Q2 2021 Mettler-Toledo International Inc Earnings Call

All participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need the press star 1 on your telephone. Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today Ms. Mary.

Mary Finnegan. Please go ahead.

Thank you and good evening, everyone I'm Mary Finnegan I'm responsible for Investor Relations of Mettler, Toledo and happy to welcome you to the call I'm joined on the coldest day with Patrick Kaltenbach, our CEO and Shawn the della our Chief Financial Officer, Let me cover just a couple of the admin.

Please of matters. This call is being webcast and is available for replay on our website a copy of the press release and the presentation that we will refer to on today's call is also available on the website.

Let me summarize the safe Harbor language, which is outlined on page 2 of the presentation.

Statements in this.

Administration, which are not historical facts constitute forward looking statements within the meaning of the U S. Securities Act of $19.33 in the U S Securities Exchange Act of $19.34 of these statements involve risks uncertainties and other factors that may cause our actual results levels of activity.

Performance or achievements to be materially different from those expressed or implied by any forward looking statements for discussions of these risks uncertainty. Please see the discussion in our recent form 10-K, and other reports filed with the SEC from time to time.

All of the forward looking statements are qualified in their entire day by reference to the factors discussed under the captions factors affecting our future operating results and in the business and management discussion of an analysis of financial condition and results of operation sections of our filing he just 1 other items on today's call.

The may use non-GAAP financial measures more detailed information with respect to the use of an differences between non-GAAP financial measures and the most directly comparable GAAP measure is provided in the form 8-K, I will now turn the call over to Patrick.

Thanks, Mary and good evening of everywhere.

I am pleased true host the call Tonight, which we are doing from Switzerland shoulder Mary of share with me too.

I'm excited to report a note of port of excellent results.

Several of factors contributed to these results first demand of our markets was very strong and broad based.

Second we were able to capture these gross opportunities as the key priority since the onset of the pandemic walls to stay close in close contact with all of our customers and be strongly position towards customer demand recovered.

And finally, the teams around the world Heft of an excellent job and execution and customer support.

Our supply chain team has had more than the share of challenges due to 2 parts availability and logistics complications, while our market organizations have executed well to meet increasing customer demands.

Our teams have shown resiliency and agility and the environment where conditions changed rapidly.

Now, let me turn to all of our financial results. The highlights on page 3 of the presentation and you can see we had a great quarter.

Local currency sales growth was 27% and we had very strong broad base growth in all regions and most product lines.

With the exception of this exceptional sales growth and combined with focus execution of our margin of initiatives the achieved of 45% growth and adjusted operating income and 53% increase and adjusted EPS.

Cash flow generation was excellent in the quarter.

The amount of our end markets remains of positive fulfill all of our growth for the remainder of the year of would reflect more challenging comparisons than we have in the first half of the year.

The are making incremental of investments, which will position of very available future growth.

The remain confident that we can continue to gain market share and the level of strong results in 2021 and beyond.

Let me now turn into Sean to cover the financial and guidance details and then I will come back with some additional commentary on the business sure. Thanks, Patrick and good evening, everybody sales were $924.4 million in the quarter, an increase of 27% in local currency.

On the U S dollar basis sales increased 34% as currency benefited sales growth by 7% in the quarter.

The Penndot Tech acquisition contributed approximately 1% of sales growth in the quarter.

On slide number 4 we show sales growth by region.

Local currency sales increased 29% of the Americas, 23% in Europe, and 28% in Asia rest of the world.

Local currency sales increased 35% in China in the quarter.

The next slide show of sales growth by region for the first half of the year.

The local currency sales grew 23% for the first 6 months with of 22% increase in the Americas, 18% in Europe, and 28% growth in Asia rest of the world.

On slide number 6 we summarized local currency sales growth byproduct area.

For the second quarter laboratory sales increased 35% industrial increased 20% with core industrial up 27% and product inspection up 9%.

Food retail increased 9% in the quarter.

The next slide shows local currency sales growth byproduct area for the first half.

Laboratory sales increased 27% industrial increased 19% with core industrial up 27% and product inspection up 7% food.

Food retail increased 11% of the first 6 months.

Let me know move to the rest of the P&L, which is summarized on slide number 8.

Gross margin in the quarter was 58.1% of 50 basis point increase over the prior year level of 57.6%.

We benefited from volume in pricing, which was offset in part by challenges in the global supply chain, namely higher transportation logistics and raw material costs.

These items are even more challenging than we had expected. The last time, we spoke 1 additional factor as you compared to the prior year. We now have in our cost structure of the impact of the temporary cost actions, we undertook in 2020.

R&D amount of to $42.6 billion in the quarter, which is the 28% increase in local currency over the prior period the impact of the temporary cost reductions undertaken last year as well as the timing of project activity contributed to this increase.

SG&A amounted to $239 million, a 20% increase in the local currency over the prior year.

The impact of the temporary cost savings that we undertook last year higher variable compensation and increased investments in sales and marketing where the principal factors driving the increase.

Adjusted operating profit amount of to $255.3 million in the quarter, a 45% increase over the prior year amount of $176.6 million.

Adjusted operating margins increased 200 basis points in the quarter to 27, 6%. We're pleased with this margin growth, which reflects excellent sales growth combined with focused execution on our margin initiatives.

Currency benefited operating profit growth by approximately 7%, but had little impact on operating margins.

A couple of final comments on the P&L.

Operating I'm, sorry, amortization amounted to $16.2 million in the quarter.

Interest expense was $10.4 million in the quarter and the other income in the quarter amounted to $2.7 million, primarily reflecting non service related pension income.

Are effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19.5%.

Fully diluted shares amounted to $23.5 million in the quarter, which is a 3% decline from the prior year.

Adjusted EPS for the quarter was $8.10.

A 53% increase over the prior year amount of $5.29.

Currency benefited adjusted EPS growth by approximately 7% in the quarter.

On a reported basis in the quarter EPS with $7.85 as.

As compared to $5.22 in the prior year.

Reported EPS in the quarter includes 19 of purchased intangible amortization 3 cents of restructuring and <unk> due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises.

The next slide shows are P&L for the first half.

Local currency sales grew 23% for the 6 months adjusted operating income increased 47% with margins up 330 basis points.

Adjusted EPS grew 58% on a year to date basis.

That covers the P&L and and let me know comment on cash flow.

In the quarter adjusted free cash flow amounted to $233.3 million, which is an increase of 41% on a per share basis as compared to the prior year.

We're very happy with our cash flow Generacion.

DSO was 36 days, which is 4 days less than the prior year.

It came in at 4.6 times.

Which is a slightly better than last year for.

For the first half adjusted free cash flow amounted to $372.2 million, an increase of 75% on a per share basis as compared to the prior year.

Let me now turn to guidance.

Forecasting continues to be challenging.

Market conditions are very dynamic and changes to the business environment can happen quickly.

Uncertainty remains surrounding COVID-19 in particular, the impact of the latest variance the worldwide pace of vaccinations and related potential shutdowns <unk> restrictions.

The ultimate impact on the global economy is also still uncertain.

In addition, we are monitoring our supply chain very closely and recognize we must remain very agile in order to the in order to adapt to unexpected material shortages inflationary pressures and unforeseen logistic challenges, which can create unexpected volatility.

As we enter the second half of the year demand in our end markets as positive, although we face more challenging comparisons for the remainder of the year as compared to the first half of this year.

The organization continues to execute well and has demonstrated the high level of resilience and agility and adapting to rapidly changing market conditions.

We are making incremental investments for future growth and continue to feel confident in our ability to gain market share and drive earnings growth in 2021 and beyond.

Now let me cover the specifics for the full year 2021 with the benefit of our strong Q2, 2 Q2 results and improved outlook for the remainder of the year. We now expect local currency sales growth for the full year to be approximately 15%.

This compares to our previous guidance range of 10% to 12%.

We expect full year adjusted EPS to be in the range of $32.60.

To $32.90, which is of growth rate of 27% to 28%.

This compares to previous guidance of adjusted EPS in the range of $31.45.

The $31.90.

With respect to the third quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expect adjusted EPS to be in the range of $8.12.

To $8 and 27 of.

The growth rate of 16% to 18%.

In terms of free cash flow for the year, we now expect it to be in the range of $770 million, we expect to repurchase in total $1 billion in shares in 2021, which should put us in the range of of net debt to EBITDA leverage ratio of approximately 1.5 times at the end.

Of the year.

Some final details on guidance.

With respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3% in 2021 and 2% in the third quarter in terms of adjusted EPS currency will benefit growth by approximately 3% of the quarter and approximately 3.5% for the full year.

2021 that is it from my side and I will now turn it back to Patrick.

Thanks, Sean.

Let me make some comments on our operating businesses, starting the flap, which have an outstanding growth of 35% in the quarter.

Pipettes had excellent growth all all the major product categories also have robust sales growth and growth in all regions was the the average strong.

Biopharma continues to be very favorable and continuing to trend we saw in the first quarter.

You see strong customer demand of our segments such as chemical.

The expect demand for our level of laboratory products to continue to be positive due to favourable biopharma trends 16 research and filed production scale up in production.

While the phase top of comparisons in the second half of the year for you Miss free remain confident we can continue to capture share given the strength of whole of product portfolio and continued execution of all all of spending of sales and marketing initiatives.

In terms of the hallway industrial business core industrial did very well in the quarter with of 27% increase in sales.

All pre regions of the world had robust core industrial growth.

Improving market conditions, including some benefit from pent up demand combined with the strength of diversity of our product portfolio and our focus on attractive market segments contributed to the strong results.

Similar to micromanage, the laboratory room faced half of comparisons for the second half of the year, but our outlook and our confidence of gaining market share remains positive for the business.

Product inspection head increase momentum and solid sales growth of 9% in the quarter.

We saw good growth in all regions the expected growth in product inspection for the remainder of the year SVR, gaining better access to all of our customer facilities.

And believe we will benefit from some pent up demand in the business.

Food retailing grew 9% of the quarter.

Let me make some additional comments by geography.

Sales in Europe increased 23 percentage of the corridor with excellent growth in the lab call industrial and food retail.

America's increased 29% of in the quarter of an excellent growth in the lab and call industrial.

Product inspection did well in the Americas, while food retailed the client.

Finally, or Asia, the rest of the World grew 28% of the quarter with outstanding growth and laboratory and industrial.

Share from Sean China, I had another quarter of style of growth.

You would expect of another good quarter of growth in Q3 in China, although not at the same level of.

Of the first half as China faces more challenging comparisons.

Real strongly positioned in China, and the team is executing very well.

1 final comment on the business service and consumables performed very well and we were up 23% in the quarter.

Very happy with the growth and is important and profitable part of the business.

That concludes my comments on the business.

With all of better than expected sales growth in the first half, we are making incremental investments for future growth.

These investments are assembled on innovation and operational excellence and product development.

Manufacturing facilities, and an hour carpet programs, such as spinnaker sales and marketing.

Let me give you. Some reason examples starting with product development, where we have of proven track record of launching market leading technologies.

It all stems from our deep knowledge of customer processes, and what I will solutions can do to enhance our improve these processes.

Rethink of innovation and product development as customer centric rather than technology centric.

We are focused on the specific value Opal solutions can provide the customers for example in terms of productivity cop.

Compliance related of Meadows safety of data integrity.

On the website.

Recently launched our newest version of our lap ex instrument control and data management software.

This latest tuition fully supports the lap digitalization and with the strong adoption of our customer base. We have doubled the number of instruments that can be networked.

Lebbek increases of our customers productivity by speeding up daily work through the management of data and development of workflows.

It is hard to the security in compliance ensuring data quality and full day <unk> ability.

Finally lap ex helps reduce complexity of if it manages data assets and workflows centrally and seamlessly integrates into laboratory data management systems, such as the limbs.

Software is progressive the becoming of deciding factor of our customers in choosing a supply of full bench top lap solutions.

With the increasing importance of software.

<unk> is helping to position of if the trusted advisor for certain global farmer customers as we meet the demand for instruments service and software.

Wildlife received the greatest <unk> investments the.

Also have some great examples of new products on the industrial side, including the best in class Industrial terminal.

Which provides fully integrated weighing applications for free fit industry's fastest processing speed.

Similarly, the launched new low till technology, and our product inspection business, which provides industry, leading check weighing throughputs with maximum precision.

Both of these products provide value by increasing customers productivity.

New products highlight of our deep ingrained knowledge of all of all of our customers of processes and pain points and the allow us to lead the mug with technology to provide specific value to customers.

You also investing in a low manufacturing facilities to boost productivity.

Last quarterly rolled out significant automation and all of pipette tip harvesting process, resulting in a meaningful increase in yield per molding machine.

This quarter, we are on dealing of new expand the clean room, Paul pipette manufacturing as well as inaugurating of new facility facility for our secondary planned biotics that will expand novel per pet and tip of manufacturing capacity and efficiency.

The also launching of project for our process of analytics business in the U S to optimise production and its wells layout warehouse layout, which will yield improvements with material flow and productivity and production capacity.

The also continue to invest in innovation of corporate programs.

You have seen a while many years the tremendous innovation of all of those spinning of sales and marketing programs.

Ah current priority area for us is maximizing our cross selling capabilities.

Because of the Utah utilize the specialized sales force cross sailing techniques of different than what you might see of from companies that have the use of more channel list sales force approach.

Our goal is to use data Emily to ex to identify customer sites, and which we have low cross selling penetration.

The then use contexts and references to develop a woman of leads to other product categories.

It involves data and qualification of of Olympics and this leads have proven to be very effective and convert into sales.

And nobody innovative techniques via using to stay fully engaged with customer is greater use of February.

In the past.

The would conduct a few hundred veteran of annually while.

While our goal this year is to launch 2000, webinars in local languages, which helps to overcome the limitations, we face with customer and the actions due to depend damage.

The of professionalized to delivery of the Webinars and tap ex bombed the top of topics to include items, such as compliance productivity industry folded O and data integrity.

From a customer's perspective, maybe north of very cost and time efficient, while still allowing frame of actions with experts from various businesses.

All of a supply chain team and pricing team are also demonstrating of high level of innovation.

For all of supply chain team agility continues to be of necessity in overcoming the many challenges of the current environment.

At the same time. The also continued to make excellent progress on Stern drive our corporate initiative to continuously improve and drive world class of operations and supply chain.

Still drive comprised of several hundred projects throughout most of the manufacturing and back office operations focused on the material cost reductions shop floor productivity and back office productivity.

Finally, the pricing team also has also shown great resilience and agility and reacting to inflationary pretzels.

They moved quickly earlier this year to implement certain michie of price changes and at the same time that you continue to work strategically strategically on some pricing initiatives to help improve the efficiency and effectiveness of life quotes to customers.

Incorporating data analytics into up from processes real may quoting more effective in esher it more efficient fall of salespeople.

These are adjusted few of many examples we have internally enrichment continued to move our initiatives to another level.

The recently held a virtual leadership meeting with senior leaders from around the world with the theme of doubling down to drive growth.

What the emphasized to all the senior leaders and to you today.

Is we have a great strategy in place and we will execute on it and an even more determined way than before.

We will continue to invest innovation to double down on enhancing our initiatives that are the foundation of all of future growth.

We remain confident that all of strategies are effective from capturing market share and driving sales and operating profit.

That concludes all the repaired remarks, and I want to ask your operator to the line for questions.

Some of our Minder to ask the question you will need the past the Dar 1 and your telephone to withdraw your question press the pound key please stand by what we compiled the Canada roster.

The first question will come from the line of Dan.

Stipo. Please proceed.

Afternoon, guys thinks of the questions, Patrick or Sean pretty pretty major growth you're seeing in China right. Now what are you guys thinking about the the back half of the year.

And I know, where a quarter of away from the 22 Guy but is there anything you can sort of offer when it comes to just thinking about.

Sort of the multi year growth rate that makes the most sense as the forecast for China, though when you think about the strength of life Sciences, moving parts and industrial and just.

Went up demand vs sustainable demand.

Yeah, Hey, Dan I'll take that 1 this is shaun.

So when the night.

I will talk about maybe Q3, specifically and then I will talk about the full year and then you can kind of like back into what that implies for for maybe Q4, but for Q3 right now we're looking at high teens growth for Q3, and then for the full year, we're looking at mid twenties, but we fully agree we.

Enter the second half of the year with extremely strong momentum and China.

Also very strong execution from our team there there's very many favorable.

Dynamics in China at the moment, whether it's life sciences, whether it's.

Investments in industrial whether it's trends towards automation and digitalization.

Many strategic investments in different subsegments, like microelectronics, or lithium batteries and I feel like our team continues to do an excellent job of capturing these opportunities.

1 of the challenges we start to have in the second half though of course is that we start the lap some pretty significant comparison to the previous year.

And as you said to like there is a topic of pent up demand and when when the recovery started in Q3 of last year that was very much of local recovery and.

And then it's kind of we started the progress through 2021 of.

It became China was benefiting much more from the global recovery.

And what's what is always hard to tell us how much how much are we benefiting from from pent up and they're also has an element of of stimulus in China, We talked a lot about this last quarter as well, but clearly the the government's investing very heavily in many different sectors, whether it's program's really.

Added to the 5 year plan or whether it's investments in the industrial sector.

Further developing the economic zone going out to the western part of the country.

And it's always difficult to tell how much we're benefiting from these trends as well.

Okay. That's helpful. When maybe just on products inspection of things like things are picking up there as well or the young favorable comps from the back half of the year I think like the average over the 2 quarters of something like down the 7 so I'm just curious when when you think about regional dynamic folder or anything from the key geography, what makes me think of what the different regions.

Are going to sort of movement of different paces the within the the trajectory per 1 that might be different being the other I.

I guess I'm, just sort of of asking for a little bit of detail on how we should chart. The course for P. I over the next.

All of a couple of quarters.

Right now we we're we're definitely encouraged with some increase momentum I think we'd started to talk about.

Some improvement in the pipeline last quarter.

We were pleased with how we landed on we ended Q2 and if we kind of like look at.

Guidance for Q3, we're looking at low double digit in Q3 and high single digit for the year. So we're starting to see definitely some improvement there. If we start to think about it more geographically I think we're going to see high.

Higher growth in the Americas right now but.

But I think there's still this pent up opportunity for all Geography's as we go forward I think there will be an element and I think we're well positioned for it I mean, but there is also going to be an element of the the.

The COVID-19 variance and how that could potentially impact.

Access the plants and timing of projects and that creates a little bit of uncertainty, but we definitely.

Enter Q3, feeling encouraged by increased momentum from what we were seeing last quarter.

<unk> My dad.

Suddenly there naturally net.

Sean's comments here about the regions of Inc. The have definitely good opportunities across around the world but.

You also just recently launched of new mid range version for the X Ray detection in China, which was actually.

Specifically, the initially developed pulling Chinese Margaret would be very competitive in the mid range market. So we're looking also quite some optimism all of that development in China as well.

Okay, Shawn just the finish the thought on the comment you made on a delta variant or any other variant for that matter are you starting to see any skittishness on the part of the customers that are maybe.

I don't want to take closing the door, which is getting a little bit more normally to buy the accents words that keeps sort of the the natural feeling as you might have if we head in the direction that it feels like we're heading in.

No. We're not I mean, I would say that we continue to see really the very end of course impacts.

The social activities I think around the world, they're still lockdowns in certain countries, but that's more of of social perspective from of business perspective, We we don't see really any impact on our business at the moment. The reason why I mentioned it with product inspection now is if you just think back from the beginning of of the.

The the pandemic.

Product inspection has been the 1 business that's arguably been the most impacted just from some of the dynamics in the food manufacturing sector.

Not necessarily we've seen improvement in those dynamics over the course of this quarter things are starting to I'd.

I'd say reopened more so we have more access to the plants and facilities to to work on projects. Then we did a quarter ago, but I just mentioned it because those things dynamics can also change quickly if if the variance start too.

Create a situation where of packaged food companies start to.

Prohibit access to their facilities.

Yeah for sure Okay. Thank you.

Okay. Your.

Your next question will come from Vijay Kumar with Evercore. Please proceed.

Hey, this is a poll on per VJ, just a quick to partner.

So the 15% annual guide sort of implies mid single digit growth in the fourth quarter, given the 3 to guide of 11% to 13% somewhat similar comps, what's causing the <unk> step down and then.

I guess 1 of the new guide contemplating per segment growth what changed from the prior I know you've already talked about product inspection, but what about lab and industrial thanks.

Yeah sure. So hey were of course very pleased with our our year to date results were also pleased with with our outlook.

As they kind of mentioned on the China comment, it's always difficult to assess how much we've been benefiting from topics like pent up demand.

Stimulus and as we kind of look towards queue for there is always the the topic of budget flesh as well and as you all know.

We never have a significant number of of months of backlog, where typically at 1 and a half or a little bit more than 1.5 months of backlog. So it's always a little bit more difficult for us to to forecast beyond the current quarter of that we're in so right now kind of.

Planning assumption is to look at more normalized growth rates for Q4, but acknowledged there is always going to be upsize their downsides.

To our guidance.

Maybe I can answer the second part of your question and just kind of like walk down the different.

Businesses and geographies, just the kind of get that out there as well too. So we kind of start with the the lab business. We're looking at mid teens growth in Q3.

And then we're looking at high teens for the full year.

If we look at product inspection I think I already said this low double digit in Q3 and high single digit for the full year. If we look at core industrial we're looking at low double digit for Q3 and mid teens for the full year and then if we look at food retailing, we're looking to be down low to mid teens.

<unk> and Q3 and flattish for the full year and then by geography, we're looking to be high single digit for Q3 and low double digit for the full year for the Americas.

We're looking to be low to mid teens in Q3 in mid teens for the full year and then for China, We already mentioned high teens for Q3 in mid twenties for the full year.

Thanks.

Your next first of all come from Jack Me in with net friend Research. Please proceed.

Thank you.

Good afternoon, good evening.

I wanted to dig a little bit more into the lab acceleration in the quarter.

Even if you book added on a compounded phaestus I think it went from something like.

10% 13 per cent or so in the second quarter how much of this do you think is funding vs. The mix shift in the portfolio and.

For the first time, so much COVID-19 might've added in the order.

Well I will stall of an island.

Sure the channel.

They're very pleased of course with some momentum and lap I think it's a lot of it is based on all of our outstanding portfolio of that the half the continued to.

Improve in Europe true Micromanages, what about the new products, we just recently launched.

That is very strong demand across all regions in the lab business.

As you know all the time, you have increase of of share and lap as the total part of the business Ah significantly over the last years and that will most likely continue as the underlying momentum India markets is also very strong I mean, a lot of interest driven by the life Sciences Margaret W. C. A lot of adoption of all of all of products.

<unk> business is doing extremely well under the top it also and use segments like battery manufacturing and by the redevelopment for Emobility.

So we are very.

Very confident in the lap growth and the.

Probably the moving forward keeping those of the the strolling into Biopharma be the 1 segment to the will continue to lead to grow for for all of the businesses Shorn of anything you want to add yeah, maybe maybe a couple of additional comments Jack.

I think our of results were just very broad based of.

Across most product categories and regions, but.

But the lab really does stand out a little bit of above some of the other divisions of this quarter and what was kind of interesting is that the results were very strong.

In each region of the world.

And as Patrick mentioned, the the trends in Biopharma, just continue to be very very favorable.

And then we started the we continue to also see strong growth and and markets outside of Biopharma and we don't have a significant exposure to academia, but that was certainly and market that we saw improve as well during the quarter.

The frame.

And then as a follow up from wondering if you could parse out how much pricing might of contributed in the quarter. I know you talked about the agility of the team there do you think.

I'm just.

Just curious how you see the landscape is it's changing do you think there could be even more pricing opportunities in the back half.

Can you Jack can you repeat the first part of the question I didn't I didn't hear the word you how much pricing added in the compromising whether I think there could be more opportunity in the back half.

Okay, Yeah no. Thank you.

Yeah, Hey, so we.

We were very pleased with our pricing results in the quarter and if.

If you think about at last quarter, we were kind of guiding.

2% to 5%.

And Q2, and then we were looking at more of like 2 and a half and the back half of the year. We ended up finishing Q2 at 2.5% and at this point, we we expect to do between 2 and a half and and 3 for the back half of the year and I would expect to be at the high end of that range by the time, we get.

2 Q for the.

The team in the global.

Innovation continue to execute really well on our on our various midyear price increase topics. It's also as Patrick mentioned in the prepared remarks.

We're also very agile in this area of the the cost of inputs are also dynamic as well and we're constantly looking for ways to to optimize the situation.

And differentiate our approach to the to the market.

Thank you John.

You have to welcome.

Your next question will come from Tycho Peterson with the J P. Morgan. Please proceed.

Good evening.

I want to start with me the earnings on the quarter you'd be congenital 5 per cent. That's a lot less than the typical 20 to 30 per cent can you maybe just talked of some of the dynamics day or was that inflation was like the supply chain challenges you talked about.

Community touch on those.

In terms of the in terms of the the queue to be Tyco.

That's correct, yes, it was less of entering speaking we've seen in the.

Prior quarters and I'm, just curious to know whether they are inflationary pressures or that was yes, hi, Jane pressures yeah.

Yeah, absolutely that's what it was I mean, we of course had the benefit from higher sales volume.

The primary there was maybe 2 things that was offsetting that a little bit.

But the primary thing was higher costs associated with transportation of material costs.

And if you kind of like look at our gross margin for the quarter. It was down a little bit from what we were.

Guiding.

Initially in the at the at the beginning of the quarter and it was very much related to a higher transportation costs the material costs.

And then there was a lot more commentary of the prepared comments around supply chain. If I go back to the last quarter. You got a question and that you can talk about the buildings and safety stops, but but it seems like things that may be intense items supply chain side can maybe talk to some of the steps you've taken there to alleviate some of the questions.

Yeah, Let me talk to the type of so all of them apply team supply chain side is I would say the suppliers of Jason is particularly challenging with respect to electronics, that's probably the the most concerning part for US right now and you hear adult of different part of the end of.

Of the industries.

In that regard.

Also phasing locally times via stops through the of starting to come true Battle obsolescence issues, we have short term the order to note.

Notices from all the players, which the animal recoil also on the team to jump in and to redesign some of the products of <unk>.

The top of that transportation of logistics of the Psalms of so I'll also challenging for our team.

The city reduce the bottlenecks delay the ladies to however.

The deal and keyboard working on these topics true to help offset.

In terms of mitigation strategies again of material shortages, what we do for electronic components. Some of it is redesigning names short term our products to make sure that we can deliberate of you have been very successful so far.

I would say the have been very successful fulfilling our customer demand this quarter, but it's definitely locking in more resources than we initially thought and.

The also of course is Shawn said kneel facing some price increases on components electronic components for for example, which growing out of through appropriate situations, where you just have to pay a much higher prices and to use to where the the impacts us a little bit on the on the gross margin side of Israel moving forward.

But we are closed and monitoring of the situation again the F. T prepared the mitigation strategies and Kaney situations skip the more tricky but.

It's hard to predict with my Kid you next again.

Most exposed currently on some of the clinic parts.

Some of it will have more impact retail for 4 Q Q3, as well as retailers level of <unk>.

I'm also components that are used in consumer electronics and those are the most pressure right now.

So again the bell.

Several of areas, where we have to take all of these issues you have the right team some place and of course, we also trying different ways to supply material.

4 Q3, I think it will not be so far but the scene not the major 1 but the 1.

On our toes to make to make sure that we can react as quickly as possible if the situation gets more intense.

Okay. That's helpful and maybe 1 last 1 I know, it's a little bit early you're not going the guide till the next quarter, but any kind of higher level of thoughts as we think ahead to the next year in the streets at about 5 per cent revenues 9 per cent ETS, obviously, a lot of variables around the pandemic, but I'm just curious if you'd given the high level of thoughts for next year at this point.

Yeah, no it's still a bit early tyco I mean, there's a lot of moving parts and Patrick and I are actually about to kick off our annual budget tour here in a few weeks and then.

Will be will be doing that for about a month and like we do with our normal cadence every single year and I think we'll have a much better perspective, and feeling once we wrap up that tourism will definitely provide an update.

During our next call.

Sounds good.

Okay. Our next question will come from Derek dip room at the Bank of America.

Hi, good afternoon.

Hey, Derek.

Hey, so a couple of questions I get the first 1 is.

Talk a little bit about gross margin progression in the back half.

Mhm.

Yes so.

You want me to start there did you want to ask the second part of it.

Start there as opposed to the body with all the <expletive> load of stuff [laughter] alright. So.

So our gross margin was up 50 basis points in queue to as you saw we're going to be flattish for the second half of the year.

So as I kind of mentioned in the price in question, we expect the the benefits from pricing too.

To slightly increase in the second half but of course going the other side of that is these.

These increased material costs that Patrick was just speaking to the other thing that we see in the back half is that we will not have the same level of benefit that we've had in the first half of the year regarding volume.

So that's probably the other thing that kind of stands out in terms of comparing the first half vs. The second half.

Go ahead of you kind of like put that together the full years, probably up in the whatever 20 to 30 basis point kind of of range.

Got it.

So the.

The implied.

Local currency growth in the.

Fourth quarter because of the in the mid single digit range you are talking about.

Getting a 3 per cent.

Pricing tailwind so that's implying like 2 per cent volume growth that seemed a little draconian of of the drop off like that the what.

What sort of embedded net.

Yeah, I mean, I don't I don't know if I'd consider it draconian I mean, I think we were just kind of like looking at the limited visibility that we had and not to repeat all the things that I mentioned before about how much of we've been benefiting from pent up in stimulus and things like that but but but yes I recognize that there is.

An upside to it if conditions continue to be favorable.

Got it and and just a little bit of of just going back the.

The last time, mettler guided to 15% or somebody in the mid teens local currency, Greg was actually back in 2010 coming off of the financial crisis.

And I think he did 40% in 2010 local currency gross and that was off of the negative 10 cop.

And now Youre doing 15 off of the positive 1.8 calm I'm just sort of curious on market dynamics, then now and.

Then in in 2011% to 12% local currency gross the following year of of that so it's sort of falls on the tyco's question of.

Why why is 5% or.

Why why wouldn't we see sort of like there's some of level of there and what sort of like different about the the market.

Yes, I mean, hey, I think we're very pleased with our 2 year growth. This year very different situation. As you can appreciate vs 2010 fully acknowledged that our end markets are coming out of this at least we expect them to come out stronger we feel like we're coming out of the strong.

<unk>, we feel like there's market trends towards automation and digitalization that benefit us. So when we think over the medium term, we feel very positive.

To be specific about what it all means for 2022.

Like I said there is.

We kind of need to go through our normal process here to to to have a better view on that more specifically.

Got it thank you.

Welcome.

Your next question will come from Patrick Donnelly with the city. Please proceed.

Thanks, maybe there's 1 on the industrial strength.

More durable and maybe I expected among others.

It sounds like the guidance is calling for a continuation in the back half and a little bit softer, but can you just talk through I guess, what you see it in that market, obviously, China has an area of strength, but maybe on the geographical basis as well.

Trying to get a better feel free the industrial peace.

Sure Thanks, Patrick I'll take that.

We are extremely pleased to have more of a quarter of very strong growth for industrial China has a big the big impact on core industrial but you also have some very strong growth in Europe, and America's Israel thing Shull mentioned, the fact already that the up.

Not only benefiting from of strong recovery markets, including some pent up demand to you but.

So 2 of you also capitalizing on the screw with with all of US specific sales and marketing tools around 2 of spinnaker.

And to be able to benefit from our diversity of all of product portfolio in a way of markets.

B B C also in China, I would say, particularly in China some investments.

The benefits from government investments and our customers as the storms that demand for automation for connectivity for digitalization rich place really rail in our.

Product portfolio of if you have so.

I think there's also has clearly legs. So some of the finger pops of a product portfolio to stay on the line momentum and the focus of automation productivity gains real continued globose to continue to drive to the momentum.

Extremely pleased with 4 core of industrial, especially.

And.

We see some slowdown of course in queue for call based on the day.

<unk> compares but they're also looking clearly of call industrial for us as of continued opportunity to take market share.

Nah, it's helpful. And then maybe just 1 on kind of the emerging markets outside of China in the seem to be coming back a little slower with the low vaccination rates and.

Can you just give us a feel for what you see in terms of the trends there as as we work through the year.

Outside of China book.

If you look at Asia Pacific.

Broader range of fingers still up in the 20% range.

In the quarter.

So.

You would point to some specific countries.

We have for example, Thailand and Malaysia gross.

Week of this quarter.

But the rest of of which there in the broad of Basil Sorehead pretty healthy growth.

Okay I appreciate it.

Yeah. The next person will come from that side of Fries with Goldman Sachs. Please proceed.

Great Thanks, and congrats on the corner and thanks for taking my questions.

Just 1 from me and it's more focused on costs.

You guys of invest a lot in digital engagement both of the sales and the service side.

And Covid was the unique period of time, where your customers are forced to engage with the digitally I am just wondering as you've had conversations in the last month or 2 and maybe these will fade away of do.

Do the variance, but as you've had conversations with customers and getting back engaging in person have you seen the customers are more of a <unk>.

Greater desire to actually continue the digital engagement and therefore on the SG&A side of there might actually be some cost savings that are more durable than you might have thought or do you feel that the customers just want to get back to the way it once before.

Yeah, I'll I'll take the thank you.

Look what we're hearing from all customers of actually laughed the new ways of February half term engagement.

I mentioned in my remarks.

Remarks upfront February dollars will be really scale up significantly longevity couple of hundreds of <unk> go to 2000, because we see such a strong resonance from all of our customers of having that information of Andy by action channel that on top of of really specialized sales force, which is also.

Fully back in action it gives us an opportunity again to use of law.

Direct sales force to really go also offer competitive accounts of new accounts approaching these with.

If all of the solutions of it and dug deep knowledge about of a product portfolio, but use the broader digital channel. The also for existing customers and began broadcasting solutions and of much by the way the recruiting the past.

Our customers I think at the moment. If you look at you know the amount of trade shows adult sample available still of limited so they're really looking over to us to say give us different ways of how you can demonstrate your products in the if not the trade shows of you cannot vision of 10 patrons of the use digital day. Most we have studios M. Every major side.

Virtual product demos and that has been very well received part of our customers and I trusted. It will continue that way people will have a very complimentary to set up the hour direct sales force will be.

In terms of consult of selling them <unk> solutions will be on customer sites, but we will use the broad of channel of equal news channel.

Also the digitally in the face of customers it will be.

It will drive efficiency gains is the cost saving I would say, it's an efficiency gain for us moving forward. We do not think about this business of necessarily an opportunity to scale of big I'll, Let sales force is again, an additional channel.

And of the copay competitive advantage for us to engage with customers on many different levels phase 2 phase of the action as well as digital interaction.

By the way the also scaled up until a sales over the last civil of use significantly to back up all the direct sales force and.

And that has been proven to be very effective as well.

Great. Thanks for the details of it I appreciate all hop back in the queue.

Your next question of all come from Josh Vitamin with Cleveland of Research. Please proceed.

Hey, guys, maybe following up on math question in a couple of questions on op expenses.

Wondering if you could provide additional color on the magnitude of timing of the incremental investments you spoke of I guess, what level of Stefan of should be pencil and for the second half and any additional color on what these incremental investments are being targeted towards the would be helpful. As well and then the second as we look to 2022.

And potentially revenue growth maybe starts to normalise from the higher level of this year any concern of your ability to pull in cost commensurate to any slowing revenue or is there may be some pull forward going on here in 2021, the day risk 2022.

Okay, Hey, So hey, Josh I'll take this 1 this is Shaun so hey of of course, there's a lot of different moving pieces with our expense growth I think 1 of the big pieces to not lose sight of is that we had prior year cost savings and of course.

That that optically effects. This year's number as we kind of bring back.

The work force and things like that where we had some work force savings from last year, we still have an element and we also had some discretionary topics last year as well, where we had savings the the 1 area where we have.

Not brought things back of 100% would be in the area of travel and I think that 1 will play out over time.

And then, but then kind of and of.

Other factor of course is variable compensation and so if you think about like last year, we had much lower variable compensation of this year, we're going to of much higher variable compensation and then the third piece I would say it's kind of of this this element of of the investments and the investments are very much of a sign of the strength of of.

Of the organization in terms of our end markets and trying to pursue growth opportunities for the future and really take advantage of the situation. So I'd say. These are these are certainly incremental investments there a wide range of different types of investments, we talked about field turbo resources during our last call.

That program is going to be.

A little bit more disproportionally invested towards China vs. The rest of the world, but it is a very global program. We're doing other things that are.

More sales and marketing in nature that we do on an ongoing basis, but we're going to do a little bit more than we normally do.

During the second half of the year and then we're investing in other things.

In terms of from of product perspective, and but I wouldn't say we are necessarily.

Accelerating things, but we certainly are.

Working down our priority list and so I think every company has the priority list them and we're able to work down that list at of more accelerated rate just given the the strong results that we see in.

In the business.

Got it and then how should we think about the magnitude of the capacity of investments you're making.

Those expected of you had more than 2022 or could it be partially seen in 2021 as well.

In terms of manufacturing capacity.

Specifically to I wouldn't say I would say there's different investments in different parts of the business I mean, I think it's going to be nothing that will be coming all at once I think you'll see gradual improvements nothing significant of material to any 1 quarter, but certainly things that will.

Benefit.

Each quarter kind of going forward and then some stuff will kind of kick in a little bit next year. So.

Got it thanks guys.

Yeah.

The final question will come from Brandon Cool yard with Jeffries. Please proceed.

Hi, Thanks, good afternoon.

Hey, Brian.

Patrick you you talked about using spinnaker in terms of of cross selling an issue does that could be wrong I don't recall mettler talking much about that historically that the new aspect of spinnaker that you're looking to capitalize on and what the segments are 1 of the areas of the business would be most.

Acted by that.

Yeah.

Thanks, Bye and that sort of <unk>.

Excellent question is and it's not totally new but we definitely emphasizing it more because look of a product portfolio is brought it goes across the broad of part of the value of chain of our customers all the way from all of the juicy into production scale up in manufacturing.

And the spinnaker historically, we had the more focused on a very dedicated prioritize sales force along the different product lines.

Now looking at the the more intensely at cross selling opportunities in the cost of on the customer side and also starting from from 1 of existing sales contact on let's say a specific on the contact to make sure of that beyond the stand better the customer side of the tips of opportunity.

So for us to penetrate from other parts of the customer organization may be true see maybe it may be manufacturing may be in production scale up.

They are using them. This leads to retain the same baisley of of dedicated sales team members.

Right of background of know how true these although the accounts were going the customer accounts.

And can be don't use channel history of of specialized with Workforces and this is where it is now would say different on Hans from the from what you have done before via the.

You have more dedicated initiatives and actually as part of the reason leadership team meeting we had the habit is 1 of the topic across all of the division leaders in all of the business of market organization of needles of of of how we can do this more effectively moving forward to make sure that the capture all of the opportunities that behalf.

At energy from customer site.

Because of the call from me thanks.

I would now like to turn the call back over to marry then again for any closing remarks at the time.

Thank you and he thanks, everyone for joining us this evening.

If you have any questions. Please don't hesitate to reach out take care Bye bye.

This concludes today's conference call. Thank you for participating you may now disconnect.

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Yeah.

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Good day and thank you for standing by welcome to the Mettler Toledo Quarterly earnings Conference call. At this time all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need the press star 1 on.

And your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to the speaker today Ms. Mary Finnegan. Please go ahead.

Thank you and good evening, everyone I'm, Mary Finnegan, I'm responsible for Investor relations of Mettler, Toledo and happy to.

Each of the call I'm joined on the call day, with Patrick Kaltenbach, our CEO and Shawn the Gela, our Chief Financial Officer, Let me cover just a couple of administrative matters. This call is being webcast and is available for replay on our website a copy of the press release and the presentation that we will refer.

<unk> 2 on today's call is also available on the website let.

Let me summarize the safe Harbor language, which is outlined on page 2 of the presentation.

Statements in this presentation, which are not historical facts constitute forward looking statements within the meaning of the U S Securities Act of $19.33 in the U.

U S Securities Exchange Act of $19.34 of these statements involve risks uncertainties and other factors that may cause our actual results levels of activity performance or achievements to be materially different from those expressed or implied by any forward looking statements for a discussion of these risks and uncertain.

Please see the discussion in our recent form 10-K, and other reports filed with the SEC from time to time.

All of the forward looking statements are qualified in their entirety by reference to the factors discussed under the captions factors affecting our future operating results and in the business and management discussion.

Certain analysis of financial condition and results of operations sections of our filings Hey, just 1 other item on today's call. We may use non-GAAP financial measures more detailed information with respect to the use of and differences between non-GAAP financial measures and the most directly comparable.

And then of measure is provided in the form 8-K, I will now turn the call over to Patrick.

Thanks, Mary and good evening everyone.

Pleased to host the call Tonight, which we are doing from Switzerland, as Shawn and Mary are here with me true.

I'm excited to report another quarter of excellent results.

Several factors contributed to these results first demand of our markets was very strong and broad based.

Second we were able to capture these growth opportunities as the key priority since the onset of the pandemic was to stay close in close contact with all of our customers.

And be strongly positioned once customer demand recovered.

And finally, the teams around the world have done an excellent job in execution and customer support.

Our supply chain team has had more of than the share of challenges due to 2.2 parts availability and logistics complications.

While our market organizations have executed well to meet increasing customer demands.

Our teams have shown resiliency and agility in an environment where conditions change rapidly.

Now, let me turn to our financial results the highlights on page 3 of.

The presentation and you can see we had a great quarter.

Local currency sales growth was 27% and we had very strong broad based growth in all regions and most product lines.

With the exception of interest exceptional sales growth and combined with focused execution.

Execution of our margin initiatives, we achieved a 45% growth in adjusted operating income and 53% increase in adjusted EPS.

Cash flow generation was excellent in the quarter.

Okay.

Demand in our end markets remains positive, although our growth for the.

The remainder of the year will reflect more challenging comparisons than we had in the first half of the year.

We are making incremental investments, which will position us very available future growth.

We remain confident that we can continue to gain market share and deliver strong results in 2021 and beyond.

Let me now turn it to Shawn to cover the financial and guidance details and then I will come back with some additional commentary on the business Shawn Thanks, Patrick and good evening, everybody sales were $924.4 million in the quarter, an increase of 27% in local currency.

On the U.

Fuller basis sales increased 34% as currency benefited sales growth by 7% in the quarter.

The <unk> acquisition contributed approximately 1 percentage of sales growth in the quarter.

On slide number 4 we show sales growth by region local currency sales increased 29% in the Americas.

The 23% in Europe, and 28% and Asia rest of the world.

Local currency sales increased 35% in China in the quarter.

The next slide shows sales growth by region for the first half of the year low.

Local currency sales grew 23% for the first 6 months worth of 22%.

<unk> increased in the Americas, 18% in Europe, and 28% growth in Asia rest of the world.

On slide number 6 we summarized local currency sales growth by product area for.

For the second quarter laboratory sales increased 35% industrial increased 20%.

With core industrial up 27% and product inspection up 9%.

Food retail increased 9% in the quarter.

The next slide shows local currency sales growth by product area for the first half.

Laboratory sales increased 27% industrial increased 19.

The percent with core industrial up 27% and product inspection up 7%.

Food retail increased 11% for the first 6 months.

Let me now move to the rest of the P&L, which is summarized on slide number 8.

Gross margin in the quarter was 58, 1% of.

The 50 basis point increase over the prior year level of 57, 6%.

We benefited from volume and pricing, which was offset in part by challenges in the global supply chain, namely higher transportation logistics and raw material costs.

These items are even more challenging than we had expected.

The the last time, we spoke of.

1 additional factor as you compared to the prior year, we now have in our cost structure of the impact of the temporary cost actions, we undertook in 2020.

R&D amounted to $42.6 billion in the quarter, which is the 28% increase in local.

Currency over the prior period the impact of the temporary cost reductions undertaken last year as well as the timing of project activity contributed to this increase.

SG&A amounted to $239 million.

The 20% increase in local currency over.

The prior year.

The impact of the temporary cost savings that we undertook last year higher variable compensation and increased investments in sales and marketing were the principal factors driving the increase.

Adjusted operating profit amounted to $255.3 million in the quarter a 40.

5% increase over the prior year amount of $176.6 million.

Adjusted operating margins increased 200 basis points in the quarter to 27, 6%. We are pleased with this margin growth, which reflects excellent sales growth combined with focused execution on our margin initiatives.

<unk> <unk>.

Currency benefited operating profit growth by approximately 7%, but had little impact on operating margins.

A couple of final comments on the P&L opt.

Operating I'm, sorry, amortization amounted to $16.2 million in the quarter.

Interest expense.

Was $10.4 million in the quarter and other income in the quarter amounted to $2.7 million, primarily reflecting non service related pension income.

Our effective tax rate before discrete items and adjusted for the timing of stock option deductions was 19, 5%.

Fully diluted shares of amounted to $23.5 million in the quarter, which is of 3% decline from the prior year.

Adjusted EPS for the quarter was $8.10.

A 53% increase over the prior year amount of $5.29.

Currency benefited.

<unk> adjusted EPS growth by approximately 7% in the quarter.

On a reported basis in the quarter EPS was $7.85.

As compared to $5.22 in the prior year.

Reported EPS in the quarter includes 19 <unk> of purchased intangible amortization.

The sense of restructuring and <unk> <unk> due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises.

The next slide shows our P&L for the first half local currency sales grew 23% for the 6 months adjusted operating income increased.

47% with margins up 330 basis points.

Adjusted EPS grew 58% on a year to date basis.

That covers the P&L and let me now comment on cash flow.

In the quarter adjusted free cash flow amounted to 233.

<unk> and $3 million, which is an increase of 41% on a per share basis as compared to the prior year.

We are very happy with our cash flow generation.

DSO was 36 days, which is 4 days less than the prior year.

It came in at 4.6.

3 points, which is a slightly better than last year.

For the first half adjusted free cash flow amounted to $372.2 million, an increase of 75% on a per share basis as compared to the prior year.

Let me now turn to guidance.

<unk> continues to be challenging.

Market conditions are very dynamic and changes to the business environment can happen quickly.

Uncertainty remains surrounding COVID-19 in particular, the impact of the latest variance the worldwide pace of vaccinations and related potential shutdowns <unk> restrictions.

<unk> the ultimate impact on the global economy is also still uncertain.

In addition, we are monitoring our supply chain very closely and recognize we must remain very agile in order to in order to adapt to unexpected material shortages inflationary pressures and unforeseen logistic challenges, which.

Can create unexpected volatility.

As we enter the second half of the year demand in our end markets is positive, although we face more challenging comparisons for the remainder of the year as compared to the first half of this year.

The organization continues to execute well and has demonstrated the high level of resilience and.

The agility in adapting to rapidly changing market conditions.

We are making incremental investments for future growth and continue to feel confident in our ability to gain market share and drive earnings growth in 2021 and beyond.

Now, let me cover the specifics for the full year.

<unk> thousand 21, with the benefit of our strong Q2 to Q.

Q2 results and improved outlook for the remainder of the year. We now expect local currency sales growth for the full year to be approximately 15%.

This compares to our previous guidance range of 10% to 12%.

Here too.

We expect full year adjusted EPS to be in the range of $32.60.

To $32.90.

Which is a growth rate of 27% to 28% the.

This compares to previous guidance of adjusted EPS in the range of $31.45.

<unk> of $31.90.

With respect to the third quarter, we would expect local currency sales growth to be in the range of 11% to 13% and expect adjusted EPS to be in a range of $8.12.

To $8.27 of grew.

Both rate of 16 to 18.

Okay.

In terms of free cash flow for the year, we now expect it to be in the range of $770 million, we expect to repurchase in total of $1 billion in shares in 2021, which should put us in the range of a net debt to EBITDA leverage ratio of approximately.

Percentage 5 times at the end of the year.

Some final details on guidance with respect to the impact of currency on sales growth, we expect currency to increase sales growth by approximately 3% in 2021 and 2% in the third quarter in terms of adjusted EPS currency will benefit.

<unk> growth by approximately 3% in the quarter and approximately 3.5% for the full year 2021 that is it from my side and I'll now turn it back to Patrick.

Thanks, Sean.

Let me make some comments on our operating disciplines of stalling the flap, which had an outstanding growth of 30.

<unk> <unk> in the quarter.

Pipettes had excellent growth all all the major product categories also had robust sales growth and growth in all regions was the very strong.

Biopharma continues to be very favorable and continuing the trend we saw in the first quarter, we see.

The strong customer demand in the other segments such as chemical.

We expect demand for our level of laboratory products to continue to be positive due to favorable biopharma trends exceeding research and final production scale up in production.

While we face tougher comparisons in the second half of the year.

We remain confident we can continue to capture share given the strength of our product portfolio and continued execution of our spinnaker sales and marketing initiatives.

In terms of our industrial business core industrial did very very low in the quarter with of 27% increase in sales.

Sales.

All 3 regions of the world have robust core industrial growth.

Improving market conditions, including some benefit from pent up demand combined with the strength and diversity of our product portfolio and of our focus on attractive market segments contributed to the strong results.

Cumulative Michael men's the laboratory, we will face tougher comparisons for the second half of the year, but our outlook and our confidence in gaining market share remains positive for this business.

Product inspection had increased momentum and solid sales growth of 9% in the quarter.

We saw good growth in all regions, we expect good growth in product inspection for the remainder of the year SBA of gaining better access to all of our customer facilities.

And believe we will benefit from some pent up demand in the business.

Food retailing grew 9% in the quarter.

Let me make some additional comments by geography.

Sales in Europe increased 23% in the quarter with excellent growth in lab core industrial and food retail.

The Americas increased 29% in the quarter with excellent growth in lab and core industrial.

Product inspection.

Section did well in the Americas, while food retail declined.

Finally, the Asia the rest of the World grew 28% in the quarter with outstanding growth in laboratory and industrial.

As share from Sean China had another quarter of stellar growth.

We would expect another good quarter of growth in Q3 in China, although not at the same level of.

Of the first half ex China faces more challenging comparisons.

We are strongly positioned in China, and the team is executing very well.

1 final comment of the business.

Service and consumables performed very well and were up 23% in the quarter. We are very happy with the growth in this important and profitable part of the business.

That concludes my comments on the business.

With all better than expected sales growth in the first half we are making incrementally.

The mental investments for future growth.

These investments are centered on innovation and operational excellence in product development, and our manufacturing facilities and in our corporate programs, such as spinnaker sales and marketing.

Let me give you some recent examples starting with product development.

Element, where we have a proven track record of launching market leading technologies.

It all stems from our deep knowledge of customer processes, and what our solutions can do to enhance or improve these processes.

We think of innovation and product development as customer centric.

Rather than technology centric.

We are focused on the specific value of our solutions can provide the customers for example in terms of productivity.

Clients related matters safety or data integrity.

On the left side the a freeze.

<unk> recently launched our newest version of all.

Ex instrument control and data management software.

This latest tuition fully supports the lappage utilization and with the strong adoption of our customer base. We have doubled the number of instruments that can be networked.

<unk> increases our customers' productivity by speeding.

The latter aly.

Work through the management of data and development of workflows.

It enhances security and compliance ensuring data quality and full data traceability.

Finally lap ex helps reduce complexity of asset manage its data assets and workflows centrally.

Adding up and seamlessly integrates into laboratory data management systems, such as limbs.

Software is progressively becoming a deciding factor for customers in choosing a supplier for bench top lab solutions.

With the increasing importance of software.

<unk> is helping to position us as the trusted advisor.

Volumes of certain global pharma customers.

As we meet the demands for instruments service and software.

While lab receives the greater share of our R&D investments.

You also have some great examples of new products on the industrial side, including the best in class Industrial terminal.

<unk>, which provides fully integrated weighing applications for the industry's fastest processing speed.

Similarly, the launched new load sales technology, and our product inspection business, which provides industry, leading check weighing throughput with maximum precision.

Both of these products provide.

2 by increasing customers' productivity.

New products.

Highlight our deep and great knowledge of all of our customers' processes and pain points and allow us to lead the market with technology to provide specific value to customers.

We are also investing in our manufacturing facility.

The priority is to boost productivity.

Last quarter, we rolled out significant automation in our pipette tip harvesting process, resulting in a meaningful increase in yield per moulding machine.

This quarter, we are unveiling of new expand the clean room for our pipette manufacturing as well as inaugurated.

<unk> of new facility facility for our secondary brand Biotics that will expand our per pet and tip of manufacturing capacity and efficiency.

We're also launching of project for our process analytics business in the U S to optimize production and its warehouse layout.

Out warehouse layout, which will yield improvements and material flow and productivity and production capacity.

We also continue to invest in innovation of our corporate programs.

You have seen over many years, the tremendous innovation of our spinnaker.

Sales and marketing programs.

Our current priority area for us is maximizing our cross selling capabilities.

Because of the Utah utilize the specialized sales force cross selling techniques are different than what you might hear from companies that had that use of more generalist.

Sales force approach.

Our goal is to use data analytics to identify customer sites in which we have low cross selling penetration.

We then use contexts and references to develop the warm and hot leads to other product categories.

Both data.

Occasion of analytics and these fleets have proven to be very effective in converting to sales.

Another innovative techniques, we are using to staying fully engaged with customer is greater use of webinars.

In the past.

We would conduct a few hundred webinars annually.

While our goal this year is to launch 2000, webinars and local languages, which helps to overcome the limitations, we face with customer and the actions due to the pandemic.

The of professionalized, the delivery of the Webinars and tap expand the type of topics to include items such as compliance.

Productivity industry for the Doe and data integrity.

From a customer perspective, webinars are very cost and time efficient, while still allowing for interactions with experts from various businesses.

Our supply chain team and pricing team also.

Also demonstrating a high level of innovation.

For our supply chain team agility continues to be a necessity in overcoming the many challenges of the current environment.

At the same time. They also continue to make excellent progress on stern drive our corporate initiatives to continuously.

Honestly improve and drive world class operations and supply chain.

Stern drive comprised of several hundred projects throughout the end of manufacturing and back office operations focused on material cost reductions shop floor productivity and back office productivity.

Finally, the pricing team also has also shown great resilience and agility in reacting to inflationary pressures.

They moved quickly earlier this year to implement certain midyear price changes and at the same time. They continue to work strategically strategically on some pricing.

To help improve the efficiency and effectiveness of flight quotes to customers.

Incorporating data analytics into upfront processes will make quoting more effective and easier and more efficient for our salespeople.

These are just a few.

The <unk> example, we have internally in which we continue to move our initiatives to another level.

The recently held a virtual leadership meeting with senior leaders from around the world with the theme of doubling down to drive growth.

What the emphasize to our senior leaders and to you today.

Of mandates we have a great strategy in place and we'll execute on it and even more determined way than before.

We will continue to invest in innovation to double down on enhancing our initiatives that are the foundation of our future growth.

We remain confident that our strategies are effective in capturing.

<unk> market share and driving sales and operating profit.

That concludes our prepared remarks, and I want to ask you operator to open the line for questions.

As a reminder to ask the question you will need the press star 1 on your telephone to withdraw your question press the pound key please standby while we compile.

And the roster.

First question will come from the line of Dan Arias with Stifel. Please proceed.

Afternoon, guys. Thanks for the question, Patrick or Sean pretty pretty major growth Youre seeing in China right. Now what are you guys thinking about for the back half of the year.

And I know, we're a quarter.

All of the came from the 22 guide, but is there anything you can sort of offer when it comes from just thinking about.

Sort of the multi year growth rate that makes the most sense as the forecast for China and when you think about the strength of the life Sciences, the moving parts of industrial and just.

Pent up demand versus sustainable demand.

Yes.

Away from Dan I'll take that 1 this is Sean.

So when the night I will.

Talk about maybe Q3, specifically and then I will talk about the full year and then you can kind of back into what that implies for for maybe Q4, but for Q3 right now we're looking at.

High teens growth for Q3.

Hey for the full year, we're looking at mid twenties, but we fully agree we enter the second half of the year with extremely strong momentum in China also very strong execution from our team there.

As many favorable.

Dynamics in China at the moment.

Whether it's life sciences, whether its <unk>.

Investments in industrial whether it's trends towards automation and digitalization.

Many strategic investments in different sub segments, like microelectronics or lithium batteries and I feel like our team continues to do an excellent job of.

Capturing these opportunities.

1 of the challenges we start to have in the second half though of course is that we start to lap some pretty significant comparisons to the previous year and as you said to like there is a topic of pent up demand and when when the recovery started in Q3 of last year that was.

Very much of local recovery.

And then as kind of we started the progress through 2021.

Came China was benefiting much more from the global recovery.

It's always hard to tell is how much how.

How much are we benefiting from from pent up and Theyre also.

Also as an element of of stimulus in China, We talked a lot about this last quarter as well, but clearly the the government's investing very heavily in many different sectors, whether its programs related to the 5 year plan or whether it's investments in the industrial sector.

Further developing the economic zone going.

Going out to the western part of the country.

And it's always difficult to tell how much we're benefiting from these trends as well.

Yeah. Okay. That's helpful. And then maybe just on product inspection. It seems like things are picking up there as well as favorable comps in the back half of the year I think like the average over the 2 quarters of something like.

Down the 7 so I'm just curious when we think about.

Regional dynamics or the or anything in the key geographies that make you think of the different regions are going to sort of move at different paces northern's the trajectory per 1 that might be different together.

I guess I'm, just sort of asking for a little bit of detail on how we should chart the course per pie over.

The next call of couple of quarters.

Yes, I mean right now.

We're definitely encouraged with some increased momentum I think we started to talk about.

Some improvement in the pipeline last quarter.

We were pleased with how we've landed on <unk>.

Ending Q2.

And if we kind of like look at <unk>.

Guidance for Q3, we're looking at low double digit in Q3 and high single digit for the year. So we're starting to see definitely some improvement there.

We start to think about it more geographically I think we're going to see.

Higher growth in the Americas.

Right now.

But I think there's still this pent up opportunity for all geographies as we go forward I think there will be an element and I think we're well positioned for it but there is also going to be an element of the.

The COVID-19 variance and how that could potentially impact.

Access.

Access the plans and timing of projects and that creates a little bit of uncertainty, but we definitely.

Enter Q3, feeling encouraged by increased momentum from what we were seeing last quarter.

Sean.

The.

So the only thing I'm not absolutely.

In terms of Shawn's comments here about.

The regions of Inc.

Definitely good opportunities across around the world, but.

We also just recently launched a new mid range version for the X Ray detectors in China, which was actually.

Specific to the initially developed pull the Chinese market would be very competitive in the mid range market. So we are looking also.

Quite some optimism on the development in China as well.

Okay, Sean just to finish the thought on the comment you made on the Delta variant or any other bearing for that matter are you starting to see any skittishness on the part of customers that are maybe.

I don't want to say closing their doors, which is standard a little bit more normally it's about access.

Just the words that just sort of the.

The natural feeling because you might have if we head in the direction that it feels like we're heading in.

We're not I mean, I would say that we continue to see really the very end of course impacts.

Social activities I think around the world.

Theres still lockdowns in certain countries, but that's more.

<unk> of a social perspective from a business perspective, we we don't see really of any impact on our business at the moment. The reason why I mentioned it with product inspection, though is if you just think back from the beginning of the the.

The pandemic.

Product inspection has been the 1 business that has arguably been the most.

Impacted just from <unk>.

Some of the dynamics in the food manufacturing sector, we're not necessarily we've seen improvement in those dynamics over the course of this quarter things are starting to.

Say reopened more so we have more access to the plants and facilities to work on projects than we did.

The quarter ago, but I, just mentioned that because those things dynamics can also change quickly if if the variance start to create a situation where packaged food companies start to.

Prohibit access to their facilities.

Yeah, Okay. Thank you guys.

Okay.

Next question will come.

From Vijay Kumar with Evercore. Please proceed.

Hi, This is Paul on per Vijay just a quick 2 partner.

So the 15% annual guide sort of implies mid single digit growth in the fourth quarter, given the <unk> guide of 11% to 13% somewhat similar comps whats, causing the <unk> step down and then.

<unk>.

I guess 1 of the new guide contemplating per segment growth what changed from the prior I know you already talked about product inspection, but what about lab and industrial.

Yes, sure so hey.

We're of course very pleased with our our year to date results. We're also pleased with with our outlook.

<unk>.

As I.

Kind of mentioned on the China comment its always difficult to assess how much we've been benefiting from topics like pent up demand stimulus and as we kind of look towards Q4. There is always the the topic of budget flush as well.

And as you all know.

We never have a significant number of.

The months of backlog were typically at 1 of half or a little bit more than 1 and a half months of backlog. So it's always a little bit more difficult for us to to forecast beyond the current quarter that we're in so right now kind of our planning assumption is to look at more normalized growth rates for Q4.

Sure, but acknowledge there is always going to be upsides or downsides.

To our guidance.

Maybe I can answer the second part of your question and just kind of like walk down the different.

Businesses and geographies, just the kind of get that out there as well too. So we kind of start with the the lab business. We're.

Looking at mid teens growth in Q3.

And then we're looking at high teens for the full year if.

If we look at product inspection I think I already said this low double digit in Q3 and high single digit for the full year. If we look at core industrial we're looking at low double digit for Q3.

3 and mid teens for the full year and then if we look at food retailing, we're looking to be down low to mid teens in Q3 and flattish for the full year and then by geography, we're looking to be high single digit for Q3 and low double digit for the full year.

<unk> for the Americas.

We're looking to be low to mid teens in Q3 and mid teens for the full year and then for China, We already mentioned high teens for Q3 and mid twenties for the full year.

Thanks.

Your next question will come from Jack Meehan with Nephron Research. Please proceed.

Thank you.

Good afternoon, good evening.

Wanted to dig a little bit more into the lab acceleration in the quarter.

Even if you look at it on a compound.

Pounded basis, I think it went from something like.

10% of 13% or so in the second quarter, how much of the you think is funding versus the mix shift in the portfolio.

For the first half as much COVID-19 weight of added in the quarter.

Well I'll start on the island.

The.

I'm sure all of the China, Yes.

They are very pleased of course with sort of momentum and lap.

A lot of interest based on all of our outstanding portfolio at the half of that we continue to.

<unk>.

Prove in Europe during my commentary about the new products interest recently launched.

There is very strong demand across all regions.

In the lab business.

As you know all the time, we have the increase of a share and left as of total part of the business significantly over the last year's from Doug will most likely continue as the underlying momentum in the end markets is also very strong I mean, a lot of interest driven by the life Sciences market, where we see a lot of adoption of all of a whole of products.

All of the Cam business is doing extremely well and was the top but also in new segments like battery manufacturing and by the redevelopment for E mobility.

We are very.

Very confident.

The growth in the.

The properly moving forward given those of the stronger into biopharma be the 1 segment that will continue.

<unk> to lead the growth for all of the businesses, Sean anything you want to add maybe a couple of additional comments Jack.

I think our results were just very broad based.

Across most product categories and regions, but.

But the lab really does stand out a little bit of above some of the other divisions. This.

This quarter and what was kind of interesting is that the results were very strong in.

In each region of the world.

And as Patrick mentioned the trends in Biopharma, just continue to be very very favorable.

And then we started the we continue to also see strong growth in end markets.

<unk> outside of Biopharma, and we don't have a significant exposure to academia, but that was certainly an end market that we saw improve as well during the quarter.

Great.

And then as a follow up I was wondering if you could parse out how much pricing contributed in the quarter I know you talked about the agility of the team there.

There do you think.

Just curious how you see of the landscape as it's changing do you think there could be even more pricing opportunities in the back half.

Yeah.

Can you Jack can you repeat the first part of the question I didn't I didn't hear the.

Where do you how much pricing added in the corporate pricing, whether I think.

There could be more opportunity in the back half.

Okay, Yeah no. Thank you.

Yes, Hey, so we.

We were very pleased with our pricing results in the quarter and if.

If you think about at last quarter, we were kind of guiding.

2 to 2.5%.

In Q2, and then we were looking.

Looking at more of like 2 and a half in the back half of the year. We ended up finishing Q2 at 2.5% and at this point, we we expect to do between 2 and a half and 3 for the back half of the year and I would expect to be at the high end of that range by the time, we get into Q4.

For the team and the the global organization continue to execute really well on our on our various mid year price increase topics. It's also as Patrick mentioned in the prepared remarks.

We're also very agile in this area of the.

Cost inputs are also dynamic as well and we're constantly.

Currently looking for ways to optimize the situation.

And differentiate our approach to the to the market.

Thank you John.

Yep you're welcome.

Your next question will come from Tycho Peterson with J P. Morgan. Please proceed.

Hey, good evening.

I wanted to start with maybe earnings on the quarter you beat consensus by the 6% that's a lot less than the typical 20% to 30% can you maybe just talk of some of the dynamics there was that the inflation or is it the supply chain challenges you talked about.

Can you maybe touch on those.

In terms of the in terms of the Q2 beat Tycho.

Tycho the correct correct, yes, I mean, it was less of an earnings because we've seen in prior quarters and Im just curious to know whether there are inflationary pressures or that was yes, I can't crushers.

Yes, absolutely that's what it was I mean, we of course had the benefit from higher sales volume the.

The primary there was maybe 2 things that was offsetting.

Offsetting that a little bit.

But the primary thing was higher costs associated with transportation of material costs.

And if you kind of like look at our gross margin for the quarter. It was down a little bit from what we were.

<unk>.

Initially in the at the.

At the beginning of the quarter and it was very.

Much related to the higher transportation cost of material costs.

And there was a lot more commentary in the prepared comments around supply chain. If I go back to the last quarter. You had a question and I think you talked about building some safety stock split, but it seems like things that may be intensified in the supply chain side can you maybe talk to some of the steps you've taken there to alleviate some of the questions.

Yeah, Let me talk to the half Tycho. So let me of supply chain supply chain side is I would say the suppliers of Jayson is particular challenging with respect to electronics. So that's probably the.

The most concerning part for US right now and you hear that also from different part of the IND from.

Of the industries.

In that regard.

We are also facing longer lead times.

Stopped doing sort of starting to come true battle obsolescence issues, we have short term notice.

The notices from our suppliers, which the animal recoil also R&D teams to jumping in to redesign some of the products.

On top of that transportation.

Flotation the logistics of shown the sort of also challenging for our team.

<unk> reduce the bottlenecks Mueller, Malaysia however.

The dealership, we're booking on these topics true to help offset.

In terms of mitigation strategies again on materials.

Cereal shortages, what we do for electronic components. Some of it is redesigning of short term of our products to make sure that we can deliver what we have been very successful so far.

We have been very successful fulfilling our customer demand this quarter, but it's definitely locking in more resources than we initially thought and.

We also of course as shown.

<unk> said youre facing some price increases on components of electronic components per port.

For example did you go now through brokerage situations, where you just have to pay much higher prices to introduce during the day.

It takes us a little bit on the.

The gross margin side of scale.

Moving forward.

But we are.

The closely monitoring the situation of Cambria team prepared the.

Mitigation strategies in case situations get more tricky, but.

It's hard to predict with my tissue next Gambia, most exposed currently on some of electronic parts.

Some of it will more impact.

<unk> retail for Q Q3, as well as retailers leveraging.

The components of our used in consumer electronics some of those all of the most pressure right now.

So again they are.

The several areas, where we have to tackle these issues do you have the right teams in place and of course, we are also trying.

Different ways to supply of material.

For Q3, I think it will not be so far what we see not the major 1 but the.

1 of our toes to make to make sure that we can react as quickly as possible if the situation gets more intense.

Okay, that's helpful and maybe.

1 last 1 I know, it's a little bit early you're not going to guide till next quarter, but any kind of higher level thoughts as we think of head to next year. The street's at about 5% revenue is 9% EPS, obviously, a lot of variables around the pandemic, but I'm just curious if you'd be of any high level thoughts for next year at this point.

Yeah, no it's still a bit early Tycho I mean, theres a lot of moving.

Moving parts and Patrick and I are actually about the kickoff our annual budget tour here in a few weeks and then.

We will be we'll be doing that for about a month and like we do with our normal cadence every single year and I think we'll have a much better perspective than failing once we wrap up that tourism will definitely provide.

<unk> an update.

During our next call.

Sounds good thanks.

Your next question will come from Derik de Bruin with Bank of America.

Hi, good afternoon.

Hey, Derik.

Hey, so a couple of questions I guess the first 1 is.

Talk a little bit about.

Gross margin progression in the back half.

Mhm.

Yes so.

You want me to start their day do you want to ask the second part of first I'll start there as opposed to Bombardier with the whole shitload itself.

Okay.

Alright, so so.

So our gross margin was up.

The 50 basis points in Q2 as you saw we're going to be flattish for the second half of the year.

So as I kind of mentioned in the pricing question.

We expect the the benefits from pricing too.

To slightly increase in the second half, but of course going the other side of that as these.

These increased material costs that Patrick was just.

Speaking to the.

The other thing that we see in the back half is that we will not have the same level of benefit that we've had in the first half of the year regarding volume.

So that's probably the other thing that kind of stands out in terms of comparing the first half versus the second half.

Got it and you kind of like put that together the full year is probably up in the whatever 20 to 30 basis point kind of a range.

Got it.

So the.

The implied.

Local currency growth in the.

Fourth quarter book to be in the mid single digit range and yet you're talking about free rent.

We are getting of 3%.

Pricing tailwind, so that's implying 2% volume growth that seemed a little draconian of the drop off like that.

What sort of embedded in that.

Yes.

I don't know if I'd consider it draconian I mean I think we.

We're just kind of like looking at.

The limited visibility that we had and not to repeat all of the things that I mentioned before about how much of we've been benefiting from pent up in stimulus and things like that but but but yes I recognize that there is.

An upside to it if conditions continue to be favorable.

Got it.

And just a little bit of of just going back to me.

The last time mettler guided too.

15% or something in the mid teens local currency growth was actually back in 2010 coming off of the financial crisis.

And I think you did 14% in 2010 local currency growth and that was off of a negative 10 comp.

And now.

Between 15 off of a positive 1.8 comp I'm, just sort of curious on market dynamics than now and because of the net because then in in 2011% to 12% local currency growth. The following year off of that so it sort of falls on the tyco's question of.

<unk>.

Why is 5% or you know.

Why why wouldn't we see sort of like most of my levels, there and what's the like different about them in the market.

Yes, I mean, hey, I think we're very pleased with our 2 year growth this year.

Very different situation as you can appreciate vs.

While isn't 10 fully acknowledged that our end markets are coming out of this at least we expect them to come out stronger we feel like we're coming out of the stronger we feel like theres market trends towards automation and digitalization that benefit us. So when we think over the medium term, we feel very positive.

The 2.

To be specific about what it all means for 2022.

I said, we kind of need to go through our normal process here to to to have a better view on that more specifically.

Got it thank you.

Yeah welcome.

As to the next question will come from Patrick Donnelly with Citi. Please proceed.

Thanks, maybe just 1 on the industrial strength.

Far more durable than maybe I expected among others.

It sounds like the guidance is calling for a continuation in the back half of them a little bit softer, but can you just talk through I guess, what youre seeing in that market.

China is an area of strength, but maybe on the geographical basis as well.

Just trying to get a better feel for the industrial piece.

Sure Thanks, Patrick I'll take that.

We are extremely pleased to have north of a quarter of very strong growth for industrial China has been the big impact on core Industrial book you also have.

Obviously 2 of strong growth in Europe, and Americas, Israel thing, Sean mentioned, the fact already but not only.

<unk> from a strong recovery in our end markets, including some pent up demand here.

We are also capitalizing on the disclosure of our.

Specific sales and marketing tools around 2 of spinnaker.

The end to be able to benefit from our diversity of our product portfolio in a way of markets.

We see also in China, I would say, particularly in China some investments.

The benefits from government investments.

Our customers as Sean said demand.

Automation for connectivity for digitalization, which plays really well in our.

The product portfolio that we have so.

I think Theres also has clearly <unk> was 1 of the things to advanced of our product portfolio.

The line momentum and the focus on automation.

For the gains will continue will help us to continue to drive this momentum.

Extremely pleased with the.

Core industrial specialty.

And.

We see some slowdown of course in Q4 based on the.

The difficult compares but youre also looking clearly at core industrial.

Productivity for us as a continued opportunity to take market share.

No. That's helpful. And then maybe just 1 on kind of the emerging markets outside of China.

To be coming back a little slower with the low vaccination rates in the.

Can you just give us the feel for what Youre seeing in terms of trends there as we work through the year.

Jill.

Outside of China.

We look at Asia Pacific.

The range I think they are still up.

80% range.

In the quarter.

So.

You would point to some specific countries.

We have for example.

And in Malaysia.

The weaker this quarter.

But for the rest of it say in the broader base also had.

Pretty healthy growth.

Okay I appreciate it.

Your next question will come from Matt <unk> with Goldman Sachs. Please proceed.

Great.

Tyler and congrats on the quarter and thanks for taking my questions.

Just 1 from me and it's more focused on costs.

As of invest a lot in digital engagement, both from the sales and the service side.

And Covid was a unique period of time, where your customers are forced to engage with us digitally I'm just wondering as you've had conversations in the last month of 2 and maybe this will fade.

Due to the variance, but as you've had conversations with customers and getting back engaging in in person have you seen the customers are more of a.

A greater desire to actually continue the digital engagement and therefore on the SG&A side, there might actually be some cost savings that are more durable than you might have thought or do you feel that the customers just want to get back to.

Fade away before.

Well thanks, Thank you.

Look what we're hearing from all customers of X gene loved the new ways of <unk> behalf.

Engaging with them.

And in my remarks.

The remarks upfront EBITDA.

Where we really scale up significantly last year with the couple of hundreds.

The weight, whether the NAS and JV of how does it go to 2000, because we see such a strong resonance from our customers of having that inflammation of Andy by action channel.

On top of of really specialized sales force, which is also fully back in action. It gives us an opportunity to again to use of oil.

The direct sales.

Of Virtu really go also offer competitive accounts and new accounts approaching these.

With our solutions and the deep knowledge about our product portfolio, but to use the broader digital channel, but also for existing customers and began broadcasting solutions in a much better way than we could in the past.

For customers I think at the moment, if you look at the amount of Tradeshows adult for example available still limited. So they are really looking also to us to say give us different ways of how you can demonstrate your products in the if another trade shows of you cannot attend trade shows of the use digital day. Most we have studios every major.

Our virtual product demos and that has been very well received by our customers and I Trust that it will continue that way people will have a very complementary set of our direct sales force will be in terms of consultative selling and product solutions will be on customer sites, but we will use the broader channel in the ecommerce channel.

Side also the digitally interface with customers it will be.

It will drive efficiency gains is the cost savings I would say, it's an efficiency gain for us moving forward.

Do not think about this.

There is no.

Necessarily an opportunity to scale back all of our sales force is again, an additional channel.

And then of course.

A competitive advantage for us to engage with customers on many different levels of face to face interaction as well as the Julian the action.

By the way the also scaled up till of sales over the last several years significantly to pick up our direct sales force.

And that has been proven to be very effective as well.

Great. Thanks for the detailed answer appreciate it I'll hop back in the queue.

Your next question will come from Josh Waldman with Cleveland Research. Please proceed.

Yeah.

Hey, guys, maybe following up on Matt's question on a couple of questions on op expenses I'm wondering if you could provide additional color on the magnitude and timing of the incrementals.

Investments you spoke of I guess, what level of Stefan of should we pencil in for the second half and any additional color on what these incremental investments are being targeted towards would be helpful. As well and then second as we look to 2022 and <unk>.

Essentially revenue growth, maybe it starts to normalize.

Rental of advice from the higher level. This year any concern in your ability to pull in cost commensurate to any slowing of revenue or is there maybe some pull forward going on here in 2021, the Derisked 2022.

Okay, Hey, So hey, Josh I'll take this 1 this is Sean.

Hey.

Normalized of course, there's a lot of different moving pieces with our expense growth I think 1 of the big pieces to not lose sight of is that we had prior year cost savings and of course.

That that optically effects. This year's number as we kind of bring back.

The.

Hey of before us and things like that where we had some work force savings from last year, we still have an element and we also had some discretionary topics last year as well, where we had savings the 1 area where we have.

Not brought things back of 100% would be in the area of travel and I think that 1 will play out over time.

The work.

And then but then kind of.

Other factor of course is variable compensation. So if you think about like last year, we had much lower variable compensation. This year, we're going to have much higher variable compensation and then the third piece I would say is kind of this this element of the investments and the investments are very much of a sign of.

The strength of of.

And of the organization in terms of our end markets.

Trying to pursue growth opportunities for the future and really take advantage of the situation. So I would say. These are these are certainly incremental investments there a wide range of different types of investments we talked about.

<unk> turbo.

Of the sources during our last call.

That program is going to be a little bit more disproportionately invested towards China versus the rest of the world, but it is a very global program.

The other things that are.

More sales and marketing in nature that we do on an ongoing basis, but we.

We're going to do a little bit more than we normally do.

During the second half of the year and then we're investing in other things.

In terms of from a product perspective, but I wouldn't say we're necessarily.

<unk> things, but we certainly are.

Working down our priority list.

And so I think every company has the priority list and we're able to work down that list at a more accelerated rate just given the strong results that we see in.

In the business.

Got it and then how should we think about the magnitude of the capacity investments Youre, making.

Are those expected to hit more in 2020.

2 or could it be partially seen in 2021 as well.

Yes.

In terms of manufacturing capacity are you speaking specifically to I Wouldnt say I'd say theres different investments in different parts of the business I mean, I think it's going to be nothing that will be coming all at once.

I think youll see gradual improvements nothing significant or material to any 1 quarter, but certainly things that we will.

Benefit.

Each quarter kind of going forward and the.

Some stuff will kind of kick in a little bit next year. So.

Got it thanks guys.

Your final.

Question will come from Brandon Couillard with Jefferies. Please proceed.

Hey, Thanks, good afternoon.

Hey, Brendan.

Patrick you talked about.

So we're using the spin occur in terms of cross selling initiatives that can be wrong I don't recall of mettler talking much about that historically is that the new aspect of spinnaker that you're looking to capitalize on it.

And what segments of what areas of the business would be most.

It's impacted by that.

Yes.

Thanks, Brian that's sort of an excellent question, yes. It is.

Not totally new but we've definitely emphasizing it more because look at the product portfolio is brought it goes across.

Broad of part of the value chain of our customers.

All of the way from all of the QC into production scale up of manufacturing.

The spinnaker historically, we have been more focused on a very dedicated.

Prioritize sales force along the different product lines.

Now looking at the.

The more intensely at cross selling opportunities.

In the cost on the customer side and also starting from from volume.

<unk> existing sales contact on let's say of specific.

The contact to make sure that beyond the stand bet on the customer side in terms of book, but all of the opportunities for us to penetrate in the other parts of the customer organization made the QC.

Maybe the manufacturing maybe and production scale up.

Using them these leads to with Tencent basically all the dedicated sales team members with the.

The right background of Knowhow to these all the accounts within the customer count.

Again, we don't use channel list, we have the special.

The lines with Workforces in the this is where it is now.

Different or enhance from the from what we have done before we behalf more dedicated initiatives actually as part of the reason the leadership team meeting, we hadn't had that as 1 of the topic across.

Most of all of the divisional leaders and all of the business and market organization leaders of the how power.

We can do this more effectively moving forward to make sure that the capture all of the opportunities that behalf at any given customer site.

But again, that's all from me thanks.

I would now like to turn the call back over to Mary Finnegan for any closing remarks at the time.

Thank you and thanks to everyone for joining us the CEB.

If you have any questions. Please don't hesitate to reach out take care Bye bye.

This concludes today's conference call. Thank you for participating you may now disconnect.