Mettler-Toledo International, Inc.

Hello, everyone. Thank you for joining us, and welcome to the Mettler-Toledo Second Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Adam Uhlman, Head of Investor Relations. Please go ahead.

Great. Hey. Jonathan, thank you very much, and good morning, everyone. Thanks for joining us. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer, and Shawn Vadala, 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 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 discussion of these risks and uncertainties, 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 will use non-GAAP financial measures, and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K and is available on our website. Let me now turn the call over to Patrick.

Thank you, 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. Our second quarter results were strong and reflected better than expected organic sales growth across our portfolio, including very good growth in China and emerging markets. It was driven by improved market conditions and our focused Spinnaker sales and marketing program. Combined with our productivity initiatives, this resulted in excellent adjusted EPS growth in the quarter. Going forward, we are optimistic market conditions will gradually improve. Our team remains agile and focused on capturing growth opportunities, leveraging our sophisticated Spingo program and innovative product portfolio, while benefiting from trends in automation, digitalization, and onshoring investments. I am confident that strong execution of our strategic initiatives will continue to deliver solid financial performance. Let me now turn the call over to Shawn to cover the financial results and our guidance, and then I will come back with some additional commentary on the business and our outlook. Shawn?

Thanks, Patrick, and good morning, everyone. Before I review our Q2 results, I'd like to highlight a special item in our financials this quarter related to tariffs. As disclosed last quarter, We had a one-time gross benefit of $52 million from IEPA tariff refunds in Q2 that benefited cost of sales and was offset in part by a $28 million related refund to our customers that reduced our reported net sales by 3%. Discussion of our results today will exclude the impact of both of these items. Sales in the quarter were $1 billion, up 7% in U.S. dollars and in local currency, our growth was 6% and above our prior guidance of approximately 3% local currency sales growth. Acquisitions contributed approximately 1.5% to sales growth and organic local currency sales growth was 4%. On slide number four, we show sales growth by region. Organic sales excluding acquisition and tariff refunds increased 1% in the Americas, 4% in Europe, and 9% in Asia Wrestleworld, including 9% growth in China. Slide number five shows core organic sales growth by region on a year-to-date basis. On slide number six, we summarize sales growth by product area. Organic sales increased 4% in laboratory and increased 3% in industrial, which included 4% growth in core industrial and 1% growth in product inspection. Food retail grew 11% in the quarter. Lastly, service revenue grew 9% or 7% organically. Slide number seven details organic sales growth by product area on a year-to-date basis. Let me now move to the rest of the P&L, which is summarized on slide number eight. Adjusted gross margin was 59.3% in the quarter, an increase of 30 basis points. Excluding unfavorable foreign currency and acquisitions, gross margin expanded approximately 90 basis points due to benefits from favorable price realization, lower tariff rates compared to the prior year, volume growth in our productivity and cost savings initiatives, partly offset by higher transportation costs. R&D amounted to $53 million in the quarter and was up 3% on a local currency basis over the prior period. SG&A amounted to $263 million, a 4% increase in local currency over the prior year, and includes sales and marketing investments offset in part by cost savings. Adjusted operating profit amounted to $309 million in the quarter, up 9% versus the prior year. Adjusted operating margin was 29.3%, an increase of 50 basis points versus the prior year, or up 100 basis points excluding unfavorable currency. Adjusted EPS for the quarter was $11.46, a 14% increase over the prior year. On a reported basis in the quarter, EPS was $11.55 as compared to $9.76 in the prior year. Reported EPS in the quarter included a 92 cent net tariff refund benefit, 26 cents of purchased intangible amortization, $0.22 of restructuring costs, and a $0.04 tax headwind related to the timing of stock option exercises. Finally, we had a $0.31 acquisition-related charge related to higher earn-out achievements on previous acquisitions. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $367 million on a year-to-date basis and was negatively impacted by the timing of tax payments, which were $55 million higher than the prior year. DSO was 35.6 days, while ITO was 4.2 times. Let me now turn to our guidance for the third quarter in the full year of 2026. As you review our guidance, please keep in mind the following factors. We are encouraged by our Q2 results and improved market conditions, especially in China and emerging markets. Second, conditions in the Middle East remain volatile, and while we have limited exposure to the region, this could impact customer decision-making should conditions significantly change. We are not currently seeing any change in related customer behavior and have not included an escalation of the conflict in our forecast. Lastly, we are very confident in our ability to execute on our growth and productivity initiatives and believe we are well positioned to gain market share regardless of the macro environment. Now, turning to our guidance for the full year 2026, we have increased our local currency sales growth from approximately 4% to approximately 4% to 5%, reflecting organic growth of 3% to 4%. Our forecast excludes the impact of the previously described tariff refunds. Adjusted EPS for the year is forecast to be in the range of $47.15 to $47.50, which represents a growth rate of 10% to 11% or 11% to 12% excluding currency. This reflects an increase from our previous guidance of 8% to 10% growth. At recent spot rates, foreign currency is estimated to be a 1% benefit to sales growth and a slight headwind to EPS for the year. For the third quarter of 2026, we expect local currency sales to grow approximately 4%, which includes approximately a half percent benefit from acquisitions. We expect adjusted EPS to be in the range of $12 to $12.15, a growth rate of 8% to 9%, or 9% to 10% excluding currency. Currency for the quarter at recent spot rates would be neutral to third quarter sales and a 1% headwind to adjusted EPS. Some further comments on our 2026 guidance. We expect total amortization, including purchase intangible amortization, to be approximately $78 million. Purchase intangible amortization is excluded from adjusted EPS and is estimated at $28 million on a pre-tax basis or approximately $1.07. Interest expenses forecast at $67 million for the year. Other income is estimated at approximately $24 million. We expect our tax rate before discrete items will remain at 19% in 2026. Pre-cash flow is expected to be approximately $900 million in 2026 which represents 6% growth on a per share basis. Share repurchases are now expected to increase to $875 million for the full year as compared to our annualized repurchase level of $825 million during the first half of the year. That's it from my side and I'll now turn it back to Patrick.

Thanks, Shawn. Let me start with some comments on our operating businesses, starting with Lab, which had good growth in the quarter across most product areas. We saw improving trends across our biopharma customer base and continue to see strong growth in process analytics and bioproduction. Laboratory balances and analytical instruments growth was also strong and benefited from the many innovations we have brought to the market in the recent years. Our LabX software and growing demand from hot segments like semiconductor, Advanced Materials and Batteries. Turning to industrial, Core Industrial did well this quarter with sales growth driven by strong demand for our solutions that enable automation. We saw strength across markets like biopharma, food manufacturing, semiconductor, and new energy. As expected, product inspection organic sales growth this quarter was modest due to the timing of customer projects but organic growth is expected to pick up again in the second half. Lastly, food retail sales growth was better than expected due to the timing of project activity. Now let me make some additional comments by geography, starting in the Americas where sales grew 1% excluding acquisitions. We had strong momentum in most lab product categories and in our core industrial automation solutions and product inspection. These results were offset in part by timing of food retail and transportation and logistics project activity. Turning to Europe, sales growth this quarter was solid and included growth across most of the business, including strong growth in core industrial and food retail. Finally, Asia and the rest of the world had very good growth this quarter across the portfolio and in most major markets. Our business in China grew 9% and was stronger than expected as our team continues to do an excellent job identifying high-growth markets and leveraging our innovative portfolio. Biopharma customs demand was also healthy and contributed to our results. Markets outside of China also had strong growth this quarter. Emerging markets have been an important element of our long-term growth strategy for many years. India, Southeast Asia, Eastern Europe, and Latin America offer us excellent growth opportunities as these markets develop and mature, and we believe many of them will also benefit from nearshoring investments over the coming years. Our company is uniquely positioned to capitalize on emerging market growth over the coming years. In the second quarter, emerging markets outside of China represented approximately 18% of our sales, slightly more than our business in China, and grew high single digits in the quarter. Emerging markets excluding China have also grown high single digits on average in local currencies over the last five years, above the company average, and are an important contributor to our growth. To take advantage of these growth opportunities, we have longstanding dedicated market organizations in emerging markets, China, and around the world. Our market organizations are a significant competitive advantage, allowing us to stay close to customers and better understand local market needs. We have dedicated growth plans for each major country, and we leverage our broad portfolio of solutions across a range of price and value points to meet varying customer requirements. Additionally, in markets like Mexico, we have further developed local assembly and manufacturing capabilities in recent years, which strengthen our ability to serve local market needs and enhance our competitive position. The market organizations in emerging economies also leverage the same spinnaker sales and marketing programs we have developed in other countries, including various digital tools, value selling guides, and Sales Enablement Tools. We have also rolled out Blue Ocean to most of our YMOs and having a single instance of a global information technology infrastructure provides rich data, analytics and unique real-time business insights. This is a significant competitive advantage that allows us to target opportunities in various hot segments like bioprocessing, GLP-1s, semiconductor and battery in an agile way. As domestic and foreign direct investments continue to grow over the coming years, we expect emerging markets to remain a healthy contributor to our growth well into the future. In summary, we are very pleased with our Q2 results and the solid growth our team has delivered. We remain focused on capitalizing on our customers' investments in automation, digitalization, and onshoring around the world. After a few years of disruptions and uncertainties related to tariffs, governmental policies, and geopolitics, we believe customers will continue to return to a more normal replacement activity going forward. We have maintained a strong focus on investing in innovation and growth in recent years while protecting profitability, which will serve us well as our markets recover. This concludes our prepared remarks. Operator, I'd now like to open the line to questions.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dan Arias from Stifel. Your line is now open. Please go ahead.

Hey, good morning, guys. Thank you for the questions here. Shawn or Patrick, last quarter you raised the guide for China, so I guess not a surprise to see the pickup there, but it does seem like maybe it improved a bit sooner. Can you just dive into the acceleration a bit? What does the momentum there look like when it comes to pharma versus non-pharma and just sort of the consistency that you expect in the coming quarters? If I remember correctly, the improvement seemed like it was due more to core industrial last quarter. So to what extent do you have pharma improvements sort of baked into the outlook for the rest of the year here?

Yeah, thank you, Dan. And yes, of course, we are very happy with the growth we have seen in China. Nine percent in Q2 was really very strong results versus the guidance we initially had for the quarter. I mean, the growth has really been led by industrial. which had double-digit growth in China. We are benefiting from many of the core segments such as biopharma but also food as well as the hot segments like investments in battery that is happening in China. For lab, the growth was a bit more modest. We expect continued improvement there also in the second half, both also from biopharma and maybe also academia will pick up towards the end of the year. We've heard at least Some indications of some additional funding for academia in China as well. But then again, also the good hot segments and strong investments in areas like lithium battery and new energy. So overall, I would say really led by industrial growth across many segments, and pharma was a good part of that as well.

Yeah, hey, Dan, and then just to be specific, like in terms of the second half of the year work, We're looking at high single digit now for China also for Q3 and for the full year. And we kind of, this momentum that Patrick referred to on industrial, we feel very good about entering the second half. Also the trends around automation and digitalization that we talk a lot about. We're definitely seeing those benefits in China as well. And then I think as we kind of go into the second half of the year too, we also feel like that the lab business is gradually improving as well.

Yeah, okay, thank you for closing the loop on that. And then maybe just on product inspection, a little bit of growth in that piece. I think you had been pointing to that being down a touch this quarter on some timing elements that you referred to. Can you just maybe expand on that? Was there anything that got pulled forward from 3Q as it relates to that timing? And then if you put the timing aspect aside, maybe just talk about spending and demand relative to the way that you saw things last quarter in PI specifically. Thanks a bunch.

Yeah, no, hey, thanks, Dan. So if you remember, we had a really good Q1 in PI, and then we were trying to caution people that Q2 would be a little bit lighter, just given the timing of how the project activity was looking like it was playing out. But as we kind of like go into the second half of the year, I mean, we feel very good. I mean, you know, we're probably looking at mid-single-digit growth in the third quarter, and for the full year, we're probably looking at, you know, high single-digit growth, which is probably more like mid-single-digit growth on a on a organic basis. But when you step back, you know, 70% of that business is food manufacturing. So from an end market perspective, you know, not quite like pharma, but when we look at how the team is executing, we actually feel really good. I mean, we talked a lot about the benefits of innovation in this business over the last few years, and we kind of continue to see that. We're coming out with a couple of new products this year, which is pretty exciting. and then this general strategy that we talked a lot about in terms of how to better position ourselves for the mid-market segment seems to be, you know, working very well and well-received in the marketplace.

Yep, very good. Okay, thank you, guys.

Your next question comes on the line of Tycho Peterson at Jefferies. Your line is now open. Please go ahead.

Hey, thanks. Just want to maybe unpack some of the other trends from QQ. I guess as we think about the revised guide in the back half of the year, can you talk a little bit more about some of the underlying assumptions by end market and segment? Obviously, you just covered PI and China, but maybe walk through where you're changing your assumptions otherwise.

Yeah. Hey, Teich, I'll take that one. Thank you. Hey, so I'll start with the product categories, and then I'll give you the division. So So lab for Q3 would be mid-single digit. Core industrial, we're looking at low single digit, and I think it's important to remember that core industrial had a very challenging comparison to the prior year in Q3 of last year. It grew 10% organically. Product inspection, mid-single digit, which I just said, and then retail, we're guiding it flat. In terms of the Americas, were guiding at low to mid single digit. Again, this one had a more challenging comparison just to highlight in Q3 of last year, which was up, I think, 9% organically. Europe, up low single digit. China, we talked about high single digit. And then maybe just to kind of wrap it up with the full year, full year lab would be low to mid single digit. Core industrial would be low to mid single digit. Product Inspection would be high single-digit. And of course, there's a little bit of acquisition largely from the first half of the year in these numbers. So Core Industrial would be low single-digit organically. PI would be mid-single-digit. Retail would be low to mid-single-digit. And if we look at the regions, Americas would be low single-digit or about flattish organically. Europe would be low single-digit. And then China would be high single-digit.

Okay, very helpful. And then follow-up, you know, you guided two and a half on price for 2Q. Just curious where you landed and what you're thinking for the back half of the year. And then separately, did you capture any, you know, recapture any of the delayed chemical orders? Thank you.

Yeah, sure. Hey, so on the pricing side, continue to be really pleased with the team's execution, but ultimately pricing comes back to value proposition. I think a lot of the The investments we've been making over the last few years on innovation continue to pay off well. So in the end, our price realization for the quarter was around 3%. So we're very happy with that. So a little bit better than the 2.5% that you were mentioning in terms of our original guidance. Towards the end of the quarter, we also put in place some additional pricing measures, isolated in a few areas where we were seeing a little bit of inflationary pressures. So our guidance for the second half of the year is more in the 2.5% kind of a range. And again, as a reminder, we're also lapping a lot of the mid-year price increase actions that we did last year in response to all the tariffs from last year. So when you kind of wrap that all up, our full-year price realization is now approaching 3% for the full year. I think the other part of your question was, China, I mean, not China, chemical, Europe. Do you want to take that one?

I can take that one, yeah. So, yeah, on chemical, just as a reminder, I mean, overall, it's under 15% of our total sales, and we had probably the biggest exposure across industrial and lab for chemical. And as far as mostly specialty chemicals, and when we talked in Q1 about the pressures we have seen in the EU, it was mainly energy-related and some of you on things. Actually, the EU chemical results were better in Q2, so they recovered. But we still would say we take a bit more cautious stance on the overall segment still because they are more exposed to energy cost fluctuations than other segments that we're seeing. But overall, of course, in the quarters to come, we will also have easier comps in this segment.

Great. Thank you.

Your next question is from the line of Josh Waldman from Cleveland Research. Your line is now open. Please go ahead.

Hey, thanks for taking my questions. I think one for Patrick and one for Shawn. Patrick, nice to see the reacceleration in lab. I guess, can you give more details on what drove this? will be great to get a sense on what you're hearing from customers on the why behind the inflection in the second quarter, following what seemed to be a softer start to the year. Was it budgets being delayed, concern around the war or other? And then as you think about durability, kind of going forward, the comps get more difficult, but it sounds like you're expecting mid-singles again in the third quarter. Do you think Lab should stay in this steady state of mid-single digits here as we work through the second half and maybe into 27.

Thanks, Josh. We will not talk about 27 yet. But of course, we are actually quite delighted with how Lab is performing. And a lot of that is based not only on our strong go-to-market strategy and our local market teams that we have that are really very close to our customers, I think it's also based on the fact that we have really put a lot of effort into innovation over the last years. We launched a lot of new great products across the Lab portfolio. And within Lab, at the moment, of course, the process analytics business is performing extremely well in biopharma, as you can imagine. So that drives a lot of the growth as well. And then you look at the rest of the portfolio that we have, analytical instruments have been very good in Q2, and we see that also moving forward. We saw the pipette business coming back to growth as well last quarter, which is very promising. So I would say, yeah, we're actually quite pleased with the momentum we have in lab moving forward. We do expect, as Shawn said, four lab mid-single digits. Thank you very much. of the instruments that are used typically in the QA-QC lab, and most of them are connected to our LabX portfolio, which gives our customers a really unique opportunity to do their testing in a very compliant way and using LabX as a complete workflow control system and also aggregate the data to use AI on the next level if they want to. So I think We are very pleased with where we are with LAP, and I think there's more to come. Thank you.

Yeah, good to hear. Okay. And then, Shawn, can you give an update on how margins are tracking versus your plan? Any updated view on the four-year margin expectation? I mean, it seems like you're tracking ahead of plan. Is this reflecting moving pieces on the tariff refunds, or are there other drivers you'd highlight?

Yeah, so just to be clear, the tariff refund topic is excluded from our results, our adjusted results and our guidance. Now, of course, you know, changes in tariff rates is a different story, you know, and so that can be a factor here. But we feel very, very good about the team's execution. You know, we really, I think we've, you know, we've been trying to like really focus on this always in the past. I think if you look at the different initiatives that we have kind of underlying margin expansion, like, you know, the Stern Drive program, productivity programs, cost savings initiatives, they're all, I think, very important. And I think it definitely highlights, I think, some of the culture in the company as well. If we look at Q2, you know, you kind of heard we, if you look at, you know, the operating margin, we were up like 100 basis points if you exclude currency. If you look at that from a A full year perspective in terms of what we're thinking for 2026, you know, we'll probably be excluding currency probably up, you know, 60, 70 basis points, maybe modestly better than what we were thinking before. Now, there's some currency in that, so on a reported basis or, you know, or not excluding currency, it would be up slightly, maybe in the, you know, 10 to 20 basis point kind of range. Okay, okay, appreciate it. That's at the operating margin level, yeah.

I see, okay, thank you.

Yep. Your next question is from the line of Vijay Kumar from Evercore ISI. Your line is now open. Please go ahead.

Hi, guys. Thank you for taking my question. I guess, Shawn, my first one, a quick housekeeping. What was... Did you say FX and M&A contribution in the quarter?

Yeah, it was about, so in terms of, and you're talking, I'm sorry, Vijay, you said, did you say FX and M&A in terms of revenue? That's foreign exchange. Correct. Yeah, yeah, yeah. So I usually don't think in terms of foreign exchange. So the acquisition contribution was about one and a half percent. And then in terms of I think if you kind of like look at our, you know, our reported numbers versus our local currency, it implies 1%, but I think with rounding, it's north of 1%.

That's helpful. Yeah. And I guess when I look at the updated guidance, Shawn, when you do the math, I think the implied exit rate for Q4 is somewhere between 4% to 5%, depending on the midpoint or high end of the guidance. That's a step-up rate. That's a sequential step-up from TQ. I know in the past you've spoken about the backlog and order of visibility rate. Is that what's driving the sequential step-up? What gives the confidence in this fourth quarter, etc.?

Yeah, so I think, yeah, so Vijay, a couple things. So first of all, I think if you If you look at it from a growth perspective, yeah, the implied Q4 is a little bit higher than the Q3 guidance. I think a lot of that also has to do with the fact that Q3 has a much more challenging comparison to the prior year. I kind of called out a little bit the industrial business as an example, and also the Americas had a challenging comp. So I think that's kind of part of it. But I think if you also just look at You know, sequentials in terms of just like, you know, the flow of quarters and dollars from one quarter to another. I feel like the sequentials are, you know, pretty in line with historical sequentials. And then it's, we kind of like exit the year. We feel like, you know, we feel like we have some good momentum entering into the back half of the year. And I think, you know, yeah, when you look at what we're seeing in the business today, we definitely feel good about, you know, the momentum that we're kind of carrying into the second half. So. Thank you.

Your next question is from the line of Michael Riskin at Bank of America. Your line is now open. Please go ahead.

Great. Thanks for taking the question, guys. We want to dig a little bit more into biopharma. It sounds like that's one of the places you're feeling a little better this quarter. I had some comments on process analytics, bioproduction, balances. I just would also expand more on that. Did you see, was it sort of like a, how big of a step up was it? Was it, you know, above your expectations? Anything about where you're seeing, where you're seeing that momentum the most and just expectations for that going forward? You feel like you're early on or you've already sort of like crested it, if you know what I mean?

Yeah. Thanks, Mike. I'll take that question. Let's talk about biopharma and bioprocessing here. I'll start with bioprocessing, which is all, I think, a load. and many more. coming on from these automation providers where we serve them with our automation solution equipment from industrial products that we have. So there's really good momentum there. When you ask about the investments in pharma and biopharma, you're probably referring here to the reshoring activities, I guess. I think, number one, we are extremely well positioned for that because about 50% of all sales go into production. plus about 20% QA, QC. So we cover a lot of the value chain there. And we are in an excellent position with our biopharma portfolio, but also helping on the industrial automation portfolio. We see some good activities, some RQs here related to reshoring, but I still would say it's early index. I think this momentum will continue to pick up in the second half and also as we go into 2027. But yes, there are some activities, probably all I've heard about, companies expanding their manufacturing in the U.S. I think until there will be really some groundbreaking of additional facilities that will still take some time and then will then be more investment coming in the years 27 and 28. For now, again, most of what we see is

Facility Investments and Capacity Expansion in the U.S. Yeah, and another interesting dynamic, too, is like, you know, there's been a lot of questions and talk about replacement cycles. And if you just look at our results in Q2, and, you know, Q1 quarter doesn't, you know, necessarily make a trend, but it was encouraging to see, you know, very strong growth in the analytical instrument business as well as laboratory balances. And if you think about the types of instruments that are typically on a QAQC benchmark, Those categories actually did very well in the quarter here. Okay.

And then maybe just going back to what Vijay was just asking about in terms of the second half outlook, as you just touched on in that answer, you do have a little bit of a step up, but you also talked about in your prepared remarks expectations for Middle East and geopolitics and the macro and all that. Sounds like you're not expecting, you're kind of expecting status quo for that. I guess what I'm trying to get at is it feels like you did get bit by that a little bit in the first quarter, so I just kind of want to get at how much buffer there is in the guide if things do escalate, just maybe a degree of conservatism or areas of upside potentially to offset if the macro Middle East gets a little bit worse, just sort of have a repeat of what happened in 1Q. Thanks.

Yeah, hey, Mike, maybe I'll take that one. Patrick can add some color if you'd like, but... I think there's a little bit of a difference right now. I think one is like there is very strong momentum that we're seeing in terms of customer activity. And so we feel very good about how we're sitting to the second half. Now, we always acknowledge we're pretty short cycle with one and a half months of backlog. But when we look at everything holistically, we actually feel good and we start to laugh. also some some topics from a year ago like academia and biotech which are smaller end markets in general but we just feel like some of these markets are starting to improve we're starting to see growth again in the pipetting liquid handling business which has also been really good it's been a headwind for a while for us if you look at like the q1 dynamic like you mentioned you know absolutely and i think one of the issues there was that you know we had expected um We had expected companies to maybe start the year slow. I think with all the uncertainty that was hitting companies right at the beginning of the year, you know, one of the things we kind of felt was that a lot of customers were holding off on finalizing budget commitments within their organization. So a lot of things were also getting held up as kind of like a generic statement. Right now, it seems like, you know, people have their budgets. They know what they want to do. There are the projects and and while things can always change, we feel like there's pretty good momentum going into the second half of the year. And then I think we'll learn a lot more about what it means over the next three months. And it might be more of a question on what it could mean for 2027. But I think the reality is that there's a lot of dynamic topics going on always in the world and we'll continue to monitor them. But regardless of the environment, I feel like the team is trying to stay focused on what we can control and executing well.

Okay, thanks. Appreciate it.

Yeah. Your next question is from the line of Jack Meehan at Operon Research. Your line is now open. Please go ahead.

Thank you. Good morning, guys. I had a couple of follow-up guidance questions for you. The first is, so if I just look at EPS, you know, you beat the second quarter by, you know, about $0.70, and the midpoint of guidance is going up by $0.70. So it seems like a lot of the raise is related to what you saw in the second quarter. So just trying to square that with your comment that overall it seems like conditions are improving. Just is that conservatism, or are there other offsets that you're building at this point?

Yeah, I think it's fair, Jack. I mean, I think if you kind of like look at how the second half, like very happy with our Q2 results, of course, very happy to raise guidance for the full year, very happy with the momentum we're seeing in the business. Acknowledge if you're trying to look at what your second half model looks like today versus three months ago, it looks like maybe there's a little bit of conservatism or moderation slightly. It's not reflecting anything we're seeing in the business, but we feel like maybe that kind of de-risks any concerns out there for any of the geopolitical stuff, and we feel generally pretty good as we kind of go into the second half of the year.

Great. And then I wanted to poke a little bit more at the core industrial business. You talked about chemicals a bit. I'm actually not sure if some of that overlaps in the lab, but we now have six months in a row of You know, U.S. manufacturing PMIs over 50. So it felt like we might see a little bit more momentum there. I was wondering if you'd just talk about more like the macro sensitive stuff, like if you think there's still some of that correlation or if there's a reason why maybe it diverges for some reason.

Yeah. Yeah, no, it's a good question because, you know, if you kind of look at, well, first of all, there's a couple different things. The one thing that, you know, isn't necessarily evident and the results until you like look internally and unpack them is like the categories that are really supporting automation and digitalization around the world are actually growing very well. And we see that. We also, while we're less correlated to PMIs than we were 10 years ago, we also recognize that, you know, when the economy does better, we generally should do better as well too. And even though there's a little bit of a delay, but the one thing that maybe doesn't jump out is that you know within industrial there can be small pockets of project activity and one of those pockets is our transportation and logistic business and the reality is there's just like some timing going on with with with larger customer projects and and that's you know that's kind of like mitigating some of the other positive results you're seeing in that business but overall I we feel Sound good. Thanks, Shawn.

Your next question is from the line of Luke Sergott at Barclays. Your line is now open. Please go ahead. As a reminder, please check that you are unmuted. Your next question is from the line of Casey Woodring at JPMorgan. Your line is now open. Please go ahead.

Great. Thank you for taking my questions. Now that we're in the back half of the year, curious just how reshoring conversations have trended, if those have picked up at all, and if you would expect orders to roll through here before the year ends?

Yeah. Keiji, good morning. I mean, I think I'm partly at least interested in one of my former answers. Yes, we see some activity there with RFQs that are related to reshoring. Again, as customers are expanding manufacturing in the United States, that is a good indication that there's more business to come. Again, the larger factories and investments still have to be made, so there are still early innings. But we truly see the farmer-bio-farmer investments as Thank you very much. We are pretty positive that this will carry well into 2027, 2028.

Got it. That's helpful. And then, Patrick, can you just walk through how performance trended in the Americas by business segment and market? Curious on how things like academic and government and biotech trended, right? Like you mentioned pipetting, return to growth. So within that 1% organic number in Americas, we'd just be curious to hear what drove that and maybe what's still lagging and and how you would see that region playing out in the back half. Thank you.

Maybe, Shawn, you can repeat again how you guided Americas for Q3 and fiscal year.

So the Americas, the guide for Q3 is low to mid-single-digit, but again, we're lapping 9% in the prior year. And, you know, if you kind of like look at the different end markets, I don't know, Patrick, If you want to contribute here, but I can kind of run with it if you want. In terms of the end markets, we're certainly seeing improvement in some of the areas that have been softer, like academia or biotech. Our pipetting business is a good example of that. It's larger exposures for that business, smaller for the Americas overall. So that feels pretty good. Bioprocessing has been a very hot segment in the U.S. for us. a lot of the different like hot segments as well that pop like process analytics particularly benefits from like like power semiconductor are also doing very well and then if you think about like these trends around industrial automation digitalization good momentum there as I mentioned and you know like Patrick said you know unshoring we're well positioned for it but still probably very early innings there and then what was also nice is just like I kind of commented on earlier about like the If you think about the value chain, that QA, QC space where analytical instrumentation, that was good momentum also in the quarter. I think the setup, the trends continue to, I think, go generally in a good direction. We do get lumpiness from time to time from things like retail, but if you look beyond that, the underlying business looks positive today. Great, thank you.

Your next question is from the line of Callum Tishmarsh at Morgan Stanley. Your line is now open. Please go ahead.

Great. Good morning, guys. Thanks for the question. Maybe just following up on Tycho's question on price, could you maybe just break out a bit more specifically which segments and geographies you've been more aggressive with on prices as we think about performance in the quarter? and then obviously that 2% I believe is the long-term assumption for price. But just given the uptick in end market health and some of the innovation you've spoken to, any reason why that couldn't set about 2% when we think about 2027 and beyond?

Yeah, we'll talk probably more about those types of assumptions at our upcoming analyst day, but I certainly wouldn't expect us to come out with a higher price increase guidance than 2%. We feel pretty good about that one for the long term. In terms of breaking it down, Callum, we typically wouldn't get into too much detail, but maybe a good way to think about it is that we tend to do well in most geographies in the world, but geographies where there's higher inflationary pressures are going to have higher price increases. For example, in the United States, of course, we had a lot of The tariff pressures, you know, a year ago. So, of course, the U.S. would have had a higher price realization than some of the other geographies.

Great. And I know that, you know, relatively small portions of the business, but maybe just talk us through in a bit more detail what you've seen in high growth areas like bioprocess and semis. And then for those areas, I guess, are you comfortable with the portfolio you have today of products, or would that be apt to perhaps offer something broader for the future? Thanks a lot.

Thanks, Callum. These hot segments, whether it's semiconductor, battery, GLP-1, and others, these are all low single-digit contributors to overall sales, but they see really good growth. Of course, our market teams are really focused on solutions for these areas. So I would say we play well in them. If you look at the U.S., as Shawn said, semiconductor definitely is a really good segment. GLP-1s, the whole biopharma segment. If you go to other areas around the world, if you go to, for example, to China, the battery segment is really also back there to very good momentum and also investment in biopharma and GLP-1s. But don't think this is the larger part of our business. Again, the broader part of our business is in pharma, biopharma, in chemical and food and other areas. But these hot segments are important for us from a perspective that we really want to maximize our growth in these areas as well. And we do very strategic investment when it comes to solutions for these end markets and working very, very close with customers Thank you.

Your next question comes from the line of Izzy Kozlowski from Goldman Sachs. Your line is now open. Please go ahead.

Hi, thank you for taking my questions. So first, I guess, maybe touch on the lab business and what's driving that improvement. Are you starting to see pharma invest more heavily in sort of lab-in-the-loop and automation capabilities as they look to shore up some of their AI strategies? Or would you characterize the improvement in pharma and lab as just kind of general certainty coming back to the markets?

Yeah, look, hey, look, when you look at LAP, I mean, a lot of it is, of course, driven by the innovation we have brought out, not only in terms of automation and digitalization capabilities, but that's a good part of it as well. You got that? I mean, when you think about how pharma companies are automating their experimental setups, they'll use a lot of our equipment together with some of the automation partners that we have. to automate their experiments and to really try towards higher throughput. What is essential there is that they also have an informatics platform like LabX that collects all the information, and then they can use it on an aggregated level to drive the next experimental conditions, et cetera. But Lab overall is benefiting across the board, not only from automation, but also from the number of new products New features with the products, innovation that we released over the last years, and it goes almost across the entire value chain in the lab. Because think about the more early research part. We launched a new semi-automatic pipette this year, which has really received really well in AutoChem, which has launched a new solution that I think will drive some good growth moving forward. And then on the lab product categories, we have also launched a lot of new products. So I think there is... Given that we have also a big exposure to the QA-QC market, that will be a good moment for us moving forward.

And I think part of your question was also the uncertainty. I think the increased certainty certainly helps. We hear that a lot in terms of biopharma generally spending more than where there was a lot of hesitation at the beginning of the year.

Great, that's super helpful. And then maybe touch on your service business, you know, how that trend in the quarter and then updated expectations going forward.

Yeah, service in the quarter grew, what was it, nine?

It was nine percent. Organically, it was seven.

Organic seven. So again, really growing faster than our products at the moment. And we're really proud of that. We continue to make really strategic investments. In our service business, we have still a good opportunity to continue to outgrow the rest of the market, number one. Our service is an important business for us because it drives across a lot of customer loyalty. Our net promoter scores are very high in this area. We launched also new capabilities in service. For example, our service engineers have now access to an AI-supported knowledge base where they can basically use all of the internal information that we have regarding earlier service records about R&D material, application notes, etc. So whenever they go out and service a product, they basically can use these AI-supported tools to do best-in-class service, which drives, of course, our first fixed ratio a lot and also drives customer loyalty up. There's a lot of things that customers can get, but I say only at MT because we have access to this data, we have access to solutions that none of our competitors have when it comes to servicing instruments that I install base. And there's still a growing opportunity for us moving forward. So I'm very optimistic that services will continue to grow. Last year, we, for the first time, exceeded $1 billion revenues in services, and that's at a high single-digit growth rate.

Yeah, so to put it in perspective for the year, it's probably going to be I just have one question.

My understanding is the U.S. Pharmacopoeia had some material revisions that went into effect earlier this year around pharmaceutical weighing requirements. I've seen some analysis that's describing this as quite significant. So, and I believe the effective date for compliance started in the first quarter this year. So, is this an influence that you would spike out? If so, you know, what sort of activities is it driving at customers, and how is Mettler exposed to such a change? Thank you.

Yeah, thanks. That's a very good point. I mean, it's not only the U.S. Pharmacopeia we have seen already last year and earlier this year, the versions of the Japanese Pharmacopeia and the China Pharmacopeia last year, which actually had the same revisions when it comes to weighing regulations, which helped to drive incremental growth. And we are extremely well positioned with our recently launched portfolio of new lab balances to help our customers to support the move complying with these regulations.

Your next question comes from the line of Dan Leonard at RBC. Your line is now open. Please go ahead.

Thanks a bunch. Hello. Patrick, I would just like to revisit your comments on emerging markets outside of China, that high single-digit growth rate. Can you offer some more color? Is that all volume? Do you have pricing power? Anything to share on service attachment rate and the long tail of emerging regions?

Yeah, very good question, Dan. Thank you. Yeah, we're growing high single-digit in these emerging markets outside of China. and, of course, if you think about, for example, India has great momentum. If you think also regions outside of Southeast Asia, if you think about Latin America, Mexico, Brazil has already received pretty good growth and also good investments of many companies out there. There is also some reshoring, homeshoring, but let's say reshoring ongoing also in these regions. which really helps us to benefit a lot from the growth opportunities across our platforms. So this is a play that goes across, I mean, if you think about the end markets, it goes across pharma, but also chemical, and the chemical also, if you think, for example, about investments into the battery segment where manufacturers have expanded their footprint outside of China into other areas, into Asia Pacific, and that comes along with a lot of investment in new instruments and but also of course related services. I wouldn't say that there's a significantly difference in terms of connect rate when it comes to the laboratory instruments outside of or in these emerging markets compared to other regions. So that of course then also drives an additional incremental revenue opportunity for us moving forward and also recurring revenues.

And we also do well on price as well in these markets. Like I said before, it's very much a global topic for us where the value proposition tends to resonate globally, which is great.

And then as a follow-up, does the opportunity in these emerging markets just map towards manufacturing GDP by country, or are there any areas of disproportional opportunity that you would highlight?

I think India, I mean, certainly is a standout, right? I mean, at least, you know, the last couple years, if you look at the growth, it's been really, really impressive. It's certainly a geography that we, you know, prioritize on. And we just think we have a lot of great opportunity there. And, you know, if you look at the underlying, some of the, you know, the near-shoring and opportunities with generics, those types of things, there's just a lot of good things on the horizon there. But, I mean, hey, all the other areas too we differentiate on as we allocate resources and you know not to repeat them all but Patrick mentioned a lot of them but like but they're all whether they're in the you know Asia, Eastern Europe, Latin South America there's there's a lot of great opportunity and one of the strengths of Mettler has always been that we have direct sales organizations in these individual countries so that we can really understand the local markets and really have teams that really have that application know-how and work with the local customers and that really makes a difference.

Thank you very much.

There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Adam for closing remarks.

Thanks, Jonathan, and thank you everybody for joining us this morning. Please feel free to reach out to me if you have any follow-up questions, and I hope you all have a great weekend. Take care.

This concludes today's call. Thank you for attending. You may now disconnect.