Q3 2024 Mettler Toledo International Inc Earnings Call
And noise after the Speakers' remarks, there will be a question and answer session and if you'd like to ask a question. Please press star one I would now like to turn the conference over to Adam Uhlman head of Investor Relations you may begin.
Adam Uhlman: Hey, Thanks, Sarah and good morning, everyone. Thanks for joining us on the call with me today is Patrick Kaltenbach, Our Chief Executive Officer, <unk> <unk>, our Chief Financial Officer, Let me cover some administrative matters. This call is being webcast and is available for replay on our website at <unk> Dot com a copy of the press release and the presentation.
Adam Uhlman: <unk> that we will refer to on today's call is available on our website. This call will include forward looking statements within the meaning of the U S. Securities Act is $19 33 in the U S Securities Exchange Act of $19 34. These statements involve risks uncertainties and other factors that may cause our actual results financial condition.
Performance and achievements to be materially different from those expressed or implied by any forward looking statements for a discussion of these risks and uncertainties. Please see our recent annual report on Form 10-K and quarterly.
Adam Uhlman: Current reports filed with the SEC the company disclaims any obligation or undertaking to provide any updates or revisions to any forward looking statements except as required by law on today's call. We may use non-GAAP financial measures. A reconciliation of these non-GAAP financial measures most directly comparable measure.
Adam Uhlman: <unk>.
Speaker Change: Is provided in the 8-K available on our website, let me now turn the call over to Patrick.
Patrick Kaltenbach: Thanks, Adam and good morning, everyone. We appreciate you joining our call today.
Patrick Kaltenbach: Last night, we reported our third quarter financial results. The details of which are outlined for you on page three of our presentation.
We experienced good growth during the third quarter in our laboratory business had particularly strong growth in service.
Patrick Kaltenbach: While China grew modestly this quarter.
Patrick Kaltenbach: Market conditions remain challenging, particularly in the industrial sector.
Patrick Kaltenbach: We are very pleased with our team's strong execution of our growth and margin expansion initiatives, which supported good earnings growth in the quarter.
Patrick Kaltenbach: We continue to execute very well and will benefit from the prior year shipping delays in the fourth quarter. However, glue.
Speaker Change: Global market conditions remained soft.
Speaker Change: We introduced many exciting innovations as well as next generations of our spinnaker sales and marketing and student drive productivity programs over the past year.
Speaker Change: We also continue to leverage our business diversity and the ability to provide value throughout our customers' value chain to identify and capture growth opportunities and believe we are very well positioned to gain market share and deliver good earnings growth in the future.
Speaker Change: Let me now turn the call over to Sean to cover the financial results and our guidance and then I will come back with some additional commentary on the business and outlook Shawn.
Sean: Thanks, Patrick and good morning, everyone sales in the quarter were $954 $5 million, which represented an increase in local currency and in U S dollars of 1% on.
Sean: On slide number four we show sales growth by region local currency sales grew 1% in Europe declined 1% in the Americas and grew 4% and Asia rest of the world.
Sean: Local currency sales increased 1% in China in the quarter.
Sean: On slide number five we show sales growth by region for the first nine months of the year local currency sales were flat for the first nine months with 4% growth in Europe, 1% growth in the Americas, and a 6% decline in Asia rest of the world.
Sean: Local currency sales decreased 15% in China on a year to date basis.
Sean: As a reminder, our first quarter sales benefited by 6% from recovering delayed product shipments, which is a 2% benefit to our year to date results.
Sean: Excluding this our local currency sales declined 2% on a year to date basis.
Sean: On slide number six we summarized local currency sales growth by product area for.
Sean: For the quarter laboratory sales increased 5% and industrial was flat with core industrial down, 1% and product inspection up 1%.
Sean: Food retail declined 20% in the quarter against significant project activity last year.
Sean: The next slide shows local currency sales growth by product area for the first nine months labs.
Laboratory sales increased 2% and industrial decreased 2% with core industrial down, 4% and product inspection up 1%.
Sean: Food retail decreased 14% on a year to date basis.
Sean: Let me now move to the rest of the P&L, which is summarized on slide number eight.
Sean: Gross margin was 60% an increase of 60 basis points as positive price realization and benefits from our Stern drive program were partially offset by lower volume.
Sean: R&D amounted to $47 1 million in the quarter, which is a 1% increase in local currency over the prior period.
SG&A amounted to $228 8 million a.
Sean: A 5% increase in local currency over the prior year and includes higher variable compensation.
Sean: Adjusted operating profit amounted to $296 6 million in the quarter unchanged from the prior year.
Sean: Adjusted operating margin was 31, 1%, which represents a decrease of 30 basis points over the prior year.
Sean: A couple of final comments on the P&L amortization amounted to $18 2 million in the quarter interest expense was $18 $6 million and other income amounted to $1 9 million.
Sean: Our effective tax rate was 19% in the quarter. This rate is before discrete items and is adjusted for the timing of stock option exercises.
Sean: Fully diluted shares amounted to $21 2 million, which is approximately a 3% decline from the prior year.
Sean: Adjusted EPS for the quarter was $10 21.
Sean: A 4% increase over the prior year.
Sean: On a reported basis in the quarter EPS was $9 96 as.
Sean: As compared to $9 21 in the prior year.
Sean: Reported EPS in the quarter included 20, <unk> of purchased intangible amortization <unk> of restructuring costs and an <unk> <unk> tax benefit from the timing of option exercises.
Sean: The next slide illustrates our year to date results local currency sales were flat for the nine month period adjusted operating income decreased 3%.
Sean: Ore declined 1%, excluding unfavorable foreign currency.
Sean: And our adjusted operating margin contracted 50 basis points.
Sean: Adjusted EPS was flat on a year to date basis and grew 2% excluding unfavorable currency.
Sean: That covers the P&L and let me now comment on adjusted free cash flow, which amounted to $671 million for the first nine months, a 7% increase on a per share basis from the prior year levels due to favorable working capital.
Sean: DSO was 36 days, while IPO was four times.
Sean: Let me now turn to our guidance for the remainder of this year and our initial thoughts on next year.
Sean: As you review our guidance please keep in mind the following factors.
Sean: Market conditions remained soft, especially in China.
Sean: While we are not seeing a negative change in market conditions. We're also not seeing a significant improvement.
Sean: Secondly, while there is uncertainty in our core markets the global economy, and geopolitics, we expect market conditions to gradually improve throughout 2025. We also expect to continue to benefit from trends customer trends in automation digitalization and on and near shoring.
Sean: Third we assume foreign currency at current rates.
Sean: And finally, please keep in mind that our third party logistics provider delays negatively impacted our Q4 results last year by $58 million.
Sean: Nearly all of which was recovered in our first quarter sales results. This year.
Sean: This will benefit our Q4 2024 sales growth by approximately 6%.
Sean: And we will reduce our sales growth in 2025 by one 5%.
Sean: This also negatively impacts our margin expansion in 2025.
Sean: Now turning to our guidance for the fourth quarter of 2024, we expect local currency sales to grow by approximately 8%.
Sean: This includes an expected benefit of approximately 6% from the prior year shipping delays.
Sean: We expect adjusted EPS to be in the range of $11 63.
Sean: To $11 78.
Sean: Currency for the quarter at recent spot rates would be neutral to fourth quarter sales and adjusted EPS.
Sean: For the full year 2020 for our local currency sales growth forecast is unchanged at approximately 2% or down 1%. Excluding the previously mentioned shipping delays.
Sean: We expect full year adjusted EPS to be in the range of $40 35.
Sean: The $40 50.
Sean: Up 15 on the low end of our prior guidance range of.
Sean: Free cash flow and share repurchases for 2024 are expected to be approximately $850 million.
Sean: We have also provided our initial guidance for 2025 and based on our assessment of market conditions. Today, we would expect local currency sales to increase approximately 3%, which includes the previously mentioned headwind to full year sales growth of one 5% from the shipping delays that benefited 2020.
Sean: For <unk>.
Adjusted EPS is forecast to be in the range of $41 85.
Sean: To $42 50.
Sean: Which represents a growth rate of 4% to 5% at.
Sean: At recent spot rates foreign currency foreign exchange.
Sean: Is estimated to be a slight headwind to adjusted EPS growth.
Sean: Lastly, I would like to share a few other details on our 2025 guidance to help you as you update your models, we expect total amortization, including purchased intangible amortization to be approximately $75 million.
Sean: Purchased intangible amortization is excluded from adjusted EPS and is estimated at $24 $8 million on a pre tax basis or <unk> 92 per share.
Sean: Interest expense is forecast at $82 million for the year and other income is estimated at approximately $2 million.
Sean: We expect our tax rate before discrete items will remain at 19% in 2025.
Sean: Free cash flow is forecast at approximately $860 million in 2025 and share repurchases are expected to be approximately $875 million.
That's it from my side and I'll now turn it back to Patrick.
Patrick Kaltenbach: Thanks, Shawn let me start with some comments on our operating businesses, starting this lap which grew approximately 5% compared to last year.
Patrick Kaltenbach: We had good growth across most of the portfolio and regions and continued to benefit from a more robust offering and recent innovations as well as our initiatives to accelerate growth in service and consumables.
Patrick Kaltenbach: Former customer activity has been mixed but improving at a low pace.
Patrick Kaltenbach: Our process analytics business returned to solid growth this quarter.
Patrick Kaltenbach: return to solid growth this quarter as our bioproduction customers have finished de-stocking excess inventories.
Unknown Speaker
Speaker Change: To expand our already broad portfolio of instruments we offer to our laboratory customers, we recently launched a new stain-free automated cell counter and a new microblade reader to help our customers in R&D and QAQC labs.
Speaker Change: These new products add further to the long list of innovations we have brought to the market in recent years and expand our technology leadership.
Speaker Change: Shifting now to our industrial business, sales for the quarter were flat and slightly lower than expected, primarily due to market headwinds in China.
Speaker Change: Our co-industrial sales declined 1%, reflecting sluggish market conditions across most industries.
Speaker Change: Our team remains active in leveraging Spinnaker to identify and capture the most attractive market opportunities in core industrial, which has reduced our sensitivity to the economy, although we are not immune.
Speaker Change: Additionally, we have further enhanced our portfolio and have expanded our line of weighing terminals that feature integrated software solutions leveraging advanced algorithms.
Speaker Change: These new terminals provide process automation control for many different filling and dosing workflows, seamlessly integrating into customer systems.
Speaker Change: Lastly, shifting to our food retail business. As I mentioned earlier, our food retail sales declined against a very significant project related growth in the prior year.
Now let me make some additional commands by geography.
Thank you.
Speaker Change: Starting in the Americas, our sales declined 1% in the quarter.
Speaker Change: We had good growth across our lab portfolio with farmer customers, while food retail declined against very significant growth in the prior year.
Speaker Change: Core industrial sales declined slightly as demand for automation-related solutions was offset by lower demand in other areas.
Speaker Change: Sales in Europe grew 1% in quarter and included growth both from laboratory and core industrial, benefiting from modest growth from pharma customers while food manufacturing remains soft.
Speaker Change: Our teams in Europe continue to execute well despite challenging economic conditions across the region.
Speaker Change: And finally, our Asia REST for World results this quarter were in line with our expectations.
Speaker Change: Our China operations returned to sales growth in the quarter due to easier comparisons and strong execution of our sales team, but underlying demand remains soft due to weak economic growth and excess capacity in certain industries.
Speaker Change: Our teams across Asia continue to execute very well on driving sales and market share growth.
Speaker Change: Targeting growth in emerging markets such as Southeast Asia and India remain an important element of a long-term growth strategy.
Speaker Change: While we have reinforced our unique go-to-market strategies with the launch of the next wave of Spinnaker.
Speaker Change: In 2025, we will make additional targeted investment in these areas to further extend our market leadership and strengthen our competitive advantages.
Speaker Change: An important element of our growth algorithm is gaining market share in our highly fragmented markets and pursuing growth opportunities in faster growing market segments.
Speaker Change: Spinnaker helps us identify these new growth opportunities and guides our sales force to ensure we maximize our potential.
Speaker Change: We continue to see significant market trends and opportunities related to the localization of strategically important technologies, investments to develop new energy solutions for the future, and efforts to increase resilience in supply chains around the world.
Speaker Change: At the same time, customers continue to seek productivity and insights through automation and digitalization.
Speaker Change: Spinnaker encompasses our lead generation programs with existing customers, and it houses our Top K program to identify growth opportunities with potential new customers.
Speaker Change: TopK uses proprietary data analytics on our internal big data warehouse and external data sources to identify and pursue opportunities.
Speaker Change: Our teams are expanding our capabilities in this area to automate more of the qualification processes and accelerating the rate that we can generate tailored and actionable investment alerts for our field sales force.
Speaker Change: This program has been very important in driving lead growth with new customers this year, and our team remains focused on expanding our data sets and adding sophisticated analytics and automation to enhance this program in 2025.
Speaker Change: Another important driver for our long-term growth is to accelerate the growth of our service business.
Speaker Change: As a reminder, ServiceRip is approximately 25% of our sales. It has grown 7% on a year-to-date basis in local currencies.
Speaker Change: which includes very strong growth of 9% in the third quarter.
Speaker Change: Service will continue to be an important growth driver in the future.
Speaker Change: Service is a key part of our solutions offering and is a very important competitive advantage as we support our customers' ability to maintain uptime, improve productivity, and comply with regulatory requirements.
Speaker Change: We believe we have the largest service network amongst our direct competitors with over 3,000 technicians delivering a very professional and consistent service experience to customers throughout the world.
Speaker Change: Our Customer Satisfaction Ratings for our Service Business and our Net Promoter Scores are excellent and are at record high levels.
Speaker Change: We aim to grow our service business faster than the company average over the medium term and are making dedicated investments in field technicians, in telesales and data analytics resources to support our growth aspirations.
Unknown Speaker 00.00.00
Speaker Change: Additionally, we continue to benefit from our actions to improve the productivity of our service organization and increase its capacity to serve customers.
Speaker Change: including leveraging new software capabilities to estimate service durations, semi-automated scheduling of service visits, and utilizing expanded call triage capabilities to resolve service requests remotely and reduce trips to our customer locations.
Speaker Change: We are also expanding the use of sophisticated data analytics and automation technologies to increase the effectiveness of our dedicated service sales team.
Speaker Change: Our largest opportunity is servicing a greater proportion of our install base, which approximates $3 billion of potential service revenue.
Speaker Change: Today, we have penetrated about one third of this opportunity, and given the vast amount of data we possess about it, like when an instrument was sold, who's using it, in what application it's being used, we can create targeted sales campaigns to service them specifically tailored to their needs based on our data.
This will help further expand our coverage.
Speaker Change: Service contracts help ensure that the measurements from our precision instruments are reliable and also help prevent costly downtime.
Speaker Change: We have maintained our focus on selling more service packages at the point of new product sale. Over the years, we have made important enhancements and differentiation to service levels of prepaid contracts to meet the varying needs of our customers.
Speaker Change: We have also enhanced our portfolio of services over the years with solutions like our RapidCal tank scale calibration service.
Speaker Change: Regular calibration of tank scales is required across industries such as pharma and chemical to ensure measurements are accurate and reliable.
I will wrap up the CALD service.
Speaker Change: can calibrate these scales three times faster than traditional methods and also does not require a tank to be emptied, cleaned, and filled with expensive ultrapure water that would need to be discharged afterwards.
Speaker Change: So it is not only faster, but also much more efficient and environmentally friendly.
They've also enhanced
Speaker Change: Our offering of certified calibration certificates to ensure compliance with regulations and avoid cost of inaccurate measurements.
Speaker Change: Our calibration services are highly differentiated from the competition and include our comprehensive and audit-proof electronic documentation that adheres to the highest standards, to the highest industry standards.
Speaker Change: So, that is a brief overview of the efforts we have on the way to accelerate our growth by reinforcing our unique go-to-market approaches with Spinnaker.
Speaker Change: Identifying and capturing growth opportunities with new customers and growth industries and accelerating the growth rate of our service business.
Speaker Change: We expect our focused execution on these initiatives will continue to deliver very tangible benefits over the next year and beyond.
Speaker Change: Now this concludes our prepared remarks. Operator, I'd now like to open the line to questions.
Speaker Change: Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Please ensure that your phone is not on mute when called upon. Thank you. Your first question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.
Speaker Change: Hi guys, good morning and thanks for taking my question. Patrick, maybe my first one for you on the Fiscal 25 assumptions here. At the X, the 150 basis points had when the underlying mid-singles, it's in line with the peers.
Speaker Change: What are you assuming for labs versus industrials? And I think your comments on services was helpful. Is services still expected to grow in mid-singles plus high singles in fiscal 25?
Speaker Change: Yes, so let me start with the last part of the question and I'll let Sean walk you through the details on the growth expectations of different segments.
Speaker Change: So services, yes, we expect to continue to grow above company average. So we expect it to continue to meet to high single grid digits.
next year.
Speaker Change: As I said in my prepared remarks here, we are investing quite heavily in our service business, not only in expanding our service portfolio, but also strengthening our telesales team, leveraging more data to each to install base.
Speaker Change: and tapping into that install base that we don't cover yet today is a significant growth opportunity for us in the future.
Speaker Change: Bajorn, will you walk Vijay through the details of the segmentation? Yeah, hi Vijay. Hey, maybe I'll just walk you through the different assumptions for 2025 and
Speaker Change: And I'll do it on a reported basis, but I'll also do it adjusting for the headwinds on the shipping delays just so that that's clear.
Speaker Change: So our lab business, we're assuming will grow low to mid-single digit on a reported basis, but will grow mid to high-single digit, excluding the headwind of the shipping delays.
Speaker Change: Our core industrial business and our product inspection businesses are both estimated to grow low single digit on both the reported and an adjusted basis.
Speaker Change: and that would be the same for our, obviously, our total industrial business. And then our retail business is expected to be flat next year or up low single digit adjusted for the shipping delays.
Speaker Change: And then I'll give you the regions too, since we're doing it. America is on a reported basis is expected to grow low to mid single digit and on an adjusted basis for the shipping delays that would grow mid single digit. Our European business.
Speaker Change: is expected to grow low single-digit on a reported basis and adjusted for the shipping delays, it would grow mid-single-digit. And then China is expected to grow low single-digit on both a reported and adjusted basis.
Speaker Change: That's helpful, Sean, and maybe one on that margins here, EPS guidance. I know you guys start typically conservative. What are you assuming for operating margin expansion for fiscal 25 and our service margins about corporate?
Speaker Change: is expected to be flattish to this year, maybe up slightly.
Speaker Change: You know, our service business, yeah, it does have a margin above the corporate average.
Speaker Change: But hey, maybe I use this as an opportunity to talk about maybe some of the optics about the shipping delays on earnings because I can imagine that's a challenge to try to understand the guidance.
Speaker Change: So we talked about the first optic, which is on sales, and then from a sales perspective, it's a one and a half percent headwind. I think that's pretty well understood. So our organic sales growth.
Speaker Change: for 2025 is expected to be 4.5% adjusted for the timing of the shipping delays.
Speaker Change: But there's also a very meaningful impact on on our EPS growth as well in our margin expansion and since especially since most of our products
Speaker Change: are, that were affected or in our lab business, which are at above
Average Margins
Speaker Change: And you can kind of see this, like, if you think about
Speaker Change: The Operating Profit Margin Compression in Q4 of last year and the Operating Margin Expansion in our Q4 Guidance of this year. If you look at our Q4 Guidance of this year, it implies an Operating Margin Expansion over last year of about 320 basis points.
Speaker Change: or so. And directionally, we're going to see something, you know, we're not going to give out details at this time for Q1, but directionally, you're going to see something similar in terms of margin compression in Q1.
Speaker Change: of 2025. And then, you know, after that, we should get back to more normal cadence.
Speaker Change: And if you think about it, it kind of makes sense if you think about our overall gross margin percentage and the related incrementals associated with timing shifts.
Speaker Change: because, you know, they're going to be a little bit higher because of the nature of our fixed cost structure.
Speaker Change: But we also wanted to communicate if we didn't have this effect of these shipping delays.
Speaker Change: Our EPS growth guidance would be more in line with our typical relationship between sales growth and EPS growth. And you know, we've estimated probably be about 4% higher.
to our EPS guidance.
And then we also have a couple of other.
you know, additional items. You know, the first is
Unknown Executive, Adam Uhlman
are slightly unfavorable.
Speaker Change: to EPS at the moment too, and we mentioned that in the script.
Speaker Change: But when we step back from all that, the other message we wanted to make sure we could communicate today, too, is that, you know, we still have a lot of very exciting opportunities to invest in the business, and we're not going to slow down.
These investments just because of the optics.
Speaker Change: of the shipping delay to our sales growth, and I think that's important because I think we have a lot of good things in the pipeline that we're investing in.
Speaker Change: and also just to remain, you know, the other thing we wanted to communicate is that, you know, we do remain very confident about our ability to grow earnings and expand margins going forward, you know, in accordance with our medium to long term guidance.
Understood. Thanks, guys.
Speaker Change: The next question comes from Matt Sykes with Goldman Sachs. Your line is open.
Speaker Change: Hi, good morning. Thanks for taking my questions. Patrick, maybe just first on services. You guys gave a lot of great color.
Speaker Change: Your prepared comments. One thing I'm just curious about, and understanding that margins are already above corporate average, just curious about the level of operating leverage you can extract from services, understanding the
Speaker Change: 3,000 technicians you already have. It sounds like you're willing to make more investments in that. I'm just wondering on the technology and automation side, how much of that can offset maybe increased hiring to create operating leverage in the services business margin?
Speaker Change: Yeah, thanks, Matt. That's a great question. And of course, we continuously also can improve the effectiveness of our service team. I mentioned a little bit in the call that we're using special software capabilities, including deep learning algorithms to understand
Speaker Change: how we can most effectively schedule services and and also with that drive up efficiency of our technicians in the field. We make continuous improvements.
Speaker Change: along this via one of our platform which has recently also launched a new service template that takes care of that to make sure that we
Most Effectively Useable Service Technicians.
Speaker Change: Yeah, of course also changing more and more of our future product portfolio with more remote service capabilities and And with that driving more efficiency of the service team as well
Speaker Change: But that said, I mean, we still will expand to probably headcount in service as well, not only on the technician side.
Speaker Change: But also making sure that we have enough support to drive marketing campaigns and lead generation for services out there. I talked a little bit about
Speaker Change: Untapped opportunity of of of instruments that we happen to feel that we don't service today. We have information again, as I said,
Speaker Change: when they have been bought, where they are, what application they are used.
Speaker Change: for and we are now getting back to these customers, reaching out to them and offering new and broader service portfolio.
Speaker Change: and to service these instruments and these solutions will require also more.
Speaker Change: and more technicians in the future. I think it's a great growth opportunity, I think it's something that leads to strong customer satisfaction. Our net promoter scores and services are outstanding, customers love our service.
Unknown Executive, Adam Uhlman
Unknown Executive, Adam Uhlman
Smart Software Solutions, Deep Learning Algorithms, and Data Scientists.
in Ecuba as well.
using in the future also more knowledge.
management tools to understand, really.
Speaker Change: How we can more efficiently drive the information to service engineers, that we can reduce, you know, dual visits to customers, etc. Making sure that they have all the right information when they get to customers, etc. To make sure they can, we can increase and maximize first-time fixes, etc. So there's a lot of opportunities.
Speaker Change: And that's why we are continuing to invest in this and we'll see in the next years to come also nice growth from this business.
Speaker Change: Great, thanks for that caller, Patrick. And then just on China, understanding your guidance for next year for low single-digit growth, just curious, how much stimulus impact are you kind of assuming?
Speaker Change: in that growth rate. And then just more longer term, you know, have you changed your assumptions on longer term China growth as it faces your business? Just just curious to see if that's been adjusted. I know there's a lot of different potential headwinds that could come in, but just curious about how your framing of that growth has changed.
Yeah, excellent. Yes.
Speaker Change: look forward for next year in a question regarding the stimulus. So if you have not factored,
Speaker Change: Anything regarding stimulus in our forecast of low single digit for next year?
Speaker Change: As you probably also have heard from some of our competitors, it is pretty unclear yet when the stimulus will really gain traction, so we take a more cautious approach here when we forecast a growth for next year.
Speaker Change: can apply for the stimulus that is out there, but I don't think it will have a meaningful impact this year, and we also have not factored anything yet in for next year.
Speaker Change: and that's that basically brings us into the low single-digit growth model for next year, long, mid and long term.
Speaker Change: We think there's still a very good potential for us in China, we have not changed our long-term outlook of
or High Single-Digit Growth in China.
Speaker Change: We have a great team in China that works very closely with our customers to develop solutions for the Chinese market and it also makes us compete very effectively against local players.
Speaker Change: So I think we have a great opportunity to continue to drive market share and participate in the underlying growth, but on top of that, gain market share. That's why we have not changed the long-term model for China.
Thank you very much.
Speaker Change: The next question comes from Dan Arias with Stiefel. Your line is open.
Speaker Change: Morning guys, thanks for the questions here. Sean or Patrick, maybe just another one on the Outlook for 25. Obviously a lot of moving parts out there.
Speaker Change: Where, as you sit today, do you see the biggest sources of variability when it comes to what could have you better or worse than the initial outlook? Obviously, China is a big one, so I get that.
Speaker Change: But if there's more to add there, then by all means, but beyond China, I'm just kind of interested in where you see the error bars as being the widest when it comes to just the businesses or the key regions that you that you have.
Speaker Change: Yeah, hey, Dan, this is Sean. I'll take that. I mean, I think you said it. I mean, China, we've always said in the past, things can move relatively fast and quickly in either direction, and I'm sure it will continue to.
Speaker Change: You know, have zigs and zags along the way. So we certainly see upside to the guidance in China. But, you know, who knows how things develop here over the next year.
Unknown Speaker . . . . . . .
Speaker Change: you know, other other swing factors. I mean, of course, our end markets are a big part of that, you know, when do companies really get back to
Speaker Change: Unknown Speaker Moving forward with a lot of projects that have been on the sidelines recently. I think you guys all know where our core secular exposures are, but it really, you know, you kind of quickly just get into things outside of our control, whether it's market conditions, macro.
Speaker Change: Geopolitics, those types of things. But in terms of what we can control, you know, we feel we feel very good about that, you know, the teams just continue to execute really well. Patrick and I were just
Speaker Change: On our world trip recently and it's always really engaging and energizing for the two of us to be with all of our teams around the world.
Speaker Change: Okay, and then maybe on margins, a good portion of the portfolio has been refreshed, I believe at this point. And I think the idea for you is to replace products with those that have better margins. So is that something that you think can be meaningful when it comes to overall profitability next year?
Speaker Change: You know, I think, I mean, no individual product, you know, launch, you know, moves the needle for us, but we have had a very good cadence recently. It's definitely helps. I think you see it in our margin expansion this year. And, but I just, I just kind of view that as part of the, the overall
Speaker Change: One of the ingredients of many that drives our overall margin expansion, but definitely something we're mindful of, you know, for sure. And I think even more importantly, the new products are very well
Speaker Change: Received in the marketplace and that drives our value proposition and ultimately a customer's willingness to pay So it certainly helps us with our pricing in the market as well, too
Okay, thanks very much.
Speaker Change: The next question comes from Dan Leonard with UBS. Your line is open.
Thanks for the time.
Speaker Change: I have a question about a potential change in the tariff environment. How are you preparing for any change and is there anything different about your business today versus the 2018-2019 time frame when tariffs were a topic?
Speaker Change: Yeah, good, good question. And yes, as you also point back to 2018-19, we definitely had really successfully navigated tariffs in the past as well. I mean, what has changed since then for us, number one is
Speaker Change: We, of course, have also continued to really expand our production footprint worldwide and expand, for example, our Mexico production to supply the U.S.
Speaker Change: and providing us a little bit more manufacturing flexibility. So we have also started already over the last two years.
Speaker Change: building some redundant manufacturing lines in that we had initially only in China, now also in Mexico. But we have more flexibility as we have really global manufacturing footprint. China, Mexico are not the only footprints we have.
Speaker Change: If there's more headwinds or changes out there which we continuously monitor, we will of course tap into that opportunity to, as needed, then adjust our manufacturing footprint if that is needed, I think. We have a unique advantage with our global supply chain and we just definitely continue to fully leverage that.
Speaker Change: I think we have definitely made the right steps to start early on de-risking the setup that we had with the bigger footprint in China and making sure we have enough redundancies.
Speaker Change: that will continue to do so, and I think it will actually, in that regard, I think we are still, of course, exposed to tariffs, but we are pretty, I think they're pretty good prepared to react on those.
Speaker Change: Appreciate that. And then a quick follow up, Patrick, you mentioned that in speaking to your process analytics business that destocking is fully behind you at this point.
Speaker Change: What does the growth rate of that business then look like in the absence of de-stocking? Is it back to traditional long-term growth rates or is it something different?
Speaker Change: Yeah, we actually are extremely happy to see that, you know, the momentum in our product analytics business really has picked up.
Speaker Change: It's a clear sign that de-stocking is behind us. It's not only the size.
Speaker Change: of the orders received. It's also the frequency of the orders received that really tells us that customers are back to normal operation.
Speaker Change: I think also with the launches of new products that we had over the last years, we are well positioned to maintain our strong market position there. And in terms of the growth rate, John, do we have the growth rate for the last quarter for
for Pro-European Peace.
Speaker Change: Unknown Speaker We do not give out specific numbers, but I would say within our lab portfolio, we had good growth throughout the portfolio. But we had very, very strong growth. I think it was double digit and product process analytics. And we and by the way, we also had really good growth and analytical instruments.
Okay, thank you.
Speaker Change: The next question comes from Jack Meehan with Nefron Research. Your line is open.
Thank you. Good morning.
Speaker Change: I'm going to ask a little bit about the assumptions on the fourth quarter guide. I was just doing some simple math, I think.
The revenue forecast implies something like 6% growth sequentially.
Speaker Change: I was just benchmarking, you know, looking back, I think it was more something more like a little over 10%. So we're just curious, like, if you look sequentially, you know, like why you were building in a little bit more conservatism than we've seen previously.
Speaker Change: I'm sorry, Jack, can you can you repeat it? I didn't pick it up. Yeah.
Unknown Speaker 1
Speaker Change: Just looking at the ramp from the third quarter to the fourth quarter on total sales, I think it's about 6% sequential growth is what your guide implies. In the past, it's been a little bit over 10%. Just why you're embedding a little bit more conservative. Sorry, thanks. Yeah, yeah, yeah, yeah. So yeah, hey, I understand the question. I, yeah, I think it might might be even closer to 7% sequential, but I understand it. Yeah, hey, we're a little bit more cautious right now. You know, I think China's a big part of it. You know, on the end on market conditions in general, but
Speaker Change: but particularly China. I think if you kind of dig into the sequentials, you'll see China is the one that is more on the stand out there.
Speaker Change: And yeah, and hey, I was a little distracted because I was just looking at the notes on this process analytics thing. We grew double digit in Europe and in the U.S., but we grew high single digit globally.
Speaker Change: And then maybe just to follow up on again, like kind of the third quarter to fourth quarter dynamic. Can you just remind us like
Speaker Change: What you've historically seen as it pertains to a budget flush, like, I know some companies have more, you know, it's a little bit more dynamic. But if you just talk about what you're expecting in that regard, and
Speaker Change: I think there's going to be some, we're not counting on a full flush. I mean, and I think you can see it with your first question, right? I think a typical, like,
Speaker Change: 5 or 10 year average of sequentials from Q3 to Q4 is more in the 10% kind of a range So you can tell we're not counting on a full flush, but I think part of that's also related to
Speaker Change: to China. I mean, you know, we hear mixed things from when talking to the our teams. I mean, there's definitely a lot of activity, we definitely see some some positive things out there. But but there's also things that are still delayed, you know, and so it's, it's a little bit on, you know, which which customer you're talking to sometimes.
here.
Sounds good. Thank you, Sean. Yeah, you're welcome.
Speaker Change: The next question comes from Rachel Vansdell with J.P. Morgan. Your line is open.
Rachel Vansdell: Great. Good morning. Thanks for taking the questions. I wanted to follow up on some of the China comments, but really more focused on the near-term trends. So you mentioned that China returned to growth this quarter. You also highlighted that there's some excess capacity in some of the markets and pressures in industrial as well.
Rachel Vansdell: So can you just unpack that for us a little bit more and then Sean, you just mentioned on Jack's question that in terms of that 3Q to 4Q sequential ramp, some of that is pressured by China. So can you just walk us through what are your China assumptions into 4Q as well?
Rachel Vansdell: Yeah, sure. Maybe I'll start and I'll let Patrick kind of
Speaker Change: Pick it up. So, so, you know, so what, you know, a couple positives, one overall, we did return to growth. I mean, we've been going through a period in China now of very significant decreases. There's been kind of this resetting, if you will, over the last
Speaker Change: for quarter. So it was nice to see modest growth in the quarter. We did have a low single digit growth in the lab business and then we had a low single digit decline on the industrial business.
Speaker Change: In fairness to the industrial business, the lab had an easier comparison. I mean, our lab business kind of started to downturn a lot more than on the industrial side. And you could argue the industrials then held up pretty resiliently in spite of a very challenging
Market Situation Overall, so low single digit is.
Speaker Change: is, you know, relative to market conditions, I think shows how well the team still continues to execute there. And Patrick and I were just there recently, and the industrial team was sharing with us a lot of the innovations that they've come out with also on the laboratory side. And it's just
Speaker Change: It's really kind of neat to see the breadth of the things that they're doing locally and, and, and bringing to the market in terms of
in terms of how we're thinking about China for
Unknown Executive, Adam Uhlman
Speaker Change: is mid-single-digit growth, and if you exclude the impact of this shipping delay benefit, it's going to be more like low-single-digit growth in the fourth quarter.
Speaker Change: And on a reported basis, that will kind of translate into more like low double digit growth on the laboratory side, acknowledging that they're, they're, they're lapping, you know, still an easy comparison there. And then on the industrial side, it would, you know, we're expecting it to be down.
Unknown Executive, Adam Uhlman
Speaker Change: Thanks, Sean. If I may add, in terms of the question regarding and unpacking the growth areas in China, I think we are seeing
Speaker Change: better recoveries in pharma and in process analytics, also in some of the special chemistry spaces in China. That's recovering well. Again, also there we have tea stocking behind us.
Speaker Change: The area where we still are not yet in the same recovery mode is industrial automation.
Speaker Change: Part of that is also linked to areas that have seen exceptional growth over the last two years, like, for example, the battery segment in China.
Speaker Change: And that's truly that's a capacity issue. I mean, they are sitting on a lot of overcapacity, so they are not at the moment not investing in additional capacity expansion and automation solution. And that's pulling some of our growth rates in China down on this industrial automation.
Speaker Change: Great, that's all helpful. And then just as my follow up, could you walk us through those four key assumptions by segment and geography in terms of what you're doing, including and excluding the comp? Perfect. Thanks, guys.
Speaker Change: Yeah, absolutely. I'm going to start with the talk with labs. So on a
Speaker Change: As like I did before for 2025, I'll give you the reported number and then I'll give you the adjusted number for the shipping delay from last year. So on a reported basis, we expect lab to be up low double digit and on an adjusted basis for the shipping delay up mid single digit.
Speaker Change: The core industrial business, we expect to be up low single digit on a reported basis and down slightly low single digit on a adjusted basis for the shipping delay.
Speaker Change: For product inspection, we expect both to be up high single-digit, so that would translate into a total industrial growth of mid-single-digit on a reported basis and up low single-digit on an adjusted basis.
Speaker Change: and then retail would be down about 10% on a reported basis and down high teens on an adjusted basis.
Speaker Change: And then, as we look at the geographies, we estimate Americas will be up low to mid-single digit on a reported basis and flattish on an adjusted basis.
Speaker Change: Uh, Europe would be up low double digit on a reported basis.
and up low single digit on a adjusted basis.
Speaker Change: And then China, we already mentioned, would be up mid-single digit on a reported basis and then up low-single digit on an adjusted basis for the shipping delay.
Speaker Change: The next question comes from Josh Waldman with Cleveland Research. Your line is open.
Speaker Change: Hey, morning. Thanks for taking my questions. Patrick, it seems like you've made more of a point to talk on share gains over the last couple quarters. Do you think you're seeing improvement and momentum here? And if so, is it more a function of a change in the competitive landscape or maybe the environment from
Speaker Change: You know, say a customer preference or anything like that, or is it more just building momentum on some of the internal service and sales efforts?
Patrick Kaltenbach: Yeah, I think it's a bit of both. Josh, thanks for the question. I mean, what we're seeing is that the products that we have launched in the different categories compete extremely well. Of course, we're also looking also at growth numbers.
Unknown Executive, Adam Uhlman
Patrick Kaltenbach: in the last couple of quarters and see that we are doing really well, despite the low growth environment, we are still, you know, outgoing these competitors in many areas.
Patrick Kaltenbach: in the markets that we serve are very stable, that our products are being well received by our customers and our teams.
Speaker Change: Thank you so much for joining us today, and we hope that our sales teams are really able to compete with this portfolio very effectively. That's also part of the feedback we, Sean and I, got when we did our budget tour and talked to the market organizations worldwide. Actually they are very happy with the results.
Speaker Change: the products, the latest releases that we have in different categories, whether it's lab, whether, for example, also product inspection.
Speaker Change: They can compete effectively with these new products that we have launched and in some areas we even went into market segments that we didn't serve before, if you think about
Speaker Change: Product Inspection Business, where we have launched a number of mid-range products, we call them, so it's a more mid-range product level. We historically have been always the market leader and still are the market leader in the high-end segment.
Speaker Change: with this new portfolio, we can really also tap deeper into the mid-range product portfolio. And that's going very nicely for us. We have launched several x-ray products and that is what we're going to do. Thank you.
Speaker Change: helping us winning in the midrange, but also opening more doors and helping us to upsell some of this product portfolio.
Speaker Change: So it's again, it's a blend together with the strong go to market strategies that we have.
Top Can Spinning a Portfolio to Identify These Customers.
to prepare the right materials for the sales team and
Speaker Change: and get them in touch with these accounts and qualify the accounts and bring our portfolio and top of mind of these new customers. I think that's a differentiation and that's that's really the combination of a strong innovative product portfolio of the right sales tools to also get in front of the customers also new customers that we don't serve today is the winning recipe also moving forward.
Speaker Change: Got it. And then Patrick, can you talk a bit more on the trend you're seeing within the pharma market? I think you
commented strength on strength in the U.S. and Europe.
Speaker Change: Does that more benefit the process analytics and pipettes, or are you seeing improvement in instruments and then...
Speaker Change: you know, based on what you're seeing from these accounts, kind of real time and where you expect to end the year, do you think we're on a path back to kind of normalized longer term growth in 25 from these accounts? Unknown Speaker
Better sales engagement, better momentum in some of some accounts.
Speaker Change: Still prolonged sales cycles, to be honest. I mean, there are customers out there who want to upgrade their portfolio. We see the benefit of all new products, but it still takes them longer to get them through the internal approval cycles. But I'm quite optimistic that also that will, in the, let's say, quarters to come, will get back to more normal levels.
Look, I mean
Speaker Change: 70-80% of our business is replacement business and that has been tuned down for almost 2 years now.
Speaker Change: that also means moving forward. There is one point in time when the budgets will be released, there is a catch-up that we can capture. That's why we are also really focusing so much on innovation and having the best updated portfolio out there to capture this wave when these budgets are released.
Got it. Okay. Thank you.
Speaker Change: The next question comes from Patrick Donnelly with Citi. Your line is open.
Patrick Donnelly: Hey guys, thank you for taking the questions. Sean, I wanted to drill a little more into the margins, you know, certainly get the moving pieces on 25. It sounds like, you know, flat for 25, mainly due to the
Unknown Executive, Adam Uhlman
Patrick Donnelly: I guess, what are the key levers going forward off of this?
Speaker Change: Are the China headwinds maybe weighing on things a little bit? Can you talk about the China margins? Just just trying to dive into the margin piece, some of that logistics. Yeah, sure. Sure. Thank you. Yeah, sure. I understand the question, Patrick. I mean, so if you look at 24, our operating profit margin is expected to expand in the 50 basis point kind of range. You're right. If you exclude.
Speaker Change: Unknown Speaker The shipping delay, that probably would have been down a little bit. You know, it's kind of the same as you kind of like look at the sales growth, right, the sales would have been, I mean, we need to acknowledge volumes are still down, you know, so you would just if you adjust for the shipping delay.
So,
Speaker Change: So our what's our guidance 2% and if you exclude the three or minus one and then if you exclude pricing volumes down
Speaker Change: down 3%. So there's there's a reality there. But I think if you kind of look back,
Speaker Change: you know, if you're just like looking at the last couple years, I think you're looking at a period where where there hasn't been volume growth, you know, and and that but that's after a period where there was exceptional volume growth. And so I think you need to go back if you really want to do a look back, I go back to like, you know, 2019 pre COVID and our margins have expanded.
Speaker Change: You know they were at that time they were under 26% so we've had tremendous margin expansion still over this time It just wasn't quite a straight line
Speaker Change: Now, as we kind of look forward, we still remain very confident, as I mentioned earlier in the Q&A. And, you know, why do we remain confident? Like all the things that we have at our...
at our disposal to increase margins are still very.
Speaker Change: have a lot of runway to them. You know, it starts with growing the business. We have a lot of opportunities there. We still serve very highly fragmented markets. We've been investing a lot on innovation. We just launched a new generation of spinners or six, so we have plenty of opportunities. These are six.
expand
Speaker Change: Sales going forward and then we talked about service today. Second is pricing, you know, pricing has been and will continue to be a key lever. We have a lot of very innovative things within the program. We have
Speaker Change: very sophisticated analytics, we have very sophisticated tools, we have a
Speaker Change: Teams all around the world working together with our market organizations and as well as our product Organizations to optimize price. We have some pretty sophisticated things also in terms of our ability to provide pricing Recommendations and all this has been also supported well by by our R&D pipeline, which is continuing to increase the value propositions of our products
and then Stern Drive, we
Speaker Change: We talked about it earlier this year about launching the latest generation and wave of Stern Drive, which is about how do we improve efficiencies in the organization, primarily targeting our supply chain as well as reducing costs.
Speaker Change: Lots of very interesting things in that program, still have many innings to go in terms of the runway.
Speaker Change: There are also a lot of new technologies that we're able to take advantage of in our manufacturing setup to be more productive. And then on the last call, we talked about Blue Ocean, and that was also a little intentional to remind people of the power of Blue Ocean. And there's a lot of things that Blue Ocean gives us in terms of
Speaker Change: Foundation and an enabler for a lot of the programs we do but it also helps us drive productivity whether it's through the ability to automate processes
Speaker Change: and Leveraged Shared Service Centers, but also providing better insights to make better decisions in the business through more advanced analytics.
Speaker Change: That's really helpful. Anything on the China margins, quickly, if you don't mind?
Speaker Change: You know, China, I think China is at above corporate average margin. So it's been it's been a bit of a headwind to our overall margin over the last year. But, you know, but you know, it's nice to see that we started to turn the corner there on growth and going forward.
So, but, but nothing, nothing particular within China.
Speaker Change: You know, we we've addressed productivity issues there with the with the volume decrease. The team's been very focused on.
Speaker Change: acknowledging that and but we also feel like we have a very strong organization that executes well and is prepared for the future and and I'd say our Chinese team is certainly one of the leaders in our company when it comes to
Speaker Change: That's really helpful. Thanks, Sean. And then Patrick, just quickly on the industrial side, it sounds like China obviously weighing on things. Can you just talk industrial broadly? Is it mainly China that's the issue? And what the kind of what you're seeing on that front from customers would be helpful? Thank you guys. Yeah. Yeah, good question. Look, I mean, China is definitely a factor, as I said, but it's also in the US and Europe that we have seen a slower market in the last quarter. Some of the areas,
Speaker Change: I would say it wouldn't take a pause, but also the decision cycle is taking a bit longer. If you compare, if you also look at the earnings reports of some of our competitors in the industrial space, you can see that some of the...
Speaker Change: Automation growth has been slowing down quite a bit. I think we're still competing very effectively, but we're not totally immune to these changes out there. I mean, PMI as well.
Speaker Change: I don't always link it to PMIs, but it has been down for many quarters.
Speaker Change: and with that there has been a subdued, I would say, investment in some of the industrial automation. I'm sure that will come back because there is a need for productivity gains, there is also a shrinking workforce if you look into Europe and the US.
Speaker Change: and that will require also investment in automation and digitalization and our solutions are front and center here and empowering our customers to drive the needed productivity gains and also compliance when it comes to
Speaker Change: data handling, et cetera. So midterm, I'm not concerned about that, to be honest. So again, we have a strong product portfolio. I think that the trend for automation and visualization will stay intact.
But yes, we had a slower quarter this
Speaker Change: This last quarter, and it was not only China, China was probably more prominent, but also the U.S. and Europe or something.
Speaker Change: And as a reminder to our industrial business, while it has more exposure to the general economy than our other businesses.
Speaker Change: You know, about 60% of it still is anchored in our core segments of a combination of pharma, biopharma, food manufacturing, and chemical, but we also see, you know, a lot of these delays and things taking a little bit longer in our core segments as well, too. It's not just the general economy.
Very helpful. Thank you, guys.
Speaker Change: The next question comes from Tycho Peterson with Jeffreys. Your line is open.
Tycho Peterson: Hey, thanks. I actually just want to follow up on some of the industrial stuff. So product inspection, you're getting the high single digit in the fourth quarter. I assume that's easy comp because you're talking about low single digit next year. But can you maybe just touch on food manufacturing? That's been a challenging business for a while. And any risks, I guess, with the new administration on deregulation for either that or broader parts of the portfolio?
I know it's early days.
Well.
Speaker Change: Yeah, you want to? Yeah, I can, I can start and you can chime in, John. Look, I mean, as I said in the beginning, the good news here is we are competing really well in the product inspection with our upgraded portfolios with the new mid-range products.
Speaker Change: Yes, the market is still slow. Customers are under pressure. If you look at the big package food customers out there, they all, of course, are also under pressure when it comes to their margins. That's why what we're seeing is good engagement, but prolonged sales cycles.
Speaker Change: Still, Q4 I think is a bit of an easier comp compared to last year, that's right.
Speaker Change: but midterm, I think we will stay in that low to mid-single-digit range that we have forecast for next year for PI. There's not a fundamental change I would expect from the current administration.
Speaker Change: when it comes to the impact of packaged food companies, which is a large part of our customer base.
Speaker Change: Yeah, okay. I mean, I think we need to see what they come out with. But you know, I think what we find is every time there's a concern about, you know, are people still going to buy whatever, you know, there's, there's new brands, there's new sizes, you know, there's new shapes, there's, you know, there's, you know, like, and so people are still going to eat, you know, and so, and so that then so there, there, there tends to be always opportunities, even if there's risks with change. Yeah, there's again, there's different modalities we serve from checkling, making sure that it's the right amount and customers are as concerned that they package.
Speaker Change: enough into the package flow, but also not too much. So they want to have check weighing at the end of the line and then the other controller when it comes to physical contamination.
Speaker Change: It's a brand protection for these companies. Yeah, it's we make food safe. And our customers use it definitely as a big part of their brand protection. Nobody wants to find physical contamination. Exactly, exactly.
Speaker Change: And then Patrick, I'm trying to reconcile your comments in the opening about just more on-shoring, but then automation was soft in the Americas. I mean, when do you think automation actually turns here? Do you think, you know, you could actually overshoot next year, given some of the on-shoring initiatives?
Patrick Kaltenbach: We'd love to overshoot, of course, but I can tell you, I mean, that onshore and reshoring process is something that we monitor very closely. But, I mean, this takes also time, right? It's not like you shut down
Unknown Executive, Adam Uhlman
Patrick Kaltenbach: There's still to come, when it really will gain momentum, probably more of that next year, the years to come, but the exact timing is difficult to forecast, to be honest.
Okay, thank you.
Speaker Change: And your final question comes from Michael Riskin with Bank of America. Your line is open.
Michael Riskin: Great. Thanks. Excuse me, guys. I'll be quick. First, Sean, I want to confirm some comments you made earlier. I thought I heard you say that
Michael Riskin: margin flat in 2025? I just want to make sure I heard that correctly and it's not sort of an adjusted number just a little bit hard to reconcile the EPS with guide with that is that kind of like flattish maybe down a little bit or was that a hard flat?
Speaker Change: so operating margin margins flattish yeah maybe yeah and then the and then but the gross profit margin would be up like 30 to 40 bits
Speaker Change: Yes. Okay. Yeah. All right. Exactly. That makes sense. And then, um, uh, sort of caught up on that on the, uh, shipping component. Just want to make sure we back it out correctly. Um, the way you kind of described it, um, for 2024, you know, it's a fair to say that.
Speaker Change: X shipping margins would be up something like 50-75 bps range, 50-70 bps next year. And that's the swing. I'm just trying to Yeah, I mean, I haven't. Yeah, I don't know the exact math, but that sounds like a reasonable range to
Okay, and then, um,
Speaker Change: last one from me I think I was just asking about product inspection I want to ask a little bit on food retail I know it's not you know
Speaker Change: Critical part of your business, something you talk about a lot, but that's just sort of been
Speaker Change: declining pretty consistently for a while. I mean, you often have tough comms, one time customer issues, things like that. It's just gone from like 15% of revenues back in the day down to I think five and continues to face some challenges. Just
Speaker Change: Taking a step back. What are your thoughts on that? I mean, is that is that something you continue to think can can be a core part of the business or Could there be some strategic solutions there? Thanks
Speaker Change: Good question. I mean, look, food retail, as you say, is a very lumpy business. We do a lot of
Speaker Change: Key account management, there's a lot of major customers and retail chains that they're buying from us, but they come in project ways. And the decline you see this year is really on back of a very strong year. Last year, last year, we had a lot of good.
Speaker Change: It's overall, it's still about 5% of our total revenues. We don't expect that to significantly increase. It's really a strong technology platform leverage that we have. It's a weighing solution.
Speaker Change: With that regard, we think it's still a very part of our portfolio. We have invested actually a bit in the last couple of years updating the products.
Speaker Change: We came up with very new, really interesting solutions for customers, also using AI-based features to
Speaker Change: for the customer, but also for the checkout servants. And that's been received very well. So we see also, again,
Speaker Change: A good number of projects in the pipeline, but strategically, again, don't we don't think about any immediate change there other than having just part of the platform leverage and technology leveraging of our portfolio.
Next time, I'll leave it there. Thanks, guys. Thank you.
Speaker Change: This concludes the question and answer session. I'll turn the call to Adam for closing remarks.
Adam Uhlman: All right, great. Hey, thanks everybody for joining us this morning. If you have any follow-up questions, please feel free to reach out. And I hope you all have a great weekend. Take care.
Speaker Change: This concludes today's conference call. Thank you for joining. You may now disconnect.