Mettler-Toledo International Inc. — 2024 Q1

Yes. Thanks, Dan. Thanks for the question. I think it's pretty much as you interpreted. It's largely related to doing a little bit better on the shipping delays that we had in Q4. Of course, we did a little bit better than that in terms of Q4 results in general. But even though we're not seeing any negative changes in the business. We also prefer to be a little bit cautious here until we get closer to the second half and have a little bit more visibility.

I can take this, Dan. Look, we have been definitely pleased that we have seen a somewhat better result in Q1 than we had expected. That said, we still expect it to be quite weak. I mean, as Shawn said, we'll have more than 20% decline in China second quarter based on the very tough compares we see against Q2 last year and the years before where there has been quite heavy investment in China. There was significant spending during COVID and also some, of course, inventory buildup, et cetera.

Yes. And just to maybe specifically address the comment about potential deceleration. I think it's important to also just look at maybe the multiyear comparisons here and if you just like look at the trends in terms of like dollar terms or renminbi terms, we're kind of hitting a high watermark a year ago in Q2 in terms of what we're lapping in terms of comps. So actually, the comp level that we have in Q2 is a more difficult comp than we had in the first quarter.

Yes. Thanks, Jack. Hey, the rest of it, we -- despite being down 6%, excluding the shipping benefit, we're pleased we did better than expected. We kind of expected customers to start a little more cautiously this year. I think they did start cautiously, but we're glad that they didn't -- they weren't as cautious as maybe we were thinking at the beginning of the quarter.

Yes, sure. So let me start by business area. So our Q2 guide for Lab is to be down low single digit and for the full year to be up low- to mid-single digit. Product inspection, I don't know if I could also maybe add, if you exclude the shipping delay for the full year, that would be flattish.

No. Vijay, thanks for the question. No, I mean, we're not seeing -- I want to be clear, we're not seeing anything negative or new negative changes in the business. We just feel like it's still a little bit early in the year. We only have 1.5 months' worth of backlog, and we're just a little bit cautious here kind of going into the second quarter.

Thanks for the question, Vijay. Look, as Shawn just said, we have about 1.5 months of backlog. So we have a pretty fast turnover in most of our businesses. When we look at the second half, again, the comps will get much easier for us based on what we have seen last year. So that, of course, implies a positive growth for the second half.

Yes. Mike, this is Shawn. Maybe not to entirely repeat what we just said, but probably we'll echo it to a large degree. I think it comes back to this sitting on pretty much 1.5 months' worth of backlog. We do see good activity in our pipeline. As Patrick, I think, mentioned before, we are seeing order cycles being elongated a little bit in the first quarter.

Yes. So in terms of the first quarter, as we kind of said, we benefited about 6% in terms of sales from the shipping delay benefit. Our expectation was that we were going to benefit about 5%. So we had a 1% benefit. So you can kind of maybe draw your own conclusions of what that would have meant or not. But maybe more importantly, if you just take that reported number of sales in Q1 and you look at our guidance for Q2, regardless of shipping delay benefit. With that benefit, the reported number is actually a very similar dollar number sequentially to what we see in the second quarter.

So I want to dig into the Industrial performance in the quarter. You mentioned some strength in Americas and 1Q on some project level activity, but then you also said that you expect core industrial to be down high singles in 2Q. So can you just kind of walk us through the drivers of that core Industrial business in the first half of the year? Were there any one-timers that we need to be aware of in 1Q, for example?

Thank you, Rachel, and I'll start and maybe let Shawn chime in as well. Looking at it, we are very proud of the performance of our Industrial business. I think it comes down to really the outstanding portfolio enhancements we have made over the last year. I mentioned the Industry 360 terminal and other things we launched driving productivity for our customers, and they really pick it up nicely.

Yes. Maybe just to get to the other part of your question, Rachel. The first quarter in the U.S., certainly, that project activity is lumpy. And so we certainly will not see that in the second quarter. So there's an element of that. And then maybe the other point I make here is that in core Industrial, it has a larger mix of business weighted towards China versus our other businesses.

And then just for my follow-up, I want to dig into some of the biopharma commentary that you gave. So you mentioned some of slower spending to start of the year, we've been hearing that across the sector this earnings season. But can you just unpack for us what does guidance assume in terms of those biopharma customer budget starting to open up? And then have you seen any activity level from biopharma customers pick up in April and then early May here from that group as well?

Well, look, when we talk about biopharma, I think the business we really focus on here is our Process Analytics business. Biopharma definitely still has been soft in the first quarter, and we also expected given the year, biopharma customers to be soft in the second quarter as well.

And the other part of biopharma, of course, pipettes and we certainly have seen improvement in pipettes relative to some of the destocking issues that we were dealing with last year.

Yes. Very good. Thanks. Matt, I mean, again, we are very proud about the performance of our service business. We had 6% growth in the first quarter against a very strong growth in the first quarter last year. We see strong demand for our services. We continue to build out the service portfolio that we can deliver to our customers. We compete extremely well. We still have a lot of opportunity with the installed base that we have out there, connecting more of our services to the installed base, and we have dedicated marketing programs in place to connect more of the business.

Yes. Matt, this is Shawn, maybe I'll take that one. So we're very pleased with the execution from our team in Europe. We have our most direct sales organization there in terms of direct channel to the customer. And I tend to think we always feel the best benefit of our Spinnaker sales and marketing programs in Europe. So I think that's one of the things that we feel very good about.

First, great to see the recapture of the shipping delays coming in above your expectations and recapturing pretty much all of that lost revenue. Just when it comes to the new logistics provider, would you say that situation is fully resolved? You got the protocols and processes in place to move smoothly going forward?

Yes. Thanks, Catherine. I'm really happy how the team performed in Q1 and how we could resolve that issue that we had in Q4. Actually, I'm looking at all the major KPIs that we have bought I would say, today, we are in a very, very good situation. We can, of course, keep a very close eye on it because a couple of months of great performance is not enough for us to say, everything is locked down. But happy with the performance right now. Our team, our own team has been really deeply engaged with fixing the situation.

And then maybe on the second quarter guide, it's implying a slower sequential increase than what you've typically seen historically. So can you just talk through any areas of conservatism that you feel are in the second quarter guide? It looks like maybe on the Industrial side is where that's a slower uptick sequentially than historically, but curious if you could just give some more color there.

Yes, sure, Catherine, maybe I take that one. So of course, there was the shipping delay benefit in Q1, but I -- but if you exclude that, I think like the multiyear CAGRs still look pretty similar between Q2 and Q1.

Yes. I mean I think if you like look at our -- like if you look at our full year guide for China, we're still expecting to be down high-single digit. I think if you try to break it out between the businesses, maybe on a full year basis, Industrial might be a little bit better than that, than Lab. But I think that's largely because of what we saw in Q1.

Yes. And we see a very good engagement with customers in China as well. The sales team has really good engagement. We monitor very closely. So there's a lot of customer interest out there that I think will help us also to get back to that growth in the second half.

Yes. And then to kind of feed off that, our team there has just always been such an agile team to pivot to where the growth opportunities are. And certainly, that was a topic we were talking about throughout this week with our -- at the executive level as just some of the programs that they're doing locally to identify those pockets of growth and go after them. So we feel like we're well positioned as things improve.

Yes. So I kind of mentioned earlier in one of the other questions. Pricing came in pretty much as expected in the quarter at 2%. We're still kind of holding our guide for the full year on pricing at 2%. Of course, we're going to try to do better than that. I think all the things we're doing on innovation certainly continues to enhance our value proposition. And so that always helps. I see good execution on this topic as well, too. So we'll see how it plays out for the rest of the year.

Yes. Look, I mean I think we saw very good interest in our products and performance, as we said, better than expected throughout the end markets and product portfolio. If I would point to maybe one segment, it could be Food, actually, the food market, we saw really good interest for our product inspection business that also drove a little bit of the better performance there.

Joshua, maybe I'll take that one. So we'll start with price. So as I mentioned, price came in as expected in the quarter, it came in at 2%. So we were happy with that. We expect price to be 2% again in Q2 and for the full year, which is kind of consistent with our previous guidance. And as I kind of mentioned, we do feel very good about our value proposition, all the stuff we talked about earlier about innovation really strengthens that value proposition, so that helps to always support our pricing in the market.

Great. Thank you, everybody, for joining us this morning. If you have any follow-up questions, please feel free to reach out to me. And I hope you all have a great weekend. We'll talk to you soon. Thank you.