The conference operator, Sarah, introduces the Mettler-Toledo First Quarter 2024 Earnings Call and welcomes the participants. Adam Uhlman, Head of Investor Relations, is joined by CEO Patrick Kaltenbach and CFO Shawn Vadala. The call will include forward-looking statements and non-GAAP financial measures, and a reconciliation of these measures will be provided. Patrick thanks everyone for joining the call.

The company's first quarter financial results were better than expected, with a strong performance across most product categories and geographies. The recovery of delayed product shipments from the previous quarter also contributed to the positive results. However, there is still uncertainty in the global economic and geopolitical environment, and the company maintains a cautious outlook. Sales are expected to return to growth in the second half of the year. The financial results and guidance for the year are covered by Shawn Vadala, who reports that sales were largely unchanged from the previous year, with a 6% growth in Europe, 3% growth in the Americas, and an 8% decline in Asia/Rest of the World, with a 19% decline in China.

In the third paragraph, the company discusses their sales performance in the first quarter, excluding the benefit from recovering their fourth quarter shipping delays. They estimate a 6% decline in sales, with the Americas down 1%, Europe down 5%, and Asia/Rest of the World down 12%, including a 21% decline in China. They also provide a breakdown of sales growth by product area, with laboratory sales increasing 2%, industrial sales remaining flat, and food retail declining 9%. Service sales grew 6%, but excluding the Q4 shipping delay benefit, laboratory product sales declined 6%, industrial sales declined 3%, and food retail declined 15%. Moving on to the rest of the P&L, the company reports a 30 basis point increase in gross margin, with improvements in productivity, pricing, and mix, offset by lower volume and currency headwinds. R&D and SG&A expenses remained relatively unchanged in local currency, and adjusted operating profit was flat with the prior year. The company also mentions their effective tax rate of 19% and other financial details.

The article discusses the financial performance of the company in the previous quarter, highlighting a 3% decline in fully diluted shares and a 2% increase in adjusted EPS. The reported EPS also decreased due to various factors such as purchase intangible amortization and restructuring costs. The company also saw a significant increase in adjusted free cash flow, attributed to favorable working capital. The company remains cautious in its forecast for the second quarter and expects a decline in sales in China, as well as potential challenges from the economy and geopolitical risks. The company also provides guidance for the second quarter, expecting a decline in local currency sales and an approximate 2% headwind from currency fluctuations.

The company expects local currency sales to grow by 2% in 2024, with adjusted EPS in the range of $39.90 to $40.40. They anticipate a headwind to sales and adjusted EPS growth due to unfavorable foreign exchange. Other details include estimated amortization, interest expense, and tax rate. The Lab business saw a decline in sales, but the company remains confident in their strong product portfolio and sales program.

The company's go-to-market approach has been a competitive advantage in a period of reduced demand. Industrial sales declined 3%, but core industrial products performed better than expected due to upgraded portfolio and growth opportunities in onshoring and nearshoring. The product inspection business also had strong performance, while food retail sales declined as expected. In the Americas, sales declined slightly, but there was strong project-related growth in industrial. In Europe, sales declined 5% and were in line with expectations due to soft economic indicators and potential risks from the conflict in the Middle East.

The company had strong results in all regions, including Asia/Rest of the World, and is well positioned to capture growth opportunities. The CEO is optimistic about the long-term growth potential of the company, citing advancements in the life science and analytical tools industry, as well as opportunities in fast-growing segments. The company's broad portfolio, commitment to innovation, and ability to serve customers throughout the value chain are all key factors in their success.

The company has invested over $0.5 billion in research and development to add automation and digitalization features to their products, increase productivity and provide insights throughout the value chain. They have recently launched a new portfolio of laboratory balances which feature increased robustness, seamless data management, improved sustainability, and up to 30% better measurement and performance. The LabX software also connects the balances to their analytical instruments to automate workflows and ensure secure and compliant data capture. These innovations have contributed to the company's leadership in the market and they are excited about their future growth potential.

The company has a strong competitive advantage in the analytical instruments market, providing 40% of instruments used in quality control labs. They have recently launched new instruments with advanced automation and digitalization features, such as the EVA titrators for efficient water content analysis and the DSC 5+ with a fully automated sample changer. They also have a new automated sample prep solution, the InMotion Karl Fischer Six, which addresses the specific customer need for analyzing multiple samples with one instrument. Automation has been a key factor in the company's success, particularly in the thermal analysis market.

The instrument increases efficiency and generates reproducible results with less resources. The software automatically detects and evaluates thermal effects, saving time and providing consistent results for users of all levels. The company's industrial business has successfully integrated automation and connectivity features into its products, with a focus on terminals and load cells for seamless integration into factory automation systems. Their Industry 360 terminal is an ultra-fast weight indicator that connects scales and sensors and integrates pre-programmed weighing applications into a customer's programmable logic controllers. This saves customers time and eliminates the need for additional equipment. The company has also expanded its capabilities in pharma manufacturing IT systems to simplify and standardize integration of their weighing solutions.

The company has launched new advanced terminals and hygienic floor scales that are well-suited for industries like pharma. They have also introduced new products in their product inspection business, including a series of X-ray inspection technology. The success of their food retail business has been attributed to new product introductions, such as the FreshBase scales and the upcoming FreshBase Plus AI scale. The company has accelerated their innovation investments to capture growth opportunities.

The company's investments have strengthened their portfolio and increased their value proposition for customers. They are now opening the line for questions from analysts. The company has raised their organic guide and bottom line expectations, mainly due to improved shipping delays from the previous quarter. They expect continued challenges in China in the second quarter, but anticipate some deceleration and easier comps. They have not seen any significant improvement in the Chinese market yet.

The company is pleased with their Q1 results, which were better than expected. However, they anticipate a weak Q2 due to a decline in China's market and tough comparisons from last year. They believe they are well-positioned to compete and gain momentum as the market recovers. The company's Q2 comps are more difficult than those in Q1, and they have not yet seen an impact from the announced stimulus.

In the first quarter, the company posted flat local currency growth, with about a point coming from better logistics capture. The rest of the upside was due to customers being less cautious than expected and strong execution by the organization. For the second quarter, Lab is expected to be down low-single digit and for the full year, up low to mid-single digit. Product inspection is expected to be flat for the full year if the shipping delay is excluded.

In Q1, the company exceeded expectations by 500 basis points and has raised guidance by 50 basis points. However, there have been no changes in the business that would warrant caution for the rest of the year. It is still early in the year with only 1.5 months' worth of backlog.

The speaker expresses caution going into the second quarter and mentions the need for more visibility before reassessing the second half of the year. The backlog rate for Mettler is typically around 1.5 months and the company is optimistic about growth in the second half, but wants more visibility before making any predictions. The company is seeing good customer engagement and interest in new products, but sales cycle times are longer. Overall, the company is confident in its position and believes it can achieve its goals for the second half.

The speaker asks about the company's expectations for market conditions in the coming year. The company is looking for indicators such as backlog, pipeline activity, and order cycles to gain confidence in the reopening of markets and acceleration in the second half of the year. They also mention easier comparisons in the second half and hope to see market development in the second quarter.

The speaker discusses the uncertainty and risks in the world, including economic and geopolitical factors, and mentions that the company's first quarter earnings beat expectations due to the shipping recovery. They also provide insight into the impact of the shipping delay on the P&L and explain that the second quarter EPS guidance is higher than the first quarter despite a 2% headwind from foreign currency. This is attributed to the company's cost savings and productivity measures.

The company expects gross margins to be down 20 basis points in the second quarter due to lower volume and higher transportation costs. However, pricing and operating margins are expected to improve for the full year. The industrial segment had a strong performance in the Americas in the first quarter but is expected to decline in the second quarter. There were no significant one-time events in the first quarter that impacted the core industrial business.

The speaker is proud of the performance of their industrial business, attributing it to portfolio enhancements made over the past year. The decline in Q2 is due to a tough comparison to strong business in the same quarter last year. They are not concerned about the attractiveness of their products or customer engagement. The decline is also influenced by lumpy project activity in the US and a difficult comparison in their China business. They have seen slower spending in the biopharma sector at the start of the year.

The speaker discusses the performance and expectations for the biopharma sector, specifically the process analytics and pipettes businesses. They mention that while biopharma has been soft in the first quarter and is expected to remain so in the second quarter, there is hope for growth in the second half due to easier comparisons. They also mention some inventory issues and recent interest in single-use sensors for biopharma customers. The speaker also briefly touches on the services business, stating that it was strong in Q1 and progress has been made on their services initiative.

The company is proud of their 6% growth in their service business and sees strong demand for services. They plan to continue building their service portfolio and connecting more with their installed base. Their operating profit on services is higher than the average and they plan to invest more in this area. They are cautious about Europe, but comps are helping in succeeding quarters.

The company is pleased with the execution in Europe and the team's ability to benefit from Spinnaker sales and marketing programs. However, there is uncertainty due to soft economies and elevated energy costs. The team is doing well and capitalizing on opportunities in hot segments like semiconductor and lithium battery. The company has recaptured the lost revenue from shipping delays and the situation with the new logistics provider is fully resolved.

In paragraph 24, Patrick Kaltenbach discusses the protocols and processes that have been put in place to ensure smooth operations going forward. He is pleased with the team's performance in Q1 and the resolution of the issue from Q4. They are closely monitoring all major KPIs and have seen strong collaboration between their own logistics teams and the external provider. While everything is currently running smoothly, there are continued performance improvement plans in place to ensure outstanding customer experience. The second quarter guide may appear to show slower growth, but Kaltenbach assures that they have monitoring KPIs in place to address any potential deviations.

The speaker provides more information about the slower uptick in the industrial side, stating that excluding the shipping delay benefit, the multi-year CAGRs are similar between Q1 and Q2. They mention that China's higher percentage of the business and higher comps may be affecting the sequential numbers. The next question asks about the underlying improvement in China, and the speaker responds that the full year guide is still expecting a high-single digit decrease.

The speaker believes that the industrial business will perform better than the lab business on a full-year basis, but both will likely see a decline in Q2 due to longer-term comp issues. However, the lab business is expected to benefit more in the second half of the year compared to the industrial business. The speaker also mentions that the market in China is uncertain and they are waiting for another quarter to make any predictions. The government's efforts to instill confidence and encourage investment may lead to long-term growth opportunities in China.

The company is well positioned for growth due to their alignment with government priorities and trends in automation and digitalization. The sales team has good engagement with customers, especially in China. The team is agile and able to pivot to pursue growth opportunities. Pricing was in line with expectations at 2% and the company is aiming for 2% for the full year. Margins may be impacted by volume fluctuations, but the company is focused on innovation and execution to enhance their value proposition.

The company is doing well in terms of material costs and expects to see modest benefits throughout the year. They have a good balance between driving productivity and reinvesting in the business. The team will be focused on growth and investment opportunities in the coming months. In the latter part of Q1, the company saw increased interest in their products and better-than-expected performance across end markets and product portfolio.

The speaker discusses the company's performance in the food market, citing strong interest in their product inspection business, driven by their new product portfolio. They also mention success in the mid-range market and good engagement across all end markets and geographies. The speaker then comments on price, stating that it came in as expected at 2%. They also mention using tough times to support share gains and note success in their go-to-market strategy.

The company expects a 2% increase in price for Q2 and the full year, supported by their strong value proposition and innovative products. They are executing well and gaining market share, especially in Europe, through their Spinnaker program. The new Spinnaker 6 program is creating momentum and focus within the organization.

Adam Uhlman thanks everyone for joining the call and invites any further questions. He wishes everyone a great weekend and the call concludes.

This summary was generated with AI and may contain some inaccuracies.