Mettler-Toledo International, Inc.

Adam Ullman, Head of Investor Relations. You may begin.

Hey, thanks, JL, and good morning, everybody. Thanks for joining us this morning. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer, and Sean Vidala, 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. A copy of the press release and the presentation that we will refer to today is 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. 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, please see our annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation we're 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. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8 and is available on our website. Let me now turn the call over to Patrick.

Thanks, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our fourth quarter financial results, the details of which are outlined for you on page three of our presentation. We had a strong finish to the year and we capitalized on very good customer demand for laboratory products, especially in Europe. Strong sales growth and solid execution of our margin improvement initiatives contributed to excellent adjusted EPS and cash flow. Reflecting on our achievements in 2024, we delivered good results despite soft market conditions and continue to benefit from our strong culture of execution and continuous improvement. At the same time, we stay focused on our long-term strategy of delivering innovative solutions and extending our market leadership. Looking ahead, driving growth is our top priority in 2025. And we will continue to build on our competitive strength and take advantage of opportunities in automation, digitalization, and high-growth areas to further expand our market share and deliver good earnings growth. 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?

Thanks, Patrick, and good morning, everyone. Sales in the quarter were $1.045 billion which represented an increase in local currency and in U.S. dollars of 12%. On slide number four, we show sales growth by region. Local currency sales grew 7% in the Americas, 19% in Europe, and grew 14% in Asia, rest of world. Local currency sales increased 4% in China in the quarter. Excluding the impact of shipping delays in the fourth quarter of 2023, local currency sales grew 6%, including 3% in the Americas, 8% growth in Europe, and 10% in Asia, rest of the world, including 2% growth in China. On slide number five, we show sales growth by region for the full year 2024. Local currency sales increased 3%, with 3% growth in the Americas, 8% growth in Europe, in a 1% decline in Asia, rest of the world. Local currency sales decreased 11% in China for the full year. Excluding the impact of shipping delays, local currency sales in 2024 were flat, including 1% growth in the Americas, 2% in Europe, and a 3% decline in Asia, rest of the world, including a 12% decline in China. On slide number six, we summarize local currency sales growth by product area. For the quarter, laboratory sales increased 18% and industrial grew 8% with core industrial up 5% and product inspection up 12%. Food retail declined 14% in the quarter. Excluding the impact of the shipping delays, we estimate our laboratory sales grew 10% Industrial grew 5% with core industrial up 1% and product inspection up 12% and food retail declined 21%. Service sales increased 8% in local currency in the fourth quarter. The next slide shows local currency sales growth by product area for the full year 2024. Laboratory sales increased 6% and industrial increased 1% with core industrial down 1% and product inspection up 4%. Food retail decreased 14%. Excluding the impact of the shipping delays last year, we estimate our laboratory sales grew 2%. Industrial was flat with core industrial down 3% and product inspection up 4% and food retail declined 17%. Service sales increased 7% in local currency for the full year. Let me now move to the rest of the P&L, which is summarized on slide number eight. Gross margin was 61.2% in the quarter, an increase of 220 basis points due to higher volume, positive price realization, and benefits from our productivity initiatives. R&D amounted to $50.1 million in the quarter, which is a 7% increase in local currency over the prior period. SG&A amounted to $237.3 million, a 6% increase in local currency over the prior year and includes higher variable compensation. Adjusted operating and profit amounted to $351.9 million in the quarter, up 25% from the prior year. Adjusted operating margin was 33.7%, which represents an increase of 360 basis points over the prior year. A couple of final comments on the P&L. Immortization amounted to $18.2 million in the quarter. Interest expense was $17.9 million, and adjusted other income amounted to $1.1 million. Our effective tax rate was 19 percent in the quarter. This rate is before discrete items and is adjusted for the timing of stock option exercises. Fully diluted shares amounted to 21.1 million, which is approximately a 3 percent decline from the prior year. Adjusted EPS for the quarter was $12.41, a 32 percent increase over the prior year. On a reported basis in the quarter, EPS was $11.96, as compared to $8.52 in the prior year. Reported ETFs in the quarter included $0.24 of purchase intangible amortization, $0.09 of restructuring and other costs, and a $0.12 headwind from the timing of stock auction exercises. The next slide illustrates our full year 2024 results. Local currency sales grew 3% adjusted operating income increased 4% or 6%, excluding unfavorable foreign currency, and our adjusted operating margin grew 60 basis points. Adjusted EPS grew 8% for the full year and grew 10%, excluding unfavorable currency. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $900.6 million in 2024, a 2% increase on a per share basis from 2023, and just over 100% of adjusted net income. DSO was 36 days, while ITO was 4.2 times. Let me now turn to our guidance for the first quarter and for the full year 2025. As you review our guidance, please keep in mind the following factors. First, uncertainty remains across many of our core markets in the global economy. Geopolitical tensions remain elevated and include the potential for new tariffs that we have not factored into our guidance. Secondly, we expect market conditions to gradually improve throughout 2025. We also expect to continue to benefit from customer trends in automation, digitalization, and on and near shoring. We assume foreign currency at current rates, which is a headwind to sales and adjusted EPS growth of approximately 2% for the quarter and year. Finally, please keep in mind that our third-party logistics provider delays negatively impacted our Q4 2023 results by approximately $58 million, nearly all of which was recovered in our Q1 2024 results. This will be a headwind to our Q1 2025 sales growth of approximately 6% and will negatively impact our year-over-year operating margin change by approximately 260 basis points and adjusted EPS growth by approximately 18%. For the full year, 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 first quarter of 2025, we expect local currency sales to decline by approximately 3 to 4%, representing growth of 2 to 3%, excluding the prior year shipping delays. Operating margin is expected to decline 220 basis points at the midpoint of our range, or growth of 30 basis points, excluding the shipping delays. We expect adjusted EPS to be in the range of $7.75 to $7.95, down 11% to 13%, or a growth rate of 7% to 9%, excluding the shipping delays, in unfavorable foreign currency. For the full year 2025, our local currency sales growth forecast is unchanged at approximately 3% or up 4.5% excluding the shipping delays. Operating margin is forecast to be flattish at the midpoint of our range or up approximately 60 basis points excluding the shipping delay. We expect full year adjusted EPS to be in the range of $42.35 to $43, up 50 cents from our prior range, which reflects EPS growth of 3 to 5 percent or 9 to 10 percent, excluding the shipping delays and unfavorable currency. 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 and tangible amortization, to be approximately $73 million. Purchase intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pre-tax basis, or 93 cents per share. Interest expense is forecast at $74 million for the year, down from our prior forecast due to lower interest rates on our revolver and our strong free cash flow in 2024. Other income is estimated at approximately $7 million. We expect our tax rate before discrete items will remain at 19% in 2025. Free cash flow is still expected to be approximately $860 million in 2025, and share repurchases are expected to be approximately $875 million. That's it from my side, and I'll now turn it back to Patrick.

Thanks, Sean. Let me start with some comments on operating businesses, which will exclude the impact from last year's shipping delays. I will start with Lab, which had a very strong performance in the quarter. We had excellent growth across most of the portfolio, including very strong growth across process analytics and analytical instruments, especially with pharma and biopharma customers. We continue to receive very positive feedback from the market on our innovative portfolio and on our service solutions, which we believe is contributing to market share gains. Shifting now to our industrial business, our underlying sales growth was led by our product inspection business, which has gained momentum as the year unfolded. Our growth initiatives and new products targeting the mid-market are delivering market share gains, and we have also benefited from growing adoption of X-Ray inspection technology as customers look to increase product safety by detecting a wider range of physical contaminants. Our X2 X-ray platform has allowed us to offer differentiated solutions at attractive price points across a wide range of applications and also provides valuable features that simplify maintenance and cleaning. The strong winds we have had with our X-ray platform are helping mitigate weak underlying demand from the food manufacturing industry, which continues to face challenges and longer investment cycles. Switching over to our core industrial business, our underlying sales growth this quarter was modest as market headwinds persisted, especially in China. While customer demand in some market segments like pharma and biopharma have improved recently, general industry and chemical sector have remained soft. Lastly, food retail declined against very significant project-related growth in the prior year. Now let me make some additional comments by geography, which will also exclude the impact of last year's shipping delay. Starting in the Americas, our underlying sales growth was led by our process analytics business that continues to benefit from recovery in bioprocessing. And we also had good growth in other laboratory products in our product inspection business. This growth was offset by a significant decline in food retail, following very large projects related growth in the prior year. Now shifting to Europe, we had excellent underlying sales growth this quarter that included very strong growth across both laboratory, and core industrial. Our pharma and biopharma customers have led our growth over the past year as we have benefited from our innovative portfolio and our unique direct sales and marketing strategies. Finally, our Asia, rest of the world results were also better than expected, with strong results throughout the region outside of China. We have significant growth opportunities across the Asia-Pacific region, and have accelerated growth plans in various countries such as Japan and India to expand our market share. Our results in China were in line with our expectations with modest underlying growth, as improved lab demand was partially offset by weaker industrial sales. Market conditions in China remain subdued, and we expect low single-digit growth in 2025. As we have mentioned in the past, trends in China can change quickly, and our team remains focused on taking advantage of growth opportunities. In summary, again, we are very pleased with the successful close to 2024, and we are optimistic that market conditions will gradually improve as we move throughout 2025. The many important growth investments we have made in the recent years have further enhanced our market leadership and will support above-market growth and margin expansion well into the future. As we enter 2025, we will remain focused on implementing our new strategies and techniques with Spinnaker 6, which include an expanded big data analytics efforts for our lead generation and Salesforce guidance programs, and new digital solutions that enhance our customer experience. We will also make further progress with our Blue Ocean program, which is a critical backbone for many of our corporate programs such as Spinnaker and Stern Drive. Blue Ocean is our global process harmonization initiative built on a single instance of SAP, and it provides us valuable real-time business intelligence insights that allow us to react quickly to changes in the business and operating environment. We are also very pleased with the growth in service sales over the past year, And our team is focused on continuing to drive strong growth over the coming years. We are making important investments to support our service growth initiatives, which include additional resources to help us address a larger proportion of our installed base that we do not service today. We also have dedicated initiatives on the way to help increase our sales of service contracts at the point of new instrument sale. We will also continue to sustain important investments in innovation over the coming year. Innovation empowers our customers to generate new insights, improve and digitalize their workflows, and make their results more precise and reliable. Innovation is also important as it helps stimulate replacement cycles, support our market share gains, and enhance our value proposition that re-imposes our pricing. Over the past several years, we have launched many important enhancements to our portfolio, and we will have many exciting innovations to be introduced over the coming years as well. Now lastly, in 2025, we will look to capture additional benefits from new tools in our Sterndrive program, which aims to drive operational excellence in our manufacturing facilities and our global supply chain. As a reminder, we are on the third wave of Sterndrive, which is focused on smart automation and digitalization technologies to drive productivity and capture material cost savings. The MetaToledo franchise is stronger than ever, and we remain focused on the things that we can control through the different execution of our initiatives. Sorry, through the diligent execution of our initiatives. We are well positioned and continue to implement strategies with a good balance of initiatives focused on growth, innovation, and operational excellence. This concludes our prepared remarks. Operator, I'd now like to open the line to questions.

Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Your first question comes from the line of Vijay Kumar of Evercore. Your line is open.

Hi, guys. Good morning, and thank you for taking the question. Congrats on a nice sprint here. Patrick, maybe my first one on, you look at the Q4 performance here, headline 12%. excluding the shipping comp, the underlying is 6%. Wouldn't that imply, like, you know, if that's your exit rate, shouldn't your underlying be, you know, in the mid-single digit rate for Q1? Was there any one-offs in Q4, in the sense, will the customers pre-buy, you know, ahead of a potential tariff in geopolitical risk?

Hey, thanks, Vijay. Good morning. That's a very good question. Of course, we are extremely proud of our strong finish to 2024 and the strong Q4. As you said, 6% underlying growth, if you exclude the shipping delays, has been a very strong result. It has been especially strong in lab, as we said, and in Europe. But also across the entire portfolio, we have been really, really pleased with the results. Now, looking at what drives the growth, I think a lot of that is driven by, of course, a lot of innovation that we pushed in the market last year. I mean, customers see really the strength of our portfolio. We probably have seen a little bit of a budget flush in Europe. It's always hard to quantify that, but if we have indications of what contributed to a higher growth than we potentially would have expected, it was probably a bit of a budget flush in Europe. Regarding your point, whether there had been pull-ins because of the tariffs, we have actually no indications that that triggered the strong results. I think it's more our really exceptional portfolio. that we have out there, our strong go-to-market strategies being close to customers when they have been ready to spend money. And as I said, in Europe, specifically, we had, I would say, some releases of budget flush that we have not seen the year before.

Yeah, I think, too, DJ, if you kind of look at the sequentials, we feel like it makes sense. If you look at kind of like a longer-term CAGR for Q1, we also think it makes sense. And we still kind of stand by the comments we made last quarter where we do expect the beginning of the year in 25 to start off a little bit slower and then things gradually improve throughout the year. With all the different uncertainties in the world, we wouldn't be surprised if our end markets start off a little bit more cautiously this year.

Understood. And that sort of segues into my follow-up on the macro geopolitical situation. I know the guide isn't contemplating any of this in China for low singles growth. Maybe if you can talk about what is your competitive landscape in China? Do you have local competition? And how should we think about potential risks related to China? You know, I know one of your peers was put on a list. Is there any risk for that spreading broader to life science companies?

Yeah, look, We have been in China for over 30 years, and there always has been local competition. And we have a very strong team in China, R&D team, manufacturing team, very strong sales team. I think we are competing very effectively in China. We also have a very broad portfolio that you couldn't point to one single competitor that we are competing against. It's really a very fragmented space across lab and industrial and product inspection. Again, none of the competitors None of one of the competitors would have the same portfolio we have. And again, since we are manufacturing in China and sourcing in China's products and our R&D teams actually are developing also solutions in China for China. I mean, I would say there's, I would never say there's no risk, but I would say there's probably a more limited risk for a company like ours who has been in China and is serving the local market with local solutions.

Yeah, as Patrick says, we clearly benefit from our diversity there as well too.

Understood. Thank you, guys.

Your next question comes from the line of Dan Arias of Stifel. Your line is open.

Hey, good morning, guys. Thanks for the questions. Sean, on the industrial business there and following up on those comments, is there any change in the way that you're feeling about industrial this year? I mean, to Patrick's point, it does seem like there's some good overall momentum in product inspection. I think you have been thinking low singles for both core industrial and PI, if I remember correctly. So is it fair to assume that that's still the view or you may be tracking a little bit differently at this point?

Yeah, I mean, we're, you know, in terms of guidance, we're still a little more cautious on the core industrial side. You know, if we look at, you know, the different businesses, you know, we were very pleased with the core overall, but clearly, you know, in terms of core industrial, there's still some more challenges in that marketplace, especially when you peel it back and look at, you know, our Chinese business as an example. But for product inspection, we were extremely pleased with the quarter, certainly better than what we expected, you know, with 12% growth in the quarter. You know, and then as we kind of like look towards the full year here, we're still thinking like mid single digit, but we, for product inspection, but we but we expect to get off to a better start in that business. I think some of the momentum in product inspection will carry forward into the first quarter. And we'd expect to be more like high single digit in that business in Q1. And when you kind of like look at that business, it's kind of interesting because the end markets are challenged, you know, but we are also competing really well. The new products that we've talked a lot about, even in the prepared remarks are being really well received by the marketplace. and our teams are executing really well.

Yeah, okay. And then maybe just sort of a similar idea on lab. I just want to understand the assumptions on biopharma, which looks like it's gradually recovering here. So on the low to mid-singles growth that you had penciled in for that business, is the simple way to think about it just that low singles is modest improvement and mid-singles is better improvement? or was there not a lot that was baked in? I mean, Patrick, last quarter, you would express some optimism there, but it was early, so I wasn't sure whether that was translating to the outlook. Would just love to sort of get your view there at this point, as we're a couple of months into the year, just a month and a half in the year.

Yeah, I mean, for lab, so for lab, you know, for, you know, for the year for 25, I mean, of course, we had a very strong quarter. I can let Patrick comment when I finish, but I mean, you know, it was, very broad throughout the portfolio, but when you kind of look at certain categories like analytical instruments did exceptionally well, process analytics did extremely well. So it was just really nice to see some of the trends that we saw in Q3 kind of carrying into Q4 with, I'd say, even somewhat better results. And Patrick kind of talked about it already, like a bit of a budget flush in Europe, which was certainly more than what we were expecting. As we kind of look at the full year for 2025, You know, our guidance is, I think, similar to last time on a reported basis, upload a mid single digit for lab, but for excluding this shipping delay effect, we would be up mid to high single digit. But similar to my comment before about the sequencing of the year, we do expect things to start off a little bit more moderate in the first quarter. On a reported basis, we would expect our lab business to be down low single-digit, but then excluding the shipping delay, we'd expect to be up mid-single-digit.

Okay. And, Sean, just to maybe drive home the point, so there is some level of improvement that you have assumed in the biopharma environment, so to speak, that kind of underpins that growth rate that you're talking about there?

Yeah. I mean, the guidance hasn't changed, but for biopharma, like particularly bioprocessing, we certainly saw market conditions improving in the fourth quarter. But keep in mind, you know, our guidance for 25 was always that things would gradually improve throughout the year in 2025. But certainly, yeah, we saw some affirmation in the fourth quarter. Maybe the one thing that still hasn't come back yet is maybe the other part of biopharma, which is the biotech side. You know, we're still seeing, you know, mixed conditions when it comes to liquid handling, pipettes, and small biotech. So, yeah. Okay. Very good. Thank you, guys.

Your next question comes from the line of Jack Meehan of Nefron Research. Your line is open.

Thank you, and good morning. First question is on the core industrial piece of the business. We're just curious what your latest take is on some of the macro factors. You know, you saw the PMI Jack Coldrick, Go over 50 for the first time in a while on Monday for the US. Jack Coldrick, was curious if you feel like there's a little bit more wind in the sails entering your potential for that business to improve.

Jack Coldrick, yeah good morning jack a really good question look at Bitcoin industrial, I mean the. Jack Coldrick, Also, that the past year, not directly linking to to PM ice and a lot of our products going into. automation and digitalization efforts across many industries. When you look at our projected growth for industry, and Sean can give you the breakdown afterwards, I mean, a lot of that is depending also on the fact that a big part of the business compares also to the growth we had seen in China in the past years, which is now still slow. The investment on the industrial side, in China particularly, is still subdued. We don't see the momentum to have been, you know, we had strong F growth in, for example, the battery segment before, which is now definitely not the same demands, or these customers are not investing in the same area. So I would say don't link it directly to PMIs. Of course, I mean, we are counting on the fact that our customers and a strong interest in our digitalization automation solutions, that will continue. But it's not forecast to go at the same rate as lab or product inspection in 2025. Sean, you want to break it down in terms of the growth rate?

Yeah, I mean, in terms of, you know, how we're thinking for the full year for, I think we might have mentioned it already, but the core industrial, we're expecting low single-digit growth for the full year in 2025 on a reported and adjusted basis. And, you know, as Patrick says, that business we've kind of estimated and talked in the past about 60% of that business is a combination of pharma, food, and chemical, which for us is largely specialty chem. And then you have these hooks into automation and digitalization. But certainly the economy, we're not immune to it. And when it's up, it certainly doesn't hurt. But at the same time, I think there is an element of you know, how do customers respond to some of the uncertainty in the world right now? And, you know, and that kind of maybe fits into the pacing of the year a little bit. But nonetheless, it was nice to see above 50 PMIs for the first time in a while.

Yeah, agreed. And then just one housekeeping one, the raise to the 2025 EPS forecast, is that just a function of for Q coming in a little bit better, or were there any other changes to the assumptions that drove that?

Yeah, so, I mean, a lot of it was the beat in Q4, but then we had kind of like two things kind of not offsetting, but kind of going in opposite directions. On one hand, we had a lot of negative foreign currency since the last time we reported. You know, I think everybody has certainly seen the strengthening of the dollar, but, you know, with our exposure, We're also sensitive to the strengthening of the Swiss franc versus the euro. And as a reminder, every 1% change there is like about a $2.5 million hit or increase to operating profit or change in operating profit. And then we have a similar size exposure with the Chinese renminbi versus the dollar. So every 1% change there has like about a $2.5 million or so impact too. to operating profit. But then kind of going the other way is we had a couple of benefits kind of below operating profit. We had, you know, when you kind of have a chance to update your model, you'll see that interest expense came down a little bit, benefiting from a little bit lower interest rates and the strong cash flow we had in the fourth quarter. And then other income benefited a little bit just from updating like actuarial assumptions with pensions and things like that.

Sounds good. Thanks, Sean.

Yeah, you're welcome. Your next question comes from the line of Matt Sykes of Goldman Sachs. Your line is open.

Hi, good morning. Thanks for taking my questions. I just want to go back to the strength that you cited in Europe, particularly in lab. I know you mentioned there was some element of a budget flush there, but can we extrapolate sort of that improving demand among that customer segment in Europe into other developed market regions like the US? I mean, does this encourage kind of your view as to what Lab globally could do, maybe ex-China could do?

Yeah, look, for me, it's first and foremost an encouragement of how well our portfolio is received by the market. We have spent a lot of focus on driving innovation to the markets. We spent a lot of growth initiative money over the last three years. We launched a lot of new platforms. And those resonate really well. And I think probably in Europe we have, maybe in some areas, maybe a quarter launch advantage of that. But I'm definitely positive that what we have seen in Europe, people hopefully also see in the U.S., that strong uptake of the market. And then remember, a lot of our business is with replacement business. And these newly launched products will also help trigger replacement cycles. So yeah, I'm actually positive seeing that we compete so well in a very difficult environment like Europe. This is how the economy in Europe is doing at the moment, but our growth rates are really speaking to the strength of both our platform and also go-to-market strategies. We really go very quickly to the growth initiatives that we're seeing out there. Our Salesforce guidance works extremely well, and I'm confident that If the market uncertainty maintains reasonable in the U.S., then we will also see hopefully better momentum as the U.A. evolves.

Yeah, too. And when you look at the fourth quarter, I mean, Europe did better than the U.S., but the U.S. still did very well also. Even if you exclude the shipping delay effect, I think we're up high single digit. And by the way, China... did very well in lab as well, too. They were up high teams. And so kind of as expected, lab was going to have a much better core than industrial in China. So lab globally was good, but Europe was clearly the leader.

Got it. Thank you. And just going back to tariffs for a second, just specifically on Mexico, I know there's been a delay in that, but you do have a manufacturing footprint there. Could you maybe remind us what your exposure is in terms of um you know revenue shipped um out of mexico and then you've often been very flexible in your manufacturing footprint if if these tariffs were to go through like what would be the duration and what would be the decision behind maybe flexing that manufacturing to another region and what is your capability of of doing that yeah maybe i'll start if patrick wants to comment um so you know just so maybe i'll back up a little bit matt too so like just to be clear we've built in

the recent tariff on the incremental 10% in China into our guidance. We've mentioned in the past in China, we have less than $100 million of imports into the US or exports to the US. So the new tariff is less than $10 million. And we're confident we'll be able to mitigate that with our various programs. And we built that into the guidance. We've also mentioned in the past that our Mexico exports to the U.S. is less than China. And so, you know, we'll kind of see how things play out there. But, you know, we also feel like, you know, we've looked at different scenarios. We're monitoring closely, and we're prepared to react if we need to. And, you know, it will be a combination of, you know, maybe there's some supply chain topics, but there's also things we can look at on the pricing side as well. In terms of, like, a market, you know, itself, Mexico is probably about 2% of our sales, and by the way, so is Canada. But we don't export a lot from the U.S. to those markets in terms of, like, direct product sourcing in the U.S. So we've looked at that scenario, and we also feel like we should be able to manage that if we got into, like, this retaliatory topic in North America.

Thank you very much.

Yeah, you're welcome. Your next question comes from the line of Rachel Battensdahl of JPMorgan. Your line is open.

Perfect. Hi, good morning. Thank you so much for taking the question. First, with housekeeping, I wanted to ask on the first quarter guide, can you walk us through what are you assuming by segment for the first quarter, including and excluding that shipping comp across segments and then geographies as well?

Yeah, sure, Rachel. So I'm just going to go top to bottom and And I'll cover things, even if I already mentioned them, just to make sure we're complete. So for lab, for Q1, for 25, our guidance is down low single digit on a reported basis and up mid single digit on an adjusted basis, adjusting for this shipping delay topic from last year in Q1. Total industrial would be down low single digit. Our guidance is in Q1. and adjusting for the shipping delay, it would be flat. And then within that, you have core industrial down high single digit on a reported basis and down mid single digit on an adjusted basis. And then you have product inspection up high single digit on both a reported and adjusted basis. And then in terms of the geographies, the Americas are guidance for Q1. is to be down low single digit and on an adjusted basis for the shipping delay, it would be up low single digit. Europe would be down high single digit on a reported basis, and it would be up low single digit on an adjusted basis. And then China would be up low single digit on a reported basis and an adjusted basis. And do you want the full year, too, or do you Is Q1 good?

Yeah. Sure. Yeah. If anything changed on a full year, that would be helpful as well.

Yeah. Okay. So apologies if this is repeating. So lab on a reported up low to mid single digit on an adjusted basis. Up mid to high single digit. Total industrial up low single digit on both a reported and adjusted basis. Core industrial up low single digit on both a reported and adjusted basis. Product inspection up mid-single digit on both a reported and adjusted basis. Retail flattish on a reported basis and up low single digit on an adjusted basis. And then if we look at the regions, America's up low to mid-single digit on a reported basis and up mid-single digit on an adjusted basis. Europe up low single digit on a reported basis and up mid-single digit on an adjusted basis. And then China up low single digit on both a reported and adjusted basis, and that was all for the full year.

Great. That's super helpful. If I could just squeeze in my follow-up then, just on sticking on that topic of China, you guys pointed towards low single-digit growth for the year, which was also your prior assumption. So, have you seen any impact regarding some of this equipment stimulus to date yet? And is anything embedded for stimulus within that full number And also just break down for us, obviously we have some of this equipment-specific stimulus that some of your peers have called out. What about the broader economic and monetary policy that we're seeing out of China on a stimulus impact? Should that be more of the driver for you guys than the equipment stuff? Just unpack that for us. Thank you.

Yeah, very good. Thanks, Rachel. I'll take that and let Sean chime in as well. So we have actually not participated a lot with our product portfolio in the or last stimulus package, and those were more targeted towards high-end research products. We, of course, had some deals where we bundled instruments together to qualify for the stimulus amount and the thresholds, but it didn't really move the needle for us in Q4. We also have not included any projection of a stimulus in our 2025 guidance. If there is a broader-based stimulus, that would definitely help us to probably be ahead of what we are forecasting now for 2025 in China, but it remains to be seen. Again, we took a cautious stand here and said we'll go with the current market conditions as they are. Again, if it's a broad market stimulus that goes across the industries, we will benefit definitely more. If it's another very targeted high-end research instrument, front-end research stimulus, maybe not so much. And again, the outlook will remain unchanged.

Right. And I think for, you know, we talked about a little bit in the past, you know, for us, one of the topics is, you know, broader stimulus obviously is bigger. You know, it's just, you know, we're implying a broader fiscal stimulus, more similar to what they've done in past where they're really doing stuff to support economic development. But of course, when they do that, it also increases confidence in the country. And I just think like, you know, the more that they can send strong signals to increase confidence in the business community so that people will start pulling the trigger on capital expenditures, et cetera, or just spending and investing in general, that would be very positive.

Your next question comes from the line of Josh Waldman of Cleveland Research. Your line is open.

Hey, good morning. Thanks for taking my questions. Patrick, I mean, it sounds like the strength in Europe, maybe even the U.S., was focused within biopharma. I guess, is that right? And, I mean, do you or did you see an uptick in other markets? And then, I guess, how do you interpret the strength in the fourth quarter as it relates to confidence of customers to return to normal growth and spending going forward? and curious what you're hearing from customers as it relates to their desire to spend on more replacement-type purchases in 2025. Any change there?

Yeah, thanks, Josh. Again, when we talk about the growth and the particular growth in terms of end-market segments, you have pharma, biopharma, water contributor, but so was also the food industry, and you have also heard about the numbers that we have, for example, in product inspection. So I would say it was, in Q4 specifically, it was, of course, a broad part of the markets, and not just pharma, biopharma, but we clearly see the strongest demand coming out of pharma, biopharma. And that is also affecting probably more the lab business and the process analytics business, especially when you think about biopharma processes, which is then exactly driving the growth that you're seeing in process analytics. Now, looking forward, is the Q4 for us a good indicator that the market will fully recover to normal levels? We are still cautious there, and we are looking at 2025 as also a transitory year still. As we said, we guide the first half lower than the second half. I mean, the 3 percent growth and extra shipping delays to 4.5 percent growth is still not back to what we would consider a normal year, so to speak. But we are hoping that the market will continue to pick up. Again, our portfolio competes really well. And in terms of the replacement cycles, yes, the last two years have been probably a bit subdued in terms of product replacement. And once the budgets come available, we have an opportunity to capture also more growth coming from replacement.

Got it. Okay. And then, Sean, a question on tariffs may be asked another way. I mean, it sounds like the updated guide contemplates potential impacts in tariffs. Any way to frame up how you're thinking about offsetting the cost impact? I mean, do you think more of the offset will come from price or is it more weighted towards supply chain levers?

You know, I mean, I think it will be similar to last time we dealt with the topic. I mean, clearly, it will be a combination of both. I mean, we're clearly looking at The different scenarios, we're clearly looking at pricing opportunities in the portfolio. You know, we do it in a very differentiated way, you know, and so we're, you know, we've done that analysis. And then we also look at, you know, some of the processes within supply chain and, you know, whether we can make tweaks, you know, here or there. But, of course, pricing is a more agile, you know, topic than supply chain. Sometimes supply chain can take a little bit more time. Thanks, guys.

Your next question comes from the line of Patrick Donnelly of Citi. Your line is open.

Hey, guys. Thanks for taking the questions. Sean, maybe just to pick up right where you left off there on the margin front, can you just talk about the margin build this year? It's always helpful to hear about the price contribution, the moving pieces, both 1Q and for the year would be helpful just to think about the margin side.

Yeah, so of course we were Really happy with our margin expansion in the fourth quarter, just really strong. I mean, if you put it into perspective, our gross margin expanded 220 basis points. And if you exclude all this noise from the shipping delay, it was still up by 160 basis points. And what we saw in the quarter was getting back to volume growth. Volume growth was clearly stood out for us in our numbers, and it was really great to see Um, pricing kind of came in as we expected, you know, kind of in this, uh, 2%, you know, uh, range. And so we were very pleased with the, with the execution actually had a very strong finish to the year in our global pricing program. Um, and then, and then we, you know, we continue to benefit, uh, from some, some of the other things we're working on, you know, whether it's like. Programs within the stern drive umbrella about productivity and cost reduction in certain categories. And then we were able to still invest in the business, like in our service organization. So really great finish to the quarter on a full year basis. You know, it drove actually also, you know, very good results on a full year basis. And if we kind of then skip to more your question with the first quarter, you know, the first quarter is, you know, we're expecting pricing to kind of start out at 2%. We're expecting that also for on a full year basis as well too. Hey, I acknowledge, you know, there could be some upside to that number depending on how the tariff situation evolves. We'll see how that goes and we'll update accordingly, you know, next quarter as we kind of learn more about how the tariffs unfold. But right now we're assuming 2%. And then, you know, and then I think it will be a similar thing. I think in the first half of the year we'll have less volume than the second half of the year. You know, if we kind of like look at the actual quarters themselves, you know, you would see that the first quarter would be, you know, from an operating margin perspective, would be down by about 220 bps. And I think in the prepared remarks, I said excluding the shipping delay was up by 30, but it's probably more like up like 40. And then on a full year basis, our operating margin would be flattish. maybe up slightly, but the shipping delay had an impact of about 60 bps on an operating margin. And then if we kind of jump up to the gross margin, on a reported basis, our gross margin would be down probably in the 40 bps kind of a range because of the shipping delay volume topic. But on a reported basis, and that's kind of like apples to apples, comparing apples to apples, but then on a reported basis, it would be up by about 20 bps. So the shipping delay had the effect of reducing our gross margin by about 60 basis points. And then for the full year, it would be flattish, maybe up slightly on a reported basis. But again, if you exclude the shipping delay from last year and do apples to apples, it would be up probably about 20 bps.

That's really helpful details. Thanks, Sean. And then Patrick, maybe one for you. I think on one of the earlier questions on the exit rates, you kind of said you wouldn't be surprised if end markets start a little more cautious this year. Just listening to the call, I mean, it sounds like product inspection momentum is picking up. Pharma seems better. Just curious if that was more conservatism or something you're seeing to start the year in specific markets. It sounds like most of these markets are picking up, but just wanted to clean that up if you could. Thank you so much.

Yeah, sure. I mean, when you look at product inspection, for example, of course, there's also, of course, a project business with longer cycle times. And when we look at the sales projection for Q1, these are also unlike a lot of our other portfolio where we have very fast turnaround times in terms of inventory. Here we have longer cycles, and then we have a longer few in terms of the sales volume on the incoming orders. Yeah, biopharma is having good momentum at the moment. The food industry, as we said, specifically in the product inspection area, we see that our product portfolio resonates extremely well. They'll be getting into new market segments that we didn't serve before. In the mid-market, it opens a lot of new doors. A lot of the deals we have are actually with new customers that we didn't serve before. But we have a little bit of cautiousness stand here on the outlook because we also want to see how these uncertainties around tariffs, et cetera, in a different market really play out. I mean, it's still pretty volatile there. For us, it's really important that we follow the leads very quickly, that we have a strong lead generation engine, that we turn them around into orders. And we have demonstrated in the past that we are very effective on this. I'm counting on the team on the continued execution excellence to drive every potential order home also in Q1. But there is uncertainty out there, and we cannot neglect that. It's still in China. It's also in some of the mature markets, again, with these potential tariffs. We need to see how that plays out. So I think it's well advised to take a bit of a conservative stand at the moment.

Yeah, makes a lot of sense. Thank you.

Your next question comes from the line of Catherine Schulte of Baird. Your line is open.

Hey guys, thanks for the questions. Maybe first on your services business. I think this was the second consecutive quarter of high single digit growth there, and I believe your guide assumed mid to high single digits for 25. Do the results this quarter make you confident in hitting the high end of that range?

Yes, actually, it does. And we had in service, we had a very strong 2020 overall with 7% growth. The first half was, I think, about 6%. Q3 was 9%. Q4 was 8%. And we're really looking forward to continued growth in service. We have launched a growth acceleration program also last year for services where we invest more into service capacity. We have also developed a broader set of in our service portfolio. and making sure that we address a bigger part of the installed base that we have out there that currently is not under service from private method leaders. I think we have good opportunity to reach that growth rate that we projected for service.

Great. And maybe just on the new administration, I know you don't have much NIH exposure, but are there any other policies more broadly that you think could either disrupt or benefit you other than the tariff piece that you've already talked about?

I don't think so. I mean, I think that's the biggest impact probably on the business. There could be tariffs. Again, it creates uncertainty in the market. But in these, I would say, rather turbulent times, we also have demonstrated in the past that MetaToledo is really a company that is very agile and captures opportunity. Of course, uncertainties are never good for the market, but it's also for companies like MetaLongwave, a global footprint who can react quickly in terms of how we can serve our customers. And we have demonstrated also during COVID, it's an opportunity to gain market share. So I look at it also as an opportunity. It's also the story I tell to my team here. We have to see this as an opportunity to continue to serve our customers in the best possible way. We have tremendous customer trust as a supplier, and that should benefit us as well.

Great, thank you.

Your next question comes from the line of Tycho Peterson of Jefferies. Your line is open.

Hey, thanks. You guys noted accelerating growth in India. I mean, I feel like it's been a while since you've called that out. Just curious what secular trends you're seeing there that warrant increased investment.

I think we have not really, I think, spoken in detail about accelerated growth in India. We said we have growth acceleration plans in India in countries also outside of China, and one of the areas, one of the countries was Japan, the other one was India that we highlighted, but we have also other regions that we, where we have developed over the last, let's say, two years, dedicated growth acceleration plans. India actually was doing well for us throughout 2024. Sean, do you have the final number?

Yeah, I do. I mean, we did have actually a very strong quarter. Now, I don't know how much of it the shipping delay topic would have played into it, but it was a, a very, very strong double-digit number. And for the full year, we were up high single-digit there. So we did well in India, and we see it as a market that should outgrow other markets going forward.

Okay. And then two quick follow-ups. Sean, I appreciate your commentary on pricing 2% for the quarter and first quarter for the year. How high could you take that if you needed to in an inflationary environment? Is there kind of a natural ceiling on where you think you could take it? And then maybe totally separately, you talked about process analytics strength. Is that more greenfield or are you taking kind of share there in bioproduction? Thanks.

Yeah, hey, so in terms of pricing, Tycho, it all depends really on the environment. Like we kind of saw that when inflation really increased a few years ago, I think we were able to do more, like that ceiling was higher because inflation was higher, right? And I think that the environment of tariffs could lead to a higher inflationary environment, or it could lead to an environment where our market is just gonna raise prices higher, but it will very much be dependent on what the tariffs are, what countries are hit or not hit, how broad it is or not. So we'll play it out. I mean, I think for us, I think we are well positioned because we feel like we have invested a lot in our value proposition. We feel like that very much resonates with our customers I think our sales organization around the world does a really great job of articulating that. And fortunately, because we sell most of the time directly and we're often selling it to the direct end user, they also appreciate that value proposition. And then as you know, our average price of our products is less than $10,000. So when we start talking about a percent dollar-wise, it's not like a significant dollar increase. So I wouldn't want to put a ceiling on it, but we do feel like we're pretty well positioned going into it. In terms of process analytics, Patrick, did you want to comment on that?

Sure, I can. So I think we are well positioned with our portfolio, as we also have there have launched a lot of new products over the last two years, and that's resonating well with customers both in pharma, biopharma, but also, for example, in the semiconductor industry for ultra-pure water applications. We have a strong portfolio, so we see also from that portfolio good growth. I mean, it's always hard to take market share. I'm proud of our portfolio. I'm proud of our team of how they execute on the go-to-market strategy. So, yeah, I would say potentially yes, but they don't have any absolute numbers. Again, the portfolio is strong. The customers love our portfolio. They love our service, and that's where we need to be to also continue that growth.

Okay. Thank you.

Our last question comes from the line of Michael Ricekin of Bank of America. Your line is open.

Great. Thanks for sending me in, guys. I'm sort of scratching the bottom of the barrel for questions. Almost everything's been asked by one of the other analysts, but maybe just a couple miscellaneous cleanups. You alluded to this earlier, Sean, on the EPS bridge for 25, the 50 cent increase. You talked about interest rates and FX in terms of the fifth strength. have an impact, any chance you could just give us the numbers? I'm sure we could do the math, but those will be more precise in terms of, you know, how much each contributed.

Yeah, hey, Mike, I mean, I think the math is probably pretty clear. I mean, I think, you know, you can see the B, and then we updated the interest and the other numbers, and then, you know, the FX and the other probably, you know, squeezes out together and, you know, the high 50s or something.

Okay.

All right. Fair enough. And then just on the margins, to an earlier question, you talked through the margin, gross margin versus out margin for the year. But in my notes, I had you guys having gross margin up a little bit previously. I think that you expect gross margins up 30 to 40 bits. Now it seems like it's a little bit less than that. Is that FX having an issue or is there anything else in terms of moving pieces there?

Yeah, no, I think, I mean, I think, you know, we ended a little bit. I think the absolute number that we ended this year is going to be like, I think the number that we have for next year is the same. It's just that we landed a lot higher than what we expected this year, you know, so, yeah. So, I think it's up slightly on a reported basis, and then if you exclude the shipping delay topic, it's probably up probably, what did I say, 30 basis points, so.

Okay. That works. All right. Thanks so much. Yeah, thanks. Thank you.

That concludes our Q&A session. I will now turn the conference back over to Adam for closing remarks.

Okay, great. Hey, thanks, everybody, for joining us on the call this morning. If you have any follow-up questions, please feel free to reach out to me. I hope you all have a great weekend, and we'll talk to you soon.

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