Q2 2026 Mettler-Toledo International Inc Earnings Call

July 31, 2026

Speaker #1: Hello, everyone. Thank you for joining us, and welcome to the METTLER TOLEDO second quarter 2026 earnings conference call. After today's prepared remarks, we will host a Q&A session.

Operator: Hello, everyone. Thank you for joining us, and welcome to the Mettler-Toledo Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Adam Uhlman, Head of Investor Relations. Please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Adam Uhlman, Head of Investor Relations.

Speaker #1: Please go ahead.

Speaker #2: Great. Hey, Jonathan, thank you very much, and good morning, everyone. Thanks for joining us. On the call with me today are Patrick Kaltenbach, our Chief Executive Officer, and Shawn Vadala, our Chief Financial Officer.

Adam Uhlman: Great. Hey, Jonathan. Thank you very much. Good morning, everyone. Thanks for joining us. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer, and Shawn Vadala, our Chief Financial Officer. Let me cover some administrative matters. This call is being webcast, is available for replay on our website at mt.com. A copy of the press release and the presentation that we will refer to on today's call is also available on our website. This call will include forward-looking statements within the meaning of the US Securities Act of 1933 and the US Securities Exchange Act of 1934. 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.

Speaker #2: Let me cover some administrative matters. This call is being webcast and is available for replay on our website at mt.com. A copy of the press release and the presentation that we will refer to on today's call are also available on our website.

Speaker #2: This call will include 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, financial condition, performance, and achievements to be materially different from those expressed or implied by any forward-looking statements.

Speaker #2: For discussion of these risks and uncertainties, see our recent annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement, except as required by law on today's call.

Adam Uhlman: For a discussion of these risks and uncertainties, see our recent annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statement, except as required by law. On today's call, we will use non-GAAP financial measures, a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K, is available on our website. Let me now turn the call over to Patrick.

Speaker #2: We will use non-GAAP financial measures, and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K and is available on our website.

Speaker #2: Let me now turn the call over to Patrick.

Speaker #3: Thank you, Adam. Good morning, everyone. We appreciate you joining our call today. Last night, we reported our second quarter financial results, the details of which are outlined for you on page 3 of our presentation.

Patrick Kaltenbach: Thank you, Adam. Good morning, everyone. We appreciate you joining our call today. Last night, we reported our Q2 financial results, the details of which are outlined for you on page three of our presentation. Our Q2 results were strong, reflect a better-than-expected organic sales growth across our portfolio, including very good growth in China and emerging markets. It was driven by improved market conditions, our focused Spinnaker sales and marketing program. Combined with our productivity initiatives, this resulted in excellent adjusted EPS growth in the quarter. Going forward, we are optimistic market conditions will gradually improve. Our team remains agile and focused on capturing growth opportunities, leveraging our sophisticated Spinnaker program and innovative product portfolio while benefiting from trends in automation, digitalization, and onshoring investments. I am confident that strong execution of our strategic initiatives will continue to deliver solid financial performance.

Speaker #3: Our second quarter results were strong and reflect better-than-expected organic sales growth across our portfolio, including very good growth in China and emerging markets.

Speaker #3: It was driven by improved market conditions and our focused spending on our sales and marketing program. Combined with our productivity initiatives, this resulted in excellent adjusted EPS growth in the quarter.

Speaker #3: Going forward, we are optimistic market conditions will gradually improve. Our team remains agile and focused on capturing growth opportunities, leveraging our sophisticated spending programs, and innovative product portfolio, while benefiting from trends in automation, digitalization, and onshoring investments.

Speaker #3: I am confident that strong execution of our strategic initiatives will continue to deliver solid financial performance. Let me now turn the call over to Shawn to cover the financial results and our guidance, and then I will come back with some additional commentary on the business and our outlook.

Patrick Kaltenbach: I am confident that strong execution of our strategic initiatives will continue to deliver solid financial performance.

Patrick Kaltenbach: Let me now turn the call over to Shawn to cover the financial results and our guidance, then I will come back with some additional commentary on the business and our outlook. Shawn?

Speaker #3: Shawn?

Speaker #4: Thanks, Patrick, and good morning, everyone. Before I review our Q2 results, I'd like to highlight a special item in our financials this quarter related to tariffs.

Shawn Vadala: Thanks, Patrick, and good morning, everyone. Before I review our Q2 results, I'd like to highlight a special item in our financials this quarter related to tariffs. As disclosed last quarter, we had a one-time gross benefit of $52 million from IEPA tariff refunds in Q2 that benefited cost of sales and was offset in part by a $28 million related refund to our customers that reduced our reported net sales by 3%. Discussion of our results today will exclude the impact of both of these items. Sales in the quarter were $1 billion, up 7% in US dollars. In local currency, our growth was 6% and above our prior guidance of approximately 3% local currency sales growth. Acquisitions contributed approximately 1.5% to sales growth. Organic local currency sales growth was 4%. On slide number four, we show sales growth by region.

Speaker #4: As disclosed last quarter, we had a one-time gross benefit of $52 million from IEPA tariff refunds in Q2 that benefited cost of sales, and was offset in part by a $28 million related refund to our customers that reduced our reported net sales by 3%.

Speaker #4: Discussion of our results today will exclude the impact of both of these items. Sales in the quarter were $1 billion, up 7% in US dollars, and in local currency, our growth was 6%—above our prior guidance of approximately 3% local currency sales growth.

Speaker #4: Acquisitions contributed approximately 1.5% to sales growth, and organic local currency sales growth was 4%. On slide number 4, we show sales growth by region.

Speaker #4: Organic sales, excluding acquisition and tariff refunds, increased 1% in the Americas, 4% in Europe, and 9% in Asia/Rest of World, including 9% growth in China.

Shawn Vadala: Organic sales, excluding acquisition and tariff refunds, increased 1% in the Americas, 4% in Europe, and 9% in Asia, rest of world, including 9% growth in China. Slide number five shows core organic sales growth by region on a year-to-date basis. On slide number six, we summarize sales growth by product area. Organic sales increased 4% in laboratory and increased 3% in industrial, which included 4% growth in core industrial and 1% growth in product inspection. Food retail grew 11% in the quarter. Lastly, service revenue grew 9% or 7% organically. Slide number seven details organic sales growth by product area on a year-to-date basis. Let me now move to the rest of the P&L, which is summarized on slide number eight. Adjusted gross margin was 59.3% in the quarter, an increase of 30 basis points.

Speaker #4: Slide number 5 shows core organic sales growth by region on a year-to-date basis. On slide number 6, we summarize sales growth by product area.

Speaker #4: Organic sales increased 4% in Laboratory and increased 3% in Industrial, which included 4% growth in Core Industrial and 1% growth in Product Inspection. Food Retail grew 11% in the quarter.

Speaker #4: Lastly, service revenue grew 9%, or 7% organically. Slide number 7 details organic sales growth by product area on a year-to-date basis. Let me now move to the rest of the P&L, which is summarized on slide number 8.

Speaker #4: Adjusted gross margin was 59.3% in the quarter, an increase of 30 basis points. Excluding unfavorable foreign currency and acquisitions, gross margin expanded approximately 90 basis points due to benefits from favorable price realization, lower tariff rates compared to the prior year, volume growth, and our productivity and cost savings initiatives, partly offset by higher transportation costs.

Shawn Vadala: Excluding unfavorable foreign currency and acquisitions, gross margin expanded approximately 90 basis points due to benefits from favorable price realization, lower tariff rates compared to the prior year, volume growth in our productivity and cost savings initiatives, partly offset by higher transportation costs. R&D amounted to $53 million in the quarter and was up 3% on a local currency basis over the prior period. SG&A amounted to $263 million, a 4% increase in local currency over the prior year. Includes sales and marketing investments, offset in part by cost savings. Adjusted operating profit amounted to $309 million in the quarter, up 9% versus the prior year. Adjusted operating margin was 29.3%, an increase of 50 basis points versus the prior year or up 100 basis points excluding unfavorable currency. Adjusted EPS for the quarter was $11.46, a 14% increase over the prior year.

Speaker #4: R&D amounted to $53 million in the quarter and was up 3% on a local currency basis over the prior period. SG&A amounted to $263 million, a 4% increase in local currency over the prior year, and included sales and marketing investments offset in part by cost savings.

Speaker #4: Adjusted operating profit amounted to $309 million in the quarter, up 9% versus the prior year. Adjusted operating margin was 29.3%, an increase of 50 basis points versus the prior year, or up 100 basis points excluding unfavorable currency.

Speaker #4: Adjusted EPS for the quarter was $11.46, a 14% increase over the prior year. On a reported basis in the quarter, EPS was $11.55 as compared to $9.76 in the prior year.

Shawn Vadala: On a reported basis in the quarter, EPS was $11.55 as compared to $9.76 in the prior year. Reported EPS in the quarter included a $0.92 net tariff refund benefit, $0.26 of purchased intangible amortization, $0.22 of restructuring costs, and a $0.04 tax headwind related to the timing of stock option exercises. Finally, we had a $0.31 acquisition-related charge related to higher earn-out achievements on previous acquisitions. That covers the P&L. Let me now comment on adjusted free cash flow, which amounted to $367 million on a year-to-date basis and was negatively impacted by the timing of tax payments, which were $55 million higher than the prior year. DSO was 35.6 days, while ITO was 4.2 times. Let me now turn to our guidance for Q3 and the full year 2026. As you review our guidance, please keep in mind the following factors.

Shawn Vadala: On a reported basis in the quarter, EPS was $11.55 as compared to $9.76 in the prior year. Reported EPS in the quarter included a $0.92 net tariff refund benefit, $0.26 of purchased intangible amortization, $0.22 of restructuring costs, and a $0.04 tax headwind related to the timing of stock option exercises. Finally, we had a $0.31 acquisition-related charge related to higher earn-out achievements on previous acquisitions. That covers the P&L. Let me now comment on adjusted free cash flow, which amounted to $367 million on a year-to-date basis and was negatively impacted by the timing of tax payments, which were $55 million higher than the prior year. DSO was 35.6 days, while ITO was 4.2x. Let me now turn to our guidance for Q3 and the full year 2026. As you review our guidance, please keep in mind the following factors.

Speaker #4: Reported EPS in the quarter included a $92 net tariff refund benefit, $26 of purchase intangible amortization, $22 of restructuring costs, and a 4% tax headwind related to the timing of stock option exercises.

Speaker #4: Finally, we had a $31 million acquisition-related charge related to higher earn-out achievements on previous acquisitions. That covers the P&L. Let me now comment on adjusted free cash flow, which amounted to $367 million on a year-to-date basis and was negatively impacted by the timing of tax payments, which were $55 million higher than the prior year.

Speaker #4: DSO was 35.6 days, while ITO was 4.2 times. Let me now turn to our guidance for the third quarter and the full year 2026.

Speaker #4: As you review our guidance, please keep in mind the following factors. First, we are encouraged by our Q2 results and improved market conditions, especially in China and emerging markets.

Shawn Vadala: First, we are encouraged by our Q2 results and improved market conditions, especially in China and emerging markets. Second, conditions in the Middle East remain volatile, and while we have limited exposure to the region, this could impact customer decision-making should conditions significantly change. We are not currently seeing any change in related customer behavior and have not included an escalation of the conflict in our forecast. Lastly, we are very confident in our ability to execute on our growth and productivity initiatives and believe we are well positioned to gain market share regardless of the macro environment. Now, turning to our guidance for the full year 2026, we have increased our local currency sales growth from approximately 4% to approximately 4% to 5%, reflecting organic growth of 3% to 4%. Our forecast excludes the impact of the previously described tariff refunds.

Speaker #4: Second, conditions in the Middle East remain volatile and, while we have limited exposure to the region, this could impact customer decision-making should conditions significantly change.

Speaker #4: We are not currently seeing any change in related customer behavior and have not included an escalation of the conflict in our forecast. Lastly, we are very confident in our ability to execute on our growth and productivity initiatives and believe we are well positioned to gain market share regardless of the macro environment.

Speaker #4: Now, turning to our guidance for the full year 2026, we have increased our local currency sales growth from approximately 4% to approximately 4% to 5%, reflecting organic growth of 3% to 4%.

Speaker #4: Our forecast excludes the impact of the previously described tariff refunds. Adjusted EPS for the year is forecast to be in the range of $47.15 to $47.50.

Shawn Vadala: Adjusted EPS for the year is forecast to be in the range of $47.15 to $47.50, which represents a growth rate of 10% to 11%, or 11% to 12%, excluding currency. This reflects an increase from our previous guidance of 8% to 10% growth. At recent spot rates, foreign currency is estimated to be a 1% benefit to sales growth and a slight headwind to EPS for the year. For Q3 2026, we expect local currency sales to grow approximately 4%, which includes approximately a half percent benefit from acquisitions. We expect adjusted EPS to be in the range of $12 to $12.15, a growth rate of 8% to 9%, or 9% to 10%, excluding currency. Currency for the quarter at recent spot rates would be neutral to Q3 sales and a 1% headwind to adjusted EPS. Some further comments on our 2026 guidance.

Shawn Vadala: Adjusted EPS for the year is forecast to be in the range of $47.15 to 47.50, which represents a growth rate of 10% to 11%, or 11% to 12%, excluding currency. This reflects an increase from our previous guidance of 8% to 10% growth. At recent spot rates, foreign currency is estimated to be a 1% benefit to sales growth and a slight headwind to EPS for the year. For Q3 2026, we expect local currency sales to grow approximately 4%, which includes approximately a half percent benefit from acquisitions. We expect adjusted EPS to be in the range of $12 to 12.15, a growth rate of 8% to 9%, or 9% to 10%, excluding currency. Currency for the quarter at recent spot rates would be neutral to Q3 sales and a 1% headwind to adjusted EPS. Some further comments on our 2026 guidance.

Speaker #4: This represents a growth rate of 10% to 11%, or 11% to 12% excluding currency. This reflects an increase from our previous guidance of 8% to 10% growth.

Speaker #4: At recent spot rates, foreign currency is estimated to be a 1% benefit to sales growth and a slight headwind to EPS for the year.

Speaker #4: For the third quarter of 2026, we expect local currency sales to grow approximately 4%, which includes approximately a half-percent benefit from acquisitions. We expect adjusted EPS to be in the range of $12.00 to $12.15, a growth rate of 8% to 9%, or 9% to 10% excluding currency.

Speaker #4: Currency for the quarter at recent spot rates would be neutral to third-quarter sales and a 1% headwind to adjusted EPS. Some further comments on our 2026 guidance.

Speaker #4: We expect total amortization, including purchase intangible amortization, to be approximately $78 million. Purchase intangible amortization is excluded from adjusted EPS and is estimated at $28 million on a pre-tax basis, or approximately $1.07.

Shawn Vadala: We expect total amortization, including purchased intangible amortization, to be approximately $78 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $28 million on a pre-tax basis or approximately $1.07. Interest expense is forecast at $67 million for the year. Other income is estimated at approximately $24 million. We expect our tax rate before discrete items will remain at 19% in 2026. Free cash flow is expected to be approximately $900 million in 2026, which represents 6% growth on a per share basis. Share repurchases are now expected to increase to $875 million for the full year, as compared to our annualized repurchase level of $825 million during H1. That's it for my side. I'll now turn it back to Patrick.

Speaker #4: Interest expense is forecast at $67 million for the year. Other income is estimated at approximately $24 million. We expect our tax rate before discrete items will remain at 19% in 2026.

Speaker #4: Pre-cash flow is expected to be approximately $900 million in 2026, which represents 6% growth on a per-share basis. Share repurchases are now expected to increase to $875 million for the full year, compared to our annualized repurchase level of $825 million during the first half of the year.

Speaker #4: That's it from my side, and I'll now turn it back to Patrick.

Speaker #1: Thanks, Shawn. Let me start with some comments on our operating businesses, starting with FLAP, which had good growth in the quarter across most product areas.

Patrick Kaltenbach: Thanks, Shawn. Let me start with some comments on our operating businesses, starting with Lab, which had good growth in the quarter across most product areas. We saw improving trends across our biopharma customer base and continued to see strong growth in process analytics and bioproduction. Laboratory balances and analytical instruments growth was also strong and benefited from the many innovations we have brought to the market in the recent years, our LabX software, and growing demand from hot segments like semiconductor, advanced materials, and batteries. Turning to Industrial, Core Industrial did well this quarter with sales growth driven by strong demand for our solutions that enable automation. We saw strength across markets like biopharma, food manufacturing, semiconductor, and new energy.

Speaker #1: We saw improving trends across our biopharma customer base and continue to see strong growth in process analytics and bioproduction. Laboratory balances and analytical instruments growth was also strong and benefited from the many innovations we have brought to the market in recent years, our Labac software, and growing demand from hot segments like semiconductors, advanced materials, and batteries.

Speaker #1: Turning to Industrial, core Industrial did well this quarter with sales growth driven by strong demand for our solutions that enable automation. We saw strength across markets like biopharma, food manufacturing, semiconductor, and new energy.

Speaker #1: As expected, Product Inspection organic sales growth this quarter was modest due to the timing of customer projects, but organic growth is expected to pick up again in the second half.

Patrick Kaltenbach: As expected, Product Inspection organic sales growth this quarter was modest due to the timing of customer projects, but organic growth is expected to pick up again in H2. Lastly, Food Retail sales growth was better than expected due to the timing of project activity. Now let me make some additional comments by geography, starting in the Americas, where sales grew 1% excluding acquisitions. We had strong momentum in most Lab product categories and in our Core Industrial automation solutions and Product Inspection. These results were offset in part by timing of food, retail, and transportation and logistics project activity. Turning to Europe, sales growth this quarter was solid and included growth across most of the business, including strong growth in Core Industrial and Food Retail. Finally, Asia Rest of the World had very good growth this quarter across the portfolio and in most major markets.

Speaker #1: Lastly, food retail sales growth was better than expected due to the timing of project activity. Now let me make some additional comments by geography, starting in the Americas, where sales grew 1%, excluding acquisitions.

Speaker #1: We had strong momentum in most lab product categories and in our core industrial automation solutions and product inspection. These results were offset in part by the timing of food retail and transportation and logistics project activity.

Speaker #1: Turning to Europe, sales growth this quarter was solid and included growth across most of the business, including strong growth in core industrial and food retail.

Speaker #1: Finally, Asia Rest of World had very good growth this quarter across the portfolio and in most major markets. Our business in China grew 9% and was stronger than expected, as our team continues to do an excellent job identifying high-growth markets and leveraging our innovative portfolio.

Patrick Kaltenbach: Our business in China grew 9% and was stronger than expected as our team continues to do an excellent job identifying high growth markets and leveraging our innovative portfolio. Biopharma customers demand was also healthy and contributed to our results. Markets outside of China also had strong growth this quarter. Emerging markets have been an important element of our long-term growth strategy for many years. India, Southeast Asia, Eastern Europe, and Latin America offers us excellent growth opportunities as these markets develop and mature, and we believe many of them will also benefit from nearshoring investments over the coming years. Our company is uniquely positioned to capitalize on emerging market growth over the coming years. In Q2, emerging markets outside of China represented approximately 18% of our sales, slightly more than our business in China, and grew high single digits in the quarter.

Speaker #1: Biopharma customer demand was also healthy and contributed to our results. Markets outside of China also had strong growth this quarter. Emerging markets have been an important element of our long-term growth strategy for many years.

Speaker #1: India, Southeast Asia, Eastern Europe, and Latin America offer us excellent growth opportunities as these markets develop and mature, and we believe many of them will also benefit from nearshoring investments over the coming years.

Speaker #1: Our company is uniquely positioned to capitalize on emerging market growth over the coming years. In the second quarter, emerging markets outside of China represented approximately 18% of our sales, slightly more than our business in China, and grew high single digits in the quarter.

Patrick Kaltenbach: In Q2, emerging markets outside of China represented approximately 18% of our sales, slightly more than our business in China, and grew high single digits in the quarter.

Speaker #1: Emerging markets, excluding China, have also grown by high single digits on average in local currencies over the last five years, above the company average, and are an important contributor to our growth.

Patrick Kaltenbach: Emerging markets excluding China have also grown high single digits on average in local currencies over the last 5 years, above the company average and are an important contributor to our growth. To take advantage of these growth opportunities, we have long-standing dedicated Market Organizations in emerging markets, China, and around the world. Our Market Organizations are a significant competitive advantage, allowing us to stay close to customers and better understand local market needs. We have dedicated growth plans for each major country, and we leverage our broad portfolio of solutions across a range of price and value points to meet varying customer requirements. Additionally, in markets like Mexico, we have further developed local assembly and manufacturing capabilities in recent years, which strengthen our ability to serve local market needs and enhance our competitive position.

Patrick Kaltenbach: Emerging markets excluding China have also grown high single digits on average in local currencies over the last five years, above the company average and are an important contributor to our growth. To take advantage of these growth opportunities, we have long-standing dedicated Market Organizations in emerging markets, China, and around the world. Our Market Organizations are a significant competitive advantage, allowing us to stay close to customers and better understand local market needs. We have dedicated growth plans for each major country, and we leverage our broad portfolio of solutions across a range of price and value points to meet varying customer requirements.

Speaker #1: To take advantage of these growth opportunities, we have long-standing, dedicated market organizations in emerging markets like China and around the world. Our market organizations are a significant competitive advantage, allowing us to stay close to customers and better understand local market needs.

Speaker #1: We have dedicated growth plans for each major country, and we leverage our broad portfolio of solutions across a range of price and value points to meet varying customer requirements.

Speaker #1: Additionally, in markets like Mexico, we have further developed local assembly and manufacturing capabilities in recent years, which strengthen our ability to serve local market needs and enhance our competitive position.

Patrick Kaltenbach: Additionally, in markets like Mexico, we have further developed local assembly and manufacturing capabilities in recent years, which strengthen our ability to serve local market needs and enhance our competitive position.

Speaker #1: The market organizations in emerging economies also leverage the same Spinnaker sales and marketing programs we have developed in other countries, including various digital tools, value selling guides, and sales enablement tools.

Patrick Kaltenbach: The Market Organizations in emerging economies also leverage the same Spinnaker sales and marketing programs we have developed in other countries, including various digital tools, value selling guides, and sales enablement tools. We have also rolled out Blue Ocean to most of our MOs and having a single instance of a global information technology infrastructure provides rich data, analytics, and unique real-time business insights. This is a significant competitive advantage that allows us to target opportunities in various hot segments like bioprocessing, GLP-1s, semiconductor, and battery in an agile way. As domestic and foreign direct investments continues to grow over the coming years, we expect emerging markets to remain a healthy contributor to our growth well into the future. In summary, we are very pleased with our Q2 results and the solid growth our team has delivered.

Speaker #1: We have also rolled out Blue Ocean to most of our MOs, and having a single instance of a global information technology infrastructure provides rich data analytics and unique real-time business insights.

Speaker #1: This is a significant competitive advantage that allows us to target opportunities in various hot segments like bioprocessing, GLP-1s, semiconductors, and batteries in an agile way.

Speaker #1: As domestic and foreign direct investments continue to grow over the coming years, we expect emerging markets to remain a healthy contributor to our growth well into the future.

Speaker #1: In summary, we are very pleased with our Q2 results and the solid growth our team has delivered. We remain focused on capitalizing on our customers' investments in automation, digitalization, and onshoring around the world.

Patrick Kaltenbach: We remain focused on capitalizing on our customers' investments in automation, digitalization, and onshoring around the world. After a few years of disruptions and uncertainties related to tariffs, governmental policies, and geopolitics, we believe customers will continue to return to a more normal replacement activity going forward. We have maintained a strong focus on investing in innovation and growth in recent years while protecting profitability, which will serve us well as our markets recover. This concludes our prepared remarks. Operator, I'd now like to open the line to questions.

Speaker #1: After a few years of disruptions and uncertainties related to tariffs, governmental policies, and geopolitics, we believe customers will continue to return to a more normal replacement activity going forward.

Speaker #1: We have maintained a strong focus on investing in innovation and growth in recent years while protecting profitability, which will serve us well as our markets recover.

Speaker #1: This concludes our prepared remarks. Operator, I would now like to open the line to questions.

Speaker #2: Thank you. We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand.

Operator: Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dan Arias from Stifel. Your line is now open. Please go ahead.

Speaker #2: To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimal sound quality.

Speaker #2: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Dan Arias from Stiefel.

Speaker #2: Your line is now open. Please go ahead.

Speaker #1: Hey, good morning, guys. Thank you for the questions here. Shawn or Patrick, last quarter you raised the guide for China, so I guess it's not a surprise to see the pickup there.

Dan Arias: Hey, good morning, guys. Thank you for the questions here. Shawn or Patrick, last quarter you raised the guide for China, I guess not a surprise to see the pickup there, but it does seem like maybe it improved a bit sooner. Can you just dive into the acceleration a bit? What does the momentum there look like when it comes to pharma versus non-pharma and just sort of the consistency that you expect in the coming quarters? If I remember correctly, the improvement seemed like it was due more to core industrial last quarter. To what extent do you have pharma improvements sort of baked into the outlook for the rest of the year here?

Speaker #1: But it does seem like maybe it improved a bit sooner. Can you dive into the acceleration a bit? What does the momentum look like when it comes to pharma versus non-pharma, and what sort of consistency do you expect in the coming quarters?

Speaker #1: If I remember correctly, the improvement seemed like it was due more to core Industrial last quarter. So, to what extent do you have Pharma improvement sort of baked into the outlook for the rest of the year here?

Speaker #3: Yeah, thank you, Dan. And just yes, of course we are very happy with the growth we have seen in China. Its 9% in Q2 was really a very strong result versus the guidance we initially had for the quarter.

Patrick Kaltenbach: Yeah. Thank you, Dan. Yes, of course, we are very happy with the growth we have seen in China. It's at 9%, and Q2 was really very strong results versus the guidance we initially had for the quarter. I mean, the growth has really been led by industrial, which had double-digit growth in China. We are benefiting from many of the core segments, such as biopharma, but also food, as well as the hot segments like investments in battery that is happening in China. For lab, the growth was a bit more modest. We expect continued improvement there also in H2, both also from biopharma and maybe also academia will pick up towards the end of the year. We see, or we've heard at least of some indications of some additional funding for academia in China as well.

Speaker #3: I mean, the growth has really been led by industrial, which had double-digit growth in China. We are benefiting from many of the core segments such as biopharma, but also food, as well as the hot segments like investments in battery that are happening in China.

Speaker #3: For lab the the the growth was a bit more modest we expect continued improvement there also in the second half. Both also from biopharma and maybe also academia will pick up towards the end of the year we see we've heard at least of some indications of some additional funding for academia and in China as well.

Speaker #3: But then again, there are also the good, hot segments and the strong investments in areas like lithium battery and new energy. So overall, I would say, really led by industrial, the growth.

Patrick Kaltenbach: Again, also the good hot segments and strong investments in areas like lithium battery and new energy. Overall, I would say really led by industrial, the growth, across many segments, and pharma was a good part of that as well.

Speaker #3: Across many segments, and pharma was a good part of that as well.

Speaker #4: Yeah. Hey Dan and then just to be specific like in terms of the second second half of the year we're we're we're we're looking at high single digit now for China also for Q3 and and for the full year and we kind of this momentum that Patrick referred to on industrial we we feel very good about entering the second half.

Shawn Vadala: Yeah. Hey, Dan. Just to be specific.

Dan Arias: Okay

Shawn Vadala: like in terms of the H2 of the year, we're looking at high single digit now for China also for Q3 and for the full year. This momentum that Patrick referred to on industrial, we feel very good about entering H2. Also, the trends around automation and digitalization that we talk a lot about, we're definitely seeing those benefits in China as well. I think as we kind of go into the H2 of the year, too, we also feel like the lab business is gradually improving as well.

Speaker #4: Also the trends around automation and digitalization that we talk a lot about we're definitely seeing those benefits in China as well. And then I think as we kind of go into the second half of the year too we also feel like that the lab business is gradually improving improving as well.

Speaker #1: Yeah, okay. Thank you for closing the loop on that. And then maybe just on product inspection—a little bit of growth in that piece.

Dan Arias: Yeah. Okay. Thank you for closing the loop on that. Maybe just on product inspection, a little bit of growth in that piece. I think you had been pointing to that being down a touch this quarter on some timing elements that you referred to. Can you just maybe expand on that? Was there anything that got pulled forward from Q3 as it relates to that timing? If you put the timing aspect aside, maybe just talk about spending and demand relative to the way that you saw things last quarter in PI specifically. Thanks a bunch.

Speaker #1: I think you had been pointing to that being down a touch this quarter on some timing elements that you referred to. Can you just maybe expand on that?

Speaker #1: Was there anything that got pulled forward from Q3 as it relates to that timing? And then, if you put the timing aspect aside, maybe just talk about spending and demand relative to the way that you saw things last quarter in PI specifically.

Speaker #1: Thanks a bunch.

Speaker #4: Yeah, no. Hey, thanks, Dan. So, if you remember, we had a really good Q1 in PI, and then we were trying to caution people that Q2 would be a little bit lighter, just given the timing of how the project activity was looking like it was playing out.

Shawn Vadala: Yeah. No. Hey, thanks, Dan. If you remember, we had a really good Q1 in PI, we were trying to caution people that Q2 would be a little bit lighter just given the timing of how the project activity was looking like it was playing out. As we go into the H2 of the year, we feel very good. We're probably looking at mid-single digit growth in Q3. For the full year, we're probably looking at high single digit growth, which is probably more like mid-single digit growth on an organic basis. When you step back, 70% of that business is food manufacturing. From an end market perspective, not quite like pharma. When we look at how the team is executing, we actually feel really good.

Speaker #4: But as we kind of go into the second half of the year, I mean, we feel very good. I mean, you know, we're probably looking at mid-single-digit growth in the third quarter.

Speaker #4: And for the full year we're probably looking at you know high single digit growth which is probably more like mid single digit growth on a on a organic basis.

Speaker #4: But when you step back, you know, 70% of that business is food manufacturing. So from an end market perspective, you know, not quite like pharma, but when we look at how the team is executing, we actually feel really good.

Speaker #4: I mean, we talked a lot about the benefits of innovation in this business over the last few years, and we kind of continue to see that.

Shawn Vadala: We've talked a lot about the benefits of innovation in this business over the last few years, we kind of continue to see that. We're coming out with a couple new products this year, which is pretty exciting. This general strategy that we've talked a lot about in terms of how better position ourself for the mid-market segment seems to be working very well and well-received in the marketplace.

Speaker #4: We’re coming out with a couple of new products this year, which is pretty exciting. And then this general strategy that we talked a lot about, in terms of how to better position ourselves for the mid-market segment, seems to be, you know, working very well and is well received in the marketplace.

Speaker #1: Yep. Very good. Okay. Thank you, guys.

Dan Arias: Yep. Very good. Okay. Thank you, guys.

Speaker #2: Your next question comes from the line of Taiko Peterson at Jefferies. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Tycho Peterson at Jefferies. Your line is now open. Please go ahead.

Speaker #5: Hey, thanks. Just want to maybe unpack some of the other trends from Q2. I guess as we think about the revised guide in the back half of the year, can you just talk a little bit more about some of the underlying assumptions by end market and segment?

Tycho Peterson: Hey, thanks. Just want to maybe unpack some of the other trends from Q2. I guess, as we think about the revised guide in the back half of the year, can you just talk a little bit more about some of the underlying assumptions by end market and segment? Obviously, you just covered PI in China, but maybe walk through where you're changing your assumptions otherwise.

Speaker #5: Obviously, you just covered PI in China, but maybe walk through, you know, where you're changing your assumptions otherwise.

Speaker #4: Yeah. Hey, Taiko, I'll take that one. Thank you. Hey, so I'll start with the product categories, and then I'll give you the division.

Shawn Vadala: Yeah. Hey, Tycho. I'll take that one. Thank you. I'll start with the product categories. I'll give you the division. Lab for Q3 would be mid-single digit. Core Industrial, we're looking at low single digit, and I think it's important to remember that Core Industrial had a very challenging comparison to the prior year in Q3 of last year. It grew 10% organically. Product Inspection, mid-single digit, which I just said. Retail, we're guiding it flat. In terms of the Americas, we're guiding at low to mid-single digit. Again, this one had a more challenging comparison, just to highlight in Q3 of last year, which was up, I think 9% organically. Europe, up low single digit. China, we talked about high single digit. Maybe just to kind of wrap it up with the full year.

Speaker #4: So, for lab in Q3, growth would be mid-single digit. Core industrial, we're looking at low single digit. And I think it's important to remember that core industrial had a very challenging comparison to the prior year—in Q3 of last year, it grew 10% organically.

Speaker #4: Product Inspection mid single digit, which I just said, and then retail, we're guiding it flat. In terms of the Americas, we're guiding at low to mid single digit.

Speaker #4: Again, this one had a more challenging comparison, just to highlight in Q3 of last year, which was up, I think, 9% organically. Europe was up low single digits.

Speaker #4: China, we talked about high single digits. And then, maybe just to kind of wrap it up, for the full year, lab would be low to mid single digits.

Shawn Vadala: Full year Lab would be low to mid-single digit. Core Industrial would be low to mid-single digit. Product Inspection would be high single digit. Of course, there's a little bit of acquisition largely from the H1 in these numbers. Core Industrial would be low single digit organically. PI would be mid-single digit. Retail would be low to mid-single digit. If we look at the regions, Americas would be low single digit or about flattish organically. Europe would be low single digit. China would be high single digit.

Speaker #4: Core Industrial would be low to mid-single digits. Product Inspection would be high single digits. And, of course, there's a little bit of acquisition, largely from the first half of the year, in these numbers. So, Core Industrial would be low single digit organically.

Speaker #4: PI would be mid-single digit. Retail would be low to mid-single digit. And if we look at the regions, Americas would be low single digit or about flattish organically.

Speaker #4: Europe would be low single digits, and then China would be high single digits.

Speaker #5: Okay, very helpful. And then, following up on—you guided to two and a half on price for Q2. Just curious where you landed, and what you're thinking for the back half of the year.

Tycho Peterson: Okay. Very helpful. Follow up on, you've guided 2.5 on price for Q2. Just curious where you landed and what you're thinking for H2. Separately, did you recapture any of the delayed chemical orders? Thank you.

Speaker #5: And then, separately, did you capture any—you know—recapture any of the delayed chemical orders? Thank you.

Speaker #4: Yeah, sure. Hey, so on the pricing side, we continue to be really pleased with the team's execution, but ultimately, pricing comes back to the value proposition.

Shawn Vadala: Yeah, sure. Okay. On the pricing side, continue to be really pleased with the team's execution, but ultimately pricing comes back to value proposition. I think a lot of the investments we've been making over the last few years on innovation continue to pay off well. In the end, our price realization for the quarter was around 3%. We're very happy with that. A little bit better than the 2.5% that you were mentioning in terms of our original guidance. Towards the end of the quarter, we also put in place some additional pricing measures, isolated in a few areas where we were seeing a little bit of inflationary pressures. Our guidance for H2 is more in the 2.5% kind of a range.

Speaker #4: I think a lot of the investments we've been making over the last few years on innovation continue to pay off well. So in the end, our price realization for the quarter was around 3%.

Speaker #4: So we're very happy with that. It's a little bit better than the 2.5% that you were mentioning in terms of our original guidance.

Speaker #4: Towards the end of the quarter, we also put in place some additional pricing measures, isolated in a few areas where we were seeing a little bit of inflationary pressure.

Speaker #4: So our our guidance for the second half of the year is more in the two and a half percent kind of a range. And and again we're as a reminder we're also lapping a lot of the mid-year price increase actions that we did last year in response to all the tariffs from last year.

Shawn Vadala: Again, as a reminder, we're also lapping a lot of the mid-year price increase actions that we did last year in response to all the tariffs from last year. When you kind of wrap that all up, our full year price realization is now approaching 3% for the full year. I think the other part of your question was China. I mean, not China, Chemical Europe. Do you want to take that one, or?

Speaker #4: So when you kind of wrap that all up, our full-year price realization is now approaching 3% for the full year. I think the other part of your question was China—I mean, not China, chemical Europe.

Speaker #4: Do you want to take that one, or...?

Speaker #1: Yeah I can take that one yeah. Hey Taiko so yeah on on chemical just as a reminder I mean overall it's under 15% of our total sales and we had probably the biggest exposure in across industrial and lab for for chemical.

Patrick Kaltenbach: I can take that one. Yeah. Hey, Zachary. Yeah, on Chemical, just as a reminder, I mean, overall, it's under 15% of our total sales, and we had probably the biggest exposure across Industrial and Lab for Chemical. As far as it's mostly specialty chemicals, and when we talked in Q1 about the pressures we have seen, in the EU, it was mainly energy related. I won't view on things. Actually, the EU Chemical results were better in Q2, they recovered. We still would say we take a bit more cautious stance on the overall segment still because they are more exposed to energy cost fluctuations than other segments that we're seeing. Overall, of course, in the quarters to come, we will also have easier comps in this segment.

Patrick Kaltenbach: I can take that one. Yeah. Hey, Tycho Yeah, on Chemical, just as a reminder, I mean, overall, it's under 15% of our total sales, and we had probably the biggest exposure across Industrial and Lab for Chemical. As far as it's mostly specialty chemicals, and when we talked in Q1 about the pressures we have seen, in the EU, it was mainly energy related. I won't view on things. Actually, the EU Chemical results were better in Q2, they recovered. We still would say we take a bit more cautious stance on the overall segment still because they are more exposed to energy cost fluctuations than other segments that we're seeing. Overall, of course, in the quarters to come, we will also have easier comps in this segment.

Speaker #1: It's— and as far as— it's mostly specialty chemicals, and when we talked in Q1 about the pressures we have seen in the EU, it was more— more— mainly energy related.

Speaker #1: So our view on this is, actually, the EU chemical results were better in Q2. So they recovered. But we still would say we take a bit more cautious stance on the overall segment still, because they are more exposed to energy cost fluctuations than other segments that we're seeing.

Speaker #1: But overall, of course, in the quarters to come, we will also have easier comps in the segment.

Speaker #5: Great. Thank you.

Tycho Peterson: Great. Thank you.

Speaker #2: Your next question is from the line of Josh Waldman from Cleveland Research. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Josh Waldman from Cleveland Research. Your line is now open. Please go ahead.

Speaker #1: Hey, hey, thanks for taking my questions. I think one for Patrick and one for Shawn. Patrick, nice to see the reacceleration in Lab. Can you give more details on what drove this?

Josh Waldman: Hey, thanks for taking my questions. I think one for Patrick and one for Shawn. Patrick, nice to see the re-acceleration in lab. I guess, can you give more details on what drove this? Would be great to get a sense on what you're hearing from customers on the why behind the inflection in Q2, following what seemed to be a softer start to the year. Was it budgets being delayed, concern around the war or other? Then as you think about durability, kind of going forward, the comps get more difficult, but it sounds like you're expecting mid singles again in Q3. Do you think lab kind of should stay in this steady state of mid-single digits here as we work through H2 and maybe into 2027?

Speaker #1: It would be great to get a sense of what you're hearing from customers on the reasons behind the inflection in the second quarter, following what seemed to be a softer start to the year.

Speaker #1: You know was it budgets being delayed? Concern around the war or or other? And then as you think about durability you know kind of going forward the comps get more difficult but it sounds like you're expecting mid singles again in the third quarter.

Speaker #1: Do you think Lab, you know, kind of should stay in the steady state of mid-single digits here as we work through the second half and maybe into '27?

Speaker #3: Yeah we will not talk thanks Josh. We will not talk about '27 yet. But of course we are actually quite delighted with our with with how lab is performing.

Patrick Kaltenbach: Yeah. Thanks, Josh. We will not talk about 2027 yet. Of course, we are actually quite delighted with how lab is performing. A lot of that is based not only on our strong go-to-market strategy and our local market teams that we have that are really very close to our customers. I think it's also based on the fact that we have really put a lot of effort into innovation over the last years. We launched a lot of new great products across the lab portfolio. Within lab, at the moment, of course, the process analytics business is performing extremely well in biopharma, as you can imagine. That drives a lot of the growth as well. Then you look at the rest of the portfolio that we have, analytical instruments have been very good in Q2, and we see that also moving forward.

Speaker #3: And a lot of that is based not only on our strong go-to-market strategy and our local market teams that we have, that are really very close to our customers.

Speaker #3: I think it's also based on the fact that we have really put a lot of effort into innovation over the last few years. We launched a lot of new, great products across the lab portfolio.

Speaker #3: And within Lab at the moment, of course, the Process Analytics business is performing extremely well in biopharma, as you can imagine. So that drives a lot of the growth as well.

Speaker #3: And then you look at the rest of the portfolio that we have. Analytical instruments have been very good in Q2, and we see that also moving forward.

Speaker #3: We saw the pipette business coming back to growth as well last quarter, which is very promising. So I would say, yeah, we're actually quite pleased with the momentum we have in Lab moving forward.

Patrick Kaltenbach: We saw the Pipette business coming back to growth as well last quarter, which is very promising. I would say, we're actually quite pleased with the momentum we have in lab moving forward. We do expect, as Shawn said, for lab, mid-single digits growth about that range. It's pretty broad-based. I think if there's even some upside to this, it could be potentially an acceleration in China that still has to materialize. Again, we saw some initial good momentum, but that was more in industrial in China, and I think lab has more to come. Overall, extremely well positioned for lab products with our LabX software platform.

Speaker #3: We we do expect as as Shawn said for lab mid single digits growth about about that range. And it's it's pretty broad based. I think if there is some some even some upside to this it would be potentially an acceleration in China that still has to materialize.

Speaker #3: Again, we saw some initial good momentum, but that was more in industrial in China, and I think lab is more to come. Overall, we are extremely well positioned for lab products, with our Lab Access software platform.

Speaker #3: As you know, we provide about 40% of the instruments that are typically used in the QA/QC lab, and most of them are connected to our LabX portfolio.

Patrick Kaltenbach: As you know, we provide about 40% of the instruments that are used typically in a QA/QC lab, and most of them are connected to our LabX portfolio, which gives our customers a really unique opportunity to do just their testing in a very compliant way and using LabX as a complete workflow control system and also aggregate the data to use AI on the next level if they want to. I think we are very pleased with where we are with lab, and I think there's more to come. Thank you.

Speaker #3: Which gives our customers a really unique opportunity to do their testing in a very compliant way, and using Lab Access as a complete workflow control system.

Speaker #3: And also aggregated data to use AI on the next level if they want to. So, I think we are very pleased with where we are with Lab.

Speaker #3: And I think there's more to come. Thank you.

Speaker #1: Yeah, good to hear. Okay, and then, Shawn, can you give an update on how margins are tracking versus your plan? Any updated view on the full-year margin expectation?

Josh Waldman: Good to hear. Okay. Shawn, can you give an update on how margins are tracking versus your plan? Any updated view on the full-year margin expectation? It seems like you're tracking ahead of plan. Is this reflecting moving pieces on the tariff refunds or are there other drivers you'd highlight?

Speaker #1: I mean, it seems like you're tracking ahead of plan. Is this reflecting, you know, moving pieces on the tariff refunds, or are there other drivers you'd highlight?

Speaker #4: Yeah so just to be clear the the tariff refund topic is excluded from our our results or adjusted results in in our guidance. Now of course you know changes in tariff rates is a different story.

Shawn Vadala: Just to be clear, the tariff refund topic is excluded from our results, our adjusted results, and our guidance. Now of course, changes in tariff rates is a different story, that can be a factor here. We feel very good about the team's execution. I think we've been trying to really focus on this always in the past. I think if you look at the different initiatives that we have kind of underlying margin expansion like the SternDrive program, productivity programs, cost savings initiatives, they're all, I think, very important and I think it definitely highlights, I think some of the culture in the company as well. If we look at Q2, you kind of heard, if you look at the operating margin, we were up like 100 basis points if you exclude currency.

Speaker #4: You know and and so that's that's that can be a factor here. But we feel very very good about the team's execution. You know we we really I think we've you know we've been trying to like really focus on this always in the past.

Speaker #4: I think if you look at the different initiatives that we have kind of underlying margin expansion, like, you know, the Stern Drive program, productivity programs, cost savings initiatives—they're all, I think, very important.

Speaker #4: And I think it it definitely highlights I think some of the culture in the company as well. If we look at Q Q2 you know you kind of heard we if you look at you know the operating margin we were up like 100 basis points if you exclude currency.

Speaker #4: If you look at that from a full-year perspective in terms of what we're thinking for 2026, you know, we'll probably be—excluding currency—probably up, you know, 67 to 70 basis points, maybe modestly better than what we were thinking before.

Shawn Vadala: If you look at that from a full year perspective in terms of what we're thinking for 2026, we'll probably be excluding currency probably up 60, 70 basis points, maybe modestly better than what we were thinking before. There's some currency in that, so on a reported basis, or not excluding currency, it would be up slightly maybe in the 10 to 20 basis point kind of range.

Speaker #4: Now there's some currency in that. So on a reported basis or you know or not excluding currency it would be up slightly maybe in the you know 10 to 20 basis point kind of range.

Josh Waldman: Okay. Appreciate it.

Speaker #4: And that's at the operating— that's at the, that's at the operating— that's at the operating margin level. Yeah.

Shawn Vadala: That's at the operating margin level. Yeah.

Speaker #1: I see. Okay. Thank you.

Josh Waldman: I see. Okay. Thank you.

Speaker #4: Yeah.

Shawn Vadala: Yep.

Speaker #2: Your next question is from the line of Vijay Kumar from Evercore ISI. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Vijay Kumar from Evercore ISI. Your line is now open. Please go ahead.

Speaker #5: Hi, guys. Thank you for taking my question. I guess, Shawn, my first one is quick housekeeping. What was FX and M&A contribution in the quarter?

Vijay Kumar: Hi guys. Thank you for taking my question. I guess, Shawn, my first one, quick housekeeping. What was FX and M&A contribution in the quarter?

Speaker #4: Yeah it was about so in terms of and you're talking I'm sorry Vijay you said did you say FX in in in M&A? In terms of revenue.

Shawn Vadala: Yeah. You are talking, I am sorry, Vijay, you said, did you say FX and M&A in terms of revenue?

Speaker #5: That's foreign exchange and. Correct.

Vijay Kumar: Foreign exchange, yeah.

Shawn Vadala: So-

Speaker #4: So. Yeah yeah yeah. So I usually don't think in terms of foreign exchange. So the acquisition contribution was about one and a half percent.

Vijay Kumar: Correct

Shawn Vadala: Yeah. I usually don't think in terms of foreign exchange. The acquisition contribution was about 1.5%. In terms of FX, I think if you kind of look at our reported numbers versus our local currency, it implies 1%, but I think with rounding it's north of 1%.

Speaker #4: And then in terms of FX I I think if you kind of like look at our you know our reported numbers versus our local currency it implies 1%.

Speaker #4: But I think, with rounding, it's north of 1%.

Speaker #5: That's helpful.

Vijay Kumar: That's helpful.

Speaker #4: Yeah.

Shawn Vadala: Yeah.

Speaker #5: And I guess when I look at the updated guidance, Shawn, when we do the math, I think the implied exit rate for Q4 is somewhere between 4% to 5%, depending on the midpoint or high end of the guidance.

Vijay Kumar: I guess when I look at the updated guidance, Shawn, when we do the math, I think the implied exit rate for Q4 is somewhere between 4% to 5%, depending on the midpoint or high end of the guidance. That's a step-up, right? That's a sequential step-up from Q3. I know in the past you've spoken about the backlog and order visibility, right? Is that what's driving the sequential step-up? What gives the confidence in this Q4 exit rate?

Speaker #5: That's a step up rate. That's a sequential step up from 3Q. I know in the past you've spoken about the backlog and order visibility rate is that what's driving the sequential step up?

Speaker #5: Like what what gives the confidence in this fourth quarter exit rate?

Speaker #4: Yeah so I I think yeah so Vijay a couple things. So first of all I think if you if you look at it from a growth perspective yeah the implied Q4 is a little bit higher than than the Q3 guidance.

Shawn Vadala: Yeah, Vijay, a couple of things. First of all, I think if you look at it from a growth perspective, yeah, the implied Q4 is a little bit higher than the Q3 guidance. I think a lot of that also has to do with the fact that Q3 has a much more challenging comparison to the prior year. I kind of called out a little bit the industrial business as an example, and also the Americas had a challenging comp. I think that's kind of part of it. I think if you also just look at sequentials in terms of just the flow of quarters and dollars from one quarter to another, I feel like the sequentials are pretty in line with historical sequentials.

Speaker #4: I think a lot of that also has to do with the fact that Q3 has a much more challenging comparison to the prior year.

Speaker #4: You know, I kind of called out a little bit the industrial business as an example, and also, the Americas had a challenging comp.

Speaker #4: So, I think that's kind of part of it. But I think if you also just look at, you know, sequentials in terms of just, like, you know, the flow of quarters and dollars from one quarter to another, I feel like the sequentials are, you know, pretty in line with historical sequentials.

Speaker #4: And then as we kind of like exit the year we feel like you know we feel like we have some good momentum in entering into the the back half of the year.

Shawn Vadala: As we kind of exit the year, we feel like we have some good momentum entering into H2. I think, yeah, when you look at what we're seeing in the business today, we definitely feel good about the momentum that we're kind of carrying into H2.

Speaker #4: And I think, you know, yeah, when you look at what we're seeing in the business today, we definitely feel good about the momentum that we're kind of carrying into the second half.

Speaker #4: So.

Speaker #5: Interesting. Thank you.

Vijay Kumar: Understood. Thank you.

Speaker #2: Your next question is from the line of Michael Riskin at Bank of America. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Michael Ryskin at Bank of America. Your line is now open. Please go ahead.

Speaker #1: Great, thanks for taking the question, guys. Maybe I want to dig a little bit more into biopharma. It sounds like that's one of the places you're feeling a little bit better this quarter.

Michael Ryskin: Great. Thanks for taking the question, guys. Maybe want to dig a little bit more into biopharma. It sounds like that's one of the places you're feeling a little better this quarter. Had some comments on bioprocess analytics, bioproduction balances. Just would love to expand more on that. How big of a step-up was it? Was it above your expectations? Anything about where you're seeing that momentum the most and just expectations for that going forward. You feel like you're early on or you've already sort of crested it, if you know what I mean?

Speaker #1: You know, I had some comments on bioprocess analytics, bioproduction, you know, balances. Just would also expand more on that. Did you see—was it sort of like a—how big of a step up was it?

Speaker #1: Was it you know above your expectations? Anything about where you're seeing where you're seeing that momentum the most and just expectations for that going forward?

Speaker #1: Do you feel like you're early on, or you've already sort of crested it? If you know what I mean.

Speaker #3: Yeah, thanks, Mike. I'll take that question. Look, let's talk about biopharma and bioprocessing here. Starting with bioprocessing, which, I think, is a low double-digit percent of our total sales.

Josh Waldman: Yeah. Thanks, Mike. I'll take that question. Let's talk about biopharma and bioprocessing here. Start with bioprocessing, which is, I think, a low double-digit of our total sales. It's mostly Pro, but also part of the industrial automation portfolio plays here. Pro had really good growth again in Q2, especially in Americas, with bioprocessing. There's also some good equipment demand from industrial coming on from these automation providers, where we serve them with our automation solution equipment from industrial products that we have. There's really good momentum there.

Patrick Kaltenbach: Yeah. Thanks, Mike. I'll take that question. Let's talk about biopharma and bioprocessing here. Start with bioprocessing, which is, I think, a low double-digit of our total sales. It's mostly Pro, but also part of the industrial automation portfolio plays here. Pro had really good growth again in Q2, especially in Americas, with bioprocessing. There's also some good equipment demand from industrial coming on from these automation providers, where we serve them with our automation solution equipment from industrial products that we have. There's really good momentum there.

Speaker #3: It's mostly Pro, but also part of the industrial automation portfolio. Pro had really good growth again in Q2, especially in the Americas.

Speaker #3: With with bioprocessing and there's also some good equipment demand from industrial. Coming up from these automation providers where we serve we serve them with our automation solution equipment from from industrial products that we have.

Speaker #3: So, there's really good momentum there. But when you ask about the investments in pharma and biopharma, you're probably referring here to the reshoring activities, I guess.

Patrick Kaltenbach: When you ask about the investments in pharma and biopharma, you're probably referring here to the reshoring activities, I guess. I think, number one, we are extremely well-positioned for that because about 50% of all sales go into production, plus about 20% QA/QC. We cover a lot of the value chain there, and we are in an excellent position with our biopharma portfolio, but also helping on the industrial automation portfolio. We see some good activities, some RFQs here related to reshoring, but I still would say it's early innings. I think this momentum will continue to pick up in H2 and also as we go into 2027. Yes, there are some activities, and probably you all have heard about companies expanding their manufacturing in the US.

Speaker #3: We we I think we are number one we are extremely well positioned for that because we about 50% of our sales go into production plus about 20% QA QC.

Speaker #3: So we cover a lot of the value chain there. And we are an excellent position with our biopharma portfolio but also helping on the industrial automation portfolio.

Speaker #3: We see some active, some good activities. Some RFQs here are related to reshoring, but I still would say it's early in it.

Speaker #3: So I think the momentum will continue to pick up in the second half and also as we go into 2027. But yes, there are some activities in New York, probably all I've heard about, you know, companies expanding their manufacturing in the US.

Speaker #3: I think until there will be really some groundbreaking for additional facilities, that will still take some time, and then there will be more investment coming in the years 2027 and 2028.

Patrick Kaltenbach: I think until there will be really some groundbreaking of additional facilities, that it will still take some time, and there's going to be more investment coming in the years 2027 and 2028. For now, again, most of what we see is facility investments and capacity expansion in the US.

Speaker #3: For now, again, most of what we see is facility investments in capacity expansion in the US.

Speaker #4: Yeah and another interesting dynamic too is like the you know there's been a lot of questions and talk about replacement cycles and if you just look at our results in Q2 and you know Q1 quarter doesn't you know necessarily make a trend but it was encouraging to see you know very strong growth in the analytical instrument business as well as laboratory balances and if you think about the types of instruments that are typically on a QA QC bench you know that that cat those categories actually did did very well in in the quarter here.

Shawn Vadala: Another interesting dynamic too is there's been a lot of questions and talk about replacement cycles. If you just look at our results in Q2, and Q1 doesn't necessarily make a trend, but it was encouraging to see very strong growth in the analytical instrument business as well as laboratory balances. If you think about the types of instruments that are typically on a QA/QC bench, those categories actually did very well in the quarter here.

Speaker #4: So.

Speaker #1: Okay. Okay. And then maybe just going back to what Vijay was just asking about in terms of the second half outlook. You know, as you just touched on in that answer, you do have a little bit of a step up, but you also talked about in your prepared remarks expectations for Middle East and geopolitics and the macro and all that.

Michael Ryskin: Okay. Maybe just going back to what Vijay was just asking about in terms of the H2 outlook. As you just touched on in that answer, you do have a little bit of a step-up, you also talked about in your prepared remarks expectations for Middle East and geopolitics and the macro and all that. Sounds like you're kind of expecting status quo for that. I guess what I'm trying to get at is, feels like you did get bit by that a little bit in Q1, just kind of want to get at how much buffer there is in the guide if things do escalate. Just maybe a degree of conservatism or areas of upside potentially to offset if the macro Middle East gets a little bit worse, just so we don't have a repeat of what happened in Q1. Thanks.

Speaker #1: Sounds like you're kind of expecting the status quo for that. I guess what I'm trying to get at is, it feels like you did get bit by that a little bit in the first quarter.

Speaker #1: So I just kind of want to get at, you know, how much buffer there is in the guide if things do escalate. Just, you know, maybe a degree of conservatism or areas of upside potentially to offset if the macro Middle East gets a little bit worse.

Speaker #1: Just so we don't have a repeat of of what happened in 1Q. Thanks.

Speaker #4: Yeah hey Mike maybe I'll take that one and Patrick can add some color if you like. But but you know hey I think at the I think there's a little bit of a difference right now.

Shawn Vadala: Hey, Mike, maybe I'll take that one, Patrick can add some color if you'd like. I think there's a little bit of a difference right now. I think one is there is very strong momentum that we're seeing in terms of customer activity. We feel very good about how we're sitting to the H2. Now, we always acknowledge we're pretty short cycle with 1.5 months of backlog, when we look at everything holistically, we actually feel good, we start to lap also some topics from a year ago, like academia and biotech, which are smaller end markets in general, we feel like some of these end markets are starting to improve. We're starting to see growth again in the pipetting liquid handling business, which has also been really good.

Speaker #4: I think one is like there there is very strong momentum that we're seeing in terms of customer activity. And so we feel very good about how we're we're sitting to the second half.

Speaker #4: Now we always acknowledge we're we're pretty short cycle with one and a half months of backlog but when we look at everything holistically we we actually feel good and we start to laugh also some some topics from a year ago like academia and biotech which are smaller end markets in general but we just feel like some of these end markets are starting to improve.

Speaker #4: We're starting to see growth again in the pipetting liquid handling business, which has also been really good. It's been a headwind for a while for us.

Shawn Vadala: It's been a headwind for a while for us. If you look at the Q1 dynamic, like you mentioned, absolutely. I think one of the issues there was that we had expected companies to maybe start the year slow. I think with all the uncertainty that was hitting companies right at the beginning of the year, one of the things we kind of felt was that a lot of customers were holding off on finalizing budget commitments within their organization. A lot of things were also getting held up as kind of like a generic statement. Right now, it seems like people have their budgets. They know what they want to do. There are the projects, while things can always change, we feel like there's pretty good momentum going into the H2 of the year.

Speaker #4: If you look at like the the Q1 dynamic like you mentioned you know absolutely. And I think one of the issues there was that you know we had expected we had expected companies to maybe start the year slow.

Speaker #4: I think with all the uncertainty that was hitting companies right at the beginning of the year you know one of the things we kind of felt was that a lot of customers were holding off on finalizing budget commitments within their organization.

Speaker #4: So, a lot of things were also getting held up. That's kind of like a generic statement. Right now, it seems like people have their budgets.

Speaker #4: They know what they want to do. There are the projects, and while things can always change, we feel like there's pretty good momentum going into the second half of the year.

Speaker #4: And then I think we'll, you know, we'll learn a lot more about what it means over the next three months, and it might be more of a question on what it could mean for 2027.

Shawn Vadala: I think we'll learn a lot more about what it means over the next 3 months, it might be more of a question on what it could mean for 2027. I think the reality is that there's a lot of dynamic topics going on always in the world, we'll continue to monitor them. Regardless of the environment, I feel like the team has tried to stay focused on what we can control and executing well.

Speaker #4: But you know, I think the reality is that there are always a lot of dynamic topics happening in the world, and we'll continue to monitor them.

Speaker #4: But regardless of the environment, I feel like the team is trying to stay focused on what we can control and executing well.

Speaker #1: Okay. Thanks. Appreciate it.

Michael Ryskin: Okay. Thanks. Appreciate it.

Speaker #4: Yeah.

Shawn Vadala: Yeah.

Speaker #2: Your next question is from the line of Jack Meehan at Operon Research. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Jack Meehan at Nephron Research. Your line is now open. Please go ahead.

Speaker #1: Thank you. Good morning guys. I had a couple of follow up guidance questions for you. The first is so if I just look at EPS you know you beat the second quarter by you know about 70 cents in the midpoint of guidance is going up by 70 cents.

Jack Meehan: Thank you. Good morning, guys. I had a couple of follow-up guidance questions for you. The first is, so if I just look at EPS, you beat the Q2 by about $0.70, and the midpoint of guidance is going up by $0.70. It seems like a lot of the raise is related to what you saw in the Q2. Just trying to square that with your comment that overall it seems like conditions are improving. Just is that conservatism or are there other offsets that you're building in at this point?

Speaker #1: So it seems like a lot of the raise is related to what you saw in the second quarter. So just trying to square that with your comment that overall, it seems like conditions are improving.

Speaker #1: Is that just conservatism, or are there other offsets that you're building in at this point?

Speaker #4: Yeah I think I think it's fair Jack. I mean I think if you kind of like look at how we're we're you know how the second half like very happy with our Q2 results of course.

Shawn Vadala: Yeah. I think it's fair, Jack. I think if you look at how the H2 is very happy with our Q2 results, of course. Very happy to raise guidance for the full year. Very happy with the momentum we're seeing in the business. Acknowledge if you're trying to look at what your H2 model looks like today versus three months ago. It looks like maybe there's a little bit of conservatism or moderation slightly. It's not reflecting anything we're seeing in the business, but we feel like maybe that kind of de-risks any concerns out there for any of the geopolitical stuff, and we feel generally pretty good as we kind of go into the H2 of the year.

Speaker #4: Very happy to raise guidance for the full year, very happy with the momentum we're seeing in the business. I acknowledge if you're trying to look at what your Q—you know, second half model looks like today versus, you know, three months ago, it looks like maybe there's a little bit of conservatism or moderation, slightly.

Speaker #4: It's not reflecting anything we're seeing in the business but you know we we feel like yeah maybe that that kind of de-risks any concerns out there for any of the geopolitical stuff and we feel generally you know pretty good as we kind of go into the second half of the year.

Speaker #1: Great. And then wanted to poke a little bit more at the core industrial business. You talked about chemicals a bit. I'm actually not sure if some of that overlaps in the lab but we now have six months in a row of you know US manufacturing PMIs over 50.

Jack Meehan: Great. Wanted to poke a little bit more at the core industrial business. You talked about chemicals a bit. I'm actually not sure if some of that overlaps in the lab, we now have six months in a row of US manufacturing PMIs over 50, it felt like we might see a little bit more momentum there. I was wondering if you'd just talk about more of the macro sensitive stuff, if you think there's still

Speaker #1: So it felt like we might see a little bit more momentum there. I was wondering if you could just talk about more of the macro-sensitive stuff, like if you think there's still some of that correlation, or if there's a reason why maybe it diverges for some reason.

Shawn Vadala: Yeah

Jack Meehan: some of that correlation or if there's a reason why maybe it diverges for some reason.

Shawn Vadala: Yeah. No, it's a good question because Well, first of all, there's a couple of different things. The one thing that isn't necessarily evident in the results until you look internally and unpack them is the categories that are really supporting automation and digitalization around the world are actually growing very well, and we see that. We also, while we're less correlated to PMIs than we were 10 years ago, we also recognize that when the economy does better, we generally should do better as well too, even though there's a little bit of a delay. The one thing that maybe doesn't jump out is that within industrial, there can be small pockets of project activity.

Speaker #4: Yeah. Yeah no it's it's a good question because you know if you kind of look at well first of all there's a there's a couple different things.

Speaker #4: The one thing that you know isn't necessarily evident in the results until you look internally in a PACM is that the categories that are really supporting automation and digitalization around the world are actually growing very well, and we see that.

Speaker #4: We’re also less correlated to PMIs than we were 10 years ago. We also recognize that, you know, when the economy does better,

Speaker #4: We we generally should do better as well too. And and even those there's a little bit of a delay. But the but the one thing that maybe doesn't jump out is that you know within industrial there can be small pockets of project activity and one of those pockets is our transportation and logistic business and the reality is there's just like some timing going on with with with larger customer projects and and that's you know that's kind of like mitigating some of the other positive results you're seeing in that business.

Shawn Vadala: One of those pockets is our transportation and logistic business, the reality is there's just some timing going on with larger customer projects, that's mitigating some of the other positive results you're seeing in that business. Overall, we feel actually quite good. If you look at even our Q3 guide, despite lapping also some pretty large comps in industrial as well as the Americas from a year ago, we actually feel pretty good about our guidance and how the outlook is for the H2.

Speaker #4: But overall I we feel actually quite good. And if you kind of like look at even our Q3 guide you know despite lapping also some pretty large comps and and industrial as well as the Americas from from a year ago we we've actually feel pretty good about you know our our guidance and and how it's how the outlook is for the second half.

Speaker #1: Sounds good. Thanks Shawn.

Jack Meehan: Sounds good. Thanks, Shawn.

Speaker #2: Your next question is from the line of Luke Sergot at Barclays. Your line is now open. Please go ahead. As a reminder, please check that you are unmuted.

Operator: Your next question is from the line of Luke Sergott at Barclays. Your line is now open. Please go ahead. As a reminder, please check that you are unmuted. Your next question is from the line of Casey Woodring at J.P. Morgan. Your line is now open. Please go ahead.

Speaker #2: Your next question is from the line of Casey Woodring at JP Morgan. Your line is now open. Please go ahead.

Speaker #1: Great. Thank you for taking my questions. Now that we're in the back half of the year, I'm curious how reshoring conversations have trended—if those have picked up at all—and if you would expect orders to roll through here before the year ends.

Casey Woodring: Great. Thank you for taking my questions. Now that we're in the back half of the year, curious just how reshoring conversations have trended, if those have picked up at all, and if you would expect orders to roll through here before the year ends.

Patrick Kaltenbach: Yeah. Casey, good morning. I think I partly at least addressed in one of my former answers. Yes, we see some activity there, with RFQs that are related to reshoring. Again, as customers are expanding manufacturing in the United States, that is a good indication that there's more business to come. Again, the larger factories and investments still have to be made. They are still early innings. We truly see the biopharma investments as largely incremental for us moving forward when you think about biopharma CapEx plans, especially when it comes to instrumentation. Think about the tank scales, think about the QA/QC lab. That will be moving forward. Some good momentum, and we are, of course, in a lot of discussions with some of our key customers there about their plans.

Speaker #3: Yeah. Casey, good morning. I mean, I think I partly at least addressed it in one of my former answers. Yes, we see some activity there with RFQs that are related to reshoring.

Speaker #3: Again, as customers are expanding manufacturing in the United States, that is a good indication that there's more business to come. Again, the larger factories and investments still have to be made, so it's still early innings.

Speaker #3: But we see we truly see the pharma biopharma investments as largely incremental for us moving forward forward when you think about biopharma capex plans especially when it comes to instrumentation think about a tank scales think about the QA QC labs so that there will be moving forward some some good momentum and we are of course in a lot of discussions with with some of our key customers there about their plans.

Patrick Kaltenbach: It's still early innings, but yes, the momentum has picked up, and we are pretty positive that this will carry well into 2027, 2028.

Speaker #3: And it's still early innings, but yes, the momentum has picked up, and we are pretty positive that this will carry well into 2027 and 2028.

Patrick Kaltenbach: It's still early innings, but yes, the momentum has picked up, and we are pretty positive that this will carry well into 2027, 2028.

Speaker #1: Got it. That's helpful. And then, Patrick, can you just walk through how performance trended in the Americas by business segment and market?

Casey Woodring: Got it. That's helpful. Patrick, can you just walk through how performance trended in the Americas by business segment and end market? Curious on how things like academic and government and biotech trended, right? Like you mentioned, pipetting returned to growth. Within that 1% organic number in Americas, would just be curious to hear what drove that and maybe what's still lagging, and how you would see that region playing out in the back half. Thank you.

Speaker #1: Curious on how things like academic, government, and biotech trended, right? Like you mentioned pipetting. Return to growth. So, within that 1% organic number in the Americas, I would just be curious to hear what drove that, and maybe what's still lagging, and how you would see that region playing out in the back half.

Speaker #1: Thank you.

Speaker #3: And maybe, Shawn, you can repeat again how you guided the Americas for Q3 and for the fiscal year.

Patrick Kaltenbach: Maybe, Shawn, you can repeat again how you guided the Americas for Q3 and fiscal year.

Speaker #4: Yeah, so for the Americas, the guide for Q3 is low to mid single digit, but again, we're lapping 9% in the prior year.

Shawn Vadala: Yeah. The Americas, the guide for Q3 is modest single digit. Again, we're lapping 9% in the prior year. If you look at the different end markets, I don't know, Patrick, if you want to contribute here, but I can run with it if you want. In terms of the end markets, we're certainly seeing improvement in some of the areas that have been softer, like academia or biotech. Our pipetting business is a good example of that. It's larger exposures for that business, smaller for the Americas overall. That feels pretty good. Bioprocessing has been a very hot segment in the US for us. A lot of the different hot segments as well, like process analytics particularly benefits from power. Semiconductor are also doing very well.

Speaker #4: And you know if you kind of if you kind of like look at the different end markets I don't know Patrick if you want to if you want to contribute here but I I can kind of run with it if you want.

Speaker #4: Like you know in terms of like the end markets we're we're certainly seeing improvement in some of the areas that have been softer like like academia or or biotech and and you know our our pipetting business is a good example that you know it's it's larger larger exposures for that business smaller for the for the Americas overall.

Speaker #4: So that feels pretty good. Bioprocessing has been a very hot segment in the US for us. A lot of the different hot segments as well that process analytics particularly benefits from, like power semiconductor, are also doing very well.

Speaker #4: And then if you think about like these trends around industrial automation digitalization good momentum there as I mentioned and you know like Patrick said you know unshoring we're well positioned for it but still probably very early innings there.

Shawn Vadala: If you think about these trends around industrial automation, digitalization, good momentum there, as I mentioned. Like Patrick said, onshoring, we are well-positioned for it, but still probably very early innings there. What was also nice is just like I kind of commented on earlier about if you think about the value chain, that QA/QC space where analytical instrumentation, that was good momentum also in the quarter. I think the setup, the trends continue to, I think, go generally in a good direction. We do get lumpiness from time to time from things like retail. If you look beyond that, the underlying business looks positive today.

Speaker #4: And then what was also nice is just like I kind of comment commented on earlier about like the like like if you think about the value chain you know that QA QQ QC space where like analytical instrumentation like that was that was a nice that was good momentum also in the quarter.

Speaker #4: So I think you know kind of like the the setup the trends continue to I think go generally in the the a good direction.

Speaker #4: You know we we do get lumpiness from time to time from things like retail but but if you kind of look beyond that you know the underlying business is you know looks positive today so.

Speaker #1: Great. Thank you.

Casey Woodring: Great. Thank you.

Speaker #2: Your next question is from the line of Callum Tishmarsh at Morgan Stanley. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Kallum Titchmarsh at Morgan Stanley. Your line is now open. Please go ahead.

Speaker #1: Great. Good morning guys. Thanks for the question. Maybe just following up on on Tycho's question on price. Could you maybe just break out a bit more specifically which segments and geographies you've been more aggressive with on price just as we think about performance in the quarter?

Kallum Titchmarsh: Great. Good morning, guys. Thanks for the question. Maybe just following up on Tycho's question on price, could you maybe just break out a bit more specifically which segments and geographies you've been more aggressive with on price, just as we think about performance in the quarter? Obviously that 2%, I believe, is the long-term assumption for price, but just given the uptick in end market health and some of the innovation you've spoken to, any reason why that couldn't sit above 2% when we think about 2027 and beyond?

Speaker #1: And then, obviously, that 2% I believe is the long-term assumption for price, but just given the uptick in end market health and some of the innovation you've spoken to, is there any reason why that couldn't sit above 2% when we think about 2027 and beyond?

Speaker #4: Yeah. Hey, we'll probably talk more about those types of assumptions at our upcoming Analyst Day, but I certainly wouldn't expect us to come out with a higher price increase guidance than 2%. We feel pretty good about that one for the long term.

Shawn Vadala: We'll talk probably more about those types of assumptions at our upcoming Analyst Day, but I certainly wouldn't expect us to come out with a higher price increase guidance than 2%. We feel pretty good about that one for the long term. In terms of breaking it down, Kallum, we typically wouldn't get into too much detail, but maybe a good way to think about it is that we tend to do well in most geographies in the world. Geographies where there's higher inflationary pressures are going to have higher price increases. For example, like in the United States, of course, we had a lot of the tariff pressures a year ago, so of course, the US would have had a higher price realization than some of the other geographies.

Speaker #4: You know in terms of breaking it down Callum we we typically wouldn't get into too much detail but maybe a good way to think about it is that you know you know we tend to do well in in most geographies in the world and but you know geographies where there's higher inflationary pressures are going to have higher price increases.

Speaker #4: So and so for example like in the United States of course we had a lot of the the tariff pressures you know a year ago so of course the US would have had a higher price realization than some of the other geographies.

Speaker #1: Great. And and I know that you know relatively small portions of the business but maybe just talk us through in a bit more detail what you've seen in the high growth areas like bioprocess and semis and then for those areas I guess are you comfortable with the portfolio you have today of products or you know would there be appetite to perhaps you know offer something broader you know for the future?

Kallum Titchmarsh: Great. I know they're relatively small portions of the business, but maybe just talk us through in a bit more detail what you've seen in the high growth areas like bioprocess and semis. For those areas, I guess are you comfortable with the portfolio you have today of products, or would there be appetite to perhaps offer something broader for the future? Thanks a lot.

Speaker #1: Thanks a lot.

Speaker #3: Yeah. Thanks Callum. Hey these these hot segments whether it's semiconductor battery GLP one and others these are all low single digit digit contributors job all all sales but they see really good growth and of course our our market teams are really focused on solutions for these for these areas.

Patrick Kaltenbach: Thanks, Kallum. These hot segments, whether it's semiconductor, battery, GLP-1, and all those, these are all low single-digit contributors of overall sales, they see really good growth, and of course, our market teams are really focused on solutions for these areas. I would say we play well in them. If you look at the US, as Shawn said, semiconductor definitely is a really good segment. GLP-1s, the whole biopharma segment. If you go to other areas around the world, if you go, for example, to China, the battery segment is really also back there to very good momentum and also investment in biopharma and GLP-1s. Don't think this is the larger part of our business. Again, the broader part of our business is in pharma, biopharma, chemical, and food, and other areas.

Speaker #3: So I would say we we play well in them if you look at the US as as Shawn said semiconductor definitely is a really good segment GLP ones the whole biopharma segment if you go to other areas around the world if you go to for example to China the battery segment is is really also back there to very good seg momentum and also investment in biopharma and GLP ones.

Speaker #3: But but don't don't think this is a the larger part of our business again the broader part of the business is in in pharma biopharma in in chemical and food and other areas but these hot segments are important from a from a from a perspective that we really want to maximize our growth in these areas as well and we do very strategic investment when it comes to solutions for these end markets and working very very close with customers whenever they need specific tailored solutions.

Patrick Kaltenbach: These hot segments are important for us from a perspective that we really want to maximize our growth in these areas as well, and we do very strategic investment when it comes to solutions for these end markets and working very closely with customers whenever they need specific tailored solutions for their segments. For example, we have very good results there working closely with some of the largest battery manufacturers over the last couple of years to make sure that we develop tailored solutions that really drove significant growth for us in these areas.

Speaker #3: For their segments, for example, we have very good results there, working closely with some of the largest battery manufacturers over the last couple of years to make sure that we develop tailored solutions that really drove significant growth for us in these areas.

Speaker #1: Thank you.

Kallum Titchmarsh: Thank you.

Speaker #2: Your next question comes from the line of Easy Kozlowsky from Goldman Sachs. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Izzy Koslowsky from Goldman Sachs. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Evie Koslowsky from Goldman Sachs. Your line is now open. Please go ahead.

Speaker #5: Hi. Thank you for taking my questions. So first I guess maybe touch on the lab business and what's driving that improvement. Are you starting to see pharma invest more heavily in sort of lab in the loop and automation capabilities as they look to shore up some of their AI strategies or would you characterize the improvement in pharma and lab as just kind of general certainty coming back to the market?

Izzy Koslowsky: Hi. Thank you for taking my questions. First, I guess maybe touch on the lab business and what's driving that improvement. Are you starting to see pharma invest more heavily in lab in the loop and automation capabilities as they look to shore up some of their AI strategies? Or would you characterize the improvement in pharma and lab as just kind of general certainty coming back to the market?

Evie Koslosky: Hi. Thank you for taking my questions. First, I guess maybe touch on the lab business and what's driving that improvement. Are you starting to see pharma invest more heavily in lab in the loop and automation capabilities as they look to shore up some of their AI strategies? Or would you characterize the improvement in pharma and lab as just kind of general certainty coming back to the market?

Speaker #3: Yeah, look—hey, look, when you look at Lab, I mean a lot of it is, of course, driven by the innovation we have brought out, not only in terms of automation and digitalization capabilities, but that's a good part of it as well.

Patrick Kaltenbach: Yeah. When you look at lab, a lot of it is, of course, driven by the innovation we have brought out, not only in terms of automation and digitalization capabilities, but that's a good part of it as well. You got that. When you think about how pharma companies are automating their experimental setups, they use a lot of our equipment together with some of the automation partners that we have to automate their experiments and to really drive them towards higher throughput. Essential there is that they also have an informatics platform like LabX that collects all the information, and then they can use that on an aggregated level to drive the next experimental conditions, et cetera.

Speaker #3: You got that. I mean, when you think about how pharma companies are automating their experimental setups, they use a lot of our equipment together with some of the automation partners that we have.

Speaker #3: And to to automate their experiments and to really drive them towards higher throughput but it's essential there is that they also have an informatics platform like LabX that collects all the information and then they can use that on an aggregated level to drive the the next experimental conditions et cetera.

Speaker #3: But Lab overall is benefiting across the board, not only from automation but also from the number of new products and new features with the product innovations that we released over the last years.

Patrick Kaltenbach: Lab overall is benefiting across the board, not only from automation, but also from the number of new products and new features with the products, innovation that we released over the last years, and it goes almost across the entire value chain in lab because think about the more early research part. We launched a new semi-automatic pipette this year, which has really received really well in AutoChem. We just launched a new solution that I think will drive some good growth moving forward. On the lab product categories, we have also launched a lot of new products. I think given that we have also a big exposure to the QA/QC market, that will be a good momentum for us moving forward.

Speaker #3: And it goes almost across the entire value chain in the lab. If you think think about the the more early research part we launched a new semi-automatic pipette this year which is really received really well in auto chem which was launched a new solution that I we think will drive some good growth moving forward.

Speaker #3: And then, on the Lab product categories, we have also launched a lot of new products. So I think, given that we also have a big exposure to the QA/QC market, that will be a good momentum for us moving forward.

Speaker #4: Yeah. And I think the like part of your question was also the uncertainty. Like I think the the increased certainty certainly helps right? Like you know the we we hear that a lot in terms of like biopharma and generally spending more than they where there was a lot of hesit hesitation at the beginning of the year.

Shawn Vadala: I think part of your question was also the uncertainty. I think the increased certainty certainly helps, right?

Patrick Kaltenbach: Yeah.

Shawn Vadala: We hear that a lot in terms of biopharma generally spending more than where there was a lot of hesitation at the beginning of the year.

Speaker #5: Great. That's super helpful. And then maybe touch on your service business. You know how that trend in the quarter then updated expectations going forward.

Izzy Koslowsky: That's super helpful. Maybe touch on your service business, how that trended in the quarter, then updated expectations going forward.

Evie Koslosky: That's super helpful. Maybe touch on your service business, how that trended in the quarter, then updated expectations going forward.

Speaker #3: Yeah. Service in the quarter grew—what was it—nine?

Patrick Kaltenbach: Yeah. Service in the quarter grew, what was it, 9%?

Speaker #4: It was nine percent, and organically, it was seven.

Shawn Vadala: It was 9%.

Patrick Kaltenbach: 9%.

Shawn Vadala: Organically, it was 7%.

Speaker #3: Organic seven. So again, really growing faster than our products at the moment, and we're really proud of that. We continue to make really strategic investments in our service business.

Patrick Kaltenbach: Organic seven. Again, really growing faster than our products at the moment, and I'm really proud of that. We continue to make really strategic investment in our service business. We have still a good opportunity to continue to outgrow the rest of the market, number one. Our service is an important business for us because it drives, of course, a lot of customer loyalty. Our Net Promoter Scores are very high in this area. We launched lots of new capabilities in service. For example, our service engineers can have now access to an AI-supported knowledge base where they can basically use all of the internal information that we have regarding earlier service records, about R&D material, application notes, et cetera.

Speaker #3: We still have a good opportunity to continue to outgrow the rest of the market, number one. Our service is an important business for us because it drives a lot of customer loyalty.

Speaker #3: Our net promoter scores are very high in this area. We launched also new capabilities in in service for example our service engineers can have now can have now access to a an AI supported knowledge base that where they can basically use all of the internal information that we have regarding earlier service records about R&D material application notes et cetera.

Speaker #3: So whenever they go out and service a product, they basically can use these AI-supported tools to do best-in-class service, which drives, of course, our first fix ratio a lot and also drives customer loyalty up.

Patrick Kaltenbach: Whenever they go out and service a product, they basically can use these AI-supported tools to do best-in-class service, which drives, of course, our first fix ratio a lot, and also drives customer loyalty up. There's a lot of things that customers can get that I say only at MT, because we have access to this data, we have access to solutions that none of our competitors have when it comes to servicing instruments and our install base. That's still a growing opportunity for us moving forward. I'm very optimistic that services will continue to grow, as last year we, for the first time, exceeded $1 billion revenues in services. That's at a high single-digit growth rate.

Speaker #3: There's a lot of things that customers can get but I say only at MT because we have access to this data. We have access to solutions that none of our competitors have and comes to servicing instruments that are in installed base.

Speaker #3: And there's still a growing opportunity for us moving forward. So I'm very optimistic that services will continue to grow. As you know, last year we for the first time exceeded $1 billion in revenues in services, and that's at a high single-digit growth rate.

Speaker #4: Yeah, so to put it in perspective for the year, it's probably going to be high single digits for the full year. Q3 might be more like mid to high, but you know, when you step back, for the full year we're very happy with that performance.

Shawn Vadala: Yeah. To put it in perspective for the year, it's probably going to be high single digits for the full year. Q3 might be more like mid to high, when you step back for the full year, we're very happy with that performance.

Speaker #5: Great. Thank you.

Izzy Koslowsky: Great. Thank you.

Evie Koslosky: Great. Thank you.

Speaker #2: Your next question is from the line of Michael Polark at Wolfe Research. Your line is now open. Please go ahead.

Operator: Your next question is from the line of Michael Pollack at Wolfe Research. Your line is now open. Please go ahead.

Speaker #3: Good morning. I just have one question. My understanding is the US pharmacopia had some material revisions that went into effect earlier this year around pharmaceutical weighing requirements.

Michael Pollack: Good morning. I just have one question. My understanding is the U.S. Pharmacopeia had some material revisions that went into effect earlier this year around pharmaceutical weighing requirements. I have seen some analysis that is describing this as quite significant. I believe the effective date for compliance started in Q1 of this year. Is this an influence that you would spike out? If so, what sort of activities is it driving at customers, and how is Mettler exposed to such a change? Thank you.

Michael Polark: Good morning. I just have one question. My understanding is the U.S. Pharmacopeia had some material revisions that went into effect earlier this year around pharmaceutical weighing requirements. I have seen some analysis that is describing this as quite significant. I believe the effective date for compliance started in Q1 of this year. Is this an influence that you would spike out? If so, what sort of activities is it driving at customers, and how is Mettler exposed to such a change? Thank you.

Speaker #3: I've seen some analysis that's describing this as quite significant, and I believe the effective date for compliance started in the first quarter of this year.

Speaker #3: So, is this an influence that you would call out? If so, what sort of activities is it driving in customers, and how is Butler exposed to such a change?

Speaker #3: Thank you. Yeah. Thanks. Hey that's that's a very good point. I mean it it's not only the US pharmacopia. We have seen already last year and early this year the the revisions of the Japanese pharmacopia and the China pharmacopia last year which actually had the same the same revisions when it comes to weighing regulations would help which help to drive incremental growth.

Patrick Kaltenbach: Yeah. Thanks. That is a very good point. It is not only the U.S. Pharmacopeia. We have seen already last year and earlier this year the revisions of the Japanese Pharmacopoeia and the Chinese Pharmacopoeia last year, which actually had the same revisions when it comes to weighing regulations, which help to drive incremental growth. We are extremely well-positioned, exactly with the recently launched portfolio of new lab balances to help our customers, to support them with complying with these regulations.

Speaker #3: And we are extremely well positioned, exactly with the recently launched portfolio of new lab balances, to help our customers and to support them with complying with these regulations.

Speaker #2: Your next question comes from the line of Dan Leonard at RBC. Your line is now open. Please go ahead.

Operator: Your next question comes from the line of Dan Leonard at RBC. Your line is now open. Please go ahead.

Speaker #1: Thanks a bunch. Hello, Patrick. I would just like to revisit your comments on emerging markets outside of China, that high single-digit growth rate.

Dan Leonard: Thanks a bunch. Hello. Patrick, I would just like to revisit your comments on emerging markets outside of China, that high single-digit growth rate. Can you offer some more color? Is that all volume? Do you have pricing power? Anything to share on service attachment rates and the long tail of emerging regions?

Speaker #1: Can you offer some more color? Is that all volume? Do you have pricing power? Anything to share on service attachment rates and the long tail of emerging regions?

Speaker #3: Mm-hmm. Yeah, very good question, Dan. Thank you. Yeah, we are growing high single digits in these emerging markets outside of China. And of course, if you think about, for example, India has great momentum.

Patrick Kaltenbach: Very good question, Dan. Thank you. We're growing high single digits in these emerging markets outside of China. Of course, if you think about, for example, India has great momentum. If you think also regions outside of Southeast Asia, if you think about Latin America, Mexico, Brazil, et cetera, we see pretty good growth and also good investments of many companies out there. There is also some reshoring, or home-shoring, but let's say reshoring going also in these regions, which really helps us to benefit a lot from the growth opportunities across our platforms. This is a play that goes across, if you think about the end markets, it goes across pharma, but also chemical.

Speaker #3: If you think also about regions outside of Southeast Asia, if you think about Latin America—Mexico, Brazil, et cetera—we received pretty good growth and also good investments from many companies out there.

Speaker #3: There is also some reshoring or home-shoring, but let's say reshoring, or going also into these regions, which really helps us to benefit a lot from the growth opportunities across our platform.

Speaker #3: So this is a play that goes across—I mean, if you think about the end markets, because it goes across pharma but also chemicals. And the chemical segment also, if you think, for example, about investments in the battery segment, where manufacturers have expanded their footprint outside of China into other areas in Asia Pacific, that comes along with a lot of investment in new instruments, and of course, related services as well.

Patrick Kaltenbach: The chemical also, if you think, for example, about investments in the battery segment, where manufacturers have expanded their footprint outside of China into other areas into Asia Pacific. That comes along with a lot of investment in new instruments but also, of course, related services. I wouldn't say that there's a significant difference in terms of connect rate when it comes to the laboratory instruments outside of or in these emerging markets compared to other regions. That, of course, then also drives some additional incremental revenue opportunity for us moving forward and also recurring revenues.

Speaker #3: I wouldn't say that there's a significantly difference in terms of connect rate when it comes to the laboratory instruments outside of or in these emerging markets, compared to other regions.

Speaker #3: So that, of course, then also drives an additional incremental revenue opportunity for us moving forward, and also recurring revenues.

Speaker #4: We and we also do well on on price you know as well in these markets. It's like I said before it's very much a global topic for us where the you know the value proposition tends to resonate globally which is which is great.

Shawn Vadala: We also do well on price.

Patrick Kaltenbach: Yes

Shawn Vadala: as well in these markets. It's like I said before, it's very much a global topic for us where the value proposition tends to resonate globally, which is great.

Speaker #1: And then as a follow up does the opportunity in in these emerging markets just map towards manufacturing GDP by country or are there any areas of disproportional opportunity that you would highlight?

Dan Leonard: As a follow-up, does the opportunity in these emerging markets just map towards manufacturing GDP by country, or are there any areas of disproportional opportunity that you would highlight?

Speaker #4: I think India, I mean, certainly is a standout, right? I mean, at least, you know, in the last couple of years, if you look at the growth, it's been really, really impressive.

Shawn Vadala: I think India, certainly is a standout, right?

Patrick Kaltenbach: Yeah.

Shawn Vadala: At least the last couple of years, if you look at the growth, it's been really impressive. It's certainly a geography that we prioritize on. We just think we have a lot of great opportunity there. If you look at the underlying, some of the nearshoring and opportunities with generics, those types of things, there's just a lot of good things on the horizon there. All the other areas too, we differentiate on as we allocate resources. Not to repeat them all, but Patrick mentioned a lot of them, but whether they're in Asia, Eastern Europe, Latin, South America, there's a lot of great opportunity.

Speaker #4: It's certainly a geography that we you know prioritize on. And we we just think we have a lot of great opportunity there. And you know if you look at the underlying some of the you know the the near shoring and and opportunities which generics those types of things there's just a lot of good things on the horizon there.

Speaker #4: But I mean hey all the other areas too we we differentiate on is we allocate resources and you know not to repeat them all but Patrick mentioned a lot of them but like but they're all whether they're in the the you know Asia East and Europe Latin South America there's there's a lot of great opportunity.

Speaker #4: And one of the strengths of METTLER has always been that we have direct sales organizations in these individual countries, so that we can really understand the local markets and really have teams that have that application know-how and work with the local customers. That really makes a difference.

Shawn Vadala: One of the strengths of Mettler has always been that we have direct sales organizations in these individual countries so that we can really understand the local markets and really have teams that really have that application know-how and work with the local customers, and that really makes a difference.

Speaker #1: Thank you very much.

Dan Leonard: Thank you very much.

Speaker #2: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Adam for closing remarks.

Operator: There are no further questions at this time. We have reached the end of the Q&A session. I will now turn the call back to Adam for closing remarks.

Speaker #1: Thanks Jonathan. And and thank you everybody for joining us this morning. Please feel free to reach out to me if you have any follow up questions and I hope you all have a great weekend.

Adam Uhlman: Thanks, Jonathan, and thank you everybody for joining us this morning. Please feel free to reach out to me if you have any follow-up questions, and I hope you all have a great weekend. Take care.

Speaker #1: Take care.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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