Mettler Toledo International Inc/ Q1 FY2021 Earnings Call

Thank you, and good evening, everyone. I'm Mary Finnegan. I'm responsible for Investor Relations, and I'm happy to welcome you to the call tonight. I am joined today with Patrick Kaltenbach, our CEO; and Shawn Vadala, our Chief Financial Officer.

Thanks, Mary, and good evening, everyone. I'm happy to host the call tonight, which I'm doing from Switzerland while Shawn and Mary are in Columbus, Ohio. I want to start by thanking you for your interest and commitment to Mettler-Toledo. I know many of the analysts on the call have covered us for quite some time and know us well. We also have very long-standing shareholders who are also listening in. I look forward to our future interactions and hope that they can take place in person in the not-so-distant future. Let me make some brief comments on my impressions of the first several months at Mettler-Toledo. It is clear that the company's strategies and initiatives are well developed and well ingrained throughout the organization. A high level of accountability is evident throughout the company, which underpins the culture of strong execution. I am impressed with the interactions I have had with colleagues around the world, and I share their passion for customers and innovation that is very apparent in how they approach their responsibilities.

Yes. Thanks, Patrick, and good evening everyone. Sales were $804.4 million in the quarter, an increase of 18% in local currency. On a US dollar basis, sales increased 24% as currency benefited sales growth by 6% in the quarter. On slide number 4, we show sales growth by region. Local currency sales increased 14% in both the Americas and Europe and increased 29% in Asia/Rest of the World. Local currency sales increased 44% in China in the first quarter. On slide number 5, we outline local currency sales growth by product area. In the quarter, laboratory sales increased 20%, industrial increased 17% with core industrial up 26% and product inspection up 5%.

Thanks, Shawn. Let me start with some comments on our operating results. Our lab business had outstanding growth in the quarter. Pipettes had excellent growth and continued to benefit from COVID-19 related testing demand. All other product categories also had robust sales growth and growth in all regions was very strong. Biopharma trends continue to be very favorable and we also experienced improved customer demand in other segments such as chemical. We expect Lab to be very strong in the second quarter due to favorable biopharma trends, vaccine research, bioproduction scale-up, and production. We also expect to continue to benefit from pent-up demand in segments outside biopharma. While Lab will face tougher comparisons in the second half of the year, we believe we are well positioned to continue to capture share, given the strength of our product portfolio and continued strong execution of our Spinnaker sales and marketing initiatives. In terms of our Industrial business, Core Industrial did very well in the quarter with a 26% increase in sales, driven by China, which had growth in Core Industrial in excess of 60%. Europe and the Americas also had strong low to mid-teens growth in Core Industrial. Improving market conditions combined with the strength and diversity of our product portfolio and our focus on attractive market segments contributed to the strong results.

Thank you. We'll have our first question coming from the line of Derik De Bruin from Bank of America. Your line is open.

Hi, good afternoon, and thank you for taking my call. I have a couple of questions to start. I appreciate the information on the pipette tailwind that you've experienced. However, I'm a bit surprised to hear that you're suggesting this is slowing down. From what I gather on scientific Twitter, there are still numerous articles and complaints about pipette shortages. I would like more clarity on this. Additionally, how has this impacted your overall pricing? I assume that with a pipette shortage, people would be willing to pay more for it. Could you discuss whether you've seen any incremental pricing gains in the business as a result and if those gains are also fading? Thank you.

Okay. Thanks, Derik. I'll start off and then let Shawn comment on the pricing topic specifically as well. Well, first on the shortage of pipettes and pipette tips in the market right now. You're absolutely spot on. There is still a shortage in the market, especially related to COVID-19 testing. But as Shawn elaborated, we definitely expect the testing demand for COVID-19 to go down towards the second half of the year. And there's probably not the same amount in life science research or other areas that would compensate fully for that demand. This is why we are more cautious about the outlook and don't expect the same tailwind from the pipette business in terms of revenues in the second half. On pricing, we had the first pricing round this year already, and I'll let Shawn also comment on the overall impact of that.

Yeah. So Derik, our pricing in pipettes is I'd say a little bit higher than where it would be in a typical year. That's probably been a situation that's been going on now for the last couple of quarters. But maybe more recently with the increase in resin costs, we did come out with a price increase more recently in that respect. So you'll start to see actually even higher price increases for pipettes in Q2 and probably for the remainder of the year at least until as long as these higher resin costs continue.

And so what's embedded in your overall guidance for pricing just on a full year basis?

Sure, I'll start by discussing our performance in the first quarter before moving on to the rest of the year. We achieved around 2% growth in Q1. Alongside the price increase for pipettes, we also implemented some price hikes in other areas of the business to address the material cost challenges we began encountering in Q1. Currently, we expect pricing to be in the 2.5 percent range for the second half of the year, and there may be a chance to perform slightly better than that. For Q2, we anticipate growth to be between 2% and 2.5%.

Great. And then just one final question. What's your overall bioprocess exposure I guess in dollar amount right now? And just Mettler historically has not been the company that sort of pops up on the list when you think about it. Can you just give us some context so we can measure it against some of the peers in the space?

Yeah. We don't have a specific number for bioprocess specifically, but we probably continue to say that about one-third of our business is sold in the life sciences. Of course, bioprocess is an important part of that third with the acquisition of PendoTECH, of course, we further increased our exposure into bioprocess as well.

Our next question will be coming from the line of Vijay Kumar with Evercore ISI. Your line is open.

Hi, guys. Congrats on the nice ones here. Maybe Patrick I'll start with the big picture question for you. Perhaps it's coincidental, but what does seem to be changed? We did have an acquisition. I'm just curious as you've had some claim here, what are your strategic priorities? And how should we be thinking about capital deployment, capital allocation for overall Mettler?

Very good question Vijay. And thanks for the congratulations on the quarter. We are very proud of this quarter as you can imagine as we really performed much better than we expected. Now to your question regarding acquisitions, look Mettler-Toledo has historically a very strong organic growth story and also success in organic growth. Our business model is really about increasing market share every year by better go-to-market strategies with our Spinnaker sales and marketing technologies, having unique products in the market in terms of our design, usability, et cetera. They are very much favored by our customers. And we see that growth story continuing for quite some time. We still have plenty of headroom to grow. That will not change. It's fundamentally an organic growth story. We continue to do bolt-on acquisitions, tuck-in acquisitions. You could all recall them wherever we think it makes sense from a technology perspective or where it complements our product portfolio. So I'm personally, of course, very committed to the organic growth strategy, which doesn't mean we are not looking at potential acquisitions as they would make sense. I think Mettler-Toledo overall is a great platform for such small or medium-sized tuck-in acquisitions, bolt-on acquisitions, but the underlying story definitely is an organic growth story.

Understood. And then perhaps one on the guidance here. It's a pretty impressive guidance. I look at some of your peers. Feels like they've been a little bit conservative, your guidance by far this is the best in the group so far on a comp-adjusted basis. I think you mentioned something about pent-up demand. Perhaps did it benefit in Q1, or is that based on your Q2 guidance or perhaps the back half? Any commentary on what's driving this underlying strength where Mettler is coming in well above peers and thoughts on pent-up demand I think would be helpful.

Yeah. Let me start off and then I'll pass it off again to Shawn regarding some additional flavor on the guidance question. So, of course, the increased guidance is based on our strong Q1 result and our confidence in our Q2 number. We see how well our products are received in the market. We see how strong our go-to-market strategy around Spinnaker sales and marketing really plays out. As I said in my commentary already, I think we prepared the team extremely well to capture the market demands that we covered. And we guide our sales force very effectively to the opportunities out there. And that gives us strong confidence for Q2 and also of course for the remainder of the year, even in light of the potential headwinds and risks and uncertainties that we mentioned like shortages in semiconductors and maybe some of the shortages in material supplies, which we factored into this forecast. But overall, I would say our confidence in this guidance range is very strong. Shawn, do you want to add some additional flavor?

Sure. To echo what Patrick mentioned, if you consider Q1 and our Q2 guidance together, we are looking at almost 20% growth in the first half of the year. We feel very positive about this and the momentum in our business. However, assessing factors like pent-up demand and stimulus can be challenging. Looking ahead to the second half of the year, we typically maintain around 1.5 months' worth of backlog, which adds a level of difficulty in our projections. We will encounter tougher comparisons, particularly regarding China in Q3, where we saw 17% growth last year. Additionally, we likely won't have the same amount of COVID testing as previously discussed. For the second half of the year, it's best to view it as returning to a more normalized multi-year growth rate on a multi-year basis.

Just to be clear Shawn, so there is no pent-up demand baked in the second half, that's correct?

No. We're not expecting any pent-up demand per se, at this point in time for the second half.

Thanks. So I'll just pick up where we left off. On the pent-up demand, was that greatest on the industrial part of the business? And Shawn, can you comment on the order book? I mean, I know you said, you only carry 1.5 months of backlog, but how is the order book coming out of the quarter?

Yeah. I mean, it's always difficult to talk about your quantified pent-up demand quite specifically. But certainly the industrial business had a tremendous quarter if you look at the core industrial business. What was really impressive there Tycho is that, China has now had three really strong quarters in a row in core industrial, and we started to really see very strong momentum in China which had many different growth drivers to it, maybe I'll let Patrick add some more color on that one when I kind of finish the comment. But the other thing is, we saw is really strong growth in the core industrial both in Europe and in the Americas both grew in kind of like the low-teens kind of a range. But then, if you look at the Lab business, I mean, biopharma has continued to do really well, but we also felt like there was like a pent-up topic there. If you look at segments outside of biopharma like Chemical, we felt like Chemical was very strong, but we also started to see a lot of other end-markets recover as well too. What was the second part of your question, Tycho, I couldn't remember.

Well, I think you answered it. It was on the order book and then just...

Yeah. Excellent. Very excellent question, Tycho. Look, as I came into Mettler-Toledo, I found what I expected. It's a very well-run organization, very focused on the strategic priorities and really focused on execution. The strategic priorities for the company will not change. I mean, our strategies are very well ingrained throughout the organization. We are focusing on our end-market opportunities, in terms of the areas where we can gain market share. We continue to evolve also the underlying strong programs and strategies we have put in place around Spinnaker sales and marketing which has been an evolution in strategies for more than 10 or 15 years already. The same is true on the Stern Drive program regarding operational excellence and productivity projects across the company. But I will definitely continue to work with the team on both of those programs because we think and we are convinced they still have a lot of headroom. I was talking a little bit about our opportunity to gain market share. It's very tangible for us. We see the opportunities. We see the market opportunities. We guide the sales force into the right directions. And frankly, we also have very solid product development, new product development programs underway that we continue to execute. That will be definitely also a strategic focus area for myself to make sure that we launch products into market segments where we see the strongest underlying growth. Over the last 10 years, 15 years, Mettler continuously made a shift more towards faster-growing market spaces in the Lab and life science market, which continues to grow. And there's definitely again an emphasis also on my side, to continue that trajectory to find, identify, and capture these faster-growing market segments for Mettler-Toledo. Then on our strategy priorities for me clearly also working on next-generation leadership, as you would expect from every CEO. Have a strong focus on that as well to make sure that we internally also develop leaders for the company, that can drive the company forward and continue this exceptional growth story.

Okay, that's very helpful. I have one more question about the industrial markets. Consumer packaged goods have faced challenges for a while, and I'm curious if there are any signs of improvement. It didn't seem like it from your comments. Additionally, how are you approaching infrastructure and stimulus in the U.S. if we receive a significant package?

Hey Tycho, so maybe I'll take that one. So in terms of packaged food, I think the situation, you're right. I think it's generally similar to the last time we would have talked. The packaged food companies continue to be challenged by COVID. There's still a reluctance to have visitors on-site. But we do see increased activity there, in terms of quotations and things like that. We still feel very good about the business in terms of being positioned for a pent-up opportunity here. We didn't necessarily build that into our guidance, but we do feel like we're well positioned there. But it's still difficult to tell the timing and when that's all going to happen. In terms of government stimulus, also difficult to judge; I would expect we would have some level of benefit. Some of it probably more indirect than direct. We don't have necessarily a significant NIH type of exposure. But on maybe some of the infrastructure stuff, our Industrial Business could benefit from some of that.

Our next question will be coming from the line of Patrick Donnelly with Citi. Your line is open.

Hey. Thanks for taking the question, guys. Shawn, maybe on the guidance, now that it's bumped a little higher, do you mind just running through the segment outlook in terms of what you're thinking by segments for the rest of the year with the new range?

Yes, sure. So Patrick, maybe I'll start with the divisions and then I'll talk about the regions. So if I start with the lab division for Q2, we're looking at mid-20s growth and for the full year low to mid double-digit growth. In terms of industrial business, we expect our core industrial in Q2 to be in the 20% kind of a range and then for the full year in the low double-digit kind of a range. And then, with the product inspection business being more mid to high single digits in Q2 and maybe mid-single digit plus for the full year. And then food retailing for Q2 to be high single digit and then for the full year to be more like mid-single digit. And then, if we look at the geographies, I'll start with Europe, which would be kind of like high teens to 20% kind of a range. And then, for the full year, high single digit to low double digit. Americas high teens for Q2 and then for the full year, also, high single digit to low double digit. China, we're looking at mid-20s for Q2 and then, high teens for the full year.

That's really helpful. Let's focus on China now that we've concluded that section. You've reported a strong quarter with a growth of over 40%, which is impressive given your forecast of high teens for the year. Can you discuss how sustainable this performance is? The comparison with previous quarters will become more challenging. How do you plan to navigate the rest of the year? Did you notice any temporary factors this quarter that might have pushed the numbers higher? I'm curious about how your full-year guidance aligns with the significantly stronger results in the first half.

Yes. Well, let me take it, Patrick. Look, we are really, really happy with our results in China. I think it was truly exceptional, much better than we expected and we commend the team for the excellent execution and capitalizing on the growth opportunities we have there. There have been several dynamics that you should consider when evaluating our China results. First, the number looks very high for the first quarter, but the comparisons are very easy, because they were down 13% in the prior year. However, the two-year combined growth rate is still very good. We are very strongly positioned in China, with our sales and marketing initiatives, which are allowing us to gain share and support customers. We also have worked over the last numerous years to adapt our products for the local market, which helps to support our leading position in many of the product categories in China. And in terms of the underlying dynamics, Shawn said, we see strong recovery in many of our end markets. Life Sciences in particular is very strong and we continue to expect growth from this end market. Other dynamics we are seeing is that, although, we primarily serve local markets in China, our local customers there see some greater demand from the western world actually. And that, of course, fueled some of the end markets for us like chemical. And finally, I think we're also benefiting from the government spending. If you look at China's five-year plan and the investments behind it in things like new labs, funding research, also continue to fund safety in food supply, also in packaged food is impacted as well, that plays out for us very well. And then, last but not least, similar to the rest of the world, there is an increasing focus also on automation, which plays very well for our offerings in China. So we are pretty confident that the momentum in China will continue and we strongly believe we will have a very good Q2. And then, as we said also more moderate growth because of tougher compares in the second half of the year.

That's really helpful. Thanks, Patrick. And maybe, just a quick last one on the product inspection side. Nice to see that we're back to mid-single digit growth. It sounds like the guidance is still calling for it more mid-single. We're not bumping that too much. What do you need to happen to get that segment going a little bit? It has been a little bit sluggish for over a year now? Would love some color on that front. Thanks.

Yes, definitely, I can take it as well. Look, for product inspection, I think for us pretty much it will be that the investment in the end market comes back and the confidence in the end market comes back and that customers will be willing again to invest in their facilities to bring people into their facilities. They have been pretty restrictive given the COVID-19 situation. As I said in my introductory remarks, the product line has been facing issues even with bringing service people into some of the customer sites because they were so afraid of the COVID-19 situation there. So as that market, as the COVID-19 situation eases up, we think that some of the pent-up demand of our customers will then materialize for us into somewhat higher growth rates towards the second half of the year.

Our next question will be coming from the line of Jack Meehan with Nephron Research. Your line is open.

Hi. This is Nisarg on for Jack. So there's been a lot of discussion around supply chain challenges related to the pandemic. How do you see this impacting the business?

Yes. Regarding the supply chain, we are really impressed with our team over the past year. Looking back to just over a year ago in China at the start of the pandemic, we encountered supply chain challenges. Over the last 15 months, it's been a significant journey for them. Their agility has been remarkable. However, we still face challenges. I believe the team has effectively addressed those issues. Currently, we have not adjusted our projections for any supply chain disruptions, and we feel capable of managing it. We also benefit from the diversity in our business, so if there is a component shortage in one area, it hasn’t significantly impacted the overall group. Nonetheless, we acknowledge the issue and the team is working diligently on it globally.

Yes, I would like to add some context regarding our supply chain situation. It is a priority for us to address potential upcoming challenges. We have built safety stock in areas experiencing pressure, particularly in semiconductors, as noted across the industry. For instance, the automobile sector recently had thousands of workers in Germany sent home due to a shortage of electronic components. Our supply chain team is closely collaborating with our vendors to understand the overall situation and build safety stock wherever feasible while continuing to mitigate risks. We are also exploring potential design changes to ensure we can use alternative components if necessary. The current situation is unpredictable, and our supply chain is investing more effort than ever to prevent major shortages. While we have strategies in place for our most critical components, we remain aware that we are not immune to overarching trends, and there are no guarantees.

Great. That makes sense. And can you update us on what your target is for gross margins for the year? And are there any notable factors to call out around fixed cost leverage?

Yeah. Hey, so in terms of gross margin for the year, we're kind of like looking at the second quarter will probably be overall similar to the first quarter; it could be a little bit lower. And then for the full year, the gross margin level we're thinking in the 50 to 60 basis point kind of range in terms of margin expansion. What you'll kind of see as the year progresses, I think you'll start to see a little bit more improvement from the pricing program that we talked about in the initial question from Derik. We'll continue to also have benefits, especially in the second quarter from higher volumes. But kind of on the other side of that, we do have higher costs related to material costs as well as freight. And then another dynamic that we're going to see in the second quarter is that if you think back a year ago, that's the quarter when we started to have a lot of temporary cost savings in the business. And a lot of those cost savings will now be coming back into the cost structure in the second quarter. And so that would be something kind of going the other way.

Our next question will be coming from the line of Matt Sykes with Goldman Sachs. Your line is open.

Yeah. Thanks for taking my questions. Just the first one, you spent some time on PendoTECH. And so I'm just curious as the integration kind of starts coming along and they're already facing a very strong market in bioprocessing and you integrate it into your global platform. What kind of new opportunities do you think you can open up for PendoTECH in terms of new customers or new geographies? I know they have a presence in Europe, but I'm just curious about what Mettler can add to PendoTECH as you continue to integrate them into your platform?

Yeah. Good question. And let me comment on this. So, as I said, I am extremely pleased with the acquisition of PendoTECH. I think it's really complementary to our strength that we already have in some of the bioprocessing and even some single-use sensors that we also have at Mettler-Toledo. So it's complementing the portfolio very nicely. PendoTECH is definitely stronger in downstream. We are more at the moment stronger in upstream. But if you look at the combination of the two businesses, as I said, it's actually very beneficial for customers to have the same window for both upstream and downstream applications. I think we from as Mettler-Toledo bring a lot to the table for PendoTECH in terms of our global reach, global footprint, our customer base and expand actually the market reach for them worldwide. We also have definitely sensor technology know-how in areas where they don't play today. But they have, on the other hand, a lot of design know-how on how to implement sensors in single-use designs that are used in downstream applications. So I think there's a lot of technology leverage that comes together as well as a good market leverage in terms of our strength and our global reach that we have as Mettler-Toledo. The integration is going extremely well. We are very pleased with how things are going. There was zero disruption for our customers. The response we have received from PendoTECH customers was extremely positive. We are helping them also on the supply chain side securing supply for increased demands in their products as well. So I think this is really a combination of two companies that will provide a lot of benefit for customers in the biopharma space.

Thank you for that information; it’s very helpful. I know we discussed product inspection for a while, but considering the potential pent-up demand and the challenges the business has faced in recent quarters, could you explain the sales cycle from when a decision is made to when a product is shipped and installed? I'm trying to understand how quickly things could turn around once those companies decide to resume spending.

Typically, I'll start off with this and then let Shawn chime in as well since he has more experience with this product line than I have. The sales cycle for investments in product inspections is definitely longer. These products are often designed for specific applications and customer lines. For example, a customer with a food manufacturing line may want to add specific product inspections like metal detection, X-ray, or visual inspection. The devices must fit their manufacturing line. Our sales representatives work with customers to determine their needs regarding detection, whether it's X-ray, metal detection, or visual checks. After identifying the right solutions, we design them to fit into the existing manufacturing setup, which takes several days to weeks for customer approval and system construction. This process does not allow for a quick turnaround, even with pent-up demand. However, we have increased our marketing efforts and have brought back our demo trucks, especially in Europe, to reach customers who cannot attend trade shows. We are bringing products to customers for them to see and start discussions with our sales reps about potential investments for the upcoming quarters.

No. I think you did a really good job answering it, Patrick. I wouldn't add anything to that. I think that's very much the nature of that business, which is different than our other businesses.

Next question coming from the line of Dan Brennan with UBS. Your line is open.

Thank you for taking my question. I appreciate it. Regarding the full year guidance, I'm curious about the second half of the year. This question has been raised before, but I want to ask about the Q2 guidance. If Q2 is anticipated to slow down a bit when looking at the two-year or three-year stacked comparisons, is that an indication of conservatism? Does it reflect that PMIs are at their peak and how you envision the business performing? Or is it simply that Q2 is expected to be a really strong quarter? I'm interested in how you would characterize the implications for Q3 and Q4 and what led you to that conclusion.

Yes sure. So when we look at Q2 just to clarify I wouldn't characterize Q2 as any deceleration from Q1. In fact, I think if you look at the multiyear stack, it's actually going to be very similar even excluding the PendoTECH acquisition. I think as we look at the second half of the year, as we talked about earlier, there are a few different factors. One, we have a more difficult comparison, but I guess that would neutralize in the multiyear. But if you look at this Q1, Q2 and even as we kind of ended 2020, we did feel like there was an element of pent-up demand and various dynamics kind of going around already starting in China in Q3 of last year starting to accelerate in other parts of the world in Q4. And then we saw a very significant momentum gain here in Q1 with other markets outside of biopharma really starting to recover. And so, it's always difficult to really determine and quantify how much is attributable to pent-up. Right now as we talked about earlier, we're just not assuming that there's any additional pent-up for the second half of the year. But if you look at our multiyear growth rates for the second half, I think it's more consistent with our historical normalized growth rates. And okay of course, we'll see how Q2 plays out and we'll update everybody as we kind of get to the end of the quarter.

Great. Thanks. And then when you think in kind of rest of world regions and there's a lot more volatility and kind of vaccine rollouts being slower to come by. I'm just wondering, can you just comment on the rest of the world just kind of what's baked in and kind of what trends you've been seeing there?

Yes. It's interesting to note that we've been closely monitoring developments, particularly in Europe, since the emergence of new variants. In this second phase of COVID, we’ve observed that it has a reduced impact on our target markets. The effects appear to stem more from social lockdowns rather than directly on business operations. I'm not suggesting that economies are immune to COVID or that there aren't potential risks to consider. For instance, Europe has experienced significant lockdowns recently, yet the business environment remains stable. Conversely, in places like India, which is currently facing severe challenges, our target markets continue to perform well. We will keep monitoring the situation, although India represents only about 2% to 3% of our business. Aside from India, we haven't noticed any noteworthy changes in other regions. In Latin America, for example, our exposure is limited, and we haven't seen any impact on our business so far.

Great. Thanks Shawn.

Hey guys, good afternoon. Just one for me, Shawn. I think you mentioned in the prepared remarks plans to add some commercial sales resources under Field Turbo in the second half of the year. Can you just talk about the magnitude of those plans in terms of headcount? And would those be targeted in any certain geographies or specific business lines? Thanks.

Yes. Thanks Brandon. Hey, we're excited to restart the Field Turbo program. I think it also demonstrates how we feel about the business and the growth potential especially as we're kind of preparing for 2022. We're going to be making investments in the Field Turbo program as well as other investments for growth in other types of investments for growth in other parts of the business as well too. When we look at the program, it is global in nature. But it will have a little bit of a disproportional investment in China just given the significant opportunity we see in China in the medium to long-term. And if you look at the types of resources, it will be kind of similar to the past where there'll be kind of a good mixture of field resources, but also inside resources, including telesales resources. And we just continue to see really excellent returns in terms of our investments in the field, but also the inside resources. I mean the telesales program continues to generate very significant leads for the company. These resources also do a fantastic job of leveraging our field sales so that they're even more effective as well too. So we feel very good about making these investments and I think you'll start to see them happen in the second half of the year.

Next question coming from the line of Josh Waldman with Cleveland Research. Your line is open.

Hi, everyone. I appreciate you taking the time to include me. I have two questions. First, could you provide more detail on how much of the increase in your full-year guidance is attributed to the first-quarter performance versus improvements in your outlook and your expectations for the next three quarters? Second, can you discuss how orders are developing in the Process Analytics business? I understand this sector performed well throughout 2020, and I’m curious if you’re noticing any signs of a slowdown and how that might influence growth projections in your full-year guidance?

Yes. Hi, so maybe I'll take that one Josh. So in terms of a high-level bridge to the guidance, if you look at the Q1 beat, of course, that's part of it. But from a sales perspective actually a bigger part of it was our Q2 is much higher than what we would have thought three months ago as well as a modest improvement in the rest of the year. And then, of course, it also includes 1% for PendoTECH. And if you look at it from an EPS perspective, I'd say just under half of the increase is related to the Q1 beat. And then probably something more like in the 60% kind of range was related to higher sales volume as well as a little bit of benefit from currency which improved a little bit since the last time we spoke, offset by some of these growth investments that we talked about. In terms of process analytics maybe I'll start that one and then I'll let Patrick add some comments if he has any additional color. But, hey, Process Analytics is doing extremely well about half of the business or so has an exposure to bioproduction; as you can imagine that part of the business is doing really well. We've had a lot of really great photo ops in that business actually around the world over the last few months with leaders around the world visiting bioproduction plants and our equipment's behind it. A recent one was when President Biden was at the Pfizer plant in Michigan. So that business is doing really well. We've always felt very strongly about that. Patrick talked about that when he discussed PendoTECH as well. But what we're also seeing is that the end markets other than biopharma are also coming back quite strongly there as well.

Yes. Absolutely, Shawn. The only thing I could potentially add here is as you know this is also a strong consumables business, because the sensors have to be replaced on a regular basis, which builds a very healthy revenue stream for us given the strong installed base we have. And then also we have new technologies like the intelligent sensor management technologies, which is very attractive for many customers and allows us to upgrade them and even replace some of our competitors in the space. So we are looking at a very healthy funnel for our Process Analytics business.

And we don't have further questions coming in. I would like to hand the call back to Mary.

Thank you. Hey, and thanks everyone for joining us this evening. As always, if you have any questions or any follow-up please don't hesitate to reach out. Take care everyone. Bye-bye.

And this concludes today's quarterly conference call. Thank you everyone for your participation and you may now disconnect.