Mettler-Toledo International Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 2, 2025
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Operator

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mettler Toledo First Quarter twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. I would now like to turn the call over to Adam Ohman, Head of Investor Relations. Please go ahead.

Adam Uhlman
Adam Uhlman
Investor Relations at Mettler-Toledo International

Hey, thanks Kelvin, good morning, everyone. I appreciate you joining us. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer and Sean Zdala, our Chief Financial Officer. Let me cover some administrative matters on the call. This call will be webcast and available for replay on our website at mt.com and a copy of the press release and presentation that we'll refer to on today's call is also available on our website.

Adam Uhlman
Adam Uhlman
Investor Relations at Mettler-Toledo International

This call will include forward looking statements within the meaning of The U. S. Securities Act of 1933 and The U. S. Securities Exchange Act of 1934.

Adam Uhlman
Adam Uhlman
Investor Relations at Mettler-Toledo International

These statements involve risks, uncertainties and other factors that may cause our actual results, financial condition, performance and achievements to be materially different from those expressed or implied by any forward looking statements. For a discussion of these risks and uncertainties, please see our recent annual report on Form 10 ks and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward looking statement, except as required by law. On today's call, we may use non GAAP financial measures and a reconciliation of these non GAAP measures to the most directly comparable GAAP measure is provided in the eight ks and is available on our website. Let me now turn the call over to Patrick.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Thanks, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our first quarter financial results, the details of which I outlined for you on Page three of our presentation. We had a good start to the year with solid growth in our laboratory business excluding the recovery of delayed shipments in the first quarter of twenty twenty four. Additionally, the strong execution of our margin expansion strategies led to better than expected earnings for the quarter.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

However, the ongoing global trade disputes and tariffs have significantly increased uncertainty in global customer demand. We also estimate cross incremental global tariff costs of approximately $115,000,000 on an annual basis and are implementing mitigation actions this year that will fully offset these costs next year. We are confident that our strong culture of operational excellence and our highly agile team will continue to perform well in this dynamic environment and we will benefit from the breadth of our innovative product portfolio and strategic programs. Let me now turn the call over to Sean to cover the financial results and our guidance and then I

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

will come back with some additional commentary on the business and our outlook. Sean?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Thanks Patrick and good morning everyone. Sales in the quarter were $884,000,000 which represented a decrease in local currency of 3%. Excluding the impact of shipping delays from the fourth quarter of twenty twenty three that were recovered in the first quarter of twenty twenty four, local currency sales grew 3%.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

On a U. S. Dollar reported basis, sales declined five percent. On slide number four, we show sales growth by region. Local currency sales declined 1% in The Americas, 7 Percent in Europe and 2% in Asia Rest of the World.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Local currency sales were flat in China during the quarter. Excluding the impact of shipping delay recoveries in the prior year, local currency sales grew 3% in The Americas, 4 Percent in Europe and 3% in Asia Rest of the World including 3% growth in China. On slide number five, we summarize local currency sales growth by product area. For the quarter, Laboratory sales decreased 3% and Industrial declined 1% with Core Industrial down 6% and Product Inspection up 8%. Food Retail declined 12% in the quarter.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Excluding the impact of shipping recoveries last year, we estimate our Laboratory sales grew 5%, Industrial grew 2% with Core Industrial down 2% and Product Inspection up 8% and Food Retail declined 5%. Service sales increased 6% in local currency in the first quarter. Let me now move to the rest of the P and L, which is summarized on slide number six. Gross margin was 59.5% in the quarter, an increase of 30 basis points as positive price realization and benefits from our sterndrive program were offset in part by lower volume. We estimate gross margin expanded 90 basis points excluding shipping delays.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

R and D amounted to $46,000,000 in the quarter, which is a 2% increase in local currency over the prior year. SG and A amounted to $243,000,000 a 5% increase in local currency over the prior year and includes sales and marketing investments and timing of expenses. Adjusted operating profit amounted to $237,000,000 in the quarter, down 11% from the prior year. Adjusted operating margin was 26.8%, which represents a decrease of two ten basis points over the prior year. Excluding the impact of shipping delay recoveries in the prior year, our operating margin expanded 50 basis points on 3% sales growth in the quarter.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

A couple of final comments on the P and L. Amortization amounted to $17,000,000 in the quarter, interest expense was $17,000,000 and adjusted other income amounted to $3,000,000 Our effective tax rate was 19% in the quarter. This rate is before discrete items and is adjusted for the timing of stock option exercises. Fully diluted shares amounted to $20,900,000 which is approximately a 3% decline from the prior year. Adjusted EPS for the quarter was $8.19 an 8% decrease over the prior year.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Adjusted EPS growth was 11% excluding a headwind to EPS growth of approximately 18% from the recovery of delayed shipments and a 1% headwind from foreign exchange. On a reported basis in the quarter, EPS was $7.81 as compared to $8.24 in the prior year. Reported EPS in the quarter included $0.23 of purchased intangible amortization and $0.15 of restructuring costs. That covers the P and L and let me now comment on adjusted free cash flow, which amounted to $180,000,000 in the quarter, a 1% increase on a per share basis and was impacted by higher bonus payments of $36,000,000 related to prior year performance. DSO was thirty five days, while ITO was 4.2 times.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Let me now turn to our guidance for the second quarter and for the full year 2025. As you review our guidance, please keep in mind the following factors. First, our guidance assumes U. S. Import tariffs as well as the impact of retaliatory tariffs from other countries will remain in effect at current levels.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Geopolitical tensions are elevated and include the potential for new tariffs or retaliatory tariffs that we have not factored into our guidance. As of today, we estimate our incremental global tariff costs at approximately $115,000,000 on an annualized basis, which already includes initial actions we have taken to lower our gross exposure. Secondly, we are taking various actions to offset the impact of higher tariffs, including supply chain optimization, cost savings, price increases and surcharges. Our actions are expected to fully offset tariff costs on an annualized basis, but we will have a headwind in our gross margin in 2025, especially Q2 until the full benefit is realized. Third, the U.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

S. Administration's trade policies have created increased risk to the outlook for our core markets in the global economy. Our outlook assumes market conditions will be slower than previously expected, especially in China. This implies volume growth in the second half of the year is similar to the first half of the year, excluding the impact of shipping delays. We assume foreign currency at current rates, which would not materially impact sales or adjusted EPS in 2025.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Finally, please keep in mind that our third party logistics provider delays negatively impacted our Q4 twenty twenty three results by $58,000,000 nearly all of which was recovered in our Q1 twenty twenty four results. For the full year 2025, this will reduce our sales by 1.5% and is a headwind to operating margin expansion of approximately 60 basis points and a headwind to adjusted EPS growth of approximately 4%. Now turning to our guidance. For the second quarter of twenty twenty five, we expect local currency sales to grow approximately 0% to 1%. Operating margin is expected to decrease 170 basis points at the midpoint of our range or down 70 basis points excluding the net impact of tariffs.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

We expect adjusted EPS to be in the range of $9.45 to $9.7 a growth rate of down 2% to up 1%. Included within the EPS guidance is a gross headwind of approximately 6% from higher tariff costs and we expect to offset about half resulting in a net headwind to EPS growth of 3%. For the full year 2025, our local currency sales growth forecast is 1% to 2% or up 2.5 to 3.5% excluding the shipping delays. Operating margin is expected to decrease 130 basis points at the midpoint of our range and would be up slightly excluding the net impact of tariffs and prior year shipping delays. We expect full year adjusted EPS to be in the range of 41.25 to $42 compared to our previous guidance of $42.35 to $43 which reflects EPS growth of 0% to 2% or 4% to 6% excluding the shipping delays.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Included within the EPS guidance is a gross headwind of approximately 7% from higher tariff costs or a net headwind of 2% including the benefits of our mitigating actions. Lastly, I'd like to share a few other details on our 2025 guidance to help you as you update your models. We expect total amortization including purchased intangible amortization to be approximately $72,000,000 Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25,000,000 on a pretax basis or $0.93 per share. Interest expense is forecast at $72,000,000 for the year. Other income is estimated at approximately $9,000,000 We expect our tax rate before discrete items will remain at 19% in 2025.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Free cash flow is expected to be approximately $860,000,000 in 2025 and share repurchases are expected to be approximately $875,000,000 That's it from my side and I'll now turn it back to Patrick.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Thanks, Sean. Let me start with some comments on our operating businesses, which will exclude the impact of from the recovery of delayed shipments in the first quarter of last year. I will start with Lab, which had solid growth in the quarter. We continue to benefit from recent innovations like our new line of laboratory balances, titrators and thermal analysis instruments and our sophisticated go to market approaches have helped us penetrate underserved market segments. We had strong growth in our Process Analytics business in this quarter, which continues to benefit from favorable biopharma market trends, especially in single use technologies and recent innovations like our digital sensors with intelligent sensor management that provide reliable in line measurement of critical analytical parameters.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Precise analytics, monitoring and control systems are crucial for optimizing bioprocess operations. By providing real time data and feedback, our systems can help ensure ideal cell viability, nutrition feeding and consistent productivity throughout the bioprocessing lifecycle from R and D to manufacturing in both reusable and single use formats. Turning to our Industrial business, our underlying sales growth was led by our product inspection business, where our growth initiatives and new portfolio have offset challenging market conditions for the food manufacturing industry. Our innovation investments are well received in the market. Our new innovations have low total cost of ownership and can significantly improve productivity, for example, by enabling much higher line speeds in production and reducing waste, which is more important than ever to protect margins in Food Manufacturing.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Switching to Core Industrial, sales were down slightly excluding the impact of prior year shipment delay recoveries as industry conditions remain mixed across most end markets. Our team remains active in engaging with customers with cost saving solutions like our quality control software that improves process control and reduces waste in their manufacturing operations. Our suite of smart terminals helps customers transition manual processes to semi or fully automated process control that includes full traceability for reliable reporting. These solutions are increasingly important for customers looking to expand manufacturing in higher cost geographies and automate more of them production processes. And lastly, Food Retail declined as we had expected.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Now let me make some additional comments by geography, which will also exclude the impact of last year's shipping recovery. Starting in The Americas, our underlying sales growth was led by strong growth in Process Analytics and Product Inspection. This growth was partially offset by lower core Industrial sales against strong growth in the prior year. Turning to Europe, we had underlying sales growth across our businesses the exception of Retail. Our team continues to execute very well and we have benefited from our innovative portfolio and Spinnaker programs.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

And finally, Asia Rest of the World results were about as expected and grew modestly against easy comparisons. Market conditions in China remain soft and economic uncertainty is increasing. We continue to leverage our Spinnaker program to identify growth opportunities and our team remains highly agile to take advantage of opportunities. In summary, we are pleased with the good start to 2025, although we recognize there's increased uncertainty due to tariffs and the potential impact to our end markets and global economic growth. During uncertain times, our strong culture of teamwork, collaboration and focused execution has been a critical asset that has helped our company successfully navigate uncertainty very well in the past.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

We also benefit from our business diversity and help customers across their entire value chain from research and development, scale up, quality control and production. We also serve a wide range of diverse end markets and over 70% of our sales are in core end markets of pharma, biopharma, food manufacturing and chemicals. No end customer is more than 1% of sales and we also benefit from our geographic diversity as we sell in over 140 countries around the world. We also have a broad and diverse product offering and have introduced new innovations across a wide range of our portfolio into recent years that provide tangible benefits to customers, significantly enhancing our value proposition. Our automation and digitalization solutions help customers improve their productivity and reduce costs, while enhancing compliance with relevant regulations.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Additionally, our average price points are low and typically below $10,000 and our large installed base and replacement demand helps reduce cyclicality. Approximately 35% of our sales last year was service and consumables, and we are confident our dedicated growth initiatives in this area will remain accretive to our growth and profitability. Our go to market approach is also a competitive advantage during periods of increased uncertainty. Our sales and marketing excellence program Spinnaker ensures we are identifying and guiding our sales teams to the most attractive opportunities in the market. For example, we expect to see increased U.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

S. Onshoring investment over the coming years and we will benefit from these investments. Our strong direct sales force helps us to communicate our value proposition directly to end users. Our global supply chain is another important asset as we serve customers around the world with 21 manufacturing locations in seven countries. We also continue to increase the resilience of our manufacturing footprint, which allows us to produce products in multiple regions.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

U. S. Import tariffs represent additional costs we plan to offset with supply chain optimization actions, cost savings, price increases and surcharges. Our global pricing program is deeply ingrained throughout our organization and is based on a sophisticated set of data analytics and tools that help support our end to end pricing process. Our Blue Ocean program has also allowed us to have centralized price administration with robust processes so we can react quickly to changing conditions.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Overall, we recognize there is increased uncertainty in the economy and we remain agile to respond to the changes in the market conditions as necessary. At the same time, we remain convinced in the long term growth opportunity in our end markets and our ability to gain market share and grow faster than the market, especially in very dynamic market conditions. We remain focused on the things we can control and continue to implement strategies with a good balance of initiatives focused on growth, innovation and operational excellence. Now this concludes our prepared remarks. Operator, I'd like now to open the line to questions.

Operator

Thank you. Your first question comes from the line of Dan Leonard of UBS. Please go ahead.

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

Thank you very much. My first question is one on China. Can you update us with your new forecast for revenue growth in China in 2025 and maybe parse that between industrial and lab?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. Hey, Dan, this is Sean. I'll take that one. So for China for 2025, for the full year on a reported basis, we expected China to be down slightly. Maybe I'll comment on Q2.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

We expect Q2 to be down like low to mid single digit. On the full year basis, we expect that to be kind of like up low single digit in terms of the lab business and down low single digit in terms of the industrial business. And for Q2, we expect lab to be down, low single digit and industrial to be down mid single digit. And hey, this probably is a good parlay into like a little bit our thoughts on guidance. When Patrick talks about uncertainty, clearly China is probably higher on the list in terms of areas where there's uncertainty in terms of like where we're seeing maybe some caution in the market in terms of customers maybe holding off in terms of investments.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

We see that a little bit here in the second quarter. So we're just a little bit more cautious here in Q2 and how we're thinking about kind of China developing for the rest of the year.

Adam Uhlman
Adam Uhlman
Investor Relations at Mettler-Toledo International

I think We're going to

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

call Okay. And

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

maybe as a well, a follow-up. You mentioned on shoring and there have been a lot of announcements lately. I don't know, Patrick, if there's any way you could help us better quantify the potential opportunity for Medlar from various manufacturing, onshoring initiatives.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Sure, Dan. I'm happy to take the questions. Look, mean, the whole reshoring, homeshoring, onshoring, whatever you would call it, is definitely something that will be important for us moving forward. That said, as these companies are starting to restore reshoring programs and factories are raised, etcetera, we are a bit later in the process. We are not in the initial construction phase, etcetera, involved with these companies.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

But we are, of course, talking to many customers out there, whether in semiconductor and other areas, who plan to make these relocations to make sure they understand the full benefit of our portfolio when they're ready to put in place their manufacturing control systems to help them with our industrial solutions at the same time in the QC with our QC products and of course also in the R and D environment with the broad span of our research and development tools that appear for these customers. But so far, I would say the impact on our business from reshoring and homeshoring is not yet of any meaningful size, but we expect it to be an upside in the, let's say, quarters and years to come.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. And we just feel like we're very well positioned for this trend as a global company, but also with our Spinnaker program which really helps us to identify these types of opportunities.

Dan Leonard
Dan Leonard
Managing Director & Research Analyst at UBS Group

Okay. Thank you very much.

Operator

Your next question comes from the line of Patrick Donnelly of Citi. Please go ahead.

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

Hey, guys. Thanks for taking the questions. Sean, probably one for you on the tariff side. I appreciate all the color and the gross number and some of the mitigation. Can you just break down kind of where that impact is coming from?

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

Obviously, was a pretty big concern coming in just in terms of some of the importexports there. Can you talk about that impact? And then again, the mitigation efforts that are ongoing, have you already started to move some things around? And then similarly, on the pricing side, how should we be thinking about you guys are always quite nimble on pricing increases and surcharges? So would love to just talk through both the gross impact, where it's coming from and then also the mitigation measures

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

No. Hey, Patrick, great questions. So I think the first comment is, of course, we already started to wanna have more flexibility in our global supply chain going back coming out of COVID. So as part of that, we had, you know, kind of expanded in Mexico, which was part of an acquisition that we did a while back. And then, you know, with this need to have more flexibility in our supply chain, we started to build out Mexico.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

More recently, with the with the global trades, disputes kind of on the horizon, we've been accelerating a lot of our plans here. This is one example. Of course, we do a lot of things with our global supply chain, but we've been making a lot of progress in our optimization of our global supply chain processes here recently and made a lot of progress here already this year. And as a result, our exposure to imports from directly from China, we estimate that number is more in the range of about $50,000,000 right now. So previously, we would have said that that number was under 100.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

It was a little bit dynamic, and we wanted to seek a little bit how things played out here with the timing of tariffs. But, we're really pleased to make good progress in terms of that number. Of course, China of course, Mexico is now higher than than China, but, you know, expect it to still be below a hundred million dollars. And then as we think about the rest of the world, we expect imports to The U. S.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

To be in the range of about $250,000,000 with a significant portion of that coming out of Switzerland.

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

Okay. And then just

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

the pricing offsets, how you think about that?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. I'm sorry. That's the impact, of course. And then the mitigation. So there's the supply chain.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

There is also some cost savings. And then there's pricing. So pricing, we expect our pricing before we were communicating pricing to be kind of like in the range of about 2%, for this year. Right now, we're thinking it's going to be 3% or so. It will depend a little bit on how the tariffs play out because some of our pricing is going to be price increases related to inflationary, higher inflationary conditions that we expect from the trade war.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But also a significant part of our mitigation actions also with surcharges, which gives us a little bit of flexibility, as things can go up or down with the tariff rates. And so that could change a little bit going forward. But I think the flexibility will play out kind of well here as we kind of go forward. And then as we kind of go into next year, you'll see the mix changing a little bit as we continue to work on supply chain optimization to put us in a position where we really have a lot of confidence in terms of our ability to mitigate the gross headwind at the current rates.

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

Yes, that's helpful. And then Patrick, maybe just on the industrial market overall, that's become for the group a little more concerning just given the macro backdrop, all the volatility out there. What are you hearing from customers on the core industrial piece? What's the right way to think about how you guys are forecasting that today versus maybe a few months ago when things were, I guess, slightly different? Appreciate it.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yes, sure. I'll make a general comment on how I see the industrial end market and then let Sean break it down of how we see the growth forecast for the second quarter and the full year. Look, I mean, I think we are exceptionally positioned with our product portfolio to serve the automation needs and digitalization needs in the industrial markets. And yes, we have seen recently some delays with customers that had larger projects that moved. That's also why we see a bit of a slower movement in Q2 right now in Industrial.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

But overall, we are confident in our solutions that we see. Trend for automation, the need for automation, given aging populations, reduction workforce worldwide will stay in place. And if you take also into account the whole reshoring and homeshoring activities that are coming, these customers will not start with a lot of manual processes that they will try to start to automate as much as possible given also the higher labor cost that we'll face in the homeshoring countries. So I think that's why we're seeing currently some softness given the uncertainty. I think for the long term, we are very well positioned with the portfolio.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

And Sean, can you break it down in terms of the Industrial growth numbers for Q2 and the

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

full year?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. Hey, so for on the Industrial side for Q2 for core Industrial, we expect core Industrial to be flat and we expect Product Inspection to be up mid single digit. And for the full year, we expect Core Industrial to be flattish. And we expect Product Inspection to be mid single digit.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Excellent.

Patrick Donnelly
Patrick Donnelly
Managing Director, Equity Research Analyst at Citi

Helpful. Thank you, guys.

Operator

Your next question comes from the line of Jack Meehan of Nephron Research. Please go ahead.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Hey, good morning, everyone. Wanted to continue on this topic of tariffs, but just in terms of customer behavior, I was curious if you saw any evidence of pull forward in the first quarter or in any of like the April trends that you've seen so far?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yeah. Thanks, Jake. We we have not seen a significant or any meaningful pull forward action in in the quarter. I mean, I know there was something in in the news of in the car industry, etcetera, but I would say in industry, we have not seen customers highlighting. They are placing orders earlier because they are concerned about the tariffs.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

We are serving markets that are not really concerned about these very short term moves and they also don't make a lot of short term planning. That's what I see. But from what I'm hearing from the sales force, there has been not an acceleration of orders given the tariff impact.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Okay. And then within lab, I was curious just for some more color on the process analytics business. Had some encouraging commentary from some of your peers in the bioprocessing world. I was curious how you feel about the setup there. Thank you.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Exactly, yes. And we have seen also some really nice growth in Process Analytics, also driven by some of the comments, of course, that you have heard from a lot of the biopharma customers that they really increased manufacturing. We see a good increase of both single use but also multi use sensors in the space. So there been a very healthy recovery also on the portfolio of single use sensors, which have been over the last years subdued and there was also kind of no restocking issues in last year that has been fully resolved. And now we see some really healthy order income again.

Jack Meehan
Equity Research Analyst at Nephron Research LLC

Awesome. Thank you.

Operator

Your next question comes from the line of Dan Arias of Stifel. Please go ahead.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Hey, good morning guys. Thank you. Sean, just a follow-up on manufacturing. The capabilities in Mexico, I think that's through biotechs, if I remember right, and it used to be pipette tips and life sciences reagents that you made down there. Have you expanded the production breadth beyond that at this point?

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Or is it still focused on a subsegment of lab and so that's where the gross margin gains would be focused?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

No. It's significantly expanded. We we literally added on to the facility a few years ago, and we've been moving a wide range of products throughout the portfolio, which will include lab, industrial and also on the food retailing side.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Okay, helpful. And then just when it comes to the tariff offsets, obviously you're implementing a plan today. If you were to get some de escalation here like it's possible, do you see the chance for some stickiness that could kind of leave the door open for a benefit relative to where things are today, just in the sense that, you know, to your point, you have a low ASP portfolio. So if you were to raise some price in response to tariffs and then sort of align to a cost structure for a particular scenario, but then not have that scenario be the way that it plays out, would you not necessarily have to pull it all the way back and so you could be left with some upside? Or is the idea really to just sort of flex back down on pricing and surcharges as situation changes?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And, hey, we'll see how things play out. Right? I mean, there's there's, there's a lot of different scenarios that could happen. I mean, things have changed so much here in the last two to three months more than what we would expected, you know, in terms of the surcharges. Of course, yes, they would you know, we'd have to pull them back if if rates change, but we'll we'll I think we'll just see how things play out here.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yeah. Yeah. Of course. But also on the manufacturing side. And as as we have now really increased our manufacturing footprint, for example, in in Mexico, we also have put a lot of efforts into really making sure we establish a very strong local supply chain there as well, and that that is there to stay.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

I mean, we have a very competitive setup

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

There to serve, especially the North American market is that is in some to some extent redundant to the Chinese operation that we have as well. But given the again, given that we are already almost two years into the whole relocation or redundancy building, that will not will not pull that back. We won't

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Yeah. Yeah. Yeah. I was thinking more in terms of pricing.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But but I think that's, like, probably a key outcome from all of this is because when we talk about Mexico, we we're still gonna have a very significant manufacturing footprint in China for China and for the rest of the world. We are just building some redundancies here, which just increases our flexibility. And I just think that is a a longer term strategy that that's going to be a good strength for the organization going forward.

Dan Arias
Dan Arias
Managing Director at Stifel Financial Corp

Yes. Okay. Thank you.

Operator

Your next question comes from the line of Brandon Couillard of Wells Fargo.

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

Sean, just wanted to clarify, when you're talking about seeing some orders being delayed, some push outs for projects, is that isolated to core industrial? Was that a China specific comment or or more global comment?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

My comment was specific to China that we we sense that there's a little bit more you know, if you talk to the different regions, you know, if you talk directly to the to the sales organization, there's actually still a lot of optimism in the western markets just given really good customer activity. But we we were a little more cautious from the top down here just, you know, recognizing the situation. But when we talk to maybe the Chinese organization, they're they're optimistic for the media, like, going out a little bit, but they're a little bit more cautious in terms of just timing in the short term if you kinda look at their q two outlook. So that's an area where we're we're feeling a little bit more hesitation from customers to to to delay things a little bit here, kind of a wait and see mode. Kinda makes sense.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Right? When you look at the the significant level of tariffs that are going on, I'm I'm sure some companies are gonna try to take a wait and see approach just to see how it plays out a little bit. Fortunately, for us, Brandon, though, maybe it's it's a good point to comment on is, if you look at our customers in China, we're not typically selling to the exporters. A very significant part of our business there is still our core markets, which are serving the local market. We've talked a lot in the past about, you know, I think something like 15% or or less of our business is actually sold to multinationals.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And then, you know, within that Chinese portion of most of its private companies. And like I said, most of a a very small portion of that relates to, to actually exporters. And and a lot of what we're doing is actually supporting them with their own strategic initiatives to build up their own life science industry, etcetera.

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

That's helpful. And then, Chad, it doesn't look like your free cash flow guide actually changed at all. How do you just, I guess, approach managing working capital in this environment? And are you taking down or pushing out your own CapEx just to, you know, the free cash flow numbers actually you're saying?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Yeah. Hey, I think we we still feel good about it. We'll, you know, we'll revisit as we go along. We, you know, we felt like we we did pretty good here in the first quarter, especially if you exclude timing of the bonus payments year on year related to prior year performance.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

You know, I think we we were up, you know, was it like 17% on a per share basis or something like that. And so I feel like, I feel like we had a good first quarter. Of course, we're looking at things to kind of optimize, things in terms of how we how we think about other types of, you know, line items on the cash flow statement too that, you know, will allow us to continue to reinvest in our business as we expect, but also just maybe optimize, things, in terms of how we, you know, how we how we can benefit from this year in this environment. But, you know, we'll we'll see, we'll see how things play out here a little bit.

Brandon Couillard
Brandon Couillard
Managing Director at Wells Fargo

Thanks.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yep. Thanks.

Operator

Your next question comes from the line of Vijay Kumar of Evercore ISI. Please go ahead.

Vijay Kumar
Senior Managing Director at Evercore ISI

Hey guys. Thanks for taking my question. Sean, maybe my first one on the guidance cadence here. Q1 ex the shipping delays, you guys have been up 3% low singles. Q2, zero to 1%.

Vijay Kumar
Senior Managing Director at Evercore ISI

What drives that step down in revenues? Are you assuming some demand destruction because of tariffs here in 2Q? And I think like the back half sort of assumes you step back to 3% plus to hit the annual. So maybe just talk about this cadence for 2Q and back half.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. I mean, think if you kind of like cut through our guidance and you look at price versus volume, you're right. Q two will be kind of the low point of the year. I I think it's very much related to these comments on on uncertainty in the short term, with, you know, maybe more optimism in the medium term. And and part of that part of that caution in the short term is gonna be, is is gonna be China.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But but I think, you know, maybe just to kinda like look at the the regions here, I mean, are expecting, you know, kinda flattish results here in in in lab and industrial. We we all already talked about mid single digit and product inspection. We expect retail to be down a little bit in in q two. But then from a regional perspective, we expect, you know, The Americas to be flattish to up low single digits. So it's probably another area where there's where there's a little bit of caution.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And then with Europe up low single digit and we already talked about China being like down low to mid single digits. So maybe the two areas I'd jump out a little bit was the China comments and then maybe just a little bit more cautious on The Americas in the short term.

Vijay Kumar
Senior Managing Director at Evercore ISI

Understood. And my follow-up here on tariffs, I think you said $50,000,000 was China. You know, the overall $115,000,000 when you said annualized, what is the impact for fiscal twenty five? Is that something lesser because you're using annualized commons in a thing?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. So so maybe yeah. So maybe one way to think about it, not to put an exact number on it, about 7%. It'll probably be about a 7% gross headwind to EPS, in terms of the tariff impact this year. And we expect to offset probably 75% or more of that this year, which would result in a net headwind to EPS of about 2%.

Vijay Kumar
Senior Managing Director at Evercore ISI

Sorry. I just had a follow-up on. Like the I think you used cash at current levels in your prepared remarks. So are we assuming the current, I guess, rates are sustained? Or are you is the guide assuming in a post the ninety day, pause for rates to, tariff rates to creep back up?

Vijay Kumar
Senior Managing Director at Evercore ISI

Like, what what is the guide assuming on tariffs?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. No. Good good question. We we assume it's at current rates. We assume it's at current rates.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And recognizing it can go up or down, so we'll see. Understood. Thanks guys.

Operator

Your next question comes from the line of Matt Sykes of Goldman Sachs. Maybe

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

taking the China questions in a different angle. Do you think that if this tariff situation lasts a little bit longer than expected, meaning beyond Q2, there could be some shifts in the competitive landscape in China, meaning the local players would maybe prefer local substitution if possible from a technology and performance standpoint because of pricing and that could shift things if this lasts longer than expected? Do you feel pretty comfortable with your competitive positioning to kind of penetrate through these near term issues?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yes. Thanks, Matt. Look, mean, first, I think we you want to appreciate that most of the products that we sell in China, we actually manufacture in China. So we import very little from U. S.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

To China. So while there is a bit of a tariff headwind there as well, it's much, much smaller than the other direction because most of the products that we sell in China, we manufacture in China at very, very competitive situate in a very competitive situation, but also our sales being in a very, very good position there because we source locally, we have manufacturing locally, we have a strong local marketing team. And from many perspective, our customers here is almost like a Chinese company because we are fully we are fully merged there with with the customers. We are very quick at our ping outs to local application demand changes, etcetera. We have a strong R and D and marketing team that helps us to really understand customer moves.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

So we think we can continue to compete very effectively in the local market. We've obviously done there. And the few products that we still manufacture in The U. S. Or in Germany or in Switzerland and ship them to China.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

We are looking also there into options to localize some of them, but it, of course, depends on other priorities and also on IP questions, etcetera. But the exposure of that tariff in China for U. S. Product is for us rather small. And if we think we are set up for long term good competitive position in the market.

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

Got it. And maybe just two quick ones. Patrick, one for you just on services growth. You said 6% in the quarter, a little bit below kind of the run rate you were doing last year if I recall correctly. I'm sure some of this is comps, but just maybe talk about the underlying strength that you continue to have confidence in that services growth?

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

And then Sean just could you just I'm sorry if I missed this, but just any FX assumptions in the EPS guide over the course of the year that might have offset some of the tariff impact?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Thanks, Ann. I'll start with the services questions. Yes, Q1 was a bit of tougher compare compared to last year, but we are still pretty pleased with the 6% growth that we have seen in Q1. For the full year, we forecast mid to high single digit growth in 2025. We have invested a lot also last year into growth program services to make sure that we really can tap deeper into installed base that is currently not serviced by our team.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

So we have implemented more marketing and telesales resources to reach out to customers, have real sales programs in place and also added a significant number of new service people in in the field. So I think that that whole growth program is still long runway. And I'm actually quite pleased with the outlook and what I'm hearing from the team. Also want to recognize the team here for having really outstanding feedback from our customers in terms of Net Promoter Scores. They are higher than ever.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

But it also tells me that our customers are really pleased with the service that we deliver.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But hey, maybe the second part of your question, Matt. So we reduced our full year EPS guidance by 2% at the high end of our range and 2.5% at the midpoint. At the midpoint, about two thirds of that relates to the gross tariffs offset by our mitigation actions. The other third reflects the lower sales volume for the year, offset by better operating performance and more favorable foreign currency. So currency, we expect from an EPS perspective to be at current rates, flattish or neutral for the year.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And then last quarter, we were expecting it to round to like a 2% kind of a headwind.

Matthew Sykes
Matthew Sykes
Analyst at Goldman Sachs

Thank you. Very helpful.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Your

Operator

next question comes from the line of Doug Schenkel of Wolfe Research. Please go ahead.

Avery Kriss
Equity Research Associate at Wolfe Research LLC

Good morning. This is Avery on for Doug. Thank you for the question. Just looking at your margin for the quarter, obviously we have the shipping impact, but gross margin was up 30 basis points. I was just wondering if there's any favorable mix there.

Avery Kriss
Equity Research Associate at Wolfe Research LLC

And then looking at the OpEx line, it seems like that number was a bit elevated in dollar terms, specifically SG and A. So just wondering if you could give any color there. Was that preparation being done in advance of the tariffs? And then going forward through the balance of this year, would it make sense to expect that level of OpEx as a percentage of sales to be somewhat elevated relative to last year?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Hey, so in terms of the gross margin for the quarter, we were actually very pleased with our gross margin, certainly a little bit better than what we had expected. It was up 30 bps, but if you exclude the impact of the shipping delays from a year ago, it was up 90 bps. You know, we had good good performance in pricing. It came in about 2% the 2% kind of a range.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But we also saw some good progress continued on our sterndrive program and productivity initiatives in the company. In terms of mix, might have been think there was a little bit of favorable mix there as well too, in in the quarter as well. But but otherwise, we feel good about the performance. And then, you know, if you kind of like look through the year, there's there's a lot of moving parts this year. But if you kind of like kind of exclude the shipping delay topic, you exclude the the tariff net of our mitigation actions, our gross margin is is probably up in the, you know, big, you know, 30 basis points kind of a range, which, you know, given the top line not having the volume that maybe we expected at the beginning of the year, we we feel actually pretty good about that.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

You know, in terms of s g and a, of course, there's always gonna be you know, we we are investing in the business. You know, we, you know, this was an important topic for us to as we entered the year in terms of, continuing to to drive growth in the business. We have a lot of great programs, a lot of great ideas, and, you know, we're gonna continue to do that. But, you know, when you look at one quarter versus another, there's you know, there can always be a little bit of timing, you know, and so I wouldn't, you know, try to overread from one quarter to another quarter, You know? And and, of course, we're gonna, you know, we're gonna look at non sales activities for the rest of the year and and try to be a little bit more cautious, you know, until we get a little bit more clarity on on the top line.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But I think if you just kind of cut through everything and you look at our operating margin for the full year and you kind of exclude the shipping delay topic from last year, which is, like a headwind of about 60 basis points. And if you so on a reported basis, maybe we're gonna be down by about, like, a 30 bps. But if you exclude the the shipping delay topic, which is about a 60 basis point headwind, and if you exclude the the tariff costs and the net and the mitigation activities, our operating margin is probably up slightly for the full year.

Avery Kriss
Equity Research Associate at Wolfe Research LLC

Thank you. And then just one on Industrial. So Core Industrial was down 6%, while PI was up 8%. Are you seeing a fundamental difference in customer trends between the two businesses? And what's really driving the strength in PI?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Well, I mean, PI is 70% or so of that business is sold in Food Manufacturing, where our industrial business has a broader mix. Our our industrial core core industrial business also has a broader geographic mix, with a large China element, just proportional to not only product inspection but to other parts of the world. On the product inspection side, I mean, food manufacturers are still under pressure, but we're we're very pleased with our team's performance. We've come out with some new products in the in the last few years that have addressed needs in the mid market. They tend they're they're very well received in the marketplace, and we're just competing really well, you know.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And and so so the the mark I think the market is still a challenging market, but we're we're we're having some good success here.

Operator

Your next question comes from the line of Rachel Van Stout of JPMorgan. Please go ahead.

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

Perfect. Good morning and thanks so much for taking the questions. First off, I just wanted to dig into Vijay's question earlier on the second quarter guide and the implied back half range. You highlighted some of the customer caution primarily impacting the second quarter. Can you just walk us through why do you think most of this customer caution in light of the macro environment is mainly going to impact the second quarter?

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

And, you know, which segments are you expecting to see the most improvement as we get into the back half of the year on that customer caution as well?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. So so if you kind of look at the second half, just to keep in mind, Rachel, the second half will benefit from from pricing, you know, relative to to, like, q one. So I think if we if we kinda just, like, look at volume in the second half versus volume in the first half, and when I say the first half, I mean excluding the shipping delay in q one, they're probably pretty similar. And so, you know, our view is that at the beginning of the year, our guidance assume that things were gonna improve in the second half of the year. Right now, we're we're kinda taking that off the table for the moment, and we're just saying that we think things will probably be more consistent for the second half of the year on a volume basis.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But we do have some benefit a little bit on pricing in the second half relative to the first half.

Rachel Vatnsdal
Rachel Vatnsdal
Analyst at JPMorgan Chase

Great. And then just in terms of the tariff off offsets, you highlighted supply chain optimization, price increases and surcharges as well. Can you bucket how much of the $150,000,000 is offset by each of those drivers? And then follow-up to one of the earlier questions just in terms of the gross margin impact, Can you just walk us through the timing of implementing those mitigation efforts? So really how should we think about the cadence of gross margins ramping from the second quarter through fourth quarter?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yes. Hey, we're it's a little bit early for us to give Q3 and Q4 guidance. We did our best to give provide Q2 and the full year, but of course, we do have our internal thoughts on that. But let's see how let's get through Q2 first and we'll give you an update on q three. In terms of the pieces, of course, I understand, know, where your question's coming from, but it it's pretty dynamic.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

You know? I mean, the probably the one number I I'll provide is that our our pricing assumption for the year was was 2%. We expect it to be more 3% or so now for the full year. So that kind of gives you maybe some context for, you know, what we're doing. Of course, is something we can do quicker than on the supply chain side.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

That pricing will have an element, like I mentioned before, price increases and surcharges. So the so it might go up or down on the surcharge side. So so that's a little bit, you know, something that could be a little bit, fluid as we kind of go through the year. As we kind of get to the end of the year, we we you know, or maybe even better said, as we go into 2026, you know, the you know, we're gonna see a lot of the supply chain optimization kicking in a lot kind of going into next year and, you know, precise timing, you know, things will happen throughout the year. But but but the reality is is that we're accelerating a lot of things, and it's probably best just to think of them as, being in place by the end of this year as we kind of go in into next year.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And and, yeah, if we go a little bit faster, maybe there's a little bit upside, but it's gonna take some time to do to do some of these things. And and the other thing is is like, we've already done a lot on the supply chain optimization side in terms of, already mitigating the gross tariff headwind, which we actually feel quite good about with our supply chain processes.

Operator

Your next question comes from the line of Michael Roycegen of Bank of America. Please go ahead.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

Hey, thanks for taking the question guys. For my first one, you touched on a lot of these things earlier. You talked about industrial, You talked about China. I'm just kind of hoping to get it in one place and maybe bring all those topics together. In terms of the fiscal year 2025 guide, the reduction of 1.5% local currency from 3% to 1% to 2% now.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

Any way you could just sort of bridge that for us? How much of that 150 bps reduction is China? How much is lab, industrial? Just whatever way you think makes the most sense just so we can see sort of what what's changed, obviously, and and where you're signing those cuts?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. So, you know, I think, you know, you could probably do do the math with me a little bit here. But, you know, before we were saying, you know, China was gonna be up low single digit for the full year, and now we're saying it's down slightly. So that that might be about a point in itself. You know, and then and then in terms of other changes, you know, we're you know, we're we're we're taken down, you know, both The Americas and Europe were at mid single digit before and and, you know, on a reported basis.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And that was, I'm sorry, excluding, the the shipping delay topic. And so now Americas is down more like low single digit excluding the shipping delay. So it would be, actually both on a reported and excluding shipping delay. Then the Europe is maybe just slightly lower than expected. And then in terms of like the divisional, you can kind of see probably the one thing that kind of jumps out is, you know, before on an adjusted for the shipping delay basis, you know, we were saying lab might be mid to high.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Now we're saying it's like more like mid. And then we were saying, you know, industrial would be up low single digit on an excluding the shipping delay and now we would say it would be more like flattish.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

Okay. That's a great summary of all that.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

And then I guess, I'll keep it to one follow-up. You haven't directly addressed NIH, U. S. Government. Know it's a relatively small part of your exposure, but still there's some there, especially if you think about sort of the lab, pet pets, some of those more some balances.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

Just what's been going on in that end market? Have you seen any meaningful change from customer behavior? Someone asked about stocking earlier, sounds like that hasn't happened, but just sort of your thoughts on U. S. A and G, U.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

S. NIH? Thanks.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. So I mean, of course, our direct exposure to NIH is closer to zero than it is to one. But if you look at our broader academia exposure in The US, and you look just look at our US academia exposure, it's about 2% of our global sales. And then if we add in government, it probably gets about 3%. So it's, and I'm talking specifically The US A and G as a percentage of our total sales.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

So smaller part of our business, but certainly a part of the business that is, you know, we are seeing under pressure and and and, you know, doesn't have a big impact on our numbers, but certainly, know, it's adding to a little bit of the headwind that we see in The Americas here, especially in the short term.

Michael Ryskin
Michael Ryskin
Managing Director at Bank of America Merrill Lynch

Okay. Thanks. I'll leave it there.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yep.

Operator

Next question comes from the line of Tycho Peterson with Jefferies. Maybe

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

just to kind of round it out on lab. I'm just I want to probe into pharma a little bit. You touched on bioprocess earlier to Jack's question. But pharma specifically, can you maybe talk about what you're hearing from your customers there? Any concerns about them leaning on you guys on prices?

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

They have to respond to tariffs. How do you think about replacement cycle because you've talked about that as an opportunity as well?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yes. Good. Thanks. I'll take Tycho. We are actually not hearing from our pharma customers yet any big impact in terms of their pricing concerns.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

We have very healthy engagement with pharma pharma, small molecule and large molecule customers right now. I think they're excited about the the lab portfolio we have including the automation features. Not a not I would say, no not a negative impact yet. I mean, we'll we'll see what if there's anything else coming up. But right now, what I'm hearing from the Salesforce, very strong positive engagement with pharma customers.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Okay. Maybe another angle on on China manufacturing. You know, some of your large multinational competitors, including your biggest one in balances and skills, you know, doesn't do a lot in China. And and so is there an opportunity to gain share here for you guys given your manufacturing, you know, footprint within the country?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Yeah. Yeah. Maybe. Look look at our team is very close to the customers there. But, also, I want to remind you of of a total exposure to customers there in China is about 60% is actually local companies and only 15% on multinationals.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

And we have 25% of government and state owned companies. So, yes, we are talking to customers there. If there is more happening with with companies in that space, we will definitely use some of worldwide footprint and the the references we have from from other countries.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

But yeah. But, Tycho, if I understand your question, I think you mean, like, our competitiveness in China, you know, versus other competitors that don't

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

of your other multinational competitors that, you know, don't manufacture in in China where, you know so you have a competitive advantage in China.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Exactly. Yeah. Exactly. So I I I agree.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

I think we we we do have a competitive advantage in China versus a lot a lot of our competition. And, you know, as you know, we've been there for a long time since the eighties. We we not only, manufacture mostly in for China, but we actually develop a lot of products in China for China. So we really have a good sense and the strength of what the market expectations are at the right price points. And because of that, we've been very much perceived as a Chinese company over the years.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And and if we're not making it in China, we we tend to import from from Europe, like specifically Switzerland. Yeah, we we feel good about our our posture there in China. And and frankly, we feel like we're competing well globally in general against competition.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Okay. Are you seeing any stimulus there?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Not really.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

Not not

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

a big change. I mean, there's talk about stimulus. And in the last stimulus program, our sales team was quite engaged with customers helping them bundling products together to to comply with benefit guidelines. But not not right now any new stimulus that we that we would be aware of.

Tycho Peterson
Tycho Peterson
Managing Director at Jefferies Financial Group

Okay. Thank you.

Operator

Your next question comes from the line of Catherine Schulte, Baird. Please go ahead.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Hey, guys. Thanks for the questions. Maybe first just on tariffs. For the $100,000,000 or maybe a little more of imports into The U. S.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

That aren't coming from China and Mexico, how much of that is coming from Switzerland? I'm just trying to think about what the incremental growth impact could be if the country specific tariffs go into effect in July as proposed just given your Swiss exposure and how much of that you think could be offset if necessary?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

Yeah. Hey, Catherine. So if you look at our U. Asset expect that to be a year We've also given some color on Mexico given such a significant moving piece and if it relates to the China situation. In terms of the rest of the world, we prefer not to go into every single country, but we would say that we are importing about a hundred I mean, sorry, two fifty million into The US from from Europe and the rest of the world, and a significant portion of that is coming out of Switzerland.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Got it. And then maybe just on capital deployment, any appetite to do more on the buyback side just given where the stock is today?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

No. Hey. We, you know, we're very consistent here. Right? We, you know, we we don't try to time the market and, you know, we we try to stick to exactly what we say at the beginning of the year.

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

So our assumptions are the same for the year.

Catherine Schulte
Senior Research Analyst at Robert W. Baird & Co

Great. Thank you.

Operator

Your next question comes from the line of Josh Waldman of Cleveland Research. Please go ahead.

Joshua Waldman
Senior Equity Research Analyst at Cleveland Research Company

Good morning, guys. Thanks for squeezing me in. First, Patrick, a follow-up on core industrial. I think you mentioned softness in The U. S.

Joshua Waldman
Senior Equity Research Analyst at Cleveland Research Company

In the prepared remarks. Is this primarily where you are lowering your outlook in core? Or are there other areas that are tracking below?

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

No. I'll take that, Josh. Look, it's more in China that we did lower the order outlook and core industrial. In The U. S, what I referred to in Q2 was some delays of larger products.

Patrick Kaltenbach
Patrick Kaltenbach
President & CEO at Mettler-Toledo International

But these really larger projects, industrial automation projects, and they not always really close within the time we noted the field initially thinks that we'll close. So we saw we forecast we recently saw some forecast delay in Q2. But overall, the biggest takedown in industrial in the growth rate compared to what we said in the last earnings call is that way in China.

Joshua Waldman
Senior Equity Research Analyst at Cleveland Research Company

Got it. Okay. Patrick, can you remind us what portion of the business is sales to bioproduction, OEMs, maybe how business is tracking there? And then if you're seeing any signs of onshoring in that business?

Shawn Vadala
Shawn Vadala
Chief Financial Officer at Mettler-Toledo International

And you're talking about core industrial. So we don't break that out, Josh. But we you know, what we've said in the past is that about 60% of core industrial is a combination of pharma, biopharma, food manufacturing and chemical. And for us, chemical, means more specialty chem.

Joshua Waldman
Senior Equity Research Analyst at Cleveland Research Company

Okay.

Joshua Waldman
Senior Equity Research Analyst at Cleveland Research Company

Thank you.

Operator

There

Operator

are no further questions at this time. And with that, I will now turn the call back over to Adam Ohman for closing remarks. Please go ahead.

Adam Uhlman
Adam Uhlman
Investor Relations at Mettler-Toledo International

Okay, great. Thanks. Hey, everybody. If you have any questions, free to reach out to me, and I hope everybody has a great weekend, and take care. Bye.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

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Earnings Conference Call
Mettler-Toledo International Q1 2025
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