, Chairman and Chief Executive Officer
Right. Great question, Matt. In that first quarter, our pricing continued to more than offset inflation. Our pricing was a bit more than 5%, and inflation was about 4%. So we had a spread of a little more than 100 basis points. For the full year, we expect the incremental pricing to moderate a bit. So we think we'll get 4% for the entire year. The results speak to the highly differentiated nature of the AMETEK product portfolio and our leadership position in the niche markets that we operate in. So we're pretty positive on pricing, and we're getting value, and we're adding value to our customers also. So we think it can continue for some time. While inflation may moderate a bit, we think it's going to be here for a while, and we think we can outpace inflation with price.
Matt Summerville, Analyst
Perfect. Thank you, David.
Operator, Operator
Thank you. One moment for our next question. This question comes from Allison Poliniak of Wells Fargo. Your line is open.
Allison Poliniak, Analyst
Hi, good morning.
Dave Zapico, Chairman and Chief Executive Officer
Good morning, Allison.
Allison Poliniak, Analyst
Can you, Dave, just talk about I know you don't really have the canary in the coal mine, but you did note a little bit more cautious view given the macro. I would say any noticeable trends that you're observing that are driving some of that cautious view for you guys, just in terms of what you're seeing? Obviously, backlog and results were pretty solid today. Thanks.
Dave Zapico, Chairman and Chief Executive Officer
Yes, we're confident in our guide for the balance of the year, but we are cautious given how early we are in the year and given the risks in the global macro environment. As I mentioned in the prepared remarks, our book-to-bill was 1.13. That's pretty strong. If you take out the Bison acquisition, it was still 1.1. It was positive in both groups. Our backlog is over 50% of annual sales, above normal historical levels. So I think we're positioned well to perform this year. We have mentioned that there is an expectation that we're returning to more normalized ordering patterns. And now that the supply chain is improving, we're seeing some of that play out. We also have some difficult comparisons. But when you look across our portfolio, we're feeling really good. We're mid and long cycle. It feels like the biggest part of our business, EIG, is starting to accelerate.
Allison Poliniak, Analyst
Great. And then, nice acquisition with Bison to start the year. Any color you can provide on and sort of the M&A pipeline, what you're seeing, are multiples becoming more reasonable for you guys? Any thoughts there? Thanks.
Dave Zapico, Chairman and Chief Executive Officer
Right. That's a great question. We really like the Bison deal. We deployed about $100 million on it. It's an excellent fit with our automation business, expanding our capabilities there. But more broadly, we have a very wide and deep pipeline. That pipeline is filled with attractive candidates, and it feels like the pricing has come in a bit. We are in good position to continue our acquisition strategy and provide a differentiator in coming quarters and years with our strong balance sheet and our capability there and with our strong pipeline. I'm fairly optimistic that with the pricing coming down and our efforts in developing the pipeline of deals, that we're going to have some success this year.
Allison Poliniak, Analyst
Great. Thank you.
Operator, Operator
One moment for our next question. This question comes from Deane Dray of RBC Capital Markets. Your line is open.
Deane Dray, Analyst
Thank you. Good morning, everyone.
Dave Zapico, Chairman and Chief Executive Officer
Good morning, Deane.
Deane Dray, Analyst
Maybe we can take the tour of the key end markets and maybe you can start with aerospace and defense because that got called out in both segments. Thanks.
Dave Zapico, Chairman and Chief Executive Officer
Right, exactly. Our aerospace and defense business had an excellent start to the year. Both overall and organic sales were up mid-20s in the first quarter. We really saw growth across all A&D segments, but our defense and our commercial aftermarket segments were particularly strong. Given the strong start to the year and the positive end market tailwinds, we now expect our organic sales to increase and be up 10% for the full year, with similar growth across both our commercial and defense segments. Next, I'll go to Process. Overall sales for our Process businesses increased 10% in the quarter. Organic sales were up 10%, with the acquisition of Navitor being largely offset by foreign currency headwinds. Similar to last year, growth was broad-based in the quarter as end market demand remains solid across key process end markets, including research, medical, oil, and gas. Looking ahead, we expect to continue strong organic sales growth for process, and we expect to be up mid-single digits for the year. Moving to the Power & Industrial segment, strong results in the first quarter with overall sales up low teens. This growth was driven by low single-digit organic growth and contributions from our recent acquisition, RTDS. We continue to expect mid-single-digit organic growth for our Power & Industrial businesses in 2023, with similar growth expected across both our Power & Industrial segments. Finally, our Automation & Engineered Solutions segment's organic sales were flat in the first quarter, in line with our expectations given prior year comparisons and timing of customer shipments. For all of 2023, we expect organic sales for our Automation & Engineered solutions business to be up mid-single digits with similar growth rates across both our Automation & Engineered Solutions businesses. That's a walk around the company, Deane.
Deane Dray, Analyst
That's all very helpful. Thank you. I have a follow-up question related to Allison's inquiry about normalizing the supply chain. Could you elaborate on product scarcity? How has that developed? Also, when you mentioned normalized order patterns, are customers placing smaller orders spaced out over time? Additionally, for Bill, are you releasing any buffer inventory? Previously, it was a just-in-case approach, but now it seems to be shifting back towards just-in-time. Will there be any release of this buffer inventory? Thank you.
Dave Zapico, Chairman and Chief Executive Officer
Yes. I'd just comment that there is a return to more normalized ordering patterns because lead times are back to normal. The customers aren't ordering early now that the supply chain has improved, and we're seeing that dynamic play out. It mainly plays out in our OEM-related businesses rather than our end market businesses. A little more in EMG than EIG, but it's what we've been communicating for several quarters. We were expecting it. We're very pleased with the order performance and our record backlog. Our book-to-bill was up in both groups, and the normalization is really getting back to just getting back to normal lead times.
William Burke, Executive Vice President and Chief Financial Officer
And Deane, from the inventory perspective, we did add a little bit in the quarter, but we expect as we progress through the balance of the year, you're going to see that release of inventories that we've built up over the last year or so, as you say, just in case in protecting our customers and ensuring we had enough right inventory on hand.
Deane Dray, Analyst
Would we see that inventory release result in some higher free cash flow conversion, maybe just above normal seasonality?
Dave Zapico, Chairman and Chief Executive Officer
I believe we will continue to grow the business, which will require working capital. However, I anticipate that the release of inventories will positively impact overall free cash flow, which we expect to be around 120% for all of 2023.
Deane Dray, Analyst
That’s great to hear. Thank you.
Operator, Operator
Thank you. One moment for the next question. This next question comes from Josh Pokrzywinski of Morgan Stanley. Your line is open.
Joshua Pokrzywinski, Analyst
Hey good morning guys. Dave, I just want to dig in a little bit here on throughput. So you built backlog this quarter, but you had a pretty sizable revenue beat. So I guess that's the good news. But maybe the other side of that is how should we think about where you're at, I guess, particularly on EIG in terms of is there an ability to kind of ramp revenue further based on your own supply capability or your own willingness to eat into the backlog? Like how should we think about your own throughput or kind of backlog conversion through the year? Is this sort of where you'd like to be? Or do you want to raise that higher just given the cyclical backdrop?
Dave Zapico, Chairman and Chief Executive Officer
Yes. I think EIG is more of a long-cycle business. As these supply issues resolve, we're able to convert more. I would expect our backlog to stay strong for the balance of the year. I'd expect it to be a little bit lower at the end of the year, but it's still in excess of typical. EIG is just starting to fire on all cylinders. It's really across the board. One of the things that's happening in EIG is along with strong growth, along with solid pricing, the profit performance from the recent acquisitions has been excellent. For RTDS and Navicar, the acquisitions we did last year, they're doing well. You're seeing Abaco also have a very strong year-over-year quarter in margins. So it feels really good for EIG. We haven't taken our foot off the gas.
Joshua Pokrzywinski, Analyst
Got it. That's helpful. And then, I guess just on your automation business, you have some folks that are in sort of the controller or mainline automation gear that are sitting on big orders, record backlogs as well. Are you seeing this from mega projects and things like nearshoring, the same as those folks? Or where you fit into that value chain?
Dave Zapico, Chairman and Chief Executive Officer
No, it's similar. We're in precision motion control, moving things to automate them. We're in diverse end markets, including medical and factory automation. The business we acquired, Bison Gear & Engineering, is a perfect example of what you're talking about. They have about a year of backlog. They're really capacity-limited, and that's something we can fix in relatively quick order. It's a business that will provide us with a lot of cost synergy, but at the same time, growth drivers of automation and freeing up capacity to go after reshoring and electrification requirements are really on our sweet spot. While we largely have the capacity in our existing businesses, we can really improve Bison. That aligns with what you're saying in these automation markets where there are secular growth drivers and good strong backlogs.
Joshua Pokrzywinski, Analyst
Excellent. Thanks all I have for you guys.
Dave Zapico, Chairman and Chief Executive Officer
Thank you.
Operator, Operator
Thank you. Stand by for the next question. This question comes from Rob Wertheimer of Melius Research. Your line is open.
Robert Wertheimer, Analyst
So I wanted to circle back to M&A, where some peers have called out a very strong M&A market, including, I think, one person called it kind of one of the best ever. Your comments were very positive. It could very well be AMETEK execution developing at this time. So I'm curious about your general feel on the M&A markets. If they are quite strong, I think you indicated prices coming down; what's changing in the dynamics there?
Dave Zapico, Chairman and Chief Executive Officer
Yes. The overall M&A market in the first quarter was down quite a bit. The overall market is not that good. A lot of buyers are cautious now, particularly due to financing capability. Many private equity firms are less active right now. But we're largely a self-funded acquisition strategy, and we have over $2.6 billion of cash in existing credit facilities. Our pipeline of opportunities remain strong, and we're very active in exploring it. We're in a good position to use this aspect of our strategy to differentiate our performance in the future. We're excited about the companies we've recently acquired and also about the companies we're working with. We are growing our presence in attractive growth areas, and we will stick to delivering our traditional financial orders. These are important thresholds for us, and we want to provide a strong level of returns on the capital we deploy. So it's the same setup, but at the same time, I think we're in an incrementally better position because we're a strategic buyer that has a strong balance sheet, cash flow, and a viable pipeline of deals.
Robert Wertheimer, Analyst
Great. That makes total sense. Thank you. Then just to go in a different direction, to follow up on your comment on 5, 4 maybe pricing phase a little bit barely really towards the end of the year. Is it more to give us a sense of what's happening in the cost base inflation? Have you seen a dramatic downturn in some areas or logistics or whomever? I'm just curious to give us a little bit of breakdown there.
Dave Zapico, Chairman and Chief Executive Officer
Right. As I said, our inflation was about 4%. We're seeing decreasing costs in some commodities, some logistic costs, but there are other inflationary costs like wages and travel. So there's net inflation for sure, and it's sticky, but we think it will moderate a bit this year from what we're seeing. We're well-positioned to deal with that with our pricing in our portfolio of companies.
Operator, Operator
Please stand by for the next question. Our next question comes from Nigel Coe of Wolfe Research. Your line is open.
Nigel Coe, Analyst
Thanks good morning everyone. Can we go back to sort of late January, February, when you put together the Q1 plan? Obviously, it came in a lot stronger, which is not untypical, but I think the upside is a bit more than normal. Maybe just talk about what surprised you to the upside? Clearly, A&D was a lot stronger. I'm wondering if you saw an inflection in defense. Did you see maybe China coming in a lot better than perhaps expected? Just kind of walk off better. Was it mainly backlog conversion supply chain driven or customer demand driven?
Dave Zapico, Chairman and Chief Executive Officer
Yes. The first point was our positive book-to-bill in both groups and overall was order-driven, not just backlog-driven. The second point is that the supply chain is getting much better, so we're able to convert on more backlog. In China, particularly, you mentioned it was up about 12% growth. So it was a good grower. As they're recovering from their COVID lockdowns, our business is developing nicely there. It's really both. We had good book-to-bill, we converted on the backlog, and we're strong across all geographies.
Nigel Coe, Analyst
You talked about the expectation that you'd expect to burn some backlog between now and year-end. You mentioned changing order patterns, which is very natural with the supply chain improvements. Have you seen that change, David? Did that sort of happen in March, April? Are we starting to burn backlog through the second quarter? Curious what you see in real time.
Dave Zapico, Chairman and Chief Executive Officer
Yes. We started to see a little bit of that chip patterns last year, and we did see it. It's mainly in our OEM businesses, not so much in selling directly to end users because we have customized products, and they pretty much aren't going to over-order expensive things like that. But we have been seeing it for a while, and we did see it in the quarter.
Nigel Coe, Analyst
It seems like I'm close to the end of the queue here. Maybe I'll throw one more question if I can. The Bison deal, motion control, I don't think we've seen a motion control acquisition for some time or one of the size. Is there a desire to maybe do more of these kinds of deals, maybe become a bit more of a scale player in motion control?
Dave Zapico, Chairman and Chief Executive Officer
I think there is a desire, but we need to ensure the technology and the business has to be successful in a niche, and we have to add value to it. I think there are a few other businesses that we're looking at right now that would be very attractive to us. Bison just fit all those characteristics. We can add substantial value. It was a fair price. It has capability that we don't have. We can really improve the business to address more of the applications they hadn't been able to target. It fits well in our toolkit and adds value to our solution offerings. There are other businesses like that we're looking at, and while we'll wait for the right opportunities, I think they're showing up.
Nigel Coe, Analyst
Great. Thanks, Dave.
Dave Zapico, Chairman and Chief Executive Officer
Thank you, Nigel.
Operator, Operator
One moment for the next question. This question comes from Christopher Glynn of Oppenheimer & Co. Inc. Please go ahead.
Christopher Glynn, Analyst
Hey, thanks, good morning Dave, Bill, Kevin. Amazing to see the 1.1x organic book-to-bill at this point in the supply chain cycle. I did want to ask about Abaco, as you just kind of hit the 2-year anniversary. Just curious for an overall kind of update on the past 2 years integrating and getting to know that business. Is it episodic? Or is it in a nice kind of scaling mode here would you project?
Dave Zapico, Chairman and Chief Executive Officer
No, it's definitely not episodic. After we bought it, we went through the supply chain crisis in electronics, and we had to work through all of that. We also augmented the management team. I think we're really in the right gear now with that business. The defense market is strong. We're in the right areas. That business is going to accelerate and be a big contributor for us going forward.
Christopher Glynn, Analyst
Great. On the organic kind of mid-single-digit outlook, could you parse that, how you're thinking about the two segments relative to one another? Similar kind of outperformance from the first quarter at EIG, do we expect that to continue?
Dave Zapico, Chairman and Chief Executive Officer
Yes. I think both groups have a very good chance to grow mid-single digits for the full year organically. EIG, a little bit stronger than EMG, but both groups have the potential to grow mid-single digits.
Christopher Glynn, Analyst
Great. Thank you.
Dave Zapico, Chairman and Chief Executive Officer
Thank you, Chris.
Operator, Operator
One moment for our next question. Our next question comes from Andrew Obin of Bank of America. Your line is open.
David Ridley-Lane, Analyst
Good morning. This is David Ridley-Lane on for Andrew. A lot of commentary about improvements to supply chain. Just to go down a little, what about in your Aerospace business? We've heard mixed messages about component availability and it could be constraining revenue. Obviously, you had very strong revenue growth this quarter, just an update on Aero's specific supply chain.
Dave Zapico, Chairman and Chief Executive Officer
The aero-specific supply chain is improving as our entire supply chain is. We grew mid-20% organic growth in the quarter. We have a good supply chain team there and a good management team running that business. It feels like that business is accelerating. That was our strongest area, and we took out the year on that segment. There are always challenges in different markets, but in Aerospace right now, I see us accelerating growth.
David Ridley-Lane, Analyst
Thanks for that. On the Electronic Instruments Group, that commentary is very interesting that you're actually seeing some re-acceleration in demand. Are there any secular themes that you would point to? Can you identify certain maybe reshoring-related projects that are helpful there?
Dave Zapico, Chairman and Chief Executive Officer
More than the secular, there are secular opportunities driving growth. A lot of it is our approach and our niche focus. We have very flexible businesses that are aggressive. They go after where the niche opportunities are. I'll give you a couple of examples. In the semiconductor market, our Semiconductor business, which is about 6% of our sales, was actually up in the first quarter. Most semiconductor businesses are up in the first quarter. The reason is that while we participate in the memory area that was down, we also participate in semiconductor research, which is very strong now. EUV optics within semiconductors are just very strong. So, while there is some weakness in the market, we're very agile and can adapt, and we've been doing that for years, and we're growing. The big thing across all our businesses is that there are growth opportunities for sure. We're very agile. Our distributor model lets us get after them with management teams dedicated to these businesses and markets. I don't see that stopping.
David Ridley-Lane, Analyst
Thank you for the details.
Operator, Operator
One moment for our final question. Our last question comes from Michael Anastasiou of TD Cowen. Your line is open.
Michael Anastasiou, Analyst
Good morning. Thank you for taking my question. There's been some commentary as of late regarding destocking in different areas of the medical and life science-related end markets. Can you briefly describe where your portfolio specifically plays in that area and your outlook for the year? Any color would be appreciated.
Dave Zapico, Chairman and Chief Executive Officer
Sure. The medical market is about 15% of our sales now. In the quarter, it was up high teens, driven by strong growth in our Rauland business and also our Engineered Mechanical Components business. For the full year, we expect it to be up high single digits. So we expect to grow in that medical space. It’s much like the discussion I just had with David about we're in the right niches. Rauland's primary product is really to improve the efficiency of nurses. As long as I've been alive, there have been nursing shortages in the United States, and Rauland's nurse call systems make nurses more efficient. Coming out of the pandemic, we see a lot of spending on dealing with the shortages, and Rauland has great products and is very successful in that area. In our EMC business, we're dealing with a lot of single-procedure, single-use-type devices that we're building components for, and that business is accelerating. Both of these core businesses, which make up the large part of our medical businesses, are doing well, and we were up high teens in the quarter.
Michael Anastasiou, Analyst
Great. Thank you.
Operator, Operator
Thank you. One moment for any final questions. Our last question comes from Joseph Donahue of Baird. Your line is open.
Joseph Donahue, Analyst
Hey guys. I am on for Rob. How are you doing?
Dave Zapico, Chairman and Chief Executive Officer
Good.
Joseph Donahue, Analyst
Kind of following up on the earlier commentary. Could you take the temperature on R&D spending? Should we expect it to stay strong, you think, through the rest of the year?
Dave Zapico, Chairman and Chief Executive Officer
In relation to the semiconductor, I think there's a lot happening now overall as we're transitioning from one technology to new technology and smaller nodes. We're seeing the strength in semiconductor research spending, and it's one of the strongest areas of our business right now. Again, it's another area where we're in the right niche.
Joseph Donahue, Analyst
Got you. This could just be on our side, but EMG looked a little below normal seasonal growth. Is there any difference in supply improvement across the two segments going on or anything else we should be thinking about?
Dave Zapico, Chairman and Chief Executive Officer
I think when you look at EMG, the organic growth was up 4%. They had a good quarter. You had some headwinds from currency. EIG grew faster for sure, but EMG was still solid.
Joseph Donahue, Analyst
Got it. Alright, thank you.
Dave Zapico, Chairman and Chief Executive Officer
Thank you.
Operator, Operator
Thank you. That concludes our Q&A segment. I'll now turn it back over to Kevin Coleman for closing remarks.
Kevin Coleman, Vice President of Investor Relations and Treasurer
Thank you, Chris, and thank you, everyone, for joining our conference call today. As a reminder, a replay of today's webcast can be accessed in the Investors section of ametek.com. Have a great day.
Operator, Operator
And thank you all for your participation in today's conference. This does conclude the program. You may now disconnect.