Mettler-Toledo International, Inc.

I appreciate you joining us. 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. On the call, this call will be webcast and available for replay on our website at mt.com, and a copy of the press release and presentation that we'll refer to on today's call is also available on our website. 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 recent annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement except as required by law. On today's call, we may use non-GAAP financial measures, and reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is provided in the 8K 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 first quarter financial results, the details of which are outlined for you on page three of our presentation. We had a good start to the year with solid growth in our laboratory business, excluding the recovery of delayed shipments in the first quarter of 2024. Additionally, the strong execution of our margin expansion strategies led to better than expected earnings for the quarter. However, The ongoing global trade disputes and tariffs have significantly increased uncertainty in global customer demand. We also estimate cross incremental global tariff costs of approximately $115 million on an annual basis and are implementing mitigation actions this year that will fully offset these costs next year. We are confident that our strong culture of operational excellence and our highly agile team will continue to perform well in this dynamic environment and we will benefit from the breadth of our innovative product portfolio and strategic programs. Let me now turn the call over to Sean to cover the financial results and our guidance, and then I will come back for some additional commentary on the business and our outlook.

Sean? Hey, thanks, Patrick, and good morning, everyone. Sales in the quarter were $884 million, which represented a decrease in local currency of 3%. Excluding the impact of shipping delays from the fourth quarter of 2023 that were recovered in the first quarter of 2024, local currency sales grew 3%. On a U.S. dollar reported basis, sales declined 5%. On slide number four, we show sales growth by region. Local currency sales declined 1% in the Americas, 7% in Europe, and 2% in Asia, rest of the world. local currency sales were flat in China during the quarter. Excluding the impact of shipping delay recoveries in the prior year, local currency sales grew 3% in the Americas, 4% in Europe, and 3% in Asia, rest of the world, including 3% growth in China. On slide number five, we summarize local currency sales growth by product area. For the quarter, laboratory sales decreased 3% and industrial declined 1% with core industrial down 6%, and product inspection up 8%. Food retail declined 12% in the quarter. Excluding the impact of shipping recoveries last year, we estimate our laboratory sales grew 5%, industrial grew 2%, with core industrial down 2%, and product inspection up 8%, and food retail declined 5%. Service sales increased 6% in local currency in the first quarter. Let me now move to the rest of the P&L, which is summarized on slide number six. Gross margin was 59.5% in the quarter, an increase of 30 basis points as positive price realization and benefits from our Stern Drive program were offset in part by lower volume. We estimate gross margin expanded 90 basis points excluding shipping delays. R&D amounted to $46 million in the quarter, which is a 2% increase in local currency over the prior year. SG&A amounted to $243 million, a 5% increase in local currency over the prior year, and includes sales and marketing investments and timing of expenses. Adjusted operating profit amounted to $237 million in the quarter, down 11% from the prior year. Adjusted operating margin was 26.8%, which represents a decrease of 210 basis points over the prior year. Excluding the impact of shipping delay recoveries in the prior year, our operating margin expanded 50 basis points on 3% sales growth in the quarter. A couple final comments on the P&L. Immunization amounted to $17 million in the quarter. Interest expense was $17 million. and adjusted other income amounted to $3 million. 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 20.9 million, which is approximately a 3% decline from the prior year. Adjusted EPS for the quarter was $8.19, an 8% decrease over the prior year. Adjusted EPS growth was 11% excluding a headwind to EPS growth of approximately 18% from the recovery of delayed shipments and a 1% headwind from foreign exchange. On a reported basis in the quarter, EPS was $7.81 as compared to $8.24 in the prior year. Reported EPS in the quarter included 23 cents of purchased intangible amortization and 15 cents of restructuring costs. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $180 million in the quarter, a 1% increase on a per share basis, and was impacted by higher bonus payments of $36 million related to prior year performance. DSO was 35 days, while ITO was 4.2 times. Let me now turn to our guidance for the second quarter and for the full year 2025. As you review our guidance, please keep in mind the following factors. First, our guidance assumes U.S. import tariffs as well as the impact of retaliatory tariffs from other countries will remain in effect at current levels. Geopolitical tensions are elevated and include the potential for new tariffs or retaliatory tariffs that we have not factored into our guidance. As of today, we estimate our incremental global tariff costs at approximately $115 million on an annualized basis, which already includes initial actions we have taken to lower our gross exposure. Secondly, we are taking various actions to offset the impact of higher tariffs, including supply chain optimization, cost savings, price increases, and surcharges. Our actions are expected to fully offset tariff costs on an annualized basis, but we will have a headwind in our gross margin in 2025, especially Q2, until the full benefit is realized. Third, the U.S. Administration's trade policies have created increased risk to the outlook for our core markets and the global economy. Our outlook assumes market conditions will be slower than previously expected, especially in China. This implies volume growth in the second half of the year is similar to the first half of the year, excluding the impact of shipping delays. We assume foreign currency at current rates, which would not material impact sales or adjusted EPS in 2025. Finally, please keep in mind that our third-party logistics provider delays negatively impacted our Q4 2023 results by $58 million. nearly all of which was recovered in our Q1 2024 results. For the full year 2025, this will reduce our sales by 1.5% and is a headwind to operating margin expansion of approximately 60 basis points and a headwind to adjusted EPS growth of approximately 4%. Now turning to our guidance. For the second quarter of 2025, we expect local currency sales to grow approximately 0% to 1%. Operating margin is expected to decrease 170 basis points at the midpoint of our range or down 70 basis points, excluding the net impact of tariffs. We expect adjusted EPS to be in the range of $9.45 to $9.70, a growth rate of down 2% to up 1%. Included within the EPS guidance is a gross headwind of approximately 6% from higher tariff costs, and we expect to offset about half, resulting in a net headwind to EPS growth of 3%. For the full year 2025, our local currency sales growth forecast is 1% to 2%, or up 2.5% to 3.5% excluding the shipping delays. Operating margin is expected to decrease 130 basis points at the midpoint of our range and would be up slightly excluding the net impact of tariffs and prior year shipping delays. We expect full year adjusted EPS to be in the range of $41.25 to $42 compared to our previous guidance of $42.35 to $43 which reflects EPS growth of 0% to 2% or 4% to 6%, excluding the shipping delays. Included within the EPS guidance is a gross headwind of approximately 7% from higher tariff costs or a net headwind of 2%, including the benefits of our mitigating actions. Lastly, I'd like to share a few other details on our 2025 guidance to help you as you update your models. We expect total amortization, including purchased intangible amortization, to be approximately $72 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pre-tax basis, or 93 cents per share. Interest expenses forecast at $72 million for the year. Other income is estimated at approximately $9 million. We expect our tax rate before discrete items will remain at 19% in 2025. Free cash flow is 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.