Mettler-Toledo International Q2 2025 Earnings Report

Mettler-Toledo International EPS Results

• Actual EPS: $10.09
• Consensus EPS: $9.58
• Beat/Miss: Beat by +$0.51
• One Year Ago EPS: $9.65

Mettler-Toledo International Revenue Results

• Actual Revenue: $983.22 million
• Expected Revenue: $957.41 million
• Beat/Miss: Beat by +$25.81 million
• YoY Revenue Growth: +3.90%

Mettler-Toledo International Announcement Details

• Quarter: Q2 2025
• Date: 7/31/2025
• Time: After Market Closes
• Conference Call Date: Friday, August 1, 2025
• Conference Call Time: 8:30AM ET

Mettler-Toledo International (NYSE:MTD) Inc. manufactures and supplies precision instruments and services in the Americas, Europe, Asia, and internationally. It operates through five segments: U.S. Operations, Swiss Operations, Western European Operations, Chinese Operations, and Other. The company's laboratory instruments include laboratory balances, liquid pipetting solutions, automated laboratory reactors, real-time analytics, titrators, pH meters, process analytics sensors and analyzer technologies, physical value analyzers, density and refractometry, thermal analysis systems, and other analytical instruments; and LabX, a laboratory software platform to manage and analyze data generated from its instruments. Its industrial instruments comprise industrial weighing instruments and related terminals, automatic dimensional measurement and data capture solutions, vehicle scale systems, industrial software, metal detection equipment, x-ray systems, check weighing equipment, camera-based imaging equipment, track-and-trace solutions, and product inspection systems. The company's retail weighing solutions consist of weighing and software solutions, AI-driven image recognition solution, and automated packaging and labelling solutions for the meat backroom. It serves the life science industry, independent research organizations, and testing labs; food and beverage manufacturers; food retailers; chemical, specialty chemical, and cosmetics companies; food retailers; transportation and logistics, metals, and electronics industries; and the academic community through its direct sales force and indirect distribution channels. Mettler-Toledo International Inc. was incorporated in 1991 and is based in Columbus, Ohio.

Mettler-Toledo International Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Sales & EPS Growth: Q2 sales rose 2% in local currency (4% reported) and adjusted EPS grew 5% to $10.90, driven by price realization and productivity despite headwinds.
• Negative Sentiment: Swiss Tariff Impact: New 39% U.S. tariffs on Swiss imports will reduce 2025 EPS by approximately $0.40 and pressure margins, prompting further mitigation actions.
• Neutral Sentiment: 2025 Guidance: The company forecasts 3–4% local currency sales growth, adjusted EPS of $10.55–10.75 and a ~130 bp margin decline, assuming current tariffs and FX rates.
• Positive Sentiment: Product Inspection & Industrial Strength: Product inspection sales jumped 8% with market share gains on new mid-range solutions, while core industrial grew 2% on strong automation demand.
• Negative Sentiment: China Softness: Local currency sales in China fell 2% amid ongoing customer caution and no assumed stimulus, with flat performance expected in the second half.

Presentation

[Operator]

Good morning, and thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Mettler Toledo Second Quarter twenty twenty five Conference 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 Uhlman, Head of Investor Relations. Please go ahead.

[Adam Uhlman, Investor Relations at Mettler-Toledo International]

Hey, thanks, Carly, and good morning, everyone. Appreciate you joining us this morning. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer and Sean Zadala, our Chief Financial Officer. Let me cover some administrative matters. This call is being webcast and is available for replay on our website at mt.com.

[Adam Uhlman, Investor Relations at Mettler-Toledo International]

A copy of the press release and the presentation that we will refer to on today's call is also available on our website. This call will include forward looking statements within the meaning of The U. S. Securities Act of 1933 and The U. S.

[Adam Uhlman, Investor Relations at Mettler-Toledo International]

Securities Exchange Act of 1934. 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, 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 statements except as required by law. On today's call, we may use non GAAP financial measures.

[Adam Uhlman, Investor Relations at Mettler-Toledo International]

A reconciliation of these non GAAP financial 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, President & CEO at Mettler-Toledo International]

Thanks, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our second quarter financial results, the details of which are outlined for you on Page three of our presentation. We are pleased with our second quarter and experienced growth throughout most of our businesses despite challenging market conditions. Our team performed extremely well and we continue to benefit from our innovative product portfolio and strategic programs.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

I am proud of our team's agility as we continue to navigate uncertain market conditions and our ability to implement mitigation actions to counter the impact of tariffs. We delivered solid adjusted EPS growth in the quarter and continue to compete very effectively in this environment. However, global trade disputes and tariffs are still highly dynamic. And as you may have seen last night, after our press release, the U. S.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Administration announced a significant increase in U. S. Tariffs on imports from Switzerland. If the tariffs stay at 39% on Switzerland, this would negatively impact yesterday's EPS guidance for this year by approximately $0.40 We will continue to implement mitigating actions to fully offset tariffs next year. Looking further out, while we anticipate that many customers will remain cautious with their investments in the near term due to the global trade disputes and various governmental policy uncertainties, we are also very well positioned to benefit from increased investments in the future.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

We are confident that our unique global go to market approach and innovative portfolio will enable us to seize these opportunities growth opportunities. Let me now turn the call over to Sean to cover the financial results and our guidance, and then I will come back with some additional commentary on the business and our outlook. Sean?

[Shawn Vadala, CFO at Mettler-Toledo International]

Thanks, Patrick, and good morning, everyone. Sales in the quarter were $983,000,000 which represented an increase in local currency of 2%. On a U. S. Dollar reported basis, sales increased 4%.

[Shawn Vadala, CFO at Mettler-Toledo International]

On slide number four, we show sales growth by region. Local currency sales increased 3% in The Americas, were flat in Europe and increased 3% in Asia Rest of the World. Local currency sales in China declined 2% during the quarter. Slide number five shows local currency sales growth by region on a year to date basis. On slide number six, we summarize local currency sales growth by product area.

[Shawn Vadala, CFO at Mettler-Toledo International]

For the quarter, laboratory sales increased 1% and industrial increased 4% with core industrial up 2% and product inspection up 8%. Food retail was flat in the quarter. Slide number seven summarizes our local currency sales growth by product area on a year to date basis. Let me now move to the rest of the P and L, which is summarized on slide number eight. Gross margin was 59% in the quarter, a decrease of 70 basis points on positive price realization and benefits from our sterndrive program were offset by incremental tariff costs and lower volume.

[Shawn Vadala, CFO at Mettler-Toledo International]

R and D amounted to $49,300,000 in the quarter, which is a 3% increase in local currency over the prior year. SG and A amounted to $247,300,000 a 2% increase in local currency over the prior year. Adjusted operating profit amounted to $283,300,000 in the quarter and was flat versus the prior year. Adjusted operating margin was 28.8%, a decrease of 120 basis points versus the prior year. We estimate the gross impact of tariffs reduced our operating margin by approximately 130 basis points.

[Shawn Vadala, CFO at Mettler-Toledo International]

A couple of final comments on the P and L. Amortization amounted to $17,600,000 in the quarter, interest expense was $16,800,000 and other income amounted to $3,300,000 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 $20,700,000 which is approximately a 3% decline from the prior year. Adjusted EPS for the quarter was $10.9 a five percent increase over the prior year.

[Shawn Vadala, CFO at Mettler-Toledo International]

Incremental tariff costs were a gross headwind of 5% and a net headwind of about 1.5% in the quarter. On a reported basis in the quarter, EPS was $9.76 as compared to $10.37 in the prior year, which included a discrete tax benefit of $1.07 Reported EPS in the quarter included $0.24 of purchased intangible amortization, $0.01 4 of restructuring costs and a $05 tax benefit related to the timing of stock option exercises. Slide number nine summarizes our year to date P and L. Local currency sales were flat for the six month period. Adjusted operating profit declined 6% and our operating margin contracted 150 basis points.

[Shawn Vadala, CFO at Mettler-Toledo International]

Adjusted EPS declined 1%. Excluding the impact of 2023 shipping delays that benefited 2024 results, we estimate local currency sales grew 3% on a year to date basis, operating margin declined 30 basis points and adjusted EPS grew 7%. That covers the P and L and let me now comment on adjusted free cash flow, which amounted to $4.00 $9,000,000 for the first six months, a 3% decrease on a per share basis due to lower earnings and higher bonus payments related to last year's performance. DSO was thirty five days, while ITO was 4.2 times. Let me now turn to our guidance for the third quarter and for the full year.

[Shawn Vadala, CFO at Mettler-Toledo International]

As Patrick mentioned earlier, the tariff environment remains dynamic and may continue to change. As you review our guidance, please keep in mind the following factors. First, yesterday's guidance assumed U. S. Import tariffs as well as the impact of retaliatory tariffs from other countries will remain in effect at recently announced levels prior to last night's U.

[Shawn Vadala, CFO at Mettler-Toledo International]

S. Presidential executive order and assumed a 15% US tariff rate on Swiss imports. As of today, including the increase in Switzerland tariffs to 39 mentioned in last night's U. Presidential executive order, we estimate our incremental global tariff costs at approximately $95,000,000 on an annualized basis, down from our May 2025 estimate of $115,000,000 due to lower rates for China U. S.

[Shawn Vadala, CFO at Mettler-Toledo International]

Tariffs, offset in part by the increase in Swiss tariff rates. We continue to make excellent progress with our mitigation actions and expect to fully offset these costs next year. Geopolitical tensions are elevated and include the potential for new tariffs or retaliatory tariffs that we have not factored into our guidance. Second, while our second quarter results were better than expected, market conditions remain challenging with uncertainty related to trade disputes and governmental policies. We are not assuming market conditions improve during the second half of the year, although we will benefit from higher pricing compared to the first half of the year.

[Shawn Vadala, CFO at Mettler-Toledo International]

Third, we assume foreign currency at current rates, which is a slight headwind to adjusted EPS in 2025, but is about a 1% benefit to reported sales growth in the third quarter and a 1% benefit for the year. 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 growth 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 2025, we expect local currency sales to grow approximately three percent to 4%.

[Shawn Vadala, CFO at Mettler-Toledo International]

Operating margin is expected to decrease approximately 130 basis points at the midpoint of our range. We expect adjusted EPS to be in the range of $10.55 to $10.75 a growth rate of 3% to 5%. Included within the EPS guidance is a gross headwind of approximately 5% from higher tariff costs that we expect to offset with our mitigation actions. 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 be down modestly excluding the net impacts of tariffs and prior year shipping delays.

[Shawn Vadala, CFO at Mettler-Toledo International]

As mentioned earlier, the tariffs on U. S. Imports from Switzerland at 39% were announced shortly after we provided yesterday's 2025 adjusted EPS guidance of $42.1 to $42.6 If the Swiss rate remains at 39%, this will negatively impact our full year 2025 adjusted EPS by approximately zero four zero dollars per share and reduce our EPS range to $41.7 to $42.2 compared to our May 2025 guidance of $41.25 to $42 which reflects EPS growth of 1% to three percent or 5% to 7% excluding the shipping delays. The EPS guidance after adjusting for the higher Swiss tariff rates includes 5% from incremental tariff costs versus the prior year that we expect to fully offset with mitigating actions for 2026. We will post an updated slide to our website after the call reflecting this information.

[Shawn Vadala, CFO at Mettler-Toledo International]

Lastly, I would 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 $73,000,000 Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25,000,000 on a pretax basis or $0.95 per share. Interest expense is forecast at $68,000,000 for the year. Other income is estimated at approximately $11,000,000 We expect our tax rate before discrete items will remain at 19% in 2025. 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, President & CEO at Mettler-Toledo International]

Thanks, Sean. Let me start with some comments on our operating businesses, starting with Flab, which grew slightly in the quarter. We saw good growth from pharma and biopharma customers, which was offset in part by softer demand from academia, biotech and chemical sectors. Our bioprocessing related sales remained strong and the outlook for the year is healthy for this piece of our business. We have unique solutions offering for bioproduction and we can help customers across their entire workflow with our laboratory, process analytics and industrial products.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Our process analytics business has also introduced many new innovations like digital analytical sensors that have a strong and consistent digital signal that resists interference and can store critical data for audit proof record keeping. We've also expanded our portfolio of single use sensors that covers a wide range of measurement parameters. Turning to our industrial business, we had growth in our core industrial business in the quarter despite challenging market conditions. While most end markets have generally remained soft, we have been active in capitalizing on our customers' demand for our automation and productivity solutions. Our portfolio is well positioned to benefit from onshoring investments over the coming years and our team is focused on identifying potential new project opportunities as they emerge.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Turning to product inspection, we again had stronger than expected performance this quarter amid challenging market conditions in the food manufacturing industry. Our recent innovations are providing customers a strong incentive to upgrade aging equipment given the significant reduction in total cost of ownership our new solutions provide. We expect to deliver solid growth for the remainder of the year as our market share gains offset soft industry demand. Lastly, Food Retail sales were flat for the quarter. Now let me make some additional comments by geography, starting in The Americas, where growth was stronger than expected due to strength in our core Industrial and Product Inspection business.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

We remain pleased that our refreshed portfolio of Industrial Solutions has supported solid market share gains during soft economic conditions. Market conditions for lab remain mixed as academia and biotech sectors have been soft, offset in part by strength in bioprocessing. Turning to Europe, sales were flat for the quarter against solid growth in the year ago period, especially for Lab, and we also had modest growth in Industrial. Finally, our Asia Rest of the World results were better than expected in the second quarter. Our teams executed very well and delivered strong growth in Southeast Asia.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

In China, underlying market conditions remained soft and we do not expect much improvement in the second half of the year. We are pursuing growth opportunities in hot segments like e mobility and renewable energy and GLP-1s and also looking to help customers meet more stringent quality control requirements in the 2025 Chinese pharmacopeia starting in October. We're also monitoring any potential stimulus in China this year and have not assumed anything in our forecast. Finally, I'd like to provide an update on our service business, which grew 4% in the quarter and 5% on a year to date basis. Our second quarter results were impacted a bit by timing issues and we remain optimistic for good growth in the second half of the year.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

We are making good progress with our service growth initiative. In summary, I'm extremely satisfied with our team's performance and the strong results we have achieved despite challenging and uncertain market conditions. Our proactive tariff mitigation efforts will allow us to meaningfully offset incremental cost this year, while also increasing the resiliency in our global supply chain. We will continue to leverage and evolve our global manufacturing footprint to increase our in reach and production capabilities that will ensure continued resilience and agility. I'm also very pleased with how Spinnaker is enabling us to proactively support our customers as they adapt their operations.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

The demand for more resilient supply chains has intensified since the pandemic, representing significant growth opportunities for us across nearly all regions. Onshoring and the development of regional supply chains in the coming years will serve as critical growth drivers, especially as many companies have announced significant investment plans in The United States. Strong and diverse portfolio enables us to support customers across the entire value chain and we are uniquely positioned to benefit from the many new instrument plans that have been announced by the biopharma and other industries in recent months. As companies establish new production facilities, we are uniquely positioned to benefit as life sciences overall represents about 40% of our revenue and we estimate around two thirds of that supports customers' production and QAQC operations. In addition, approximately half of our global sales support our customers' production processes with solutions in process analytics, core industrial applications and product inspection, which will also benefit from onshoring opportunities and investments in other industries.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Our market organizations are well equipped to identify and capitalize on these opportunities and powered by an expanded toolkit of our recent wave of Spinnaker. I recently spent several days with global leaders from around the world to discuss these opportunities and how we will leverage these new initiatives to reallocate resources to ensure we fully capitalize on our customers' resiliency investments. Another key growth opportunity we are actively pursuing is the increasing need to replace aging equipment for many years of deferred investments. During the latter half of 2024 and early into this year, we start to observe a return to normal replacement cycles for lab equipment among many customers. However, trade and policy uncertainties appear to have again delayed many replacements.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

We believe there is pent up replacement demand across our business following several years of soft market conditions. As the business environment stabilizes with reduced uncertainty, we anticipate an increase in replacement spending over the coming years. Overall, we are confident in our ability to execute and deliver solid earnings in 2025. We are also well positioned to uniquely benefit from the emerging growth opportunities associated with onshoring, hot segments and equipment replacement. We will also maintain a well balanced approach that emphasizes growth, innovation and operational excellence.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

The focused execution of these initiatives will drive above market growth and sustained margin expansion well into the future. Now this concludes our prepared remarks. Operator, I'd now like to open the line to questions.

[Operator]

Your first question comes from Dan Arias with Stifel.

[Daniel Arias, Managing Director at Stifel Financial]

Hey, good morning, guys. Thank you, Sean. So maybe just on the EPS guide, that sounds like it's now functionally $0.40 lower. Does that include some offset activities? Or is that you know, the gross impact and that's just sort of the way that you think things will end up by, by the end of the year?

[Daniel Arias, Managing Director at Stifel Financial]

I know you've got about twelve hours to think about it. So just so what do think you do from here?

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. No. Thanks, Dan, and and appreciate the comment. Right now, that's that's the gross headwind. Of course, there's not a lot of time left, in the year to to mitigate this year.

[Shawn Vadala, CFO at Mettler-Toledo International]

You can imagine we were already, going through our list of of additional mitigation actions already last night. So we we actually already have a a really good straw man, in terms of what we're gonna do. We're actually very confident about our ability to to mitigate it, you know, for for next year. From, a q three perspective, there's you know, we really don't see, you know, any impact at all or much at all, just given the the the nature of inventory levels that we have, like, for the next couple of months. But, know, as we kinda look to q four, there's just not a lot of time here to to mitigate it.

[Shawn Vadala, CFO at Mettler-Toledo International]

Now, of course, we'll we'll try to do some things where we we got a couple of ideas, but, but right now, we think it's probably more conservative just to just to assume, the the gross number.

[Daniel Arias, Managing Director at Stifel Financial]

Okay. And then maybe just on China. If you put the tariff stuff aside, to the extent that that's possible, does visibility into demand look like it's changing at all or at least stabilizing in some way such that a forecast one way or another has more confidence behind it? I mean, last quarter, we were talking about the environment getting more uncertain. I'm just curious whether things have changed since then.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. I mean I mean, I think, you know, kind of before before last night, you know, I mean, I think, you know, yesterday, things that creates maybe some more uncertainty in the markets in terms of how our customers maybe react with uncertainty. But but, you know, kinda coming into this release, we actually were feeling increasingly more positive. You know, we, you know, we delivered. We thought a a very good quarter in spite of a challenging market conditions.

[Shawn Vadala, CFO at Mettler-Toledo International]

We saw really good execution throughout the organization. We saw, you know, you know, modest to to grow, and with a couple of highlights in the portfolio during the second quarter. You know, as we started this year, we were probably a little bit more cautious on our industrial business. So for us, that was, you know, one of the highlights of the quarter, both on the core industrial side, but but project inspection actually had a very good quarter. And so as we kinda, like, look to the to the second half of the year, we certainly, you know, didn't anticipate that things were gonna get worse.

[Shawn Vadala, CFO at Mettler-Toledo International]

We were a little bit, I would say, cautious in terms of how we guided the second half of the year. If you kinda cut through our guidance, we kinda felt like the second half would be similar to the first half on a on a volume basis. But certainly, you know, we were encouraged by some stabilizing trends, particularly on the industrial side. If you look at the the laboratory side of the business, you know, there's still a little bit of a mixed picture. But, you know, maybe I I pause there, and I I can I can ask for some follow-up there?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yeah. Maybe, Dan, if I let me chime in a little bit here as well. You specifically on a question regarding China. So in China, we came in a temp better in in q two than we had guided. And we but we also say for the second half of the year, it will be off.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

It will be again flattish and not a significant change. We don't see a dramatic change in the underlying market conditions there. We compete very effectively with our portfolio and our team there. And as I said in my remarks as well, we have not factored it in any potential stimulus for the second half or beginning next year. We'll we'll see how that plays out.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Again, from from now, I would say, it's stable on overall volume, but there's no significant change.

[Daniel Arias, Managing Director at Stifel Financial]

Yep. Okay. Very good. Thank you, guys.

[Operator]

Your next question comes from Dan Leonard with UBS.

[Dan Leonard, MD & Research Analyst at UBS Group]

Thank you very much. Can you elaborate further on where the strength is coming from in product inspection and and comment whether your full year forecast for that business has changed at all?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yeah. Like, I will start on, you know, on the product portfolio a little bit. So we spent over the last three years a lot of emphasis on really expanding our strategies with tech models of the midrange market, and we spend a lot of energy on launching a lot of new innovative product both in the midrange and at the high end. So right now, we are definitely winning market share in that space as an outcome of all the new products that we rolled out. I'm really happy with how the strategy played out there.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Extremely well positioned in around the world with this portfolio. We have new solutions for x-ray detection, metal detection and checkweighing. And it really incentivize our customers to upgrade their existing solutions and to buy from us. And with the new vintage portfolio, we now also can tap into customers that wouldn't have looked at us before as a potential supplier because we have been perceived as more as the only high end supplier. So we've done that expanded portfolio.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Again, we get into more new accounts, definitely within market share. And we are for the second half of the year, we're also optimistic that it continues to grow. I think Sean, correct me if I'm wrong, but I think we're staying still mid single digit.

[Shawn Vadala, CFO at Mettler-Toledo International]

Actually, well, I think in the third quarter specifically, I think we could even do a little bit better than that. Our guidance comp contemplates mid to high single digit in the third quarter, but maybe just kind of stepping back for the year, you know, we're kind of looking at mid to high single digit for that business, which is which is up a little bit from what we thought before. I think the last time we spoke, we were guiding to mid single digits. So really, you know, really happy for the team. They've been, you know, working hard, executing really well.

[Shawn Vadala, CFO at Mettler-Toledo International]

These new products are really well received by the market. It's not like food manufacturing, which is a big end market. It's It's a challenging end market, but we're just doing very well here and pleased with the momentum.

[Dan Leonard, MD & Research Analyst at UBS Group]

Appreciate that color. And then as a follow-up, what was the process analytics growth rate in the quarter? And can you comment on the full year outlook for that business, given your positive commentary on bioprocessing more broadly? Thank you.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yes. We usually don't break down that number so specifically, but maybe I can give you some color. You know, on the bioprocessing side, we were actually did quite well in in process analytics. You know, we we still saw a good momentum. If you kinda peel it back a little bit, you know, in the area of, like, single use technologies, you know, we we actually did extremely well, I'd say, in the quarter.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know? But our process analytics also sells to other end markets like chemical, And so that kind of, like, you know, offsets some of that growth, you know, with if you look at it as a specific product line. But we, you know, we feel good about the trends we're seeing in our business and and bioprocessing, and we we feel like those trends should continue into the second half of the year.

[Dan Leonard, MD & Research Analyst at UBS Group]

Got it. Thanks, Sean.

[Operator]

Your next question comes from Patrick Donnelly with Citi.

[Patrick Donnelly, Managing Director at Citi]

Hey, guys. Thanks for taking the question. Maybe one of the 3Q guide, encouraging to see you guys guide above the street. Don't recall the last time that happened. It's been a little while.

[Patrick Donnelly, Managing Director at Citi]

Can you just talk about the confidence that you have there to do that? And again, it would be helpful, Sean, just to talk through what you're thinking about each segment for the quarter. And again, did things get better where you felt, again, a little more confident in putting that number above where the consensus was relative to that typical Metler conservatism that always, you know, seems to give you you know, end up a a little bit below.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. Sure. So, hey, maybe I'll start by just, walking through the guidance by business area, and then then I can make maybe a couple of, you know, comments after that. So so if we look at our lab business where our guidance is low single digit for the third quarter, if we look at our core industrial and our product inspection business, we we guide we're guiding both of those businesses mid to high single digit in the quarter and third quarter, and then retail would be down low single digit. And then if we look at geographically, we have The Americas up mid single digit.

[Shawn Vadala, CFO at Mettler-Toledo International]

We have Europe up low single digit, and then we have China flat. So when you step back from that, you know, I think the thing that probably stands out is that we're, you know, we're probably a little bit more optimistic in terms of our industrial businesses, sitting here today versus, you know, where we would have been and probably where you would have been, you know, three months ago. And I think it's like a combination of what we just talked about on product inspection. It's coming off a little bit better quarter in q two on the core industrial business. You know?

[Shawn Vadala, CFO at Mettler-Toledo International]

And when you kind of peel that one back, you know, we we also feel like we were seeing, know, really good trends in terms of automation and digitalization from our customers. If you kinda, like, really look at what's growing, that's an area that kinda stands out, is, you know, kind of a strength of our portfolio. I feel like we're very well positioned for that. Those opportunities, we've talked a lot about that in the past. We also you know, there's there's elements of this business that also have projects, you know, and so, so as we kinda look at some of that activity in the third quarter, what we can see in our pipeline also gives us some confidence here as well too.

[Patrick Donnelly, Managing Director at Citi]

Okay. That sounds good. And then maybe just on the pricing side, always a nice lever for you guys to pull. Obviously, with everything going on on the tariff side, it's probably even been more pertinent. Can you just talk about the conversations there? Again, it sounds like the Switzerland piece of the gross impact, to your point, Sean, probably a little late in the year to do too much on that.

[Patrick Donnelly, Managing Director at Citi]

But can you just talk about pricing as a potential lever? What the expectations are? What's built into guide here? And just the moving pieces as we think about pricing, margins, that area?

[Shawn Vadala, CFO at Mettler-Toledo International]

Yes. Sure. Sure. Yes. Hey.

[Shawn Vadala, CFO at Mettler-Toledo International]

So pricing always starts from my perspective, from our value proposition. Right? And, you know, we work real hard at continuously investing in innovation to make sure we can preserve and and enhance that value proposition. And, you know, when you go through times like this and you and and you're raising prices a little bit more, you know, you always test that value proposition. And, you know, what's really kinda great from my seat is that, you know, we see really good reactions in terms of the marketplace.

[Shawn Vadala, CFO at Mettler-Toledo International]

People understand it. And, you know, and and our sales force does a really great job of, frankly, articulating that that value proposition. If we kinda, like, look at the the the second quarter, you know, our pricing was, you know, was around 3%, which was which was in line with what we were expecting for the for the second quarter. You know, for the for the second half of the year, we'll probably be in the three and a half percent or so kind of a range. You know, it it was a little bit dynamic because, you know, some of the pricing would have included some surcharges three months ago, that we, you know, pulled back on with with some of the rate changes over the last three months.

[Shawn Vadala, CFO at Mettler-Toledo International]

But when we look at the full year, you know, last time we spoke, we probably would have been saying that we were gonna grow 3% or so for the for the full year in terms of well, grow price realization would be 3% or so for the full year. You know, sitting here today, we'll we'll still be in that 3% range, but maybe not the or so part. So it'll be a little bit lower. Kinda going into next year and as we think about, like, you know, the Swiss tariff rates, know, we'll we'll think about that. We'll we'll consider that.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, of course, we have very strong value propositions on on those products as well. But, you know, we'll try to do this in a balanced way, you know, for our customers as well too. And and, you know, frankly, we'll also see how the situation plays out. You know, I'm sure it's gonna be dynamic. I'm I'm sure we'll learn a lot more here over the next, over the next few months too.

[Patrick Donnelly, Managing Director at Citi]

Makes sense. Really helpful. Thanks, Sean.

[Operator]

Your next question comes from Vijay Kumar with Evercore ISI.

[Vijay Kumar, Senior MD at Evercore ISI]

Congrats on a nice execution here. Maybe, Sean, my first question for you on EPS assumptions as you look at back half heading into '26. I guess the Swiss update that analyzed to 1 point dollars 6 rate. And I guess the assumption is, should be able to offset that, rate for next year. I understand for Q4 it's too early, but for next year, should we think of that measures ability to fully offset that and related to that fiscal twenty six, I think some of your peers have made some comments on tax rates given R and D capitalization.

[Vijay Kumar, Senior MD at Evercore ISI]

How you think of a tax rate for next year?

[Shawn Vadala, CFO at Mettler-Toledo International]

Yes. Thanks, Vijay. Hey, so just I think you imply this with the question that the $1.0.6 would be approximately a full year number, but just to make sure everyone gets the right numbers that, you know, we we we estimate the impact on our results this year, the gross impact at 40¢. You know? And then as we kinda go into next year, you're right.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, we we do feel confident about our ability to to mitigate the, you know, the incremental portion for for 2026. Of course, it's still early to provide, you know, more guidance on 2026 at this point in time, but we'll, you know, we'll update you guys on the next call. But we we do, feel very good with our progress overall on our mitigation activities. And we, you know, like I said it earlier, we already have some actually really good ideas of how we would approach this one if it continues. You know?

[Shawn Vadala, CFO at Mettler-Toledo International]

In terms of the in terms of taxes, you know, I do we don't expect you know, of course, we're still analyzing this. We we don't expect much benefit at all to our tax rate for next year. So I think, you know, sitting here today, I would continue to assume the 19%. Of course, we'll we'll update you, you know, on the next call, you know, as we as we learn more and think about next year. But maybe the one benefit we we do see is on the cash tax side.

[Shawn Vadala, CFO at Mettler-Toledo International]

And so that's something that we're studying right now, and and so we should get some cash flow, benefits out of this.

[Vijay Kumar, Senior MD at Evercore ISI]

That's helpful, Sean. And, Patrick, maybe one for you. You did bring up about services, some timing issues. Are those coming back in the back half? Maybe just talk about what happened in 2Q and expectations on a go forward basis.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yes. Vijay, let me chime in here a little bit and explain. About Q2, again, most of it was really a time issue and some of the larger projects that we sometimes have in services. We are very confident about our second half growth that we will back to the growth we have seen before. We have a strong growth program in place for service organization.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

We actually started already last year putting more service engineers into the organization, strengthening the the marketing organization as well, getting deeper penetration in the installed base because we see really good growth opportunity connecting stronger with the installed base instruments. So, yes, for the second half, we are optimistic that we are getting back to growth. We have no indications that that is a major thing that we have seen in Q2. And for the full year, we're still year to date, we had 5% growth in services. That's also a very respectable number.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

I think our strategies work. Sometimes you have some timing on projects, spare parts and stuff like that, but we we don't see this as as a trend right now. We see really the second half optimistic.

[Vijay Kumar, Senior MD at Evercore ISI]

Understood. Thank you.

[Operator]

Your next question comes from Jack Meehan with Nephron Research.

[Jack Meehan, Partner & Equity Research Analyst - Life Science Tools & Diagnostics at Nephron Research LLC]

Hey. Good morning, everyone, and feel free, guys, providing guidance as the tariff rates change in real time. Appreciate the incremental color you shared on that. One of the big topics we've been focused on with earnings is, like, pull forward dynamics. I was curious, you know, as you looked at the results in the quarter, whether you saw that in any of your businesses, how you went about assessing that?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yeah. Thanks, Jack, for the question. Look. I mean, when we talk to all the sales leaders out there, we have no indications at the moment that there was any pull forward happening in q two. And the market uncertainty there was out there.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

The reason I think why we saw good growth in q two is entirely based on the fact that we have an outstanding product portfolio and complete extremely well in this dynamic and challenging market conditions. But nothing that I could point to to say I heard in any of the regions or any of the product categories that it would be, a stopping or pull forward.

[Jack Meehan, Partner & Equity Research Analyst - Life Science Tools & Diagnostics at Nephron Research LLC]

Okay. And, in the service business, you talked about some timing dynamics in the quarter. Do you mind just elaborating on what that was? And are those coming back in the second half? Thank you.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yes. As said, in my comment before to Vijay, again, you sometimes have this transition of the quarters. It's mainly project related with some some of the larger service projects they had. Some of it was spare parts. Maybe we had the strongest spare parts consumption in the quarter last year in the same quarter.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

But, again, we have no indications that this is an underlying trend for the second half year. Optimistic in terms of the service demand that we're seeing here, adoption of new services that that we have outlined and actually our our second half outlook remains stable.

[Jack Meehan, Partner & Equity Research Analyst - Life Science Tools & Diagnostics at Nephron Research LLC]

Good growth. Thank you.

[Operator]

Your next question comes from Rachelle Battensall with JPMorgan.

[Casey Woodring, VP - Equity Research at J.P. Morgan]

Hi, guys. This is Casey on for Rachelle. Thanks for taking our questions. Maybe the first one is just can you walk us through performance in Europe in the quarter relative to expectations? The flat growth there I think is a little bit below the low single digit growth you pointed us to in the guide.

[Casey Woodring, VP - Equity Research at J.P. Morgan]

So maybe just parse out drivers by segment and the outlook in that region for the back half of the year. I think you said you expect Europe to grow low singles in 3Q. Thanks.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. Hey, Casey. So hey, I'll take that one. So Europe was flat in the quarter. I think it was down a little bit from what we were previously guiding.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, the one area was, you know, I'd say the lab business was more was more flattish there. I think, know, with the industrial business up slightly, you know, if you look at the lab business, one of the things we saw in the second quarter was a lot of uncertainty in the market. You know, even with, you know, some of the things that were being announced in The US for from a tariff perspective at the beginning of the quarter, You know, some of those dynamics certainly affect other parts of the world in terms of how people are thinking about the timing of projects and and things like that. So certainly, we were not immune to that, and we kinda did see that in our in our European results. As we think about, you know, Europe for the for the rest of the year, I think I might have mentioned this already.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, we we're looking at, a low single digit growth for the third quarter. And then, and then just to kind of maybe cap it off at the full year, you know, our guidance would be would be flattish, would be flattish in in Europe. But keep in mind that there's, you know, this shipping delay topic, you know. So if you exclude the shipping delay, I think the European numbers, would would actually be up low single digit on a on a full year basis. So

[Casey Woodring, VP - Equity Research at J.P. Morgan]

Okay. Got it. That's helpful. And then maybe just one. On the onshoring piece, you talked a lot about it today and some of the recent pharma manufacturing build out announcements.

[Casey Woodring, VP - Equity Research at J.P. Morgan]

You've talked previously about how Mettler is not necessarily involved in the initial build out of those facilities given your portfolio. So just curious on timing of when you would expect some of these CapEx announcements to eventually flow through into orders and revenue for you guys. Is it a 2026 upside driver or perhaps farther out? Thank you.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

I think it's, Casey, this is still early innings. I mean, there are a lot of big announcement we made have been made. I think our strong team relation is strong connection to the customers worldwide, the customer base we have worldwide, talking to to the customers and being in discussions about their reshoring or onshoring plans and making sure they understand the strength of our portfolio and how we can support them with these plans. But it's still very early. I mean, 2026, we hope to see it really starting, and then we'll expect some even more momentum in the following years. But it's very early.

[Operator]

Your next question comes from Luke Sergo with Barclays.

[Luke Sergott, Director - Healthcare Equity Research at Barclays Capital]

Great. Thanks for the question here. I just wanted to get some framework or some type of clarity on the replacement cycle that you guys talked about having pent up demand. Can you give us a sense of like how over age the active installed base is given all the uncertainty led to some push outs and where you are in that upgrade cycle? And kind of just trying to figure out how from what you've seen in the past, could this, like, result in some type of snapback?

[Luke Sergott, Director - Healthcare Equity Research at Barclays Capital]

Or is it just that once customers get clarity, they'll just start engaging in that, you know, the upgrade cycle and it's just essentially a pause and a push on. You should see, like, a more normalized recovery like you would in the past.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. Hey, Luke. This is Sean. Hey. Maybe I'll start and I'll let Patrick add some color if he wants.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, so when I when you step back, you know, I I like to remind people that, you know, if you think about pre COVID, you know, pre COVID, probably eighty to ninety percent of our business in the West, The United States, North America, and Europe was was replacement. You know? And so, and so we you know, when we when we look at that and we look at the last few years, you know, clearly, we've seen customers, you know, not, you know, actively, you know, replacing their their installed base. Now part of that certainly could have been some acceleration that happened in COVID. But, you know, every year that we get away from COVID, you know, to from our perspective, we we feel like that kind of plays into this this thesis.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, another thing is is, like, if you look at last year, we thought we felt like we were starting to see some initial signs of replacement cycle. Like, if you think about some of the analytical instrument numbers we're putting up in the second half of the year, we we felt like there was maybe the beginning. We didn't call it a trend at that point, but we were certainly noting it in our comments. But then with the uncertainty this year, we kinda felt like people were kind of pulling back and and hesitating again. Now kinda getting into the data, it's it's always hard to to you know, it it's hard to aggregate, you know, for such a thing.

[Shawn Vadala, CFO at Mettler-Toledo International]

Our teams typically work on a more disaggregated basis when they work with the installed base. But, you know, some of the kicking of the tires that we've been doing with the team certainly indicates, an aging of of the iBase. But, you know, the the timing of that, you know, in terms of, you know, when we see it, the magnitude, those things are are still difficult for us to tell. You know, a lot of the things that we do can be delayed, you know, for a little bit, you know, and and, which kind of plays into this topic. But, but people can't delay forever.

[Shawn Vadala, CFO at Mettler-Toledo International]

And so we do feel like it's something that will will come back. Our our feeling is that as there is more certainty in the markets, you know, that's gonna be the biggest driver, and then we'll start to see things kinda come back to normal. But whether it comes back all at once or gradually over time, I think that's still, frankly, to be defined and as well as the timing.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

I think that's an important point, Sean, there's look, you should look at this as, not the total stop of replacement that we have been seeing. It was a slowdown of the replacement cycle over the last several years. And once the trends certainly comes back, there will be acceleration again after replacement cycle. But it's not a snapback. It's not like you will see all of a sudden, you will see one big spike replacement.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

It will be then again customers get more confidence, and then we will see an acceleration of the placements. Right.

[Shawn Vadala, CFO at Mettler-Toledo International]

Right. But, of course, the other thing that gets us a little excited is that we have that dynamic, but we also have you know, if you go back to my beginning comment, like, 90% of of the West used to be replacement. But I think going forward, we're we're gonna have a lot more, you know, greenfield activity than we've had in the past too with a lot of these, you know, on shoring topics as well as, you know, just the global trend towards more automated solutions, more digital solutions. These things are gonna play well for our portfolio as well too.

[Luke Sergott, Director - Healthcare Equity Research at Barclays Capital]

Great. That's helpful. And then last year, I guess, Sean, talk a little bit about the 4Q margin step up from 3Q. Just help understand the underlying drivers there, especially in context with the tariffs and your mitigation aspects there, especially on the low to mid single implied growth.

[Shawn Vadala, CFO at Mettler-Toledo International]

So just to make sure I understand your question, Luke, you're talking Q4. What period?

[Luke Sergott, Director - Healthcare Equity Research at Barclays Capital]

Four q margin. For this year for this Yeah. For this year from from March.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. Yeah. Yeah. So, I mean, you know, so we usually don't give too much detail on q four, but, of course, you can kind of squeeze it out at this point of the year. But I mean if you look at like the overall level of gross margin, it's probably going to optically look similar to the third quarter.

[Shawn Vadala, CFO at Mettler-Toledo International]

But if you look at it, but you have two things going on. One is we have a lot more volume in the fourth quarter than we do the third quarter. But this year, we're also that would assume we have, a lot more tariffs, in the fourth quarter than we do the third quarter, assuming that the the Swiss tariff rates remain at, remain at 39. But on a year on year basis, the fourth quarter margin would be down pretty significantly. Mean, it could be down in the 170, 180 basis point kind of range versus the prior year.

[Luke Sergott, Director - Healthcare Equity Research at Barclays Capital]

Okay, great.

[Operator]

Your next question comes from Tycho Peterson with Jefferies.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Hey, thanks. Want to ask about biopharma. I know you said no pull forward to Jack's question and too early to kind of benefit from onshoring as you also noted. But you talked about kind of modest recovery last quarter. I'm just curious how you're thinking about R and D spending the next couple quarters. You've got tariffs, MFN noise, obviously, some, you know, negative headlines in cell and gene therapy. How do you feel about kind of baseline R and D spending for pharma, in the in the near term?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Yeah. Hey, Tycho. This is Patrick. Look, mean, as you probably know, most of our exposure to biopharma is more bioproduction with with a lot of the process analytics business, but also through ATCA solutions that we have for that. We're not really strongly exposed to to RD in the in that space.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

So we see actually the potential both of of biopharma with all the indicated changes with the reshowing, home showing, pushing in The United States, it will be actually very attractive for us because customers will build out manufacturing sites on in The United States for existing products. They will continue then in that environment also to have, you QAQC operations that we can equip with our with our with our lab solutions and industrial solutions. So that's that's the plus we are seeing right now despite a potential impact on research might slow down given the what we hear in the news. But, the build out of manufacturing sites in QAQC and everything that comes along with it will actually be a plus and and will will be a strong tailwind for us moving forward.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. And just to make sure to kinda help everyone understand what is our exposure here. I think we might have said it in the prepared remarks, but if you think about it, about 40% of our global business is sold into life sciences, you know, broadly, like traditional pharma, biopharma, etcetera. We estimate about two thirds of that is is, comprising manufacturing in QA QC labs, with the other third being more r and d and scale up. But even within that third, you know, we're probably a little bit more weighted towards the the late stage r and d.

[Shawn Vadala, CFO at Mettler-Toledo International]

You know, if you kinda, like, peel back the portfolio a little further on the the early stage, that's clearly where we do have seen some softness, like, in the pipetting business. But but I think we're relatively less exposed there. And I think it's always one of our strengths. Right? It's like we serve all the way through the value chain, and and we've always been pretty good at being able to pivot where, and and and towards the growth opportunities that they present themselves.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Okay. That that's that's really helpful. And then, you know, I guess, similarly, know US academic

[Shawn Vadala, CFO at Mettler-Toledo International]

Oops. Yeah. You just cut out, Tycho.

[Operator]

Give me one moment. Let me get his his line back live. Mister Peterson, your line is open.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Alright. Thank you. Follow-up, wanna ask on US academic and government. I know it's a low single digit percentage of revenues, but, you know, there are green shoots here. NIH grants are starting to flow.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

As we think about, you know, the lab business in the back half of the year, could that be a source of of upside, you know, any kind of budget catch up spend?

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. I mean, like you said, it's not a significant exposure for us. You know, if you look at our US academic and government business together, it's only about 2% of our global sales. So, you know, if it swings one way or the other, it's not gonna have a meaningful effect on our overall numbers. But, you know, any any positive numbers is is something that, you we'll always take, but it's not gonna move the needle very much for us.

[Shawn Vadala, CFO at Mettler-Toledo International]

And from an NIH perspective, you know, we're we're our our business direct business to the NIH is is closer to zero as a percentage of our business than it is one. So it's pretty insignificant.

[Tycho Peterson, MD - Global Equities at Jefferies Financial Group]

Understood. Thanks.

[Shawn Vadala, CFO at Mettler-Toledo International]

Thanks, Tycho.

[Operator]

Your next question comes from Michael Ryskin with Bank of America.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Great. Thanks for the question. Sean, I want to make sure I'm in the right place on the tariff dynamics, just given how things are changing. You talked in the past about, and you kind of reiterated earlier, mitigating the majority of things as you get into 2026. I just want to be clear, is that mitigation that you're taking mitigation actions you're taking proactively?

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Where I'm coming from is we're still getting tariff headlines every day as you're being fully aware. If there's there sort of like a lag time you need to be able to fully mitigate if there's more tariff headlines in two, three months? Could that spill over into 2026? Or is that sort of a no matter what next year, don't assume any tariff?

[Shawn Vadala, CFO at Mettler-Toledo International]

I don't know if I can issue you an official guarantee here, but I think we feel very good about the the things that we're doing. I mean, you can imagine we have a lot of different work streams going on. Some of them have been short term in nature. Of course, you know, I think when you think about things like pricing, that's a more shorter thing that we can implement quicker. But we have a lot of things on the supply chain.

[Shawn Vadala, CFO at Mettler-Toledo International]

Some of the stuff was already in motion kinda coming into this year. Earlier this year, we we we accelerated a lot of projects as well. Patrick and I actually were just at our Tijuana facility earlier this week just observing some of the the activity there. I mean, the team's just doing a wonderful job. It just shows the strength of, like, the global culture of, like, people working together.

[Shawn Vadala, CFO at Mettler-Toledo International]

But that's just one example. You know, there's there's just a lot of a lot of different things in terms of our global supply chain that we can optimize. And and like I said earlier, you know, we we, you know, we also had some some additional ideas with this latest announcement. You know but I I think, you know, when you step back from all that, I think one of our the the attributes of the company and the culture has always been agility. Right?

[Shawn Vadala, CFO at Mettler-Toledo International]

Like, we're we're we we recognize things are gonna change. We don't know which direction they're gonna change, but we always focus on what we can control, and we kinda lean into that agility gene when we need to. And and I just feel really great about the organization and that culture, and and I'm you know, and that's what gives me probably the most confidence kinda going forward. But but in terms of, like, what we know today, we we feel very good about our ability to to offset things for next year.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Okay. And then for my follow-up, I kinda have to go on the same lines. Given the high Switzerland, exposure for you, can you just sort of remind us, what steps specifically you're gonna be taking to mitigate that, like, where where the exposure hits?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

And yeah. I'll just leave it at that.

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. Hey. I I probably don't wanna get into too many details here, Dan. It's probably a little bit too early for us to talk specifically about it. I think we also need to talk to our organization a little bit, you know, first about, like, what we're gonna do.

[Shawn Vadala, CFO at Mettler-Toledo International]

But we but, you know, all these things are a combination. It's never gonna be one thing. Right? There's gonna be a combination of of many different types of things that we that we can kinda pull on. And and I think we'll, you know, we'll we'll kinda go through the process.

[Shawn Vadala, CFO at Mettler-Toledo International]

And, you know, if if this thing continues, we, you know, we can provide maybe a little bit more color on our on our next call.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

All right. Thanks.

[Operator]

Your next question comes from Josh Waldman with Cleveland Research.

[Joshua Waldman, Senior Equity Research Analyst at Cleveland Research Company]

Good morning. Thanks for taking my questions. One for Sean and then one for Patrick. Sean, first a quick follow-up on Mike's tariffs questions. What were the variables that drove the gross impact stepping down to the $60,000,000 or the, I guess, 95 with the Switzerland change last night?

[Joshua Waldman, Senior Equity Research Analyst at Cleveland Research Company]

And then on the offsets, where do you find you're leaning in most to drive offsets to date? Has it has it been more price or has it been more supply chain and cost reduction focused?

[Shawn Vadala, CFO at Mettler-Toledo International]

Yeah. So, you know, so in terms of the changes, I mean, certainly, we had a a big benefit from the Chinese rate coming down. You know? And so, you know, if you think about that, you know, our Chinese exports to The US approximately about 50%. So you can kind of do some rough math on what it meant to go from a 145% rate to a 30% rate.

[Shawn Vadala, CFO at Mettler-Toledo International]

Of course, that was, offset a little bit, you know, in the last, you know, twelve hours by by the Swiss rates kinda going going higher. I think the other rates, you know, there was some puts and takes, but frankly, it's just relative noise in in the grand scheme of everything. You know, in terms of the mitigation things, you know, the the short term stuff for this year, it was a kind of a combination of, you know, of course, we had some things going on in terms of the supply chain that we had already talked about. We, you know, we hadn't waited until the announcement on April 2 or yeah. Think it was April 2.

[Shawn Vadala, CFO at Mettler-Toledo International]

We, you know, we had already anticipated things, so we already had some good work streams going on on the supply chain side. We had worked on some things from a a cost side as well too. But, of course, we we also, you know, leaned into some pricing actions that we we talked about and, you know, to put that in perspective. I mean, we we started our year with guiding price realization in the 2% kind of a range. You know, now we're kinda saying we'll be in the the 3% kind of a range, so you can get a sense for for for magnitude there.

[Shawn Vadala, CFO at Mettler-Toledo International]

But, you know, this will continue to evolve, and the the mix of what we do is gonna change. You're gonna see increasing more on on some of the the topics, like, when we start thinking about, like, our supply chain optimization. We'll start to get some of those benefits more fully as we kinda go into next year.

[Joshua Waldman, Senior Equity Research Analyst at Cleveland Research Company]

Got it. Okay. And then, Patrick, on the demand side, does it seem like visibility going into the second half is any better or worse than the visibility you felt you had either coming into the year or into the second quarter? Have order patterns become any more predictable as you progressed into the year and into the I guess through the year and into July?

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Look. I mean, the the visibility we have is is really good. The decisions we have in place, I would not say there has been a dramatic change in terms of the visibility, in terms of anything that indicate slowdown or acceleration of the business momentum. We can we we are confident in our q three growth numbers based on what we see in our our funnels and our leads, and opportunities out there that gives us confidence for Q3 also for the second half. But you also have to appreciate that we have a pretty fast turnover before before our before our products. Usually, our deal cycles are very fast.

[Joshua Waldman, Senior Equity Research Analyst at Cleveland Research Company]

Sure. Thank you.

[Operator]

Your next question comes from Doug Schenkel with Wolfe Research.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

Hey, guys. Good morning, and thank you for taking, my questions. So, just two cleanups at this point. It it sounds like q two European softness was largely comparisons. I didn't hear anything that suggest that there was a fundamental change in demand patterns across all of your businesses.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

It also sounds like switching geographies that China is at least stable with current trends and and maybe things are starting to get a little bit better. Building off of those observations, if if Europe kinda returns to normal, and starts to get a little bit better, you know, and and by normal, I mean, what you've seen the last few quarters, if China starts to get a smidge better, would those be sources of upside to your implied fourth quarter revenue growth guidance? So that's the the first question. Second is just on core industrial strength. You talked in your prepared remarks about strong demand for automation.

[Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC]

I'm just wondering if you could tell us a little bit more about that. You know, is there anything specific worth calling out in terms of where you're seeing a pickup in demand, you know, either in applications or by geography? Thank you.

[Shawn Vadala, CFO at Mettler-Toledo International]

K. Hey. Thanks, Doug. Hey. Maybe I'll start, I'll let Patrick maybe handle the second part of that.

[Shawn Vadala, CFO at Mettler-Toledo International]

So so in Europe, you know, if you look at our guidance for q three in the second half of the year, we're we're kind of in low single digit. You know, I you know, hey. Maybe there's some upside there, but we also have a a more challenging fourth quarter comparison there, even excluding this shipping delay topic. So, you know, we'll we'll see how it plays out, but I think there's still some uncertainty in the market there. China, of course, is always a wild card.

[Shawn Vadala, CFO at Mettler-Toledo International]

Right? I think we've all been waiting for that moment when we start to see things kinda pick up. There certainly has been a bouncing along the bottom theme here. I know that the team is remains optimistic as we kinda look to the future. The the the question is, like, at what time do we do we start to see things pick up?

[Shawn Vadala, CFO at Mettler-Toledo International]

Think it will be, like, you know, kinda like the rest of the world, like, as as more certainty is in the marketplace. You know, we'll start to see things start to pick up there. But we feel we feel like we're well positioned there in terms of our business. We have a great China for China business, as you know. You know, we we also sell, mostly to Chinese private companies as well there too.

[Shawn Vadala, CFO at Mettler-Toledo International]

So we and then we also, like, I think support them very well in terms of their their needs, in terms of themes, in terms of, like, the the market segments that the government's investing in. But but but, you know, we'll see. We're we're like, you can tell from our guidance, we're still a bit cautious there for the rest of the year. We'll kind of see things how how things play out.

[Patrick Kaltenbach, President & CEO at Mettler-Toledo International]

Hey, Doug. On the industrial core industrial, what we really see, what I'm excited about is this this continued call for an improved call for automation, digitalization solution, especially the automation piece, where we see automation solution providers now calling a lot of portfolio on our innovations. And it's actually across many end end markets as we understand it. It says, you know, pharma automation build outs and automation opportunities with good momentum now in The United States, but also some some interesting good recovery in, for example, in China and then in in Asia Pacific as well. So that's that's really, for us, really encouraging and promising moving forward.

[Operator]

There are no further questions at this time. I'll now turn the call back over to Adam Uhlman for closing remarks.

[Adam Uhlman, Investor Relations at Mettler-Toledo International]

Hey, thanks Carly and thanks everybody for joining us today. If you have any follow-up questions, please feel free to reach out and I hope everybody has a great weekend and we'll talk to you soon.

[Operator]

This concludes today's conference. You may now disconnect.

Participants

Executives

• Adam Uhlman, Investor Relations
• Patrick Kaltenbach, President & CEO
• Shawn Vadala, CFO

Analysts

• Daniel Arias, Managing Director at Stifel Financial
• Dan Leonard, MD & Research Analyst at UBS Group
• Patrick Donnelly, Managing Director at Citi
• Vijay Kumar, Senior MD at Evercore ISI
• Jack Meehan, Partner & Equity Research Analyst - Life Science Tools & Diagnostics at Nephron Research LLC
• Casey Woodring, VP - Equity Research at J.P. Morgan
• Luke Sergott, Director - Healthcare Equity Research at Barclays Capital
• Tycho Peterson, MD - Global Equities at Jefferies Financial Group
• Michael Ryskin, Managing Director at Bank of America Merrill Lynch
• Joshua Waldman, Senior Equity Research Analyst at Cleveland Research Company
• Doug Schenkel, MD - Life Science Tools & Diagnostics at Wolfe Research LLC