Q4 2021 Mettler-Toledo International Inc Earnings Call

Speaker 1: Good day and thank you for standing by. Welcome to the Met with 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 to press star 1 in your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. Our now I'd like to hand the conference over to your speaker today, Ms. Mary Finnegan. Please go ahead.

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 to press star one on your telephone. Please be advised that today's conference is being recorded if you require any further assistance.

Press Star Zero I would now like to hand, the conference over to your speaker today Ms. Mary.

Finnegan. Please go ahead.

Speaker 2: Thank you and good evening everyone. I'm Mary Finnegan and responsible for investor relations at Mettler Toledo. I'm happy that you're joining us this evening. I'm joined on the call today with Patrick Kaltenbach, our CEO , and Sean Videla, our Chief Financial Officer. Let me cover just a couple of finance administrative matters. This call is being webcast and is available on our website. A copy of the press release and the presentation that we refer to on today's call is also on the website.

Thank you and good evening, everyone I'm, Mary Finnegan and responsible for Investor Relations at Mettler, Toledo, and happy that you're joining us. This evening I'm joined on the call today with Patrick Kaltenbach, our CEO and Shawn Vadala, Our Chief Financial Officer, Let me cover just a couple of finance at administrative matters. This call.

<unk> is being webcast is available on our website a copy of the press release and the presentation that we referred to on today's call is also on the website let.

Speaker 2: Let me summarize the Safe Harper language, which is outlined on page 2 of the presentation.

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

Speaker 2: Statements in this presentation which are not historical facts constitute forward-looking statements within the meaning of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. These statements involve risks, uncertainties, and other factors that may cause our actual results, level of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statement.

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, and the U S Securities Exchange Act of $19 34. These statements involve risks uncertainties and other factors that may cause our actual results.

The level of activity performance or achievements to be materially different from those expressed or implied by any forward looking statements.

Speaker 2: For discussion of these risks and uncertainties, please see the discussion in our recent Form 10-K and other reports filed with the SEC from time to time. All of the board-looking statements are qualified in their entirety by reference to the factors discussed under the captions, factors affecting our future operating results and the business and management discussion and analysis of financial condition and results of operation sections of our filing.

For a discussion of these risks and uncertainties. Please see the discussion in our recent Form 10-K , and other reports filed with the SEC from time to time.

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 the business and management discussion and analysis of financial condition and results of operations sections of our filings.

Speaker 2: One 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 the non-GAAP financial measure and the most directly comparable GAAP measure is provided in the 8K. Let me now turn the call over to Patrick.

One 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 the non-GAAP financial measure and the most directly comparable GAAP measure is provided in the 8-K, let me now turn the call over to Patrick.

Thanks, Mary and good evening everyone.

Speaker 3: We had a great finish to 2021 with a strong fourth quarter result.

You had a great finish to 2021 with strong fourth quarter results.

Speaker 3: We capitalized on robust customer demand and executed very well, particularly with respect to our supply chain to meet customer demand.

Capitalized on robust customer demand has executed very well, particularly with respect to our supply chain to meet customer demands.

Speaker 3: The strength and agility of the teams around the world are reflected in these results.

The strength and agility of the teams around the world are reflected in these results.

The highlights of the quarter on page three of the presentation.

Speaker 3: Local currency sales growth was 11% and we had particularly strong growth in the Americas and Asia and the rest of the world.

Local currency sales growth was 11% and we had a particular strong growth in the Americas and Asia and rest of the world.

Both our laboratory and industrial product lines performed very well.

Speaker 3: Both our laboratory and industrial product lines perform very well.

Speaker 3: As expected, food retail was a headwind to our overall sales growth as we again had a significant decline in the quarter.

As expected food retail was a headwind to our overall sales growth as we again had a significant decline in the quarter.

Speaker 3: Despite facing higher material and transportation costs due to challenges in the supply chain, we had very solid growth in adjusted operating profit and strong growth in adjusted EPS in the quarter.

Despite facing higher material and transportation costs due to challenges in the supply chain.

Very solid growth in adjusted operating profit and strong growth in adjusted EPS in the quarter.

The fourth quarter was and to an excellent to yield results.

Speaker 3: The fourth quarter was the end to an excellent year of results.

Speaker 3: For the full year, we achieved an 18% increase in local currency sales, a 26% increase in adjusted operating profit, which resulted in a margin improvement of 130 basis points.

For the full year, we achieved an 18% increase in local currency sales at 26% increase in adjusted operating profit, which resulted in a margin improvement of 130 basis points.

We have adjusted bid outstanding.

Speaker 3: We had adjusted, we had outstanding 32% growth in adjusted EPS, and finally cash flow generation in 2021 was excellent.

32% growth in adjusted EPS and finally.

Cash flow generation in 2021 was excellent.

We not only achieved great results, we also strengthened our competitive position in 2021 innovation.

Speaker 3: We not only achieved great results, we also strengthened our competitive position in 2021, as innovation nourished our excellent product portfolio and comprehensive services offering combined with our Spinnaker sales and marketing strategies helped us capture growth opportunities.

Innovation newish excellent product portfolio and comprehensive services offering combined with our spinnaker sales and marketing strategies helped us catch up growth opportunities.

Speaker 3: He also did a superb job navigating the hurdles in the global supply chain.

You also did a good job.

Mitigating the hurdles in the global supply chain.

Speaker 3: Our agility and excellent execution further reinforced our already strong brand.

Our agility and excellent execution further reinforced our already strong brand.

Importantly, our impressive results last year allowed us to make important investments for future growth.

Speaker 3: Importantly, our impressive results last year allowed us to make important investments for future growth.

Speaker 3: We are confident in our ability to continue to gain share and believe we are ideally positioned to deliver strong results in 2022 and beyond.

Concrete and in our ability to continue to gain share and believe we are ideally positioned to deliver strong results in 2022 and beyond.

Speaker 3: I will have some additional comments later, but let me turn it first to Sean to cover the financial results.

I will have some additional commence later, but let me turn it first to Shawn to cover the financial results.

Sure.

Thanks, Patrick and good evening, everyone sales in the quarter were 1.3 dollars 7 billion. This represents our first $1 billion quarter, which was a nice way to end 2021.

Speaker 4: Thanks, Patrick, and good evening, everyone. Sales in the quarter were $1.037 billion. This represents our first billion dollar quarter, which was a nice way to end 2021. This represented a local currency increase of 11%. On a US dollar basis, sales also increased 11%.

This represented our local currency increase of 11%.

On a U S dollar basis sales also increased 11%.

Speaker 4: The PENDOTECH acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that the impact of reduced volume of pipette tips in COVID testing was a headwind of approximately 1% to sales growth in the fourth quarter. On slide number four...

The <unk> acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that the impact of reduced volume of pipette tips and Covid testing was a headwind of approximately 1% of sales growth in the fourth quarter.

On slide number four we show sales growth by region.

Speaker 4: Local currency sales increased 16% in the Americas, 4% in Europe , and 14% in Asia and the rest of the world.

Local currency sales increased 16% in the Americas for.

<unk>, 4% in Europe , and 14% and Asia rest of the world.

Speaker 4: local currency sales increased 12% in China in the fourth quarter.

Local currency sales increased 12% in China in the fourth quarter.

Speaker 4: The next slide shows sales growth by region for the full year 2021.

The next slide shows sales growth by region for the full year 2021.

Speaker 4: Local currency sales grew 18% in 2021, with a 20% increase in the Americas, 12% in Europe , and 21% growth in Asia and the rest of the world. Local currency sales increased 25% in China for the full year.

Local currency sales grew 18% in 2021 with a 20% increase in the Americas, 12% in Europe , and 21% growth in Asia rest of World.

Local currency sales increased 25% in China for the full year.

Speaker 4: On slide number six, we summarize local currency sales growth by product area. For the fourth quarter, laboratory sales increased 15 percent, industrial increased 11 percent, with core industrial up 11 percent, and product inspection up 10 percent. Food retail declined 20 percent in the quarter.

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

For the fourth quarter laboratory sales increased 15% industrial increased 11% with core industrial up 11% and product inspection up 10% food.

Food retail declined 20% in the quarter.

The next slide shows local currency sales growth by product area for the full year 2021.

Speaker 4: The next slide shows local currency sales growth by product area for the full year 2021.

Speaker 4: Laboratory sales increased 22%, industrial increased 15%, with core industrial up 18%, and product inspection up 10%. Food retail declined 6% in 2021.

<unk> sales increased 22% industrial increased 15% with core industrial up 18% and product inspection up 10% food retail declined 6% in 2021.

Speaker 4: Let me now move to the rest of the P&L for the fourth quarter, which is summarized on slide number eight.

Let me now move to the rest of the P&L for the fourth quarter, which is summarized on slide number eight.

Speaker 4: Gross margin in the quarter was 58.5%. We benefited from volume and pricing, which was offset by challenges in the global supply chain, namely higher material and transportation costs, as well as the impact of temporary cost actions we undertook in 2020.

Gross margin in the quarter was 58, 5%, we benefited from volume and pricing, which was offset by challenges in the global supply chain.

Namely higher material and transportation cost as well as the impact of temporary cost actions, we undertook in 2020.

Speaker 4: R&D amounted to $45.6 million in the quarter.

R&D amounted to $45 6 million in the quarter.

Speaker 4: which is a 14% increase in local currency over the prior period.

Which is a 14% increase in local currency over the prior year period.

Speaker 4: The impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.

The impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.

SG&A amounted to $242 $4 million, an 8% increase in local currency over the prior year.

Speaker 4: SG&A amounted to $242.4 million, an 8% 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.

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.

Speaker 4: Adjusted operating profit amounted to $319.1 million in the quarter, a 9% increase over the prior year amount of $292.8 million.

Adjusted operating profit amounted to $319 1 million in the quarter, a 9% increase over the prior year amount of $292 $8 million.

Speaker 4: The increase reflects strong sales growth combined with good execution.

The increase reflects strong sales growth combined with good execution.

Speaker 4: Adjusted operating margins were 30.8% and were impacted by higher costs associated with our global supply chain and transportation costs.

Adjusted operating margins were 38% and were impacted by higher costs associated with our global supply chain and transportation costs.

Speaker 4: A couple of final comments on the P&L. Amortization amounted to $16.9 million in the quarter. Interest expense was $11.5 million in the quarter.

A couple of final comments on the P&L amortization amounted to $16 $9 million in the quarter interest expense was $11 $5 million in the quarter.

Other income excluding one time items in.

In the quarter amounted to $5 $3 million, primarily reflecting non service related pension income.

We reduced our effective tax rate from 19, 5% to 19.0% in the quarter. This rate is before discrete items and adjusting for the timing of stock option exercises in the quarter. We're pleased with this reduction and expect to maintain the 19% rate in 2000.

Speaker 4: We reduced our effective tax rate from 19.5% to 19.0% in the quarter. This rate is before discrete items and adjusting for the timing of stock option exercises in the quarter. We are pleased with this reduction and expect to maintain the 19% rate in 2022.

'twenty two.

Fully diluted shares amounted to $23 2 million in the quarter, which is a 3% decline from the prior year.

Speaker 4: Adjusted EPS for the quarter was $10.53, a 14 percent increase over the prior year amount of $9.26.

Adjusted EPS for the quarter was $10 53.

A 14% increase over the prior year amount of $9 26.

On a reported basis in the quarter EPS was $9 94.

Speaker 4: On a reported basis in the quarter, EPS was $9.94 as compared to $9.03 in the prior year. Reported EPS in the quarter includes $0.21 of purchased intangible amortization and $0.09 of restructuring.

As compared to $9 three in the prior year rips.

The reported EPS in the quarter includes 21 <unk> of purchased intangible amortization and <unk> of restructuring.

Speaker 4: We also had two items impacting income taxes. We had $0.17 of cost due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises, and we had a $0.14 benefit from adjusting our tax rate to 19% for the first three quarters.

We also had two items impacting income taxes, we had 17 of cost due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises and we had a 14th benefit from adjusting our tax rate to 19% for the first three quarters.

Speaker 4: Finally, we had a $0.26 acquisition charge primarily principally reflecting an increase for the PendoTech acquisition earn out due to their updated projections.

Finally, we added 2006 acquisition charge, primarily principally reflecting an increase for the <unk> acquisition earn out due to their updated projections.

The next slide shows our P&L year to date.

Speaker 4: As Patrick mentioned, we had an exceptional year of results in 2021 with local currency sales growth of 18%, an adjusted operating profit increase of 26%, and our operating margins increasing 130 basis points to 28.5%.

As Patrick mentioned, we had an exceptional year of results in 2021 with local currency sales growth of 18% and adjusted operating profit increase of 26% and our operating margins, increasing 130 basis points to 28, 5%.

Speaker 4: Finally, adjusted EPS grew 32% to $34.01 in 2021.

Finally, adjusted EPS grew 32% to $34 in <unk> in 2021.

Speaker 4: We're extremely pleased with these results and our ability to capitalize on growth opportunities and navigate a challenging supply chain environment.

We're extremely pleased with these results and our ability to capitalize on growth opportunities and navigate a challenging supply chain environment.

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

Speaker 4: That covers the P&L, and let me now comment on cash flow.

Speaker 4: And the quarter adjusted free cash flow amounted to $206.6 million, which was better than what we had expected and was impacted by the timing of tax payments.

In the quarter adjusted free cash flow amounted to $206 $6 million, which was better than what we had expected and was impacted by the timing of tax payments.

Speaker 4: DSO showed further improvement in the quarter with a decline of 2 days to 35 days as compared to the prior year.

<unk> showed further improvement in the quarter with a decline of two days to 35 days as compared to the prior year.

Speaker 4: ITO came in at 4.3 times flat with the prior year.

It came in at four three times flat with the prior year.

Speaker 4: For the full year, adjusted free cash flow amounted to $821.9 million, an increase of 31% on a per share basis as compared to the prior year. The strength of our cash flow is apparent in our net income conversion, which reached 103% in 2021.

For the full year adjusted free cash flow amounted to $821 9 million, an increase of 31% on a per share basis as compared to the prior year the.

The strength of our cash flow is apparent in our net income conversion, which reached 103% in 2021.

Let me now turn to guidance.

Speaker 4: Forecasting remains challenging. Demand in our end markets is favorable, although there are pockets of uncertainty in the global economy, particularly in China.

Forecasting remains challenging demand in our end markets as favorable although there are pockets of uncertainty in the global economy, particularly in China.

The challenges within the global supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.

Speaker 4: The challenges within the global supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.

Speaker 4: Finally, we acknowledge that COVID is not behind us and variants and lockdowns can occur quickly. We recognize the importance of remaining agile and adapting to unexpected changes in the environment.

Finally, we acknowledge that COVID-19 is not behind us and variance in Lockdowns can occur quickly we.

We recognize the importance of remaining agile and adapting to unexpected changes in the environment.

Speaker 4: We remain cautious about factors outside of our control and remain focused on our growth initiatives.

We remain cautious about factors outside of our control and remain focused on our growth initiatives.

Speaker 4: We believe we can continue to gain market share and drive margin improvement via our pricing and Stern Drive initiatives.

We believe we can continue to gain market share and drive margin improvement via our pricing and stern drive initiatives.

Speaker 4: Now, let me cover the specifics. For the full year 2022, we now expect local currency sales growth to be approximately 7%. This compares to previous guidance.

Now let me cover the specifics for the full year 2022, we now expect local currency sales growth to be approximately 7%.

This compares to previous guidance of 6%.

Speaker 4: We expect full-year adjusted EPS to be in the range of $38.15 to $38.50, which is a growth rate of 12 to 13 percent.

We expect full year adjusted EPS to be in the range of $38 15.

The $38 50.

Which is a growth rate of 12 to 13, 12% to 13%.

Speaker 4: This compares to previous guidance of adjusted EPS in the range of $37.25 to $37.65. Some additional comments on

This compares to previous guidance of adjusted EPS in the range of $37 25.

To $37 65.

Some additional comments on 2022 guidance.

Speaker 4: We expect a slight headwind to sales growth from the impact of COVID testing on our pipette business.

We expect a slight headwind to sales growth from the impact of Covid testing on our pipette business we.

Speaker 4: We expect gross margins for the full year to increase in the 30 to 40 basis point range. However, we expect to see improvement in gross margins in the second half of the year as we see further benefit in pricing and other margin initiatives.

We expect gross margins for the full year to increase in the 30 to 40 basis point range. However, we expect to see improvement in gross margins in the second half of the year as we see further benefit in pricing and other margin initiatives.

Interest expense is estimated at approximately $50 million and total amortization, including purchased intangible amortization to be $67 million.

Speaker 4: Interest expense is estimated at approximately $50 million in total amortization, including purchased intangible amortization, to be $67 million.

Speaker 4: Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pre-tax or 86 cents per share.

Purchased intangible amortization is excluded from adjusted EPS.

It's estimated at $25 million on a pre tax or <unk> 86 per share.

Other income which is below operating profit is estimated at approximately $14 million.

Speaker 4: Other income, which is below operating profit, is estimated at approximately $14 million.

Speaker 4: Finally, as I already mentioned, we expect our effective annual tax rate before discreet items will be 19%.

Finally, as I already mentioned, we expect our effective annual tax rate before discrete items will be 19%.

Speaker 4: Turning to the first quarter, based on market conditions today, we expect local currency sales growth of approximately 10 percent, and expect adjusted EPS to be in the range of $7.25 to $7.35, a growth rate of 11 to 12 percent.

Turning to the first quarter based on market conditions today, we expect local currency sales growth of approximately 10% and expect adjusted EPS to be in the range of $7 25.

To $7 35.

Both rate of 11% to 12%.

A couple of further comments.

Speaker 4: A reminder that comparisons in the first quarter are particularly challenging as adjusted EPS grew more than 60% in Q1 last year.

A reminder, that comparisons in the first quarter are particularly challenging as adjusted EPS grew more than 60% in Q1 last year.

Speaker 4: We would expect gross margins to be down in Q1 due to higher supply chain and transportation costs.

We would expect gross margins to be down in Q1, two to higher supply chain and transportation costs.

Speaker 4: We will provide more insight on our next call, but it is worth mentioning now as you update your models that Q2 will have a very tough prior year comparison as local currency sales were up 27 percent and adjusted EPS increased more than 50 percent in the second quarter of last year.

We will provide more insight on our next call, but it's worth mentioning now as you update your models that Q2 will have a very tough prior year comparison as local currency sales were up 27% and adjusted EPS increased more than 50% in the second quarter of last year.

Some final details and guidance.

Speaker 4: With respect to the impact of currency on sales growth, we expect currency to decrease sales growth by approximately 1% in 2022 and decrease it by 2% in Q1.

With respect to the impact of currency on sales growth, we expect currency to decrease sales growth by approximately 1% in 2022 and decrease it by 2% in Q1.

Speaker 4: In terms of adjusted EPS, currency is a little worse than the last time we provided guidance.

In terms of adjusted EPS currency is a little worse than the last time, we provided guidance.

Speaker 4: We now expect currency will be a headwind to adjusted EPS growth of approximately 1% in 2022 and a headwind of approximately 2% in the first quarter.

We now expect currency will be a headwind to adjusted EPS growth of approximately 1% in 2022, and a headwind of approximately 2% in the first quarter.

Let me comment on free cash flow.

Speaker 4: For the full year 2022, we estimate it will reach $855 million.

For the full year 2022, we estimate it will reach $855 million.

Speaker 4: As we mentioned on our last call, our cash flow this year is impacted by higher variable compensation payments related to the very strong performance in 2021. In fact, we expect cash flow in Q1 to be down versus the prior year. Once we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share and net income conversion will be in the 100% range.

As we mentioned on our last call our cash flow. This year is impacted by higher variable compensation payments related to the very strong performance in 2021. In fact, we expect cash flow in Q1 to be down versus the prior year.

Once we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share and.

And net income conversion will be in the 100% range.

Speaker 4: We expect to repurchase approximately $1 billion in shares in 2022, which should allow us to maintain a net debt to EBITDA leverage ratio of approximately one and a half times. That is it for my side, and I'll now turn it back to Patrick.

We expect to repurchase approximately $1 billion in shares in 2022, which should allow us to maintain a net debt to EBITDA leverage ratio of approximately one five times.

That does it for my side and I'll now turn it back to Patrick.

Thanks, Sean.

Let me start with some comments on operating results.

Speaker 3: Our lab business had very strong growth in the quarter despite having great growth in the prior year. Almost all product lines

Business had very strong growth in the quarter, despite having great growth in the prior year.

Almost all product lines showed robust growth.

Speaker 3: We will start the year with very good momentum in lab in the first quarter, while growth in the remaining quarters will be impacted by a challenging multi-year comparison.

We will start the year with very good momentum and lap the first quarter, while growth in the remaining quarters will be impacted by a challenging multiyear comparisons.

Excellent product portfolio and effective sales and marketing initiatives, we believe bill position to capture growth and continued to gain market share.

Speaker 3: With our excellent product portfolio and effective sales and marketing initiatives, we believe we are well-positioned to capture growth and continue to gain market share in our laboratory business.

Lucas.

Turning to our industrial business.

Speaker 3: Core Industrial did very well in the quarter and will have a strong start to 2022.

Core industrial did very well in the quarter and we will have a strong start to 2022.

Speaker 3: We are benefiting from our attractive product portfolio, very good implementation of Spinnaker sales and marketing initiatives, as well as increasing demand from our customers for automation and digitalization.

Benefiting from our attractive product portfolio very good implementation of spinnaker sales and marketing initiatives as well as increasing demand for mobile customers for automation and digitalization.

Speaker 3: We will face tougher comparisons as the year progresses, but expect to continue to gain share here as well.

We will face tougher comparisons as the year progresses, but expect to continue to gain share here as well.

We are pleased with Lenovo.

Quarter of good growth and product inspection, which increased 10% in the quarter.

Speaker 3: quarter of good growth in product inspection, which increased 10% in the quarter.

Speaker 3: We expect a good start to the year and are optimistic that we will have good growth in 2022, as large packaged food companies show more appetite for investments.

We expect a good start to the view and are optimistic that people will have good growth in 2022 as large packaged food companies show more appetite for investments.

Finally, food retail declined 20% in the fourth quarter.

Speaker 3: Finally, food retail declined 20% in the fourth quarter.

Speaker 3: We were impacted by shortages of electronic components as well as timing of project activity.

We were impacted by shortages of electronic components as well as timing of project activity.

Speaker 3: We expect low double-digit decline in the first quarter and overall do not expect much growth here in 2022. Now, let me.

We expect low double digit decline in the first quarter.

We do not expect much growth year in 2022.

Now, let me make some additional comments by geography.

Speaker 3: Sales in Europe increased 4% in the fourth quarter, which was in line with our expectations.

Sales to Europe increased 4% in the fourth quarter, which was in line with our expectations.

Speaker 3: Both lab and industrial had solid growth while retail was down double digits.

And flat and industrial had solid growth, while retail was down double digits.

We expect good growth in Europe to start the year and overall solid growth for the full year 2022.

Speaker 3: We expect good growth in Europe to start the year and overall solid growth for the full year 2022.

Speaker 3: America has had another quarter of very strong growth with 16% increase.

Americas had another quarter of very strong growth with 16% increase.

Speaker 3: Lab had excellent growth while Industrial also did very well.

Lab had excellent growth one industry industrial also did very well.

Retail was down significantly.

Speaker 3: Americas will also have a strong start to the year and then face more challenging comparisons as the year progresses.

Americans will also have a strong start to the year and then face more challenging comparisons as the year progresses.

Finally, Asia rest of the World grew 14% in the fourth quarter with outstanding growth in laboratory and product inspection and very good growth in core industrial.

Speaker 3: Finally, Asia and the rest of the world grew 14% in the fourth quarter with outstanding growth in laboratory and product inspection and very good growth in core industrialization.

Speaker 3: China grew 12% with excellent growth in lat.

China grew.

<unk> grew 12% with excellent growth in lab.

Yes, very strongly positioned in China, and the team continues to execute well.

Speaker 3: We are very strongly positioned in China and the team continues to execute well.

Speaker 3: One final comment on the business, service and consumables performed really well and grew up 10% in the quarter.

One final comment on the business service and consumables performed really rail and drop 10% in deployment.

We continue to be very pleased with the growth in this important and profitable part of the business.

Speaker 3: We continue to be very pleased with the growth in this important and profitable part of the business.

That concludes my comments on the business.

Well I'll call. It has not yet behind US we believe we will exit the pandemic in a stronger competitive position.

Speaker 3: While COVID is not yet behind us, we believe we will exit the pandemic in a stronger competitive position.

Speaker 3: Many factors have contributed to this, including our excellent product portfolio.

Many factors have contributed to this including excellent product portfolio.

Speaker 3: extensive service offering, well-ingrained and proven sales and marketing strategies, and an agile and experienced supply chain team.

Extensive service offering well ingrained and proven.

Proven sales and marketing strategies in an agile and <unk> and supply chain team.

Another important factor is about process and system Harmonization program Blue Ocean, which is the foundation and enabler of many of our corporate programs and initiatives.

Speaker 3: Another important factor is our process and system harmonization program, Blue Ocean, which is the foundation and enabler of many of our corporate programs and initiatives.

Speaker 3: Blue Ocean is a multi-year program that harmonizes how we do business, internally and with customers. It encompasses all aspects of business.

Erosion is a multiyear program that harmonizes, how we do business internally and with customers.

You didn't complex as all aspects of our franchise.

Speaker 3: sales, service, supply chain, R&D, HR, and finance.

Sales service supply chain, R&D, HR and finance.

Speaker 3: With harmonized processes and data, we can leverage a globally standardized single-instance IT system that digitalizes our processes and provides data that increases our business transparency.

With harmonize processes and data we can leverage it globally standardized single instance, it system.

Digitalize, all processes and provides data increases our business transparency.

Let me provide some additional insight.

Speaker 3: Blue Ocean supports the framework for our Spinnaker sales and marketing initiatives.

Blue Ocean supports to framework for our spinnaker sales and marketing initiatives. Our CRM installed base provides extensive details on customers and potential customers.

Speaker 3: Our CRM and install base provides extensive details on customers and potential customers that we use in marketing campaigns, sales project alerts, cross-selling campaigns, and support for other data analytics techniques.

Use and marketing campaigns sales project alerts cross selling campaigns in support of a data analytics techniques.

Speaker 3: It provides comprehensive data on customers' purchasing activity.

It provides comprehensive data on customers purchasing activity.

Speaker 3: Blue Ocean is also the foundation for our pricing program.

Blue Ocean is also the foundation for pricing program it.

Speaker 3: It provides data analytics to guide us in our pricing decisions and also allows us to implement price increases efficiently on a global basis.

It provides data analytics to guide us pricing decisions and also allows us to implement price increases efficiently on a global basis.

Speaker 3: Similarly, Blue Ocean harmonizes our services offering, allowing us to provide standardized services on a global base.

Similarly, Blue Ocean harmonize, our services offering, allowing us to provide standardized services on a global basis.

Speaker 3: It also provides transparency in terms of field service productivity, service profitability by customer, and highlights additional sales opportunities.

<unk> also provides transparency in terms of field service productivity service profitability by customer and highlight additional sales opportunities.

Our supply chain is highly complex as it involves more than 3000 possible suppliers.

Speaker 3: Our supply chain is highly complex as it involves more than 3,000 possible suppliers, 150,000 different SKUs, more than 800,000...

<unk> hundred $50000.

Different skews.

More than 800000 components.

Speaker 3: 19 production organizations and three logistic hubs.

19 production organizations and three logistics hubs.

Speaker 3: Blue Ocean provides us with the transparency and real-time data that is critical for navigating supply chain challenges.

Blue Ocean provides us with the transparency and real time data that is critical for mitigating supply chain challenges.

Speaker 3: The agility and collaboration between our market organizations and business units allow us to leverage our supply chain as a competitive advantage in helping

Agility and collaboration between our market organizations and business units allow us to leverage our supply chain is a competitive advantage in.

In helping us gain share.

Blue Ocean is a critical it's critical to the success of our Stern drive program as it provides the data transparency to continually make improvements to our back office and manufacturing productivity.

Speaker 3: Blue Ocean is critical to the success of our sterndrive program as it provides the data and transparency to continually make improvements to our back office and manufacturing productivity. Finally, Blue Ocean is instrumental in providing meaningful real-time information that has become particularly important during the last two years given how quickly market conditions have been changing.

Finally, the ocean is instrumental in providing meaningful real time information that has become particularly important during the last two years, given how quickly market conditions have been changing.

We develop specialized and tailored daily alerts, allowing us to see firsthand the impact on our business and allow us to make decisions quickly.

Speaker 3: We develop specialized and tailored data alerts, allowing us to see firsthand the impact on our business and allow us to make decisions quickly.

Speaker 3: We will continue to evolve Blue Ocean and believe it has become a clear competitive advantage for us.

We will continue to evolve blue Ocean and believe it has become a clear competitive advantage for us.

Before I conclude I also want to make a brief comment on what use G initiatives.

Speaker 3: Before I conclude, I also want to make a brief comment on our ESG initiative.

We are committed to sustainable development across the broad environmental social and governance aspects covered by will long stint by our longstanding green empty sustainability program.

Speaker 3: We are committed to sustainable development across the broad environmental, social and governance aspects covered by our longstanding GreenMT sustainability program.

Speaker 3: We believe it is our responsibility to act in a manner that considers future generations.

We believe it is our responsibility to act in a manner that considers future generations.

Yes, great accomplishments and use cheap, including achieving carbon neutrality with respect to scope, one and two emissions and sourcing 100% renewable electricity.

Speaker 3: We have great accomplishments in ESG including achieving carbon neutrality with respect to scope 1 and 2 emissions and sourcing 100% renewable electricity.

Speaker 3: We focus on five key areas, one, environmental, two, sustainable products and services, three, responsible development.

We focus on five key areas.

Environmental <unk>.

<unk> sustainable products and services three responsible supply chain.

Speaker 3: four, engaged employees and five, good corporate governance.

<unk> engaged employees and five good corporate governance.

Speaker 3: While we have an excellent track record in ESG, we have set ambitious targets for the future.

Or do you have an excellent track record and you use cheap we have set ambitious ambitious targets for the future.

Speaker 3: Importantly, we have recently committed to absolute emission reduction targets consistent with the latest criteria issued by the Science-Based Target Initiative.

Importantly reason.

Recently committed to absolute emission reduction targets consistent with the latest criteria.

By the science based target initiative.

Speaker 3: This will cover scope 1, 2, and 3 emissions.

This was a couple of scope one two and three emissions.

Speaker 3: We have also set a target to reduce our waste intensity by 20% and achieve zero waste to landfill by 2025.

We have also set a target to reduce waste intensity by 20% and achieved zero waste to landfill by 2025.

To reinforce the importance of us Chief Executive management compensation in 2022 will incorporate specific environmental and some of this diversity targets.

Speaker 3: To reinforce the importance of ESG, executive management compensation in 2022 will incorporate specific environmental as well as diversity targets.

Speaker 3: I think both Blue Ocean and our ESG goals are great examples on how Mettler Toledo focuses on the long term to enhance the value of our franchise.

I think both Blue Ocean <unk> are great. Examples on how mettler Toledo focuses on the long term to enhance the value of our franchise.

I would now like the operator to open the call for questions.

Speaker 3: I would now like the operator to open the call for questions.

Speaker 1: As a reminder, to ask a question, you will need to press star 1 in your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please stand by while we compile the Q&A roster.

Your first question will come from Dan Arias with Stifel. Please proceed with your question.

Speaker 1: Your first question will come from Dan Arias with Staple. Please proceed with your question.

Hi, This is Eric on for Dan.

Thanks for taking the question.

Speaker 5: uh... one on capital deployment accused discuss your plan for that uh... for the year the one billion dollar share buyback like you finding any effort becoming more attractive given the recent market that might have you looking for one that

One on capital deployment could you just discuss your plan for that for the year. Besides the $1 billion share buyback like are you finding any assets, becoming more attractive given the recent market moves that might have you're looking for ones that might be.

On a larger scale than the usual smaller tuck in deals.

Speaker 4: Yeah, hey, maybe so I guess there's two parts of that question. So, you know, in terms of our M&A strategy, I'll let Patrick kind of comment on that, but no change in our strategy. We still think we're a great platform for bolt-on acquisitions.

Yes, Hey, maybe so I guess, there's two parts of that question. So.

Terms of our M&A strategy I'll, let Patrick kind of comment on that but no change in our strategy. We still think we're a great platform for bolt on acquisitions.

We also feel very strongly about our organic story. So we're very selective in terms of the acquisitions, but if you look at like the <unk> acquisition. We did last year I think thats a really excellent example.

Speaker 4: position that we're looking for, and Pendotec, of course, has been a great addition to Mettler Toledo. In terms of capital deployment, you know, we also feel good about our share repurchase program. The program continues to be very successful from our perspective, and we target about a one-and-a-half times net leverage ratio, and right now we're expecting to repurchase about $1 billion of shares in 2022. And as a reminder, we do that on a very consistent basis throughout the year.

The type of acquisition that we're looking for in <unk> of course, it's been a great addition to mettler Toledo in terms of capital deployment, we also feel.

<unk> good about our our share repurchase program.

<unk> continues to be very successful from our perspective, and we target about one five times net leverage ratio and.

Speaker 4: And right now we're expecting to repurchase about $1 billion.

And right now we're expecting to repurchase about $1 billion of shares in 2022 and as a reminder, we do that on a very consistent basis throughout the throughout the year.

Speaker 4: of shares in 2022. And as a reminder, we do that on a very consistent basis throughout the year.

Speaker 5: OK, and then could you just provide a rundown of the top line assumptions?

Okay, and then could you just provide a rundown of the top line assumptions by segment for the first quarter and for the.

2022, that's baked into the improved guidance.

Speaker 4: Yeah, sure. So, hey, I'll start with the divisions. So, I'll start with the lab division. Right now, our guidance is low double-digit growth for Q1 and high single-digit growth for the full year.

Yes, sure so hey, I'll start with the with the divisions.

So I'll start with the lab Division right now our guidance is low double digit growth for Q1 and high single digit growth for the full year.

Speaker 4: For core industrial, we expect high single-digit growth in Q1 and mid-single-digit growth for the full year.

Core industrial we expect high single digit growth in Q1, and mid single digit growth for the full year.

Speaker 4: For product inspection, we expect high single-digit growth for Q1 and high single-digit growth for the full year. And for food retailing, we expect to be down double-digit in Q1, but grow low single-digit for the full year. And then I'll also give you the geographies. For Europe , we expect Q1 to be up mid-single-digit to high-single-digit. And for the full year, to be up mid-single-digit.

For product inspection, we expect high single digit growth for Q1 and high single digit growth for the full year.

And for food retailing, we expect to be down double digit in Q1, but grow low single digit for the full year and then I'll also give you the geographies for Europe , we expect Q1 to be up mid single digit to high single digit and for the full year to be up mid <unk>.

<unk> digit.

Speaker 4: For the Americas, we expect to grow low double-digit in Q1 and grow mid-single-digit to high-single-digit full year. And then for China, we expect to grow approximately 10% Q1 and approximately 10% for the full year.

For the Americas, we expect to grow low double digit in Q1 and grow mid single digit to high single digit full year.

And then for China, we expect to grow approximately 10%.

One an approximately 10% for the full year.

Thank you so much.

Welcome.

Speaker 1: Your next question will come from the line of Derek DeBruin with Bank of America. Please proceed with your question.

Your next question will come from the line of Derik de Bruin with Bank of America. Please proceed with your question.

Hey, this is <unk> on for Derik. Thanks for the question so geographically to par on China here are you seeing any impact from China, specifically from Lockdowns and also trade tensions are heating up with some touching the bio processing <unk> segment is there any concern that the trade issues could slow demand for lab products.

Speaker 6: Hey, this is Nisargam for Derek. Thanks for the question. So geographically, two-parter on China here, are you seeing any impact in China specifically from lockdowns? And also, you know, trade tensions are heating up with some touching the bioprocessing CDMO segment. Is there any concern that the trade issues could slow demand for lab products?

Speaker 3: Let me take that. Our business in China has been very strong. We have a very strong footprint in China. We have been there for 30 years. We serve many customers on a broad base. Also, as a reminder, more than 40% of our business in China is industrial business.

Now, let me take that Tim.

Look I mean, our business in China has been very strong.

Very strong footprint in China will be happy now for 30 years.

Many customers overall base.

As a reminder, more than 40% of our business in China is industrial business.

Speaker 3: But to biopharma, what we're seeing there is very healthy trends for us. We have overall not seen impacts from lockdowns in the last quarter. And right now, at least what we are hearing from the team is they are not concerned of any of the impacts that you mentioned regarding biopharma.

But to Biopharma and what you're seeing there is very healthy trends for us overall.

<unk> not seen.

Impacts from Lockdowns in the last quarter.

Right now this will be a hearing from the team is doing.

They are not consumer.

The impact that you mentioned regarding Biopharma right now.

Great and then one more on the margins for the quarter what were some of the key go more into detail on some of the pressures you saw and how do you kind of expect them to impact early on in 2022.

Speaker 6: Great, and then one more on the margins for the quarter. What were some of the, can you go more into detail on some of the pressures you saw and how do you kind of expect them to impact early on in 2022? Do you think there's gonna be any carry over there?

Or do you think theres going to be any carryover there.

Speaker 4: Yeah, hey, so I'll take that one. So hey, maybe I'll talk more broadly about the margin and then can kind of like then kind of

Yes, hey, so I'll take that one so hey, maybe I'll talk more broadly about the margin and then kind of like them kind of talk about 2022 as well. So as we mentioned in the prepared remarks, our gross margin was down 110 basis points in the quarter.

Speaker 4: I talk about 2022 as well. So as we mentioned in the prepared remarks, our gross margin was down 110 basis points in the quarter. On one hand, we had, you know, favorable price realization. Our price realization was just over 3%.

On one hand, we had favorable price realization or our price realization was just over 3% in the quarter, which would translate to approximately 140 basis point benefit to the margin of course, we also benefited from our volume in the quarter, but the one thing that clearly stood out from our perspective was that.

Higher material costs.

Well as higher transportation costs in the quarter and as we kind of like look to Q1, we're expecting to see similar trends overall for gross margin would probably very similar dynamics, probably that pricing will continue to be in that 3% kind of a range, but we will still continue to have like a bit of a headwind on <unk>.

Speaker 4: to see similar trends overall for gross margin with probably very similar dynamics, you know, probably that pricing will continue to be in that 3% kind of a range, but we'll still continue to have like a bit of a headwind on material costs and transportation. So if we look at gross margin for Q1, wouldn't be surprised if we're down another 100 basis points in Q1, but we still remain very confident about our ability to expand the margin. And so as we look to the full year, we still believe we can expand our gross margin by 30 to 40 basis points, and we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say, hey, we can expand margins on an annual basis 70 basis points to 100 basis points. If you look at the midpoint of our guidance, we're towards the higher end of the range of that, probably about 90.

<unk> cost in transportation. So if we look at gross margin for Q1.

I wouldn't be surprised if we're down another 100 basis points in Q1, but but we still remain very confident about our ability to expand the margin and so as we look to the full year. We still believe we can expand our gross margin by 30 to 40 basis points.

Speaker 4: And we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say, hey, we can expand margins on an annual basis, 70 basis points to 100 basis points.

And we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say hey, we can expand margins on an annual basis 70 basis points to 100 basis points.

Speaker 4: If you look at the midpoint of our guidance where it towards the higher end of the range of that probably about 90 90 basis

If you look at the midpoint of our guidance, where it towards the higher end of the range of that probably about 90.

90 basis points.

Speaker 4: So so when you break that down, we are expecting a little bit better pricing in 2022 than what we previously expected We were previously guiding to about 3% for next year right now we're thinking it will be probably three and a half percent or so and wouldn't be surprised if we Get to the 4% kind of a range in the second half of the year because of course we're going to continue to To adjust and do actions as we see appropriate especially as we saw some of the pressures In the fourth quarter on our cost structure, but it's not only about pricing Of course We're also going to be doing some things in terms of optimizing our supply chain as we continue to look for opportunities For example to re-engineer components or look for other sources in this in the supply chain

So when you break that down we are expecting a little bit better pricing in 2022 than what we previously expected we.

We were previously guiding to about 3% for next year right now we're thinking it will be probably three 5% or so.

Wouldn't be surprised if we.

Get to the 4% kind of a range in the second half of the year because of course, we're going to continue to to adjust and do actions as we see appropriate, especially as we saw some of the pressures in the fourth quarter on our cost structure, but it's not only about pricing of course, we're also going to be doing some things in terms of optimizing our supply chain as we.

Continue to look for opportunities for example to reengineer components or look for other sources.

In the supply chain.

Great. Thank you.

Speaker 7: Great, thank you.

Speaker 1: Your next question will come from Josh Waldman with Cleveland Research. Please proceed with your question.

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

Speaker 6: Hi, thanks for taking my questions. Just a couple for you, Sean or Patrick, I guess, from a demand outlook perspective, could you talk through the product areas or the regions that improved versus your plan 90 days ago that led you to pull your organic growth up this early in the year?

Hi, Thanks for taking my questions just a couple for you.

As Sean or Patrick I guess from a demand outlook perspective could you talk through the product areas or regions.

And that improved versus your plan 90 days ago that led you to pull your organic growth up this early in the year.

Speaker 3: Maybe I start, John , and let you chime in as well. So let me talk through the product categories. I mean, we see sustained demand, healthy demand, in our lab business moving forward.

Maybe maybe I'll start and if I could chime in as well.

Talk to the product categories, I mean, we see sustained demand healthy demand in our lab business moving forward.

Speaker 3: And Sean gave you the numbers in terms of the growth expectations. So lab.

And Sean gave you the numbers in terms of the growth expectations. So lap.

Speaker 3: I would say holds up very strong, has been strong in Q4 already. We're also pleasantly surprised by the momentum that we still see in industrial, driven by the demand for automation and digitalization. And our product portfolio that we have there really serves the demand very well. I think I mentioned in my comments also the fact that we're still seeing

I would say holds a very strong has been strong in Q4 already.

Also pleasantly surprised by the momentum that we still see in industrial driven by the demand for automation and digitalization and novel product portfolio and if you have to really suits that demand very rail I think I mentioned in my comments, although the fact that.

Still seeing some healthy appetite in product inspection from some of the packaged food companies out there so overall.

Speaker 3: some healthy appetite in product inspections from some of the packaged food companies out there. So overall, I would say we are actually on a broader front across these categories that I just mentioned, really well.

I would say actually.

On a broader front across these categories that I just mentioned.

Really well.

Speaker 3: I'm actually surprised that we see stronger demand than we anticipated when we gave you the last guidance and that's why we raised the

Nicely surprised if we see stronger demand than anticipated.

You gave your last guidance and that's why we raised the guidance.

Speaker 3: That's basically, I wouldn't point to any specific end market here, not to any specific region. I would say overall we see better demand would be expected.

That's basically.

I wouldn't point to any specific end market here not to any specific region I would say.

Overall, we see better demand to be expected.

Speaker 8: Got it. Got it. Then, Sean, I wondered if you could provide us a bridge to the updated earnings guide. I mean, it sounds like most of the increase was due to organic growth, I guess. Is that correct? And then if you could provide us kind of your assumptions for the low and the high end of the EPS range as it relates to maybe organic growth and margin, that would be great.

Got it got it and then Sean I wondered if you could provide us a bridge to the updated earnings guidance I mean, it sounds like most of the increase was due to organic growth I guess is that correct and then.

If you could provide us kind of your assumptions for the low and the high end of the EPS range as it relates to maybe organic growth and margin that would be helpful.

Speaker 4: Yeah, hey, so I'd say, you know, if you kind of bridge EPS, you know, like you said, a lot of it has to do with higher sales growth, increasing the sales growth, of course, we also added in our beat for for 2021, which includes a lower tax rate, you know, at 19%. And that was offset a little bit. That was offset a little bit by unfavorable current.

Yes, Hey, so I'd say, if you kind of rate GPS.

Sure.

Like you said a lot of it has to do with higher sales growth increasing the sales growth of course, we also added in our feet for for 2021, which includes a lower tax rate at 19% and that was offset or.

A little bit.

That was offset a little bit by unfavorable currency.

Speaker 8: Hey, could you provide the range or the assumptions that went into the range for the updated guide, EPS guide?

Could you provide the range.

The assumptions that went into the range.

The updated guide EPS guide.

Speaker 4: Yeah, hey, we typically don't get too much into like the specific assumptions for the low end and the high end. I mean, we, you know, for the top line, for example, we said approximately 7%. So I don't want to try to start deviating from is that, you know, six point this or seven point that or, you know, on the margins, a little bit lower, a little bit higher, but you know, you could probably flex your model and, and get a sense for, you know, what that would translate in terms of an EPS range. But, you know, you can appreciate Josh. I mean, there's a lot of, you know, there's a lot of ingredients into the recipe at this point in time of the year, a lot of things.

Yes, Hey, we typically don't get too much into like the specific assumptions for the low end and the high end I mean, we for the top line. For example, we said approximately 7%. So I don't want to try to start deviating from that.

Six point, this or seven point that or on the margins a little bit lower a little bit higher but you could probably flagship model in and get a sense for what that would translate in terms of an EPS range, but you can appreciate Josh I mean, theres a lot of there's a lot of ingredients into the recipe at this point in time it.

A year a lot of things can change as we get into the year. It's a very very dynamic environment and so there's always going to be things that can be a little bit better, but there is of course theres things that can be a little bit worse.

Speaker 4: can change as we get into the year. It's a very, very dynamic environment, and so there's always gonna be things that can be a little bit better, but there's, of course, there's things that can be a little bit worse. Sure, appreciate it, guys.

Sure I appreciate it guys.

Youre welcome.

Speaker 1: Your next question will come from Tyco Peterson with JP Morgan. Please proceed with your question.

Next question will come from Tycho Peterson with Jpmorgan. Please proceed with your question.

Speaker 9: Hi, this is Rachel on for Tyco. Thanks for taking the questions and congrats on the quarter, you guys. So a few questions here on lab. So lab was better than expectations. You guys grew about 15% versus guidance of low double digits for 4Q. So can you talk about if you saw any catch-up spending on the lab side of things? And then were there any other underlying changes in that market to drive the beat there?

Hi, This is Rachel on for Tycho, Thanks for taking the questions and congrats on the quarter you guys.

So a few questions around lab to lab was better than expectations. You guys grew about 15% versus guidance of low double digit for <unk>. So can you talk about if you saw any catch up spending on the lab side of things and then were there any other underlying changes in that market can drive the beat there.

No I have looked at it I wouldn't say.

Speaker 3: There was catch-up or any pent-up demand that we saw. We see, really...

There was a catch up.

Pent up demand as we saw we see really strong demand for our products with a very strong product portfolio I think it competes extremely rail.

Speaker 3: strong demand for our products. We have a very strong product portfolio. I think it competes extremely well. Right now, we also have been able to deliver to our end customers, and that came to some extent at some cost, as Sean also mentioned, that drives, that had a little bit of impact on our gross margin, because we do broker buys for chips, et cetera, that make components more expensive. But it's very important for us to really make sure that we can deliver products to our customers.

Though we also have been able to deliver to all the way and customers.

Came to some extent some cost as John also mentioned.

That drives that has a little bit the impact of normal gross margin because we do political buys for chipsets.

<unk> is more expensive, but it is very important for us to really make sure that we can deliver.

Product silver customers.

Speaker 3: Overall, I think we see very strong demand for our products, and it's reflected in those numbers. There is not a specific market segment that I would point to. Pharma, bio-pharma, as we said, is very strong for us, for lab, but it's also, of course, deployed in other segments, like even battery segment, or if you look at the broader chemical segment, of course, all of the labs buy products from us.

Overall, I think the risk.

See very strong demand for products and it's reflected in those numbers. There is not a specific market segment that I would point to pharma Biopharma. As we said is very strong for us we'll lap but is it also.

Of course employed novel segments.

Like you've been battery segment.

Look at the broader chemical segment of course of the last five.

Products from Us and is.

There is healthy demand.

Speaker 3: from these end markets. None of them really specifically that sticks out in terms of change was what we had guided to regarding.

From these end markets, none of them really specific that sticks out in terms of change versus what we had guided to regarding Q4.

And you can see that strong momentum is also reflected in our Q1 guidance of low double digit for lab.

Speaker 4: Yeah, and you can see that strong momentum is also reflected in our Q1 guidance, you know, of low double digit for labs.

Yes helpful.

Speaker 9: Yeah, helpful. And then maybe going off that for the segment guidance. So appreciate the comments around the expectations by geography as well. So it looks like you have an improved outlook in Europe and America for the year. So can you just talk about what's driving your confidence in those regions? Is it specific segments that's driving it or kind of what drove the increase there?

And then maybe going off of that for the segment guidance.

Appreciate the comments around the exit cases by geography as well so it looks like you have an improved outlook in Europe and Americas for the year. So can you just talk about what's driving your confidence in those regions is it specific segment, that's driving it or kind of what drove the increase there.

Yes, so so yes, so the Americas was up a little bit I mean, we just continue to I mean, you saw what we did in the fourth quarter in the Americas as well I mean, there's just really not to overuse the word but really good momentum very broad based growth in the portfolio and that was despite our food retailing business being down.

Speaker 4: Yeah, so so yeah, so the Americas Yep was up a little bit. I mean, we just continue to I mean, you saw what we did in the fourth quarter in the Americas as well. I mean, it's just really not to overuse the word, but really good momentum, very broad based.

In the quarter.

I would say our industrial businesses, our lab business is doing very well, but our industrial business continues to be really resilient and performing well and as Patrick was saying earlier, we we very much are benefiting from a lot of these trends towards automation and digitalization I mean, there is just a huge demand in the world to be more productive and we're just very Ford.

Speaker 4: and performing well, and as Patrick was saying earlier, we very much are benefiting from a lot of these trends towards automation and digitalization. I mean, there's just a huge demand in the world to be more productive, and we're just very fortunate to be in a position to be able to help serve that demand. And the teams have done just such a great job in this division. There's a lot of good innovation. There's also really good execution. And as we've been trying to also pivot the business towards the more attractive market segments over the years, we continue to see that paying a lot of dividends. And then also, as Patrick mentioned, there are these hot segments in the world, both on the lab side and the industrial side that we also have been good at in terms of capturing growth. Great, that's it for me, thank you. Yep, thank you. Your next question will come from Jason Reaver with Citi. Please proceed with your question. Hey, there you gotcha.

<unk> to be in a position to be able to help serve that demand and and.

The teams have done just such a great job in this division there's a lot of good innovation. That's also really good execution.

And as we've been trying to also pivot the business towards the more attractive market segments over the year as we continue to see that paying a lot of dividends and then also as Patrik mentioned there. There are these hot segments in the world both on the lab side in the industrial side that we also have been good at in terms of capturing growth.

Speaker 10: Great, that's it for me.

Great. That's it for me thank you.

Thank you.

Speaker 1: Your next question will come from Jason Reaver with Citi. Please proceed with your question.

Your next question will come from Jason Riva with Citi. Please proceed with your question.

Speaker 6: Hey there, you got Jason on for Patrick. Congrats on the great quarter. Two quick questions for you. One, you've seen strength in the industrial market. Just curious about the visibility into that strength in the 22. And then two, just wondering on how PenderTech is performing relative to expectations and any further color to shed there. Thanks.

Hey, there you got Jason on for Patrick Congrats on the great quarter, two quick questions for you one.

<unk> seen strength in the industrial market, just curious about the visibility into that strength into 'twenty. Two and then two just wondering on how <unk> is performing relative to expectations and any further color to shed there. Thanks.

Speaker 3: Yeah, I'll take it. Good questions on industrial. I think it is.

Yes, I'll take that Tim good questions on industrial and think.

It is.

Speaker 3: As we look into 2022, of course, we will face tougher comparisons, as I said, as we go deeper into 2022 towards the second half, but we see good demand in the markets. It's driven, basically, in all major regions by

As we look into 2022 of course, we will face tougher comparisons as I said has been growing.

Into 2022 towards the second half, but we see good demand in end markets, it's driven.

Basically in all major regions by.

Speaker 3: demand for automation and for digitalization. Sean mentioned that as well. That's the really fundamental driver. We have an outstanding performance platform there on the product side to serve those.

Demand for automation, and digitalization, and Sean mentioned that as well.

A really fundamental driver will be have an outstanding performance.

Hello.

Platform there.

Slide two jusuf those demands and.

Speaker 3: and we are confident that also the new products that we launch this year like the industry 360 terminal that really addresses these demands nicely.

Confident that also the new products that you launched you feel like the industry is $3 60 to a modem or really addresses these demands nicely.

Speaker 3: Um, that, uh, and that we think it will continue into 2022, of course.

And we think that will continue into 2022.

<unk>.

Speaker 3: Given that we will have tougher comparisons, you will not see the same growth rates in the second half. But we are competing extremely well.

Even if you will have tougher comparisons you've been won't see the same growth rate in the second half.

We are competing extremely relevant.

Speaker 3: On your comment regarding Pantotech, we are very pleased with the back decision. Actually, it outperformed our expectations in 2021 and we see continued strong demand as we go into 2022 for the products.

On your comment regarding Pan to take me is very pleased with that acquisition actually outperformed.

Outperformed expectations.

In 2021, and we see continued strong demand as we go into 2022 for the products.

Great. Thank you.

Okay.

Speaker 1: Your next question will come from the line of Jack Meehan with Nephrin Research. Please proceed with your question.

Your next question will come from the line of Jack Meehan with Nephron Research. Please proceed with your question.

Speaker 6: Thanks, and good afternoon. I had another question on industrial, but was hoping you could weigh in, you know, we're seeing higher commodity prices, along with the talk around inflation. Was curious, just from a demand perspective, if you saw that playing out in terms of any of the industrial customers for your coverage, for your, just amongst your customer base on the industrial side.

Thanks, and good afternoon.

Had another question on industrial but was hoping you could weigh in.

We're seeing higher commodity prices along with the talk around inflation was curious just from a demand perspective.

You saw that playing out in terms of.

Any any industrial customers for coverage.

Youre just amongst your customer base on the industrial side.

Speaker 4: No, hey Jack, this is Sean. No, we're not seeing that impact any of our customer demand at all. Interesting comment, but no, we're not seeing it from a customer side.

No Hey, Jack this is Sean no, we're not seeing that impact any of our customer demand at all.

Interesting comment, but no we're not seeing it from a customer side.

Speaker 6: Interesting. Okay. And then back on product inspection. So, the guide for the first quarter, high singles, you know, the headline looks good. I have that compounding, though, still kind of in the low single digits given the comps. Just be curious just to get a little bit more color as you're talking with your customers when you think just the timing for when some of the renewed spend could be going into CapEx. I'm sorry.

Interesting, Okay and then.

On product inspection so the guide for the first quarter high singles.

The headline looks good I have that compounding, though still kind of in the low single digits given the comps.

Just be curious just to get a little bit more color as youre talking with your customers when do you think.

Just the timing for when some of the renewed spend could be going into capex.

Yes, I'm sorry.

Okay. Okay.

Patrick.

Okay, So I'll take it.

Speaker 3: Look, we are really happy with the results of product inspection in Q4.

Great.

Really happy with.

Product inspection in Q4.

Speaker 3: We are clearly a leader in product inspections, we have the broadest product range and also the largest service network.

Full year results.

Clearly a leader in product inspection products broadens.

Range.

The largest network of our outlook for 2020 is good and we are assuming that we see more investment from loss manufacturing. So there is some pent up demand.

Speaker 3: Our outlook for 2022 is good and we are assuming that we see more investment from large food manufacturing. So there is some pent-up demand and that's why we also guided to a double-digit growth in the first quarter and we expect this.

It also guided to double digit growth in the first quarter than we expected.

Speaker 3: segment for us to perform really, really well. But also as a reminder to understand food manufacturers represent only about 70% of our product inspection business.

This segment for us to perform really really well, but also as a reminder to understand food manufacturer.

<unk> represented only about 70% of our product inspection business.

Speaker 3: And these customers have been impacted by COVID. Remember with last year, we talked about the fact that it was also difficult for our service people to get in some of these accounts and deliver services. That is coming back, has come nicely back. So we will also see better service growth than we had last year in this segment as well.

And these customers have been impacted by Covid remember last year, we talked about the fact that it was also difficult for people to get in some of these accounts.

As soon as this is coming that is coming but has come back.

So we will see it will serve as growth than you had last year in this segment as well.

That's helpful. Thank you Patrick.

Speaker 1: Your next question will come from the line of Matt Sykes with Goldman Sachs. Please proceed with your question.

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

Speaker 5: Hi, thanks for taking my questions. I appreciate it. Maybe, Patrick, this is a high-level one for you. As you think about the supply chain, you've been dealing with a lot of challenges there. It sounds like you've been making a number of investments in Blue Ocean and other areas to try to improve that, and I'm sure this environment has probably led you to see a number of pressure points that you might be able to alleviate with spend.

Hi, Thanks for taking my questions I appreciate it maybe Patrick just a high level. One for you as you think about the supply chain and you've been dealing with a lot of challenges there it sounds like it'd be making a number of investments in blue Ocean and other areas to try to improve that and I'm sure. This environment is probably lead you to see a number of pressure points that you might be able to alleviate with <unk>.

But I guess my question is if we do come out of it and supply chain does start to loosen up do you feel like the investments that you've made so far will lead to greater efficiencies and productivity and maybe acceleration margin expansion. If we get out of this because of what you've already put into the business to make it better.

Speaker 5: I guess my question is, if we do come out of it and supply chain does start to loosen up, do you feel like the investments that you've made so far will lead to greater efficiencies in productivity and maybe acceleration, margin expansion if we get out of this because of what you've already put into the business to make it better?

We will look.

Very good question Matt.

Speaker 3: I mean, we continuously invest in Blue Ocean since many, many years, right? And you move, right now about 85% of all business is on Blue Ocean. So we still have a couple of roll-ins to do, but

We continuously invest in blue Ocean since many many years right.

Right now about 85% of two <unk>.

This is on Blue Ocean, we still have a couple of rolling to do but.

Speaker 3: We're making good progress there. Definitely the investments we're doing are all targeting productivity enhancements across the board. So we will continue to benefit from those. Whether it will be an acceleration of margin improvement, I don't think so. I mean, we have in history, we have made always good improvements in margin expansion. So I wouldn't put that into, you know,

And if you're making good progress to add definitely the investments, we'll do be doing are all targeting productivity enhancements across the board. So we will continue to benefit from.

It will be an excellent duration.

Margin improvement.

I don't think so.

And the history, we have made good improvements in margin expansion, so I wouldn't.

Put it into.

No.

Speaker 3: we move forward. We will continue to make improvements, but I think we will not see acceleration just by the fact that we do these investments in Blue Ocean. We have done this in the past. We are making great progress. We are absolutely convinced it is a competitive advantage for us.

Consideration, we move forward, we will make will be will continue to make improvements, but I think we will not see exploration shows by the fact that the duties investments of Blue Ocean. We have done this in the past and making great progress absolutely convinced it is a competitive advantage for us.

Speaker 3: Um, and it will continue to drive improvements, but more, more.

And it will continue to drive improvements, but more modern economy.

Got it.

Speaker 5: Got it. And then maybe, Sean, you mentioned your prepared marks, some uncertainty around China, you know, which I think is pretty apparent. You're looking for sort of 10% growth for the year. Anything that you're concerned about regarding China, you know, underlying that kind of uncertainty comment, or is it sort of COVID-related, lockdown-related type issues?

And then maybe Sean you had mentioned in your prepared remarks, some uncertainty around China, which I think is pretty apparent.

So youre looking for sort of 10% growth for the year anything that you're concerned about regarding China.

Underlying that kind of uncertainty comment or is it sort of COVID-19 related lockdown related type type issues.

Speaker 4: Yeah, I mean, we're not seeing anything specific in our business, Matt, but it's just that general, you know, knowledge that everyone has about like, there's just a lot of things going on there. I mean, it could be like you said, it could be.

I mean, we're not seeing anything specific in our business, Matt, but it's just that general.

Knowledge that everyone has about like Theres, just a lot of things going on there I mean, it could be like you said it could be could be COVID-19 could be lockdowns.

Speaker 4: It could be COVID, it could be lockdowns, you know, the way that they handle COVID with their zero tolerance policy, you know, could have implications on the business or in the local economy. You know, PMIs have been floating, you know, right around 50 on and off. But, you know, there's always uncertainty there. And then there's always...

The way that they handle COVID-19 with their zero tolerance policy.

Could have implications on the business or in the local economy.

PMI has had been floating.

At around 50 on and off.

But there's always there's always uncertainty there and then theres always and we always say things can change quickly there right. They can they can go in either direction very quickly and that's that's always been our history. There. So I think for US it's always important to remind people that when we give guidance to provide that type of caution so that people understand those risk, but when we look at.

Speaker 4: And we always say things can change quickly there, right? They can go in either direction very quickly. And that's always been our history there. So I think for us it's always important to remind people that when we give guidance to provide that type of caution so that people understand those risks. But when we look at China and we look to the media in the long term, I mean, we're very favorable. I mean, we continue to feel very good about the growth. We continue to feel very good about our business. We feel like a lot of the government's focus with their five-year plan in terms of life sciences and health and safety, a lot of the emerging industries that they're heavily investing in, they all play very well to our portfolio. And then this general theme of automation and digitalization also is a big theme in China as well. And so, and as they continue to expand the economic development to the West, I mean, our industrial business will also benefit. So we continue to feel very strongly about it, but in the short term, there can always be volatility.

China, and we look to the medium to long term and we're very favorable I mean, we continue to feel very good about the growth. We continue to feel very good about our business.

We feel like a lot of the governments focus with their five year plan.

In terms of life Sciences, and health and safety.

A lot of the emerging industries that are that they're heavily investing in.

They all play very well to our portfolio and then this general theme of automation and Digitalization also is a big theme in.

In China as well.

So and as they continue to expand the economic development to the West I mean, our industrial business will also benefit. So we continue to feel very strongly about it but in the short term there can always be volatility.

Speaker 5: Understood. Thanks. Very helpful.

Understood. Thanks very helpful.

Thanks.

Speaker 1: Your next question will come from Vijay Kumar with Evercore ISI. Please proceed with your question.

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

Speaker 5: Hey guys, congrats on a nice print here and thanks for taking my question. I guess one on the Q itself, you know the growth margin here is sequentially flat as historically you guys have had a very strong Q4 growth margin. I'm curious, was there any timing element here in Q4 or what happened to growth margins?

Hey, guys congrats on a nice print here and thanks for taking my question.

I guess that two.

One on the Q itself.

The gross margin here sequentially flattish historically, you guys have had a very strong Q4 gross margins I'm curious.

Was there any timing element here in Q4 or what happened to gross margins.

No Hey, Vijay this is Sean no I mean.

Speaker 4: No. Hey, VJ, this is Sean. No, I mean, I just, you know, basically we just saw the cost inputs increase much faster than what we expected, you know, and...

Basically we just saw.

The cost inputs increased much faster than what we expected.

<unk>.

Both.

Kind of broad based and a lot of different cost categories, but I'd, probably highlight electronic components is as an area that was much higher than the others.

And also transportation costs.

Speaker 4: Transportation costs came in higher than expected, which was a little bit of a surprise if you just think about, like, it's not a new topic, and we were already facing cost headwinds in terms of transportation going back to Q4 of last year, but, like we always say, like, I think the key in this environment is to make sure that we have, you know, the systems in place to be able to monitor these changes and so that we can react quickly, and I think, you know, you can, you know, and that's what we're doing. We're highly focused on it as an organization. You know, we're going to, you know, we're going to see some similar trends in Q1, but I think as you kind of look to the full year, you know, we certainly still feel good about our ability to expand margins, and as I said earlier before, you know, we still believe we'll expand our gross margin for the full year of 30 to 40 basis points, and then from an operating margin perspective, we'll, you know, we expect to be at the high end of our typical guidance, probably around 90 basis points at the midpoint of the guidance. That's helpful.

And higher than expected, which was a little bit of a surprise. If you just think about it is not a new topic and we were already facing cost headwinds in terms of transportation going back to Q4 of last year, but but like we always say like I think the key in this environment is to make sure that we have the systems in place to be able to monitor these changes and so that we can react.

Act quickly and I think you can and that's what we're doing.

Really focused on it as an organization.

We're going to.

We're going to see some similar trends in Q1, but I think as you kind of look to the full year.

We certainly still feel good about our ability to to expand margins as I said earlier before we still believe we will expand our gross margin for the full year 30 to 40 basis points and then from an operating margin perspective, we expect to be at the high end of our typical guidance probably around 90 basis points at the midpoint of the guidance.

Speaker 4: And then from an operating margin perspective, we expect to be at the high end of our typical guidance, probably around 90 basis points at the midpoint of the guidance.

Speaker 5: That's helpful, Sean, and maybe one for Patrick here, the Q1 guidance here, the comps are really tough. I'm just curious, given the lockdowns here in China, what visibility do you have into those numbers, or what is driving this Q1 trend? And the guidance raised for the year by 100 basis points, how much of that was pricing versus volume, if you will? Yeah.

That's helpful. Sean and then maybe one for Patrick here.

Q1 guidance here.

Comps are really.

I'm just curious.

Given the Lockdowns here in China.

What visibility do you have into those numbers for what is driving the Q1 strength.

And the guidance raise for the year by 100 basis points, how much of that was pricing versus volume if you will.

Yes.

<unk>.

Speaker 3: Look, our confidence in Q1 is driven by the amount we are seeing. As we said, we are not dramatically impacted by any lockdowns in China right now. There is, of course, a little bit uncertainty moving forward. It might have some impact, but we are pretty confident that only 10% that we have given you for Q1. We see the demand, we see the regions performing, not only Asia-Pacific and not only China, it's also the U.S. and Europe is performing.

Okay.

<unk> in Q1 is driven by demand you are seeing as we said to be on optimistically impacted by any lockdowns in China right. Now there is of course, a little bit uncertainty moving forward as it might have some impact.

It'd.

We are pretty confident on the 10%.

Given neutral for Q1, we see the demand.

The regions performing not only in Asia Pacific and not only China. It's also the U S and Europe is performing.

Speaker 3: as we expect and that gives us confidence that we will have a really solid Q1.

As we expect them that gives us confidence.

People will have a solid really solid Q1.

In terms of.

Speaker 3: The other question, it's a little bit of both. There's a little bit of volume, and it's also, of course, a little bit of pricing. I mean, we don't want to quantify that perfectly. Sean already made comments on pricing, but it's a component of both. We have volume increase, and we have some pricing impact.

The all the questions and look it's a little bit of both it's a little bit of volume, but it's also of course, a little bit of pricing.

Don't want to quantify to perfectly Shaun already made comments on pricing.

You have volume increase in some places.

Hello.

Got it thank you guys.

Speaker 1: Your next question will come from the line of Brandon Couillard with Jeffries. Please proceed with your question.

Your next question will come from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Speaker 5: Hey, thanks. Good afternoon. Just a couple for you, Sean. In terms of pricing for the year, should we think about that as being fairly similar between lab and industrial, or is it more weighted towards one segment or the other? And secondly, in terms of the gross margin outlook, is your expectation that kind of the material and transport headwinds fade by the second half, or is that still a drag on the gross margin line?

Hey, Thanks, good afternoon.

Just a couple for you Sean in terms of pricing for the year or should we think about that.

Similar between lab and industrial or is it more weighted towards one.

And secondly.

Gross margin outlook is your expectation that kind of material and transport headwinds faced by the second half or is that still a drag on the gross margin loan.

Speaker 4: Yeah. Hey, good question, Brandon. Hey, so in terms of pricing, you know, um, you know, probably slightly better on the lab side than on the industrial side.

Yeah, Hey, good question, Brandon Hey, so in terms of pricing.

<unk>.

It's probably slightly better on the lab side than on the industrial side.

Speaker 4: And if I just think about the portfolio, but of course, you know, we'll have, I think we'll have good price increases and, you know, in both, both divisions.

And if I just think about the portfolio.

But of course, we'll I think we'll have good price increases.

In both.

Both divisions.

Speaker 4: In terms of material costs, you know, I think we'll certainly see a drag, you know, probably through, certainly in the first half of the year. Probably, I'd like to think by the time we get to Q4, you know, we're not going to see a drag. And so hopefully there's a little bit of benefit by the time we get to the fourth quarter.

In terms of material costs.

I think we'll certainly see a drag.

Probably through certainly in the first half of the year.

I'd like to think by the time, we get to Q4, we're not going to see a drag and so hopefully theres a little bit of a benefit by the time, we get to the fourth quarter.

Speaker 4: But I wouldn't count on too much right now until we see things play out.

But I wouldn't count on too much right now until we see things play out.

Speaker 3: And that's true for both. That's true for material, but also transportation. We don't think that will ease up before the second.

And that's true for both the <unk> material, but also transportation.

I don't think thats going to ease up before the second half.

Yes.

Speaker 8: Gotcha, that's helpful. And then just one follow-up on China in the fourth quarter. Could you break out the lab versus industrial businesses for the fourth quarter and kind of what you're assuming the CPI went to the 22?

Got you that's helpful. And then just one follow up on on China in the fourth quarter could you break out the lab versus industrial businesses for the fourth quarter and kind of what youre, assuming let's say segments to 'twenty two.

Speaker 4: within China? Yeah, sure. So our lab business in the fourth quarter grew in the high 20s. And then our industrial business in the quarter grew mid-single digit. And kind of for the full year, we're expecting lab to be probably like low double digit, and then with industrial, probably like mid-single digit.

And within China.

Yes, sure so our lab business in the fourth quarter.

Through.

Hi, <unk>.

And then our industrial business in the quarter grew mid single digit and kind of for the full year.

We're expecting.

Lab to be probably like low double digit and then with industrial will probably like mid single digit.

Okay. Thank you.

Your next your next question will come from the line of Catherine Schulte with Baird. Please proceed with your question.

Speaker 1: Your next question will come from the line of Katherine Schulte with Baird. Please proceed with your question.

Speaker 2: Hi, thanks for the questions. I guess first, you mentioned consumables and services were up 10% in the quarter, and how sustainable do you think that growth is going forward? And, you know, what's your expectation from those categories in 2022?

Alright, thanks for the questions I guess first you mentioned consumables and services were up 10% in the quarter and how sustainable do you think that growth is going forward and what's your expectation from that category in 2022.

Speaker 3: Yeah, very good question, Catherine. Thank you. I mean, look, I think we have a very good potential in consumables and services in services. Of course, we also going off our install based, making sure that

Yes, very good question Catherine. Thank you I mean look I think we have.

Very good potential.

Consumables and services.

And services.

We're also going after our installed base.

Sure.

Speaker 3: Those customers who do not have their products on the contract Jack also switch to contract because it just gives them a more reliable service pattern overall in terms of, you know, early maintenance, etc. The 10% we have seen was definitely very strong in Q4, I would say. My expectation for service is that it maintains the highest single digit range.

Customers, who do not have their products on a contract to switch to contract because it just gives them a more reliable service depend on overall in terms of early maintenance et cetera.

The 10% we have seen.

Very strong in Q4 I would say.

My expectation for services maintained the high single digit range.

Speaker 3: for 2022. It's a very profitable business for us and we are putting a lot of emphasis on making sure that our customers understand the benefits of our services and we're broadening the service offering over time. So I think this is great.

For 2022.

It's a very profitable business for us and we are putting a lot of emphasis on making sure that our customers understand the benefits.

Of all the services and you brought into service offering over time.

I think this is quite some runway.

Speaker 4: Yeah, hey, Catherine, maybe one additional comment on the consumables is, of course, we won't have the benefit of the COVID testing that we've had in the past. So that could be a little bit of a head.

Yeah, Hey, Katherine maybe one additional comment on the consumables is of course, we won't have the benefit of the Covid testing.

That we've had in the past so that could be a little bit of a headwind.

Sure.

Speaker 11: Yep, okay, got it. And then in pharma and some other industries, we've seen a bigger push for on-shoring and creating redundancy in supply chains as COVID has played out. You know, where do you think we are in terms of that phenomenon and capacity build-out? I'm just curious how much longer you think that could continue to be a tailwind for the market.

Yes, Okay got it.

And then in pharma and some other industries, we've seen a bigger push for onshoring and creating redundancy in supply chain. That's COVID-19 has played out.

Where do you think we are in terms of that phenomenon and capacity build out I'm. Just curious how much longer you think that could continue to be a tailwind for the market.

I think well I think it will.

Speaker 3: probably continue as it played out in 2021 and 2020 into probably the next one or two years. That's what we are seeing, at least from some of the counts that we are closely monitoring. And I think it's not only pharma, by the way, we see also some very good momentum in semiconductor, where the big facilities coming up now in the United States, where a lot of core facilities are coming back to the United States, which is also very good business for us.

Probably continue as it played out in 2021 and 2020.

Into probably the next one or two use them.

What we are seeing at least from some of the accounts to be closely monitoring.

And I think it's not only pharma by the way we see also some very good momentum in semiconductor.

Big facilities coming up.

States.

And a lot of core facilities are coming back to United States, which resulted very good business for us.

Speaker 3: So I think that, again, that will continue from our perspective at least to 2022, maybe also 2023.

I think that.

Federal continue from our perspective at least through 2022 and maybe it was a 2023.

Speaker 3: It's definitely some good tailwind for the overall market.

It's definitely some good tailwind for the overall market.

Great. Thank you.

Your next question will come from Lee with Wells Fargo. Please proceed with your question.

Speaker 1: Your next question will come from Lou Lee with Wells Fargo. Please proceed with your question.

Speaker 1: Just want to follow up on the pricing, I think you mentioned 3.5% or even close to 4% for this year. Do you hear any pushback from customer and then does that impact your ability to further increase the pricing for next year?

My questions just wanted to follow up on the pricing I think you mentioned three 5% or even close to 4% for this year.

You'll hear any pushback.

From a customer and then does that impact your ability to further increase the pricing for next year.

Yes, Hey, so just to clarify so I said.

Speaker 4: Yeah, hey, so yeah, hey, just to clarify. So I said, we've

Speaker 4: Our guidance previously was three, and we're kind of like thinking it's about three and a half percent or so for the full year, but we wouldn't be surprised if we're in the four percent kind of a range in the second half of the year. You know, we continue to feel good about our ability to pass on price when we need to, when we face these inflationary challenges, and I think we'll continue to do that as market conditions change.

Our guidance previously it was three.

We're kind of like thinking it's about three 5% or so for the full year, but we wouldn't be surprised if we're in the 4% kind of a range in the second half of the year.

We continue to feel good about our ability to two.

To pass on price when we need to when we when we face these inflationary.

Challenges and I think we will continue to do that as market conditions change.

Got it.

Speaker 12: Got it. Another question on the 7% growth guidance. Does that change your long-term growth outlook? Like, should we think about like 7% going forward?

A question on the 7% growth guidance.

Does that change your long term growth I'll look like should we think about like 7%.

Going forward.

Speaker 3: That's a very good question.

Very good question.

Speaker 3: Maybe I start with some backdrop. We believe we have strengthened our competitive position throughout the pandemic and tend to believe that we are coming out of COVID strong.

Maybe I'll start with some backdrop, we believe we have strengthened our competitive position throughout the pandemic.

<unk> tend to believe that we are coming out of Covid stronger.

Speaker 3: We have a very strong foundation across many businesses. We are market leading positions. We have an excellent product portfolio and a global service network.

We have a very strong foundation across many businesses, we have market leading positions, we have an excellent product portfolio.

Global Service network.

I think we are able to death on the sales and marketing tools and techniques to the new environment.

Speaker 3: We are able to adapt our sales and marketing tools and techniques to the new environment. And as a result, we continue to gain share, as we mentioned many times, despite the challenge in this environment.

<unk>.

As a result, we continue to gain share as we mentioned many times despite the challenge in these environments.

Speaker 3: Um, our markets nicely rebounded in 2021 and, uh,

Our mortgage nicely rebounded in 2021.

Speaker 3: work very effectively to capitalize on this growth.

And it worked very effectively to capitalize on this growth.

Speaker 3: Now, looking forward, I still think you should think about us as a mid-single-digit growth on an organic basis in the midterm. That's about the dimension that we also think about it. It, of course, will depend on how the underlying market

Now looking forward.

Still think you should think about it.

Mid single digit growth on an organic basis in the midterm.

That's about as I mentioned, you also think about it.

Those will depend on how the underlying market.

<unk>.

Speaker 3: If it goes back to where it has been pre-pandemic, I think that's the wide range we are thinking right now. Of course, if there is more momentum in the market, we will, again, our goal is to grow above our underlying market, but I would like you to think still in mid-single digits.

Performs if it goes back to rent has been pre pandemic I think thats too wide range, we are thinking right now.

Of course, if there is momentum in the market.

Again, our goal is to grow above.

<unk> market.

I would like you to think still in mid single digits.

Got it that's very helpful. Thank you.

Speaker 1: At this time, there are no further questions in queue. I would now like to turn the call back over to Mary Finnegan for any closing remarks.

At this time there are no further questions in queue I would now like to turn the call back over to Mary Finnegan for any closing remarks.

Speaker 2: Thank you, and I just have two additional comments before I let you go for the night. First, we anticipate holding an investor meeting at our facility in Boston on Monday, November 7th.

Thank you.

We have two additional comments before I, let you go through the night.

First we anticipate holding an investor meeting at our facility in Boston on Monday November seven.

Speaker 2: We'll come back to you with more details in the coming months, but wanted to mention it to you now as you plan your calendars for this year.

We'll come back to you with more details in the coming months, but wanted to mention to you know as you plan your calendars for this year.

Speaker 2: Hey, second, we are happy to announce that Adam Ullman has recently joined our investor relations team. He was formerly a senior equity research analyst at the Cleveland Research Company.

Second we are happy to announce that Adam Uhlman is it recently joined our Investor Relations team. He was formerly a senior equity research analyst at the Cleveland Research Company.

Speaker 2: Adam will take over the lead in investor relations later this year as I will retire towards the end of 2022.

Adam will take over the lead in Investor Relations later this year as I will retire towards the end of 2022.

Speaker 2: It's great to have Adam on board, and please join me in welcoming him, and I look forward to introducing him to you in due time. For the time being, please continue to direct your investor relations matters to me. As always, if you have any questions, please don't hesitate to reach out. Take care, everybody. Bye-bye.

Great to have Adam on board and I look forward. Please join me in welcoming him and I look forward to introducing him to you in due time.

For the time being please continue to director of Investor Relations matters to me.

As always if you have any questions. Please don't hesitate to reach out take care everybody Bye bye.

Alright.

Speaker 13: This concludes today's conference call. Thank you for participating. You may now disconnect. You may now disconnect.

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

Yes.

Yes.

Right.

Okay.

Thanks.

Uh huh.

Okay.

[music].

[music].

[music].

Speaker 1: Good day and thank you for standing by. Welcome to the Met with 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 to 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 0. I would now like to hand the conference over to your speaker today, Ms. Mary Finnegan. Please go ahead.

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 to press star one 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 Finnegan. Please go ahead.

Speaker 2: Thank you, and good evening, everyone. I'm Mary Finnegan, and responsible for investor relations at Mettler Toledo, and happy that you're joining us this evening. I am joined on the call today with Patrick Kaltenbach, our CEO , and Sean Videla, our chief financial officer. Let me cover just a couple of administrative matters. This call is being webcast and is available on our website. A copy of the press release and the presentation that we refer to on today's call is also on the website.

Thank you and good evening, everyone I'm Mary Finnegan I'm responsible for Investor Relations at Mettler, Toledo, and happy that you're joining us. This evening I'm joined on the call today with Patrick Kaltenbach, our CEO and Shawn Vadala, Our Chief Financial Officer, Let me cover just a couple of finance that administrative matters. This call.

And is being webcast and is available on our website a copy of the press release and the presentation that we referred to on today's call is also on the website.

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

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

Speaker 2: Statements in this presentation, which are not historical facts, constitute forward-looking statements within the meaning of the U.S. Securities Act of 1933 and the U.S. Securities Exchange Act of 1934. These statements involve risks, uncertainties, and other factors that may cause our actual results, level of activity, performance, or achievement to be materially different from those expressed or implied by any forward-looking statement.

<unk> in this presentation, which are not historical facts constitute forward looking statements within the meaning of the U S. Securities Act of 1933, and the U S Securities Exchange Act of $19 34.

Statements involve risks uncertainties and other factors that may cause our actual results level of activity performance or achievements to be materially different from those expressed or implied by any forward looking statements.

Speaker 2: For discussion of these risks and uncertainties, please see the discussion in our recent Form 10-K and other reports filed with the SEC from time to time. All of the board looking statements are qualified in their entirety by reference to the factors discussed under the captions, factors affecting our future operating results and the business and management discussion and analysis of financial condition and results of operations sections of our filing.

For a discussion of these risks and uncertainties. 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 the business and management discussion and analysis of financial condition and results of operations sections of our filings.

Speaker 2: One 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 the non-GAAP financial measure and the most directly comparable GAAP measure is provided in the 8K. Let me now turn the call over to Patrick.

One 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 the non-GAAP financial measure and the most directly comparable GAAP measure is provided in the 8-K, let me now turn the call over to Patrick.

Thanks, Mary and good evening everyone.

Speaker 3: We had a great finish to 2021 with strong fourth quarter results.

You had a great finish to 2021 with a strong fourth quarter results.

Speaker 3: We capitalized on robust customer demand and executed very well, particularly with respect to our supply chain to meet customer demands.

Capitalized on robust customer demand has executed very well, particularly with respect to our supply chain to meet customer demands.

Speaker 3: The strength and agility of the teams around the world are reflected in these results.

The strength and agility of the teams around the world are reflected in these results.

The highlights of the quarter on page three of the presentation.

Speaker 3: Local currency sales growth was 11% and we had particularly strong growth in the Americas and Asia and rest of the world.

Local currency sales growth was 11% and we have particular strong growth in the Americas, and Asia and rest of the world.

Speaker 3: Both our laboratory and industrial product lines perform very well.

Both our laboratory and industrial product lines performed very well.

Speaker 3: As expected, food retail was a headwind to our overall sales growth as we again had a significant decline in the quarter.

As expected food retail was a headwind to our organic sales growth as we again had a significant decline in the quarter.

Speaker 3: Despite facing higher material and transportation costs due to challenges in the supply chain, we had very solid growth in Adjusted Operating Profit and strong growth in Adjusted EPS in the quarter.

Despite.

Are you seeing higher material and transportation costs due to challenges in the supply chain.

Very solid growth in adjusted operating profit and strong growth in adjusted EPS in the quarter.

The fourth quarter was due to an excellent year of results.

Speaker 3: The fourth quarter was the end to an excellent year of results.

Speaker 3: For the full year, we achieved an 18% increase in local currency sales, a 26% increase in adjusted operating profit, which resulted in a margin improvement of 130 basis points.

For the full year, we achieved an 18% increase in local currency sales of 26% increase in adjusted operating profit, which resulted in a margin improvement of 130 basis points.

Speaker 3: We had adjusted, we had outstanding 32% growth in adjusted EPS and finally cash flow generation in 2021 was excellent.

We have adjusted bid outstanding.

32% growth in adjusted EPS and finally.

Cash flow generation in 2021 was excellent.

Speaker 3: We not only achieved great results, we also strengthened our competitive position in 2021 as innovation nourished our excellent product portfolio and comprehensive services offering combined with our Spinnaker sales and marketing strategies helped us capture growth opportunities.

We not only achieved great results. We also strengthened our competitive position in 2021 is innovation.

Innovation nourished excellent product portfolio and comprehensive services offering combined with our spinnaker sales and marketing strategies helped us capture growth opportunities.

Speaker 3: He also did a superb job navigating the hurdles in the global supply chain.

You also did a good job navigating the hurdles in the global supply chain.

Speaker 3: Our agility and excellent execution further reinforced our already strong brand.

Our agility and excellent execution further reinforced our already strong brand.

Speaker 3: Importantly, our impressive results last year allowed us to make important investments for future growth.

Importantly.

Our impressive results.

Last year allowed us to make important investments for future growth.

Speaker 3: We are confident in our ability to continue to gain share and believe we are ideally positioned to deliver strong results in 2022 and beyond.

We are confident in our ability to continue to gain share and believe we are ideally positioned to deliver strong results in 2022 and beyond.

Speaker 3: I will have some additional comments later, but let me turn it first to Sean to cover the financial results. Sean.

I will have some additional commence later, but let me turn it first to Shawn to cover the financial results Sean.

Thanks, Patrick and good evening, everyone sales in the quarter were one point or $3 7 billion. This represents our first $1 billion quarter, which was a nice way to end 2021.

Speaker 4: Thanks, Patrick. And good evening, everyone. Sales in the quarter were $1.037 billion. This represents our first billion dollar quarter, which was a nice way to end 2021. This represented a local currency increase of 11%. On a US dollar basis, sales also increased 11%.

This represented our local currency increase of 11%.

On a us dollar basis sales also increased 11%.

Speaker 4: The Pendotec acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that the impact of reduced volume of pipette tips in COVID testing was a headwind of approximately 1% to sales growth in the fourth quarter. On slide number four.

The <unk> acquisition contributed approximately 1% to local currency sales growth in the quarter, while we estimate that the impact of reduced volume of pipette tips and Covid testing was a headwind of approximately 1% of sales growth in the fourth quarter.

On slide number four we show sales growth by region.

Speaker 4: Local currency sales increased 16% in the Americas, 4% in Europe , and 14% in Asia and the rest of the world.

Local currency sales increased 16% in the Americas for.

4% in Europe , and 14% and Asia rest of the world.

Speaker 4: local currency sales increased 12% in China in the fourth quarter.

Local currency sales increased 12% in China in the fourth quarter.

Speaker 4: The next slide shows sales growth by region for the full year 2021.

The next slide shows sales growth by region for the full year 2021.

Speaker 4: Local currency sales grew 18% in 2021, with a 20% increase in the Americas, 12% in Europe , and 21% growth in Asia and the rest of the world. Local currency sales increased 25% in China for the full year.

Local currency sales grew 18% in 2021 with a 20% increase in the Americas, 12% in Europe , and 21% growth in Asia rest of World.

Local currency sales increased 25% in China for the full year.

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

Speaker 4: On slide number six, we summarize local currency sales growth by product area. For the fourth quarter, laboratory sales increased 15 percent, industrial increased 11 percent, with core industrial up 11 percent, and product inspection up 10 percent. Food retail declined 20 percent in the quarter.

For the fourth quarter laboratory sales increased 15% industrial increased 11% with core industrial up 11% and product inspection up 10% food.

Food retail declined 20% in the quarter.

The next slide shows local currency sales growth by product area for the full year of 2021.

Speaker 4: The next slide shows local currency sales growth by product area for the full year 2021.

Speaker 4: Laboratory sales increased 22%, industrial increased 15%, with core industrial up 18%, and product inspection up 10%. Food retail declined 6% in 2021.

<unk> sales increased 22% industrial increased 15% with core industrial up 18% and product inspection up 10% food retail declined 6% in 2021.

Speaker 4: Let me now move to the rest of the P&L for the fourth quarter, which is summarized on slide number eight.

Let me now move to the rest of the P&L for the fourth quarter, which is summarized on slide number eight.

Speaker 4: Gross margin in the quarter was 58.5%. We benefited from volume and pricing, which was offset by challenges in the global supply chain, namely higher material and transportation costs, as well as the impact of temporary cost actions we undertook in 2020.

Gross margin in the quarter was 58, 5%, we benefited from volume and pricing, which was offset by challenges in the global supply chain.

Namely higher material and transportation costs as well as the impact of temporary cost actions, we undertook in 2020.

Speaker 4: R&D amounted to $45.6 million in the quarter.

R&D amounted to $45 6 million in the quarter.

Speaker 4: which is a 14% increase in local currency over the prior period.

Which is a 14% increase in local currency over the prior period.

Speaker 4: The impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.

The impact of temporary cost savings undertaken last year and greater project activity contributed to this increase.

SG&A amounted to $242 $4 million, an 8% increase in local currency over the prior year.

Speaker 4: SG&A amounted to $242.4 million, an 8% 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.

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.

Speaker 4: Adjusted operating profit amounted to $319.1 million in the quarter, a 9% increase over the prior year amount of $292.8 million.

Adjusted operating profit amounted to $319 $1 million in the quarter, a 9% increase over the prior year amount of $292 $8 million.

Speaker 4: The increase reflects strong sales growth combined with good execution.

The increase reflects strong sales growth combined with good execution.

Speaker 4: Adjusted operating margins were 30.8% and were impacted by higher costs associated with our global supply chain and transportation costs.

Adjusted operating margins were 38% and were impacted by higher costs associated with our global supply chain and transportation costs.

Speaker 4: A couple final comments on the P&L. Amortization amounted to $16.9 million in the quarter. Interest expense was $11.5 million in the quarter.

A couple of final comments on the P&L amortization amounted to $16 9 million in the quarter interest expense was $11 $5 million in the quarter.

Speaker 4: Other income, excluding one-time items in the quarter, amounted to $5.3 million, primarily reflecting non-service-related pension income.

Other income excluding one time items in the quarter amounted to $5 $3 million, primarily reflecting non service related pension income.

Speaker 4: We reduced our effective tax rate from 19.5% to 19.0% in the quarter. This rate is before discrete items and adjusting for the timing of stock option exercises in the quarter. We are pleased with this reduction and expect to maintain the 19% rate in 2022.

We reduced our effective tax rate from 19, 5% to 19.0% in the quarter.

This rate is before discrete items and adjusting for the timing of stock option exercises in the quarter. We're pleased with this reduction and expect to maintain the 19% rate in 2022.

Fully diluted shares amounted to $23 2 million in the quarter, which is a 3% decline from the prior year.

Speaker 4: Fully diluted shares amounted to $23.2 million in the quarter, which is a 3% decline from the prior year.

Speaker 4: Adjusted EPS for the quarter was $10.53, a 14% increase over the prior year amount of $9.26.

Adjusted EPS for the quarter was $10 53.

A 14% increase over the prior year amount of $9 26.

On a reported basis in the quarter EPS was $9 94.

Speaker 4: On a reported basis in the quarter, EPS was $9.94 as compared to $9.03 in the prior year. Reported EPS in the quarter includes $0.21 of purchased intangible amortization and $0.09 of restructuring.

As compared to $9 <unk> in the prior year.

Reported EPS in the quarter includes 21 <unk> of purchased intangible amortization and <unk> of restructuring.

Speaker 4: We also had two items impacting income taxes. We had $0.17 of cost due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises, and we had a $0.14 benefit from adjusting our tax rate to 19% for the first three quarters.

We also had two items impacting income taxes, we had 17 of costs due to the difference between our quarterly and annual tax rate due to the timing of stock option exercises and we had a <unk> 14 benefit from adjusting our tax rate to 19% for the first three quarters.

Speaker 4: Finally, we had a $0.26 acquisition charge primarily principally reflecting an increase for the PendoTech acquisition earn out due to their updated projections.

Finally, we had a 26% acquisition charge, primarily principally reflecting an increase for the <unk> acquisition earn out due to their updated projections.

The next slide shows our P&L year to date.

Speaker 4: As Patrick mentioned, we had an exceptional year of results in 2021 with local currency sales growth of 18%, an adjusted operating profit increase of 26%, and our operating margins increasing 130 basis points to 28.5%.

As Patrick mentioned, we had an exceptional year of results in 2021 with local currency sales growth of 18% and adjusted operating profit increase of 26% and our operating margins, increasing 130 basis points to 28, 5%.

Speaker 4: Finally, adjusted EPS grew 32% to $34.01 in 2021.

Finally, adjusted EPS grew 32% to $34 <unk> in 2021.

Speaker 4: We're extremely pleased with these results and our ability to capitalize on growth opportunities and navigate a challenging supply chain environment.

We're extremely pleased with these results and our ability to capitalize on growth opportunities and navigated challenging supply chain environment.

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

Speaker 4: That covers the P&L, and let me now comment on cash flow.

Speaker 4: In the quarter, adjusted free cash flow amounted to $206.6 million, which was better than what we had expected and was impacted by the timing of tax payments.

In the quarter adjusted free cash flow amounted to $206 $6 million, which was better than what we had expected and was impacted by the timing of tax payments.

Speaker 4: DSO showed further improvement in the quarter with a decline of 2 days to 35 days as compared to the prior year.

<unk> showed further improvement in the quarter with a decline of two days to 35 days as compared to the prior year.

Speaker 4: ITO came in at 4.3 times flat with the prior year.

It came in at four three times flat with the prior year.

Speaker 4: For the full year, adjusted free cash flow amounted to $821.9 million, an increase of 31% on a per share basis as compared to the prior year. The strength of our cash flow is apparent in our net income conversion, which reached 103% in 2021.

For the full year adjusted free cash flow amounted to $821 9 million, an increase of 31% on a per share basis as compared to the prior year the.

The strength of our cash flow is apparent in our net income conversion, which reached 103% in 2021.

Let me now turn to guidance.

Speaker 4: Forecasting remains challenging. Demand in our end markets is favorable, although there are pockets of uncertainty in the global economy, particularly in China.

Forecasting remains challenging demand in our end marks markets as favorable although there are pockets of uncertainty in the global economy, particularly in China.

The challenges within the global supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.

Speaker 4: The challenges within the global supply chain and in transportation and logistics and the corresponding inflationary impact also creates uncertainty.

Speaker 4: Finally, we acknowledge that COVID is not behind us and variants and lockdowns can occur quickly. We recognize the importance of remaining agile and adapting to unexpected changes in the environment.

Finally, we acknowledge that COVID-19 is not behind us and variance in Lockdowns can occur quickly.

We recognize the importance of remaining agile and adapting to unexpected changes in the environment.

Speaker 4: We remain cautious about factors outside of our control and remain focused on our growth initiatives.

We remain cautious about factors outside of our control and remain focused on our growth initiatives.

Speaker 4: We believe we can continue to gain market share and drive margin improvement via our pricing and Stern Drive initiative.

We believe we can continue to gain market share and drive margin improvement we are pricing in stern drive initiatives.

Speaker 4: Now, let me cover the specifics for the full year 2022. We now expect local currency sales growth to be approximately 7%. This compares to previous guidance.

Now let me cover the specifics for the full year 2022, we now expect local currency sales growth to be approximately 7%.

This compares to previous guidance of 6%.

Speaker 4: We expect full-year adjusted EPS to be in the range of $38.15 to $38.50, which is a growth rate of 12 to 13 percent.

We expect full year adjusted EPS to be in the range of $38 15.

To $38 50.

Which is a growth rate of 12 to 13, 12% to 13%.

Speaker 4: This compares to previous guidance of adjusted EPS in the range of $37.25 to $37.65. Some additional comments on

This compares to previous guidance of adjusted EPS in the range of $37 25.

To $37 65.

Some additional comments on 2022 guidance.

Speaker 4: We expect a slight headwind to sales growth from the impact of COVID testing on our pipette business.

We expect a slight headwind to sales growth from the impact of Covid testing on our pipette business.

Speaker 4: We expect gross margins for the full year to increase in the 30 to 40 basis point range. However, we expect to see improvement in gross margins in the second half of the year as we see further benefit in pricing and other margin initiatives.

We expect gross margins for the full year to increase in the 30 to 40 basis point range. However, we expect to see improvement in gross margins in the second half of the year as we see further benefit in pricing and other margin initiatives.

Speaker 4: Interest expense is estimated at approximately $50 million in total amortization, including purchased intangible amortization, to be $67 million.

Interest expense is estimated at approximately $50 million and total amortization, including purchased intangible amortization to be $67 million.

Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pre tax or <unk> 86 per share.

Speaker 4: Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pre-tax or 86 cents per share.

Other income which is below operating profit is estimated at approximately $14 million.

Speaker 4: Other income, which is below operating profit, is estimated at approximately $14 million.

Speaker 4: Finally, as I already mentioned, we expect our effective annual tax rate before discreet items will be 19%.

Finally, as I already mentioned, we expect our effective annual tax rate before discrete items will be 19%.

Speaker 4: Turning to the first quarter, based on market conditions today, we expect local currency sales growth of approximately 10 percent, and expect adjusted EPS to be in the range of $7.25 to $7.35, a growth rate of 11 to 12 percent.

Turning to the first quarter based on market conditions today, we expect local currency sales growth of approximately 10% and expect adjusted EPS to be in the range of $7 25 to.

To $7 35.

Our growth rate of 11% to 12%.

A couple of further comments a.

Speaker 4: A reminder that comparisons in the first quarter are particularly challenging as adjusted EPS grew more than 60 percent in Q1 last year.

A reminder, that comparisons in the first quarter are particularly challenging as adjusted EPS grew more than 60% in Q1 last year.

Speaker 4: We would expect gross margins to be down in Q1 due to higher supply chain and transportation costs.

We would expect gross margins to be down in Q1, two to higher supply chain and transportation costs. We.

Speaker 4: We will provide more insight on our next call, but it is worth mentioning now as you update your models that Q2 will have a very tough prior year comparison as local currency sales were up 27 percent and adjusted EPS increased more than 50 percent in the second quarter of last year.

We will provide more insight on our next call, but it's worth mentioning now as you update your models that Q2 will have a very tough prior year comparison as local currency sales were up 27% and adjusted EPS increased more than 50% in the second quarter of last year.

Some final details and guidance.

Speaker 4: With respect to the impact of currency on sales growth, we expect currency to decrease sales growth by approximately 1% in 2022 and decrease it by 2% in Q1.

With respect to the impact of currency on sales growth, we expect currency to decrease sales growth by approximately 1% in 2022 and decrease it by 2% in Q1.

Speaker 4: In terms of adjusted EPS, currency is a little worse than the last time we provided guidance.

In terms of adjusted EPS currency is a little worse than the last time, we provided guidance.

Speaker 4: We now expect currency will be a headwind to adjusted EPS growth of approximately 1% in 2022 and a headwind of approximately 2% in the first quarter.

We now expect currency will be a headwind to adjusted EPS growth of approximately 1% in 2022, and a headwind of approximately 2% in the first quarter.

Let me comment on free cash flow.

Speaker 4: For the full year 2022, we estimate it will reach $855 million.

For the full year 2022, we estimate it will reach $855 million.

Speaker 4: As we mentioned on our last call, our cash flow this year is impacted by higher variable compensation payments related to the very strong performance in 2021. In fact, we expect cash flow in Q1 to be down versus the prior year. Once we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share and net income conversion will be in the 100 percent range.

As we mentioned on our last call our cash flow. This year is impacted by higher variable compensation payments related to the very strong performance in 2021. In fact, we expect cash flow in Q1 to be down versus the prior year.

Once we get beyond 2022, we expect free cash flow per share will grow in line with earnings per share.

And net income conversion will be in the 100% range.

Speaker 4: We expect to repurchase approximately $1 billion in shares in 2022, which should allow us to maintain a net debt to EBITDA leverage ratio of approximately one and a half times. That is it for my side, and I'll now turn it back to Patrick.

We expect to repurchase approximately $1 billion in shares in 2022, which should allow us to maintain a net debt to EBITDA leverage ratio of approximately one five times that.

That does it for my side and I'll now turn it back to Patrick.

Thanks, Sean.

Let me start with some comments on our operating results.

Speaker 3: Our lab business had very strong growth in the quarter despite having great growth in the prior year. Almost all product lines

And will that business had very strong growth in the quarter, despite having great growth in the prior year.

Almost all product lines showed robust growth.

Speaker 3: We will start the year with very good momentum in lab in the first quarter, while growth in the remaining quarters will be impacted by a challenging multi-year comparison.

We will start the year with very good momentum and lap the first quarter, while growth in the remaining quarters will be impacted by a challenging multiyear comparisons.

With all of our excellent product portfolio and effective sales and marketing initiatives.

Speaker 3: With our excellent product portfolio and effective sales and marketing initiatives, we believe we are well-positioned to capture growth and continue to gain market share in our laboratory business.

I believe your bill position to capture growth and continued to gain market share and I will look forward to new business.

Turning to our industrial systems.

Speaker 3: Core Industrial did very well in the quarter and will have a strong start to 2022.

Core industrial did very well in the quarter and we will have a strong start to 2022.

Speaker 3: We are benefiting from our attractive product portfolio, very good implementation of Spinnaker sales and marketing initiatives, as well as increasing demand from our customers for automation and digitalization.

We are benefiting from our attractive product portfolio very good implementation of spinnaker sales and marketing initiatives as well as increasing demand from our customers for automation and digitalization.

Speaker 3: We will face tougher comparisons as the year progresses, but expect to continue to gain share here as well.

We will face tougher comparisons as the year progresses, but expect to continue to gain share here as well.

We are pleased with Lenovo.

Speaker 3: quarter of good growth in product inspection, which increased 10% in the quarter.

Quarter of good growth and product inspection, which increased 10% in the quarter.

Speaker 3: We expect a good start to the year and are optimistic that we will have good growth in 2022 as large packaged food companies show more appetite for investment.

We expect a good start to the year and are optimistic that people will have good growth in 2022 large packaged food companies show more appetite for investments.

Finally, food retail declined 20% in the fourth quarter.

Speaker 3: Finally, food retail declined 20% in the fourth quarter.

Speaker 3: We were impacted by shortages of electronic components as well as timing of project activities.

We were impacted by shortages of electronic components as well as timing of project activity.

Speaker 3: We expect low double-digit decline in the first quarter, and overall do not expect much growth here in 2022. Now let me.

We expect low double digit decline in the first quarter and overall do not expect much growth year in 2022.

Now, let me make some additional comments by geography.

Speaker 3: Sales in Europe increased 4% in the fourth quarter, which was in line with our expectations.

Sales to Europe increased 4% in the fourth quarter, which was in line with our expectations.

Speaker 3: Both lab and industrial had solid growth while retail was down double digits.

Oops lab, and industrial had solid growth, while retail was down double digits.

We expect good growth in Europe to start the year and overall solid growth for the full year 2022.

Speaker 3: We expect good growth in Europe to start the year and overall solid growth for the full year 2022.

Speaker 3: America has had another quarter of very strong growth with 16% increase.

Americas had another quarter of very strong growth with 16% increase.

Speaker 3: Lab had excellent growth while Industrial also did very well.

Lab had excellent growth one industry industrial also did very well.

Retail was down significantly.

Speaker 3: Americas will also have a strong start to the year and then face more challenging comparisons as the year progresses.

Americans will also have a strong start to the year and then face more challenging comparisons as the year progresses.

Speaker 3: Finally, Asia and the rest of the world grew 14% in the fourth quarter, with outstanding growth in laboratory and product inspection, and very good growth in core industrialization.

Finally, Asia rest of the World grew 14% in the fourth quarter with outstanding growth in laboratory and product inspection and.

And very good growth in core industrial.

Speaker 3: China grew 12% with excellent growth in last year.

China grew.

<unk> grew 12% with excellent growth in lab.

Speaker 3: We are very strongly positioned in China and the team continues to execute well.

Yes, very strongly positioned in China, and the team continues to execute well.

Speaker 3: One final comment on the business, service and consumables performed really well and dropped 10% in the quarter.

One final comment on the business service and consumables performed really rail and drop 10% in the quarter.

We continue to be very pleased with the growth in this important and profitable part of the business.

Speaker 3: We continue to be very pleased with the growth in this important and profitable part of the business.

That concludes my comments on the business.

While coverage is not yet behind us we believe we will exit the pandemic in a stronger competitive position.

Speaker 3: While COVID is not yet behind us, we believe we will exit the pandemic in a stronger competitive position.

Speaker 3: Many factors have contributed to this, including our excellent product portfolio, extensive service offering, well ingrained and proven sales and marketing strategies, and an agile and experienced supply chain team.

Many factors have contributed to this including excellent product portfolio.

Extensive service offering well ingrained and proven.

Proven sales and marketing strategies in an agile and experienced supply chain team.

Another important factor is about process and system Harmonization program Blue Ocean, which is the foundation and enabler of many of our corporate programs and initiatives.

Speaker 3: Another important factor is our process and system harmonization program, Blue Ocean, which is the foundation and enabler of many of our corporate programs and initiatives.

Speaker 3: RuOcean is a multi-year program that harmonizes how we do business, internally and with customers. It encompasses all aspects of business.

Erosion is a multiyear program that harmonizes, how we do business internally and with customers.

Encompass is all aspects of our franchise.

Speaker 3: sales, service, supply chain, R&D, HR, and finance.

<unk> service supply chain, R&D, HR and finance.

Speaker 3: With harmonized processes and data, we can leverage a globally standardized single-instance IT system that digitalizes our processes and provides data that increases our business transparency.

With harmonize processes and data we can leverage it globally standardized single instance, it system to digitalize, our processes and provides data increases our business transparency.

Let me provide some additional insight.

Speaker 3: Blue Ocean supports the framework for our Spinnaker sales and marketing initiatives.

Blue Ocean supports the framework for our spinnaker sales and marketing initiatives, our CRM and installed base provides extensive details on customers and potential customers could be used in marketing campaigns sales project alerts cross selling campaigns and support for our data analytics.

Speaker 3: Our CRM and install base provides extensive details on customers and potential customers that we use in marketing campaigns, sales project alerts, cross-selling campaigns, and support for other data analytics techniques.

Techniques.

Speaker 3: It provides comprehensive data on customers' purchasing activity.

It provides comprehensive data on customers purchasing activity.

Speaker 3: Blue Ocean is also the foundation for our pricing program.

Blue Ocean is also the foundation for pricing program.

Speaker 3: It provides data analytics to guide us in our pricing decisions and also allows us to implement price increases efficiently on a global basis.

Provides data analytics to guide us in our pricing decisions and also allows us to implement price increases efficiently on a global basis.

Speaker 3: Similarly, Blue Ocean harmonizes our services offering, allowing us to provide standardized services on a global basis.

Similarly, Blue Ocean harmonize, our services offering, allowing us to provide standardized services on a global basis.

Speaker 3: It also provides transparency in terms of field service productivity, service profitability by customer and highlights additional sales opportunities.

It also provides transparency in terms of field service productivity.

This profitability by customer and highlight additional sales opportunities.

Our supply chain is highly complex as it involves more than 3000 possible suppliers $150000.

Speaker 3: Our supply chain is highly complex as it involves more than 3,000 possible suppliers, 150,000 different SKUs, more than 800,000...

Different skus.

More than 800000 components.

Speaker 3: 19 production organizations and three logistic hubs.

19 production organizations and three logistic hubs.

Speaker 3: Blue Ocean provides us with the transparency and real-time data that is critical for navigating supply chain challenges.

Blue Ocean provides us with the transparency and real time data that is critical for mitigating supply chain challenges.

Speaker 3: agility, and collaboration between our market organizations and business units allow us to leverage our supply chain as a competitive advantage in helping

Agility and collaboration between our market organizations and business units allow us to leverage our supply chain is a competitive advantage in helping us gain share.

Blue Ocean is a critical it's critical to the success of our Stern drive program as it provides the data transparency to continually make improvements to our back office and manufacturing productivity.

Speaker 3: Blue Ocean is critical to the success of our Stern Drive program, as it provides the data and transparency to continually make improvements to our back office and manufacturing productivity. Finally, Blue Ocean is instrumental in providing meaningful real-time information that has become particularly important during the last two years, given how quickly market conditions have been changing.

Finally, the ocean is instrumental in providing meaningful real time information that has become particularly important during the last two years, given how quickly market conditions have been changing.

We develop specialized and tailored data alerts, allowing us to see firsthand the impact on our business and allow us to make decisions quickly.

Speaker 3: We developed specialized and tailored data alerts, allowing us to see firsthand the impact on our business and allow us to make decisions quickly.

Speaker 3: We will continue to evolve Blue Ocean and believe it has become a clear competitive advantage for all.

We will continue to evolve blue Ocean and believe it tends to become a clear competitive advantage for us.

Before I conclude I also want to make a brief comment on our USG initiatives.

Speaker 3: Before I conclude, I also want to make a brief comment on our ESG initiative.

Speaker 3: We are committed to sustainable development across the broad environmental, social and governance aspects covered by our longstanding GreenMT sustainability program.

We are committed to sustainable development across the broad environmental social and governance aspects covered by will long stint by our longstanding and key sustainability program.

Speaker 3: We believe it is our responsibility to act in a manner that considers future generations.

We believe it is our responsibility to act in a manner that considers future generations.

Speaker 3: We have great accomplishments in ESG including achieving carbon neutrality with respect to scope 1 and 2 emissions and sourcing 100% renewable electricity.

Yes, great accomplishments and he has achieved including achieving carbon neutrality.

We expect to scope, one and two emissions.

Sourcing, 100% renewable electricity.

Speaker 3: We focus on five key areas, one, environmental, two, sustainable products and services, three, responsible development.

We focus on five key areas one environmental.

Two sustainable products and services.

Hi.

Disposable supply chain.

Speaker 3: four, engaged employees and five, good corporate governance.

<unk> engaged employees and five good corporate governance.

Speaker 3: While we have an excellent track record in ESG, we have set ambitious targets for the future.

Or do you have an excellent track record and you use cheap we have set ambitious ambitious targets for the future.

Importantly, we have recently committed to absolute emission reduction targets consistent with the latest criteria issued by the science based target initiative.

Speaker 3: Importantly, we have recently committed to absolute emission reduction targets consistent with the latest criteria issued by the Science-Based Target Initiative.

Speaker 3: This will cover scope 1, 2, and 3 emissions.

This will cover scope, one two and three emissions.

Speaker 3: We have also set a target to reduce our waste intensity by 20% and achieve zero waste to landfill by 2025.

We have also set a target to reduce our waste intensity by 20% and achieved zero waste to landfill by 2025.

To reinforce the importance of ESG executive management compensation in 2022 will incorporate specific environmental as well as diversity targets.

Speaker 3: To reinforce the importance of ESG, executive management compensation in 2022 will incorporate specific environmental as well as diversity targets.

Speaker 3: I think both Blue Ocean and our ESG goals are great examples on how Mettler Toledo focuses on the long term to enhance the value of our franchise.

I think both Blue Ocean <unk> key goals are great. Examples on how mettler Toledo focuses on the long term to enhance the value of our franchise.

I would now like the operator to open the call for questions.

Speaker 3: I would now like the operator to open the call for questions.

Speaker 1: As a reminder, to ask a question, you will need to press star 1 in your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster.

As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Your first question will come from Dan Arias with Stifel. Please proceed with your question.

Speaker 1: Your first question will come from Dan Arias with Staple. Please proceed with your question.

Sure.

Hi, This is Eric on for Dan.

Thanks for taking the question.

Speaker 14: uh... one on capital deployment accused discuss your plan or that uh... for the year the one billion dollar share buyback like you finding any effort becoming more attractive given the recent market that might have you looking for one that

One on capital deployment could you just discuss your plan for that for the year. Besides the $1 billion share buyback like are you finding any assets, becoming more attractive given the recent market moves that might have you're looking for ones that might be.

On a larger scale than the usual smaller tuck in deals.

Speaker 4: Yeah, hey, maybe so I guess there's two parts of that question. So, you know, in terms of our M&A strategy, I'll let Patrick kind of comment on that, but no change in our strategy. We still think we're a great platform for bolt-on acquisitions.

Yeah, Hey, maybe so I guess, there's two parts of that question. So.

In terms of our M&A strategy I'll, let Patrick kind of comment on that but no change in our strategy. We still think we're a great platform for bolt on acquisitions.

I also feel very strongly about our organic story. So we're very selective in terms of the acquisitions, but if you look at like the <unk> acquisition. We did last year I think Thats a really excellent example of the type of acquisition that we're looking for in <unk> of course, it's been a great addition to mettler Toledo in terms of capital deployment.

Speaker 4: position that we're looking for, and Pendotec, of course, has been a great addition to Mettler Toledo. In terms of capital deployment, you know, we also feel good about our share repurchase program. The program continues to be very successful from our perspective, and we target about a one-and-a-half times net leverage ratio, and right now we're expecting to repurchase about $1 billion of shares in 2022. And as a reminder, we do that on a very consistent basis throughout the year.

We also.

Feel good about our our share repurchase program. The programs continues to be very successful from our perspective, and we we target about one five times net leverage ratio and and.

Speaker 4: And right now we're expecting to repurchase about $1 billion.

And right now we're expecting to repurchase about $1 billion of shares in 2022 and as a reminder, we do that on a very consistent basis throughout the throughout the year.

Speaker 4: of shares in 2022, and as a reminder, we do that on a very consistent basis throughout the year.

Okay, and then could you just provide a rundown of the top line assumptions by segment for the first quarter and for the two.

Speaker 14: OK, and then could you just provide a rundown of the top-line assumptions?

2022, that's baked into the improved guide.

Speaker 4: Yeah, sure. So, hey, I'll start with the divisions. So, I'll start with the lab division. Right now, our guidance is low double-digit growth for Q1 and high single-digit growth for the full year.

Yes, sure so hey, I'll start with the with the divisions.

So I'll start with the lab Division right now our guidance is low double digit growth for Q1 and high single digit growth for the full year.

Speaker 4: For core industrial, we expect high single-digit growth in Q1 and mid-single-digit growth for the full year.

Fourth core industrial we expect high single digit growth in Q1, and mid single digit growth for the full year.

Speaker 4: For product inspection, we expect high single-digit growth for Q1 and high single-digit growth for the full year. And for food retailing, we expect to be down double-digit in Q1, but grow low single-digit for the full year. And then I'll also give you the geographies. For Europe , we expect Q1 to be up mid-single-digit to high-single-digit. And for the full year, to be up mid-single-digit.

For product inspection, we expect high single digit growth for Q1 and high single digit growth for the full year.

And for food retailing, we expect to be down double digit in Q1, but grow low single digit for the full year and then I'll also give you the geographies for Europe .

We expect Q1 to be up mid single digit to high single digit and for the full year to be up mid single digits.

Speaker 4: For the Americas, we expect to grow low double-digit in Q1 and grow in single-digit to high single-digit full year. And then for China, we expect to grow approximately 10% Q1 and approximately 10% for the full year.

For the Americas, we expect to grow low double digit in Q1.

And grow mid single digit to high single digit full year, and then for China, We expect to grow approximately 10%.

One an approximately 10% for the full year.

Thank you so much.

Welcome.

Speaker 1: Your next question will come from the line of Derek DeBruin with Bank of America. Please proceed with your question.

Your next question will come from the line of Derik de Bruin with Bank of America. Please proceed with your question.

Hey, this is <unk> on for Derik. Thanks for the question so geographically to par on China here are you seeing any impact from China, specifically from Lockdowns and also trade tensions are heating up with some touching the bio processing CDMA segment is there any concern that the trade issues could slow demand for lab products.

Speaker 15: Hey, this is Nisargam for Derek. Thanks for the question. So geographically, two-parter on China here. Are you seeing any impacts in China specifically from lockdowns? And also, you know, trade tensions are heating up with some touching the bioprocessing CDMO segment. Is there any concern that the trade issues could slow demand for lab products?

Yeah.

Now let me take that.

Speaker 3: Let me take that. Look, our business in China has been very strong. We have a very strong footprint in China. We have been there for 30 years. We serve many customers on a broad base. Also, as a reminder, more than 40% of our business in China is industrial business.

Our business in China has been very strong.

Very strong footprint in China, we had been there for 30 years.

Many customers overall base.

Also as a reminder, more than 40% of our business in China is industrial business.

Speaker 3: But to biopharma and what we're seeing there is very healthy trends for us. We have overall not seen impacts from lockdowns in the last quarter. And right now, at least what we are hearing from the team is they are not concerned of any of the impacts that you mentioned regarding biopharma.

But to Biopharma and what you're seeing there is very healthy trends for us we have.

Overall not seen.

Impacts from Lockdowns in the last quarter.

Right now this will be a hearing from the team as they are.

A lot of concern of any of.

The impact that you mentioned regarding Biopharma right now.

Great and then one more on the margins for the quarter what were some of the key go more into detail on some of the pressures you saw and how do you kind of expect them to impact early on in 2022.

Speaker 15: Great, and then one more on the margins for the quarter. What were some of the, can you go more into detail on some of the pressures you saw and how do you kind of expect them to impact early on in 2022? Do you think there's gonna be any carry over there?

Do you think theres going to be any carryover there.

Speaker 4: Yeah, hey, so I'll take that one. So hey, maybe I'll talk more broadly about the margin and then can kind of like then kind of

Yes, hey, so I'll take that one so hey, maybe I'll talk more broadly about the margin and then kind of like them kind of talk about 2022 as well. So as we mentioned in the prepared remarks, our gross margin was down 110 basis points in the quarter.

Speaker 4: talk about 2022 as well. So, as we mentioned in the prepared remarks, our gross margin was down 110 basis points in the quarter. On one hand, we had, you know, favorable price realization. Our price realization was just over 3%.

On one hand, we had favorable price realization or our price realization was just over 3% in the quarter, which would translate to approximately 140 basis point benefit to the margin of course, we also benefited from our volume in the quarter, but the one thing that clearly stood out from our perspective was that.

Higher material costs.

Well as higher transportation costs in the quarter and as we kind of like look to Q1, we're expecting to see similar trends overall for gross margin would probably very similar dynamics, probably that pricing will continue to be in that 3% kind of a range.

Speaker 4: to see similar trends overall for gross margin with probably very similar dynamics, you know, probably that pricing will continue to be in that 3% kind of a range, but we'll still continue to have like a bit of a headwind on material costs and transportation. So if we look at gross margin for Q1, wouldn't be surprised if we're down another 100 basis points in Q1, but we still remain very confident about our ability to expand the margin. And so as we look to the full year, we still believe we can expand our gross margin by 30 to 40 basis points, and we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say, hey, we can expand margins on an annual basis 70 basis points to 100 basis points. If you look at the midpoint of our guidance, we're towards the higher end of the range of that, probably about 90.

But we will still continue to have like a bit of a headwind on material cost and transportation. So if we look at gross margin for Q1.

Wouldnt be surprised if we're down another 100 basis points in Q1, but but we still remain very confident about our ability to expand the margin and so as we look to the full year. We still believe we can expand our gross margin by 30 to 40 basis points.

Speaker 4: And we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say, hey, we can expand margins on an annual basis, 70 basis points to 100 basis points.

And we expect to still increase our operating margin overall at the higher end of our typical guidance. So as a reminder, we typically would say hey, we can expand margins on an annual basis 70 basis points to 100 basis points.

Speaker 4: If you take a look at the midpoint of our guidance for it towards the higher end of the range of that probably about 90 90 basis

If you take a look at the midpoint of our guidance where it towards the higher end of the range of that probably about 90.

90 basis points.

Speaker 4: So so when you break that down, we are expecting a little bit better pricing in 2022 than what we previously expected We were previously guiding to about 3% for next year right now we're thinking it will be probably three and a half percent or so and wouldn't be surprised if we Get to the 4% kind of a range in the second half of the year because of course we're going to continue to To adjust and do actions as we see appropriate especially as we saw some of the pressures In the fourth quarter on our cost structure, but it's not only about pricing of course We're also going to be doing some things in terms of optimizing our supply chain as we continue to look for opportunities for example to re-engineer Components or look for other sources in this in the supply chain

So when you break that down we are expecting a little bit better pricing in 2022 than what we previously expected we.

We were previously guiding to about 3% for next year right now we're thinking it will be probably three 5% ourselves and.

I wouldn't be surprised if we had.

To get to the 4% kind of a range in the second half of the year because of course, we're going to continue to to adjust and do actions as we see appropriate, especially as we saw some of the pressures in the fourth quarter on our cost structure, but it's not only about pricing of course, we're also going to be doing some things in terms of optimizing our supply chain as we.

We continue to look for opportunities for example to reengineer components or look for other sources.

And the supply chain.

Speaker 7: Great, thank you.

Great. Thank you.

Yes.

Speaker 1: Your next question will come from Josh Waldman with Cleveland Research. Please proceed with your question.

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

Speaker 8: Hi, thanks for taking my questions. Just a couple for you, Sean or Patrick, I guess, from a demand outlook perspective, could you talk through the product areas or the regions that improved versus your plan 90 days ago that led you to pull your organic growth up this early in the year?

Hi, Thanks for taking my questions just a couple for you.

Sean are passionate I guess from a demand outlook perspective could you talk through the product areas or the regions.

Crude versus your plan 90 days ago that led you to pull your organic growth up I guess early in the year.

Yes.

Speaker 3: Maybe I start, John , and let you chime in as well. So let me talk through the product categories. I mean, we see sustained demand, healthy demand, in our lab business moving forward. So we...

Yeah, maybe maybe I'll start Charles Thank you chime in as well So let me talk to the product categories. I mean, we see sustained demand healthy demand in our lab business moving forward.

Speaker 3: And Sean gave you the numbers in terms of the growth expectations.

And Sean gave you the numbers in terms of the growth expectation so lap.

Speaker 3: I would say holds are very strong, has been strong in Q4 already. We're also pleasantly surprised by the momentum that we still see in industrial, driven by the demand for automation and digitalization. And our product portfolio that we have there really serves the demand very well. I think I mentioned in my comments also the fact that we're still seeing

I would say holds a very strong has been strong in Q4 already have you also pleasantly surprised by the momentum that we still see in industrial driven by the demand for automation and digitalization of our novel product portfolio that we have there really serves that demand very rail <unk>.

And in my comments, although the fact that you're still seeing some healthy appetite in product inspections from some of the packaged food companies out there. So overall.

Speaker 3: some healthy appetite in product inspections from some of the packaged food companies out there. So overall, I would say we are actually on a broader front across these categories that I just mentioned, really well.

I would say.

<unk>.

On a broader front across these categories that just mentioned.

Really well.

Speaker 3: nicely surprised that we see stronger demand than we anticipated when we gave you the last guidance and that's why we raised the

<unk> be surprised if we see stronger demand than we anticipated.

When you gave your last guidance and Thats why we raised the guidance.

Speaker 3: That's basically, I wouldn't point to any specific end market here, not to any specific region. I would say overall we see better demand would be expected.

That's basically.

I wouldn't point to any specific end market here not to any specific region I would say.

Overall, we see better demand to be expected.

Speaker 8: Got it. Got it. Then, Sean, I wondered if you could provide us a bridge to the updated earnings guide. I mean, it sounds like most of the increase was due to organic growth, I guess. Is that correct? And then if you could provide us kind of your assumptions for the low and the high end of the EPS range as it relates to maybe organic growth and margin, that would be great.

Got it got it and then Sean I wondered if you could provide us a bridge to the updated guidance I mean, it sounds like most of the increase was due to organic growth I guess is that correct and then if you could provide us kind of your assumptions for the low and the high end of the EPS range as it relates to maybe organic growth and margin that would be helpful.

Speaker 4: Yeah, hey, so I'd say, you know, if you kind of bridge EPS, you know, like you said, a lot of it has to do with higher sales growth, increasing the sales growth. Of course, we also added in our beat for for 2021, which includes a lower tax rate, you know, at 19%. And that was offset a little bit, that was offset a little bit by unfavorable current

Yes, Hey, so I'd say, if you kind of bridge EPS.

Sure.

Like you said a lot of it has to do with higher sales growth increasing the sales growth of course, we also added in our feet for for 2021, which includes a lower tax rate at 19% and that was offset.

A little bit.

It was offset a little bit by unfavorable currency.

Speaker 8: Hey, can you provide the range or the assumptions that went into the range for the updated guide, EPS guide?

Could you provide the range.

Are the assumptions that went into the range for.

The updated guide EPS guide.

Speaker 4: Yeah, hey, we typically don't get too much into like the specific assumptions for the low end and the high end. I mean, we, you know, for the top line, for example, we said approximately 7%. So I don't want to try to start deviating from is that, you know, six point this or seven point that or, you know, on the margins, a little bit lower, a little bit higher, but you know, you could probably flex your model and, and get a sense for, you know, what that would translate in terms of an EPS range. But, you know, you can appreciate Josh. I mean, there's a lot of, you know, there's a lot of ingredients into the recipe at this point in time of the year, a lot of things.

Hey, we typically don't get too much into like the specific assumptions for the low end and the high end I mean, we.

For the top line for example, we said approximately 7% so I don't want to try to start deviating from is it <unk>.

Six point, this or seven point that or on the margins a little bit lower a little bit higher but you could probably flex your model in and get a sense for what that would translate in terms of an EPS range, but you can appreciate Josh I mean, theres a lot of there's a lot of ingredients into the recipe at this point of time of the year.

There are a lot of things can change as we get into the year is a very very dynamic environment and so there's always going to be things that can be a little bit better, but there is of course theres things that can be a little bit worse.

Speaker 4: can change as we get into the year. It's a very, very dynamic environment, and so there's always gonna be things that can be a little bit better, but there's, of course, there's things that can be a little bit worse. Sure, appreciate it, guys.

Sure I appreciate it guys.

Speaker 1: Your next question will come from Tyco Peterson with J.P. Morgan. Please proceed with your question.

Your next question will come from Tycho Peterson with Jpmorgan. Please proceed with your question.

Speaker 9: Hi, this is Rachel on for Tyco. Thanks for taking the questions and congrats on the quarter, you guys. So a few questions here on lab. So lab was better than expectations. You guys grew about 15% versus guidance of low double digits for 4Q. So can you talk about if you saw any catch-up spending on the lab side of things? And then were there any other underlying changes in that market to drive the beat there?

Hi, This is Rachel on for Tycho, Thanks for taking the questions and congrats on the quarter you guys.

A few questions around lab to lab was better than expectations. You guys grew about 15% versus guidance of low double digits for <unk>. So can you talk about if you saw any catch up spending on the lab side of things and then were there any other underlying changes in that market to drive the beat there.

No I have looked at I wouldn't say.

Speaker 3: There was catch-up or any pent-up demand that we saw. We see, really...

There was a catch up.

Pent up demand as we saw we see really strong demand for our products. We have a very strong product portfolio I think it competes extremely rail.

Speaker 3: strong demand for our products. We have a very strong product portfolio. I think it competes extremely well. Right now, we also have been able to deliver to our end customers, and that came to some extent at some cost, as Sean also mentioned, that drives, that had a little bit of impact on our gross margin, because we do broker buys for chips, et cetera, that make components more expensive, but it's very important for us to really make sure that we can deliver products to our customers.

Though we also have been able to deliver to all the way and customers.

And that came to some extent there is some cost and so on also mentioned.

That drives that has a little bit the impact on our gross margin because we do political buys for chipsets and components more expensive, but it is very important for us to really make sure that we can deliver.

New products silver customers.

Speaker 3: Overall, I think we see very strong demand for our products and it's reflected in those numbers. There is not a specific market segment that I would point to. Pharma, bio-pharma, as we said, is very strong for us, for lab, but it's also, of course, deployed in other segments like even battery segment or if you look at the broader chemical segment, of course, all of the labs buy products from us. The other thing is that it's held the amount...

Overall I think the.

We see very strong demand for our products and it's reflected in those numbers. There is not a specific market segment that I would point to pharma Biopharma. As we said is very strong for us will lap, but who can also.

Of course employed novel segments.

Like even battery segment.

Look at the broader chemical segment of course of the last five products from us and as.

There is healthy demand.

Speaker 3: from these end markets. None of them really specifically that sticks out in terms of change was what we had guided to regarding.

From these end markets, none of them really specifically that sticks out in terms of change versus what we had guided to regarding Q4.

Speaker 4: Yeah, and you can see that strong momentum is also reflected in our Q1 guidance, you know, of low double digit for labs.

And you can see that strong momentum is also reflected in our Q1 guidance of low double digit for lab.

Yes helpful and then maybe going off of that for the segment guidance.

Speaker 9: Yeah, helpful. And then maybe going off that for the segment guidance. So appreciate the comments around the expectations by geography as well. So it looks like you have an improved outlook in Europe and America for the year. So can you just talk about what's driving your confidence in those regions? Is it specific segments that's driving it or kind of what drove the increase there?

We hit the comments around the expectations by geography as well so it looks like you have an improved outlook in Europe and Americas for the year. So can you just talk about what's driving your confidence in those regions is it specific segment, that's driving it or kind of what drove the increase there.

Yes, so so yes, so the Americas was up a little bit I mean, we just continue to I mean, you saw what we did in the fourth quarter in the Americas as well I mean, there's just really not to overuse the word but really good momentum very broad based growth in the portfolio and that was despite our food retailing business being down.

Speaker 4: Yeah, so so yeah, so the Americas was up a little bit. I mean, we just continue to, I mean, you saw what we did in the fourth quarter in the Americas as well. I mean, it's just really not to overuse the word, but really good momentum, very broad based.

Speaker 4: growth in the portfolio and that was despite our food retailing business being down.

In the quarter.

I would say our industrial businesses, our lab business is doing very well, but our industrial business continues to be.

Really resilient and performing well and as Patrick was saying earlier, we very much are benefiting from a lot of these trends towards automation and digitalization I mean, there is just a huge demand in the world to be more productive and we're just very fortunate to be in a position to be able to help serve that demand and and.

Speaker 4: There's a huge demand in the world to be more productive and we're just very fortunate to be in a position to be able to help serve that demand. And you know, the teams have done just such a great job in this division, there's a lot of good innovation, there's also really good execution, and you know, as we've been trying to also pivot the business towards the more attractive market segments over the years, we continue to see that paying a lot of dividends. And then also, as Patrick mentioned, there are these hot segments in the world, both on the lab side and the industrial side that we also have been good at in terms of capturing growth. Great. That's it for me. Thank you. Yep. Thank you. Your next question will come from Jason Reaver with Citi. Please proceed with your question. Hey there, you got Jason on for Patrick. Congrats on the great quarter. Two quick questions for you. Thank you.

The teams have done just such a great job in this division there is a lot of good innovation. It's also really good execution.

And as we've been trying to also pivot the business towards the more attractive market segments over the year as we continue to see that paying a lot of dividends and then also as Patrik mentioned there. There are these hot segments in the world both on the lab side and the industrial side that we also have been good at in terms of capturing growth.

Okay.

Speaker 10: Great, that's it for me.

Great. That's it for me thank you.

Yes. Thank you.

Speaker 1: Your next question will come from Jason Reaver with Citi. Please proceed with your question.

Your next question will come from Jason Riva with Citi. Please proceed with your question.

Hey, there you got Jason on for Patrick Congrats on the great quarter, two quick questions for you one you've.

Speaker 15: Hey there, you got Jason on for Patrick. Congrats on the great quarter. Two quick questions for you. One, you've seen strength in the industrial market. Just curious about the visibility into that strength in the 22. And then two, just wondering on how PenderTech is performing relative to expectations and any further color to shed there. Thanks.

<unk> seen strength in the industrial market, just curious about the visibility into that strength into 'twenty. Two and then two just wondering on how <unk> is performing relative to expectations and any further color to shed there. Thanks.

Speaker 3: Yeah, I'll take it. Hey, good questions on industrial. I think it is.

Yes, I'll take that.

Good questions on industrial and things.

It is.

Speaker 3: As we look into 2022, of course, we will face tougher comparisons, as I said, as we go deeper into 2022 towards the second half. But we see good demand in the markets. It's driven basically in all major regions by.

As we look into 2020 to do of course, we will face tougher comparisons as I said has been growing.

People in to 2022 towards the second half, but we see good demand in end markets, it's driven.

Basically in all major regions by.

Speaker 3: demand for automation and for digitalization. Sean mentioned that as well. That's the really fundamental driver. We have an outstanding performance platform there both on the product side to serve those.

Demand for automation and for digitalization, and Sean mentioned that as well.

Fundamental driver will be have an outstanding performance.

Uh huh.

Platform Theyre on the product side too to serve those so those demands.

Speaker 3: and we are confident that also the new products that we launched this year, like the Industry 360 Terminal, that really addresses these demands nice.

And we are confident that also the new products that you launched you feel like the industry is 360 term motive I really addresses 60 months nicely.

Speaker 3: Um, that, uh, and that we think it will continue into 2022. Um, of course.

And we think that will continue into 2022.

Of course.

Speaker 3: Given that we will have tougher comparisons, you will not see the same growth rates in the second half. But we are competing extremely well.

Given that we will have tougher comparisons you won't see the same growth rates in the second half.

We are competing extremely well there.

Speaker 3: On your comment regarding Pantotech, we are very pleased with the back decision. Actually, it outperformed our expectations in 2021 and we see continued strong demand as we go into 2022 for the products.

On your comment regarding Panda take me is very pleased with that acquisition actually.

Outperformed expectations in 2021, and we see continued strong demand as we go into 2022 for the products.

Great. Thank you.

Okay.

Speaker 1: Your next question will come from the line of Jack Meehan with Mefrin Research. Please proceed with your question.

Your next question will come from the line of Jack Meehan with Nephron Research. Please proceed with your question.

Speaker 6: Thanks, and good afternoon. I had another question on industrial, but was hoping you could weigh in, you know, we're seeing higher commodity prices, along with the talk around inflation. Was curious, just from a demand perspective, if you saw that playing out in terms of any of the industrial customers for your coverage, for your, just amongst your customer base on the industrial side.

Thanks, and good afternoon.

I had another question on industrial but was hoping you could weigh in.

We're seeing higher commodity prices along with the talk around inflation was curious just from a demand perspective, if you saw that playing out in terms of any of the industrial customers for coverage for you or just amongst your customer base on the industrial side.

Speaker 4: No, hey Jack, this is Sean. No, we're not seeing that impact any of our customer demand at all. Interesting comment, but no, we're not seeing it from a customer side.

No Hey, Jack this is Sean now, we're not seeing that impact any of our customer demand at all.

Interesting comment, but no we're not seeing it from a customer side.

Speaker 6: Interesting. Okay. And then back on product inspection, so the guide for the first quarter, high singles, you know, the headline looks good. I have that compounding, though, still kind of in the low single digits given the comps. Just be curious just to get a little bit more color as you're talking with your customers when you think just the timing for when some of the renewed spend could be going into CapEx. I'm sorry.

Interesting, Okay and then.

Back on product inspection, so the guide for the first quarter high singles.

The headline looks good I have that compounding, though still kind of in the low single digits given the comps.

Just be curious just to get a little bit more color as youre talking with your customers when do you think.

The timing for when some of the renewed spend could be going into capex.

Yes.

Yes, I'm sorry.

Okay go.

Go ahead Patrick.

Okay, John I'll take it.

Speaker 3: Look, we are really happy with the results of product inspection in Q4.

Look we're really happy with the result of product inspection in Q4.

Speaker 3: Most of it fully results. We are clearly a leader in product inspections We have the products broadest product range and also the largest services network

Full year results.

Clearly a leader in product inspection, we have the products broadens.

Range.

The largest service network our outlook for 2020 is good and we are assuming that we see more investment from loss manufacturing. So there is some pent up demand that would be at this point you also guided to double digit growth in the first quarter than we expected.

Speaker 3: Our outlook for 2022 is good and we are assuming that we see more investment from large food manufacturing. So there is some pent-up demand. That's why we also guided to a double-digit growth in the first quarter and we expect this.

Speaker 3: segment for us to perform really, really well. But also as a reminder to understand food manufacturers represent only about 70% of our product inspection business.

This segment for us to perform really really well, but also as a reminder to understand food manufacturer.

<unk> represented only about 70% of our product inspection business.

Speaker 3: And these customers have been impacted by COVID. Remember with last year, we talked about the fact that it was also difficult for our service people to get in some of these accounts and deliver services. That is coming back, has come nicely back. So we will also see better service growth than we had last year in this segment as well.

And these customers have been impacted by Covid remember over the last year, we talked about the fact that it was also difficult fall well service people because some of these accounts to level as soon as it is coming from that is coming but has come down modestly picks up we will see it will serve as growth than we had last year in the second.

And as well.

That's helpful. Thank you Patrick.

Sure.

Speaker 1: Your next question will come from the line of Matt Sykes with Goldman Sachs. Please proceed with your question.

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

Speaker 14: Hi. Thanks for taking my questions. I appreciate it. Maybe, Patrick, just a high-level one for you. As you think about the supply chain, you've been dealing with a lot of challenges there. It sounds like you've been making a number of investments in Blue Ocean and other areas to try to improve that. And I'm sure this environment has probably led you to see a number of pressure points that you might be able to alleviate with spend.

Okay.

Hi, Thanks for taking my questions I appreciate it.

Patrick just a high level one for you as you think about the supply chain and you've been dealing with a lot of challenges there.

It sounds like it'd be making a number of investments in blue Ocean and other areas to try to improve that and I'm sure. This environment is probably lead you to see a number of pressure points that you might be able to alleviate with spend but.

Speaker 14: I guess my question is, if we do come out of it and supply chain does start to loosen up, do you feel like the investments that you've made so far will lead to greater efficiencies in productivity and maybe acceleration, margin expansion if we get out of this because of what you've already put into the business to make it better?

I guess my question is if we do come out of it and supply chain does start to loosen up do you feel like the investments that you've made so far will lead to greater efficiencies and productivity and maybe acceleration margin expansion. If we get out of this because of what you've already put into the business to make it better.

We will look at.

Very good question, Matt Thanks.

Speaker 3: I mean, we continuously invest in Blue Ocean since many, many years, right? And you move, right now about 85% of all business is on Blue Ocean. So we still have a couple of roll-ins to do, but

We continuously invest in blue Ocean since many many years right.

Right now about 85% of <unk> overall.

He was on Blue Ocean, we still have a couple of rolling to do but.

Speaker 3: We're making good progress there. Definitely the investments we're doing are all targeting productivity enhancements across the board. So we will continue to benefit from those. Whether it will be an acceleration of margin improvement, I don't think so. I mean, we have in history, we have made always good improvements in margin expansion. So I wouldn't put that into, you know,

And if you're making good progress to add definitely the investments, we'll do be doing are all targeting productivity enhancements across the board. So we will continue to benefit from so whether it will be an excellent duration.

Margin improvement I don't think so I mean do you have the history. We have made all these good improvements in margin expansion, so I wouldn't.

Put it in.

Now.

Speaker 3: We will continue to make improvements, but I think we will not see acceleration just by the fact that we do these investments in Blue Ocean. We have done this in the past, we are making great progress, we are absolutely convinced it is a competitive advantage for us.

Consideration, we move forward, we will make will be will continue to make improvements, but I think we will not see exploration shows by the fact that the duties investments of Blue Ocean. We have done this in the past and making great progress absolutely convinced it is a competitive advantage for us.

Speaker 3: Um, and it will continue to drive improvement, but more.

And it will continue to drive improvement, but not accelerating.

Got it and then maybe Sean you had mentioned in your prepared remarks, some uncertainty around China, which I think is pretty apparent so youre looking for sort of 10% growth for the year anything that you're concerned about regarding China.

Speaker 14: Got it. And then maybe, Sean, you had mentioned your prepared marks, some uncertainty around China, you know, which I think is pretty apparent. You're looking for sort of 10 percent growth for the year. Anything that you're concerned about regarding China, you know, underlying that kind of uncertainty comment, or is it sort of COVID related, lockdown related type type issues?

Underlying that kind of uncertainty comment or is it sort of COVID-19 related lockdown related type type issues.

Speaker 4: Yeah, I mean, we're not seeing anything specific in our business, Matt, but it's just that general, you know, knowledge that everyone has about like, there's just a lot of things going on there. I mean, it could be like you said, it could be.

Yes, I mean, we're not seeing anything specific in our business, Matt, but it's just that general.

<unk> acknowledged that everyone has about like there's just a lot of things going on there I mean, it could be like you said it could be could be COVID-19 could be lockdowns.

Speaker 4: It could be COVID, it could be lockdowns, you know, the way that they handle COVID with their zero tolerance policy, you know, could have implications on the business or in the local economy. You know, PMIs have been floating, you know, right around 50 on and off. But, you know, there's always uncertainty there. And then there's always...

The way that they they handle COVID-19 with their zero tolerance policy.

Sure.

Could have implications on the business or in the local economy.

PMI has had been floating right around 50 on and off.

But there's always there's always uncertainty there and then is there is always and we always say things can change quickly there right. They can they can go in either direction very quickly and that's that's always been our history. There. So I think for US it's always important to remind people that when we give guidance to provide that type of caution so that people understand those risk, but when we look at.

Speaker 4: And we always say things can change quickly there, right? They can go in either direction very quickly. And that's always been our history there. So I think for us, it's always important to remind people that when we give guidance to provide that type of caution so that people understand those risks. But when we look at China and we look to the media in the long term, I mean, we're very favorable. I mean, we continue to feel very good about the growth. We continue to feel very good about our business. We feel like a lot of the government's focus with their five-year plan in terms of life sciences and health and safety, a lot of the emerging industries that they're heavily investing in, they all play very well to our portfolio. And then this general theme of automation and digitalization also is a big theme in China as well. And so, and as they continue to expand the economic development to the West, I mean, our industrial business will also benefit. We continue to feel very strongly about it, but in the short term, there can always be volatility.

And we look to the medium to long term and they were very favorable I mean, we continue to feel very good about the growth. We continue to feel very good about our business.

We feel like a lot of the governments focus with their five year plan.

In terms of life Sciences, and health and safety.

A lot of the emerging industries that are that they're heavily investing in.

They all play very well to our portfolio and then the general theme of automation and Digitalization also is a big theme in China as well.

And so and as they continue to expand the economic development to the West I mean, our industrial business will also benefit.

We continue to feel very strongly about it but in the short term there can always be volatility.

Speaker 14: Understood. Thanks. Very helpful.

Understood. Thanks very helpful.

Excellent.

Speaker 1: Your next question will come from Vijay Kumar with Evercore ISI. Please proceed with your question.

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

Speaker 5: Hey guys, congrats on a nice sprint here and thanks for taking my question. I guess one on the Q itself, you know the growth margin here is sequentially flagged as historically you guys have had a very strong Q4 growth margin. I'm curious, was there any timing element here in Q4 or what happened to growth margins?

Hey, guys congrats on a nice print here and thanks for taking my question.

I guess that two one.

One on the Q itself.

The gross margin here sequentially flattish historically, you guys have had a very strong Q4 gross margins from.

I'm curious.

Was there any timing element here in Q4 or what happened to gross margins.

No Hey, Vijay this is Sean no I mean.

Speaker 4: No. Hey, VJ, this is Sean. Um, no, I mean, I just, you know, basically we just saw, um, the, the cost inputs increased much faster than what we expected, you know, and, uh,

Just.

Basically we just saw.

The cost inputs increased much faster than what we expected.

And both kind.

Kind of broad based and a lot of different cost categories, but I'd, probably highlight electronic components is.

As an area that was much higher than the others.

And also transportation costs came in higher than expected, which was a little bit of a surprise. If you just think about it is not a new topic and we were already facing cost headwinds in terms of transportation going back to Q4 of last year, but but like we always say like I think the key in this environment is to make sure that we have the systems in place to be able to <unk>.

Speaker 4: transportation costs came in higher than expected which was a little bit of a surprise if you just think about like it's not a new topic and we were already facing cost headwinds in terms of transportation going back to Q4 of last year. But like we always say, like I think the key in this environment is to make sure that we have, you know, the systems in place to be able to monitor these changes and so that we can react quickly and I think, you know, you can, you know, and that's what we're doing. We're highly focused on it as an organization. You know, we're going to, you know, we're going to see some similar trends in Q1 but I think as you kind of look to the full year, you know, we certainly still feel good about our ability to expand margins and as I said earlier before, you know, we still believe we'll expand our gross margin for the full year 30 to 40 basis points and then from an operating margin perspective we'll, you know, we expect to be at the high end of our typical guidance probably around 90 basis points at the midpoint of the guidance. That's helpful, Shawn, and maybe one for Patrick here, the Q1 guidance here, the comps are really tough, I'm just curious.

Monitor these changes and so that we can react quickly and I think you can and that's what we're doing.

Highly focused on it as an organization.

We're going to we're going to see some similar trends in Q1, but I think as you kind of look to the full year.

We certainly still feel good about our ability to expand margins and as I said earlier before we still believe will expand our gross margin for the full year of 30 to 40 basis points and then from an operating margin perspective will we expect to be at the high end of our typical guidance probably around 90 basis points at the midpoint of the guidance.

Speaker 5: That's helpful, Sean, and maybe one for Patrick here. The Q1 guidance here, the comps are really tough. I'm just curious, given the lockdowns here in China, what visibility do you have into those numbers, or what is driving this Q1 trend? In the guidance raised for the year by 100 basis points, how much of that was pricing versus volume, if you will?

That's helpful and then maybe one for Patrick here.

Q1 guidance here.

Comps are really.

I'm just curious.

Given the Lockdowns here in China.

What visibility do you have into those number for what is driving the Q1 strength.

And the guidance raise for the year by 100 basis points, how much of that was pricing versus volume if you will.

Yes.

I mean, it's.

Speaker 3: Look, our confidence in Q1 is driven by demand. We are seeing, as we said, we are not dramatically impacted by any lockdowns in China right now. There is, of course, a little bit uncertainty moving forward. It might have some impact, but we are pretty confident on the 10% that we have given you for Q1. We see the demand, we see the regions performing, not only Asia-Pacific and not only China, it's also the U.S. and Europe is performing.

Okay.

<unk> in Q1 is driven by demand you are seeing as we said we are optimistically impacted by any lockdowns in China right now there's of course, a little bit uncertainty moving forward it might have some impact.

Right.

We are pretty confident.

On the 10% we have given.

Given you for Q1 receipt of demand.

The regions performing not only in Asia Pacific and not only China. It's also the U S and Europe is performing.

Speaker 3: And as we expect, that gives us confidence that we will have a really solid Q1.

And should we expect them that gives us confidence.

But people will have a solid really solid Q1.

In terms of.

Speaker 3: The other question, it's a little bit of both. There's a little bit of volume, and it's also, of course, a little bit of pricing. I mean, we don't want to quantify that perfectly. Sean already made comments on pricing, but it's a component of both. We have volume increase, and we have some pricing impact.

The other question, it's a little bit of both there is a little bit of volume, but it's also of course, a little bit of pricing I mean.

Don't want to quantify to perfect as Sean already made comments on pricing.

You have volume increase in some places.

Sure.

Got it thank you guys.

Speaker 1: Your next question will come from the line of Brandon Couillard with Jeffries. Please proceed with your question.

Your next question will come from the line of Brandon Couillard with Jefferies. Please proceed with your question.

Speaker 16: Hey, thanks. Good afternoon. Just a couple for you, Sean. In terms of pricing for the year, should we think about that as being fairly similar between lab and industrial, or is it more weighted towards one segment or the other? And secondly, in terms of the gross margin outlook, is your expectation that kind of the material and transport headwinds fade by the second half, or is that still a drag on the gross margin line?

Hey, Thanks, good afternoon.

A couple for you Sean in terms of pricing for the year or should we think about that.

Similar between lab and industrial or is it more weighted towards one.

And secondly.

Gross margin outlook is your expectation that kind of material and transport headwinds faced by the second half or is that still a drag on the gross margin alone.

Speaker 4: Yeah. Hey, good question, Brandon. Hey, so in terms of pricing, you know, um, you know, probably slightly better on the lab side than on the industrial side.

Yes, Hey, good question, Brandon Hey, so in terms of pricing.

<unk>.

It's probably slightly better on the lab side than on the industrial side.

Speaker 4: And if I just think about the portfolio, but of course, you know, we'll have, I think we'll have good price increases and, you know, in both, both divisions.

And if I just think about the portfolio.

But of course, we'll I think we'll have good price increases.

In both.

Both divisions.

Speaker 4: In terms of material costs, you know, I think we'll certainly see a drag, you know, probably through, certainly in the first half of the year, probably, I'd like to think by the time we get to Q4, you know, we're not going to see a drag. And so hopefully there's a little bit of benefit by the time we get to the fourth quarter.

In terms of material costs.

I think we'll certainly see a drag.

Probably through certainly in the first half of the year.

Probably I'd like to think by the time, we get to Q4, we're not going to see a drag and so hopefully theres a little bit of a benefit by the time, we get to the fourth quarter.

Speaker 4: But I wouldn't count on too much right now until we see things play out.

But I wouldn't count on too much right now until we see things play out.

Speaker 3: And that's true for both. That's true for material, but also transportation. We don't think that will ease up before the second.

And Thats true for both.

Raw material, but also transportation heating you don't think that the lease up before the second half.

Yes.

Speaker 16: Gotcha, that's helpful. And then just one follow-up on China in the fourth quarter. Could you break out the lab versus industrial businesses for the fourth quarter, and kind of what you're assuming for those two segments of 22?

Got you that's helpful. And then just one follow up on on China in the fourth quarter could you break out the lab versus industrial businesses for the fourth quarter and kind of what you are seeing let's say segments of 'twenty two.

Speaker 4: within China? Yeah, sure. So our lab business in the fourth quarter grew in the high 20s. And then our industrial business in the quarter grew mid-single digit. And kind of for the full year, we're expecting lab to be probably like low double digit. And then with industrial, probably like mid-single digit.

And within China.

Yes, sure so our lab business in the fourth quarter.

Through.

Hi, <unk>.

And then our industrial business in the quarter grew mid single digit and kind of for the full year.

We're expecting lab.

Lab to be probably like low low double digit and then with industrial will probably like mid single digit.

Okay. Thank you.

Speaker 1: Your next question will come from the line of Katherine Schulte with Baird. Please proceed with your question.

Your next your next question will come from the line of Catherine Schulte with Baird. Please proceed with your question.

Speaker 11: Hi, thanks for the questions. I guess first, you mentioned consumables and services were up 10% in the quarter, and how sustainable do you think that growth is going forward? And, you know, what's your expectation from those categories in 2022?

Alright, thanks for the questions I guess first you mentioned consumables and services were up 10% in the quarter and how sustainable do you think that growth is going forward and what's your expectation for those categories in 2022.

Speaker 3: Yeah, very good question, Catherine. Thank you. I mean, look, I think we have very good potential and in consumables and services in services. Of course, we also going off our install based, making sure that

Yes, very good question Catherine. Thank you I mean look I think we have.

Very good potential in <unk> and <unk>.

<unk> services.

In services of course, we also going off our installed based.

I'm sure that those customers, who do not have their products on a contract vehicle to switch to contract because it just gives them a more reliable service pit on overall in terms of early maintenance et cetera.

Speaker 3: Those customers who do not have their products under contract, they can also switch to contract because it just gives them a more reliable service pattern overall in terms of early maintenance etc. The 10% we have seen was definitely very strong in Q4, I would say my expectation of the service is that it maintains in the high single digit range.

The 10% we have seen.

Definitely very strong in Q4 I would say.

My expectation for services has maintained the high single digit range.

Speaker 3: It's a very profitable business for us and we are putting a lot of emphasis on making sure that our customers understand the benefits of our services and we're broadening the services offering over time. So, I think this has created a lot of opportunity for us.

For 2022.

It's a very profitable business for us and we are putting a lot of emphasis on making sure that our customers understand the benefits.

Of our services and we brought into service offering over time. So I think this is quite some runway.

Speaker 4: Yeah, hey, Catherine, maybe one additional comment on the consumables is, of course, we won't have the benefit of the COVID testing that we've had in the past. So that could be a little bit of a head.

Yeah, Hey, Katherine maybe one additional comment on the consumables is of course, we won't have the benefit of the Covid testing.

That we've had in the past so that could be a little bit of a headwind.

Speaker 11: Yep, okay, got it. And then in pharma and some other industries, we've seen a bigger push for on-shoring and creating redundancy in supply chains as COVID has played out. You know, where do you think we are in terms of that phenomenon and capacity build-out? I'm just curious how much longer you think that could continue to be a tailwind for the market.

Yes, Okay got it.

And then in pharma and some other industries, we've seen a bigger push for onshoring and creating redundancy in supply chain. That's COVID-19 has played out.

Where do you think we are in terms of that phenomenon and capacity build out I'm. Just curious how much longer you think that could continue to be a tailwind for the market.

I think well I think it will.

Speaker 3: probably continue as it played out in 2021 and 2020 into probably the next one or two years. That's what we are seeing, at least from some of the counts that we are closely monitoring. And I think it's not only pharma, by the way, we see also some very good momentum in semiconductor, where, you know, the big facilities coming up now in the United States, where a lot of core facilities are coming back to the United States, which is also very good business for us.

Probably continue as it played out in 2021 and 2020.

Into probably the next one or two use them.

What we are seeing at least from some of the accounts to deal closely monitoring.

And I think it's not only pharma by the way we see also some very good momentum in semiconductor.

Well.

Big facilities coming up.

States.

A lot of core facilities are coming back to the United States, which is always a very good business for us.

Speaker 3: So I think that again, that will continue from our perspective at least to 2022 and maybe also 2023.

So I think that.

Federal continue from our perspective at least through 2022 or maybe it was a 2023.

Speaker 3: It's definitely some good tailwind for the overall market.

It's definitely some good tailwind for the overall market.

Great. Thank you.

Your next question will come from Lou <unk> with Wells Fargo. Please proceed with your question.

Speaker 1: Your next question will come from Lou Lee with Wells Fargo. Please proceed with your question.

Speaker 12: Just want to follow up on the pricing, I think you mentioned 3.5% or even close to 4% for this year. Do you hear any pushback from customers and then does that impact your ability to further increase the pricing for next year?

I mean my questions just wanted to follow up on the pricing I think you mentioned three 5% or even close to 4% for this year can you hear any pushback.

On the customer and then does that impact your ability to further increase the pricing for next year.

Yes, Hey, so just to clarify so I said.

Speaker 4: Yeah, hey, so yeah, hey, just to clarify, so I said, we

Our guidance previously it was three and we're kind of like thinking it's about three 5% or so for the full year, but we wouldn't be surprised if we're in the 4% kind of a range in the second half of the year.

Speaker 4: Our guidance previously was three, and we were kind of like thinking it's about three and a half percent or so for the full year, but we wouldn't be surprised if we're in the four percent kind of a range in the second half of the year. You know, we continue to feel good about our ability to pass on price when we need to when we face these inflationary challenges, and I think we'll continue to do that as market conditions change.

We continue to feel good about our ability to two.

Pass on price when we need to when we when we face these inflationary.

Challenges and I think we'll continue to do that as market conditions change.

Got it.

Speaker 12: Got it. Another question on the 7% growth guidance. Does that change your long-term growth outlook? Like, should we think about like 7% going forward?

Another question on the 7% growth guidance.

Ill change your long term growth outlook like should we think about like 7% going forward.

Speaker 3: Very good question.

Very good question.

Speaker 3: Maybe I start with some backdrop. We believe we have strengthened our competitive position throughout the pandemic and tend to believe that we are coming out of COVID strong.

Maybe I'll start with some backdrop, we believe we have strengthened level competitive position throughout the pandemic and tend to believe that we are coming out of COVID-19 stronger.

Speaker 3: We have a very strong foundation across many businesses. We are market leading positions. We have an excellent product portfolio and a global service network.

We have a very strong foundation across many businesses, we have market leading positions, we have an excellent product portfolio.

Global Service network.

Speaker 3: We are able to adapt our sales and marketing tools and techniques to the new environment. And as a result, we continue to gain share, as we mentioned many times, despite the challenges in these environments.

I think we are able to adapt our sales and marketing tools and techniques to the new environment.

<unk>.

As a result, we continue to gain share as we mention.

And in many times despite the challenge in this in these environments.

Speaker 3: Um, our markets nicely rebounded in 2021 and, uh,

Our markets nicely rebounded in 2021.

Speaker 3: have worked very effectively to capitalize on this growth.

And it worked very effectively to capitalize on this growth.

Speaker 3: Now, looking forward, I still think you should think about us as a mid-single-digit growth on an organic basis in the midterm. That's about the dimension that we also think about it. It, of course, will depend on how the underlying market

Now looking forward.

Still think you should think about those as a mid single digit growth.

On organic basis in the midterm.

That's above the dimension that we also think about it.

Those will depend on how the underlying market.

Speaker 3: If it goes back to where it has been pre-pandemic, I think that's the wide range we are thinking right now. Of course, if there is more momentum in the market, we will, again, our goal is to grow above our underlying market, but I would like you to think still in mid-single digits.

<unk>.

Performs if it goes back to where it has been pre pandemic thing that wide range, we are thinking right now.

Of course, if there's momentum in the market.

Again, our goal is to grow above our underlying markets.

I would like you to think still in the mid single digits.

Got it that's very helpful. Thank you.

Speaker 1: At this time, there are no further questions in queue. I would now like to turn the call back over to Mary Finnegan for any closing remarks.

At this time there are no further questions in queue I would now like to turn the call back over to Mary Finnegan for any closing remarks.

Speaker 2: Thank you, and I just have two additional comments before I let you go for the night First we anticipate holding an investor meeting at our facility in Boston on Monday, November 7th

Thank you Anne.

Two additional comments before I, let you go through the night.

First we anticipate holding an investor meeting at our facility in Boston on Monday November seven we will come back to you with more details in the coming months, but wanted to mention to you know as you plan your calendars for this year.

Speaker 2: We'll come back to you with more details in the coming months, but wanted to mention it to you now as you plan your calendars for this year.

Speaker 2: Hey, second, we are happy to announce that Adam Ullman has recently joined our investor relations team. He was formerly a senior equity research analyst at the Cleveland Research Company.

Second we are happy to announce that Adam Uhlman is it recently joined our Investor Relations team.

He was formerly a senior equity research analyst at the Cleveland Research Company.

Speaker 2: Adam will take over the lead in investor relations later this year as I will retire towards the end of 2022.

Adam will take over the lead in Investor Relations later this year as I will retire towards the end of 2022.

Speaker 2: It's great to have Adam on board, and please join me in welcoming him, and I look forward to introducing him to you in due time. For the time being, please continue to direct your investor relations matters to me. As always, if you have any questions, please don't hesitate to reach out. Take care, everybody. Bye-bye.

Great to have Adam on board and I look forward. Please join me in welcoming him and I look forward to introducing him to you in due time.

For the time being please continue to director of Investor Relations matters to me.

As always if you have any questions. Please don't hesitate to reach out take care everybody Bye bye.

Alright.

Speaker 1: This concludes today's conference call. Thank you for participating. You may now disconnect.

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