Thank you for standing by. My name is JL and I will be your conference operator today. At this time, I would like to welcome everyone to the Mettler-Toledo Fourth Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I would now like to turn the conference over to Adam Uhlman, Head of Investor Relations. You may begin.

Hey, thanks JL, and good morning, everybody. Thanks for joining us this morning. 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 and is available for replay on our website. A copy of the press release and the presentation that we will refer to today is 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. For a discussion of these risks and uncertainties, please see our 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 may 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 and is available on our website. Let me now turn the call over to Patrick.

Thanks, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our fourth quarter financial results, the details of which are outlined for you on Page 3 of our presentation. We had a strong finish to the year and we capitalized on very good customer demand for laboratory products, especially in Europe. Strong sales growth and solid execution of our margin improvement initiatives contributed to excellent adjusted EPS and cash flow. Reflecting on our achievements in 2024, we delivered good results despite soft market conditions and continue to benefit from our strong culture of execution and continuous improvement. At the same time, we stay focused on our long-term strategy of delivering innovative solutions and extending our market leadership. Looking ahead, driving growth is our top priority in 2025. And we will continue to build on our competitive strength and take advantage of opportunities in automation, digitalization, and high growth areas to further expand our market share and deliver good earnings growth. 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.

Thanks, Patrick, and good morning, everyone. Sales in the quarter were $1.045 billion, which represented an increase in local currency and in US dollars of 12%. On Slide number 4, we show sales growth by region. Local currency sales grew 7% in the Americas, 19% in Europe, and grew 14% in Asia/Rest of World. Local currency sales increased 4% in China in the quarter. Excluding the impact of shipping delays in the fourth quarter of 2023, local currency sales grew 6%, including 3% in the Americas, 8% growth in Europe, and 10% in Asia/Rest of World, including 2% growth in China. On Slide number 5, we show sales growth by region for the full year 2024. Local currency sales increased 3%, with 3% growth in the Americas, 8% growth in Europe, and a 1% decline in Asia/Rest of World. Local currency sales decreased 11% in China for the full year. Excluding the impact of shipping delays, local currency sales in 2024 were flat, including 1% growth in the Americas, 2% in Europe, and a 3% decline in Asia/Rest of World, including a 12% decline in China. On Slide number 6, we summarize local currency sales growth by product area. For the quarter, Laboratory sales increased 18%, and Industrial grew 8%, with core industrial up 5%, and product inspection up 12%. Food Retail declined 14% in the quarter. Excluding the impact of the shipping delays, we estimate our Laboratory sales grew 10%, Industrial grew 5%, with core industrial up 1%, and product inspection up 12%, and Food Retail declined 21%. Service sales increased 8% in local currency in the fourth quarter. The next slide shows local currency sales growth by product area for the full year 2024. Laboratory sales increased 6% and Industrial increased 1%, with core industrial down 1% and product inspection up 4%. Food Retail decreased 14%. Excluding the impact of the shipping delays last year, we estimate our Laboratory sales grew 2%. Industrial was flat with core industrial down 3% and product inspection up 4% and Food Retail declined 17%. Service sales increased 7% in local currency for the full year. Let me now move to the rest of the P&L, which is summarized on Slide number 8. Gross margin was 61.2% in the quarter, an increase of 220 basis points due to higher volume, positive price realization, and benefits from our productivity initiatives. R&D amounted to $50.1 million in the quarter, which is a 7% increase in local currency over the prior period. SG&A amounted to $237.3 million, a 6% increase in local currency over the prior year and includes higher variable compensation. Adjusted operating profit amounted to $351.9 million in the quarter, up 25% from the prior year. Adjusted operating margin was 33.7%, which represents an increase of 360 basis points over the prior year. A couple of final comments on the P&L. Amortization amounted to $18.2 million in the quarter. Interest expense was $17.9 million and adjusted other income amounted to $1.1 million. Our effective tax rate was 19% in the quarter. This rate is before discrete items and is adjusted for the timing of stock option exercises. Fully diluted shares amounted to 21.1 million, which is approximately a 3% decline from the prior year. Adjusted EPS for the quarter was $12.41, a 32% increase over the prior year. On a reported basis in the quarter, EPS was $11.96, as compared to $8.52 in the prior year. Reported EPS in the quarter included $0.24 of purchased intangible amortization, $0.09 of restructuring and other costs and a $0.12 headwind from the timing of stock option exercises. The next slide illustrates our full year 2024 results. Local currency sales grew 3%. Adjusted operating income increased 4%, or 6% excluding unfavorable foreign currency, and our adjusted operating margin grew 60 basis points. Adjusted EPS grew 8% for the full year and grew 10% excluding unfavorable currency. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $900.6 million in 2024, a 2% increase on a per-share basis from 2023 and just over 100% of adjusted net income. DSO was 36 days, while ITO was 4.2 times. Let me now turn to our guidance for the first quarter and for the full year 2025. As you review our guidance, please keep in mind the following factors. First, uncertainty remains across many of our core markets in the global economy. Geopolitical tensions remain elevated and include the potential for new tariffs that we have not factored into our guidance. Secondly, we expect market conditions to gradually improve throughout 2025. We also expect to continue to benefit from customer trends in automation, digitalization and on- and near-shoring. Third, we assume foreign currency at current rates, which is a headwind to sales and adjusted EPS growth of approximately 2% for the quarter and year. Finally, please keep in mind that our third-party logistics provider delays negatively impacted our Q4 2023 results by approximately $58 million, nearly all of which was recovered in our Q1 2024 results. This will be a headwind to our Q1 2025 sales growth of approximately 6% and will negatively impact our year-over-year operating margin change by approximately 260 basis points and adjusted EPS growth by approximately 18%. For the full year, this will reduce our sales growth by 1.5% and is a headwind to operating margin expansion of approximately 60 basis points and a headwind to adjusted EPS growth of approximately 4%. Now turning to our guidance. For the first quarter of 2025, we expect local currency sales to decline by approximately 3% to 4%, representing growth of 2% to 3% excluding the prior year shipping delays. Operating margin is expected to decline 220 basis points at the midpoint of our range, or growth of 30 basis points excluding the shipping delays. We expect adjusted EPS to be in the range of $7.75 to $7.95, down 11% to 13%, or a growth rate of 7% to 9%, excluding the shipping delays and unfavorable foreign currency. For the full year 2025, our local currency sales growth forecast is unchanged at approximately 3% or up 4.5%, excluding the shipping delays. Operating margin is forecast to be flattish at the midpoint of our range, or up approximately 60 basis points, excluding the shipping delay. We expect full year adjusted EPS to be in the range of $42.35 to $43, up $0.50 from our prior range, which reflects EPS growth of 3% to 5%, or 9% to 10% excluding the shipping delays and unfavorable currency. Lastly, I would like to share a few other details on our 2025 guidance to help you as you update your models. We expect total amortization, including purchased intangible amortization, to be approximately $73 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $25 million on a pretax basis or $0.93 per share. Interest expense is forecast at $74 million for the year, down from our prior forecast due to lower interest rates on our revolver and our strong free cash flow in 2024. Other income is estimated at approximately $7 million. We expect our tax rate before discrete items will remain at 19% in 2025. Free cash flow is still expected to be approximately $860 million in 2025 and share repurchases are expected to be approximately $875 million. That's it from my side, and I'll now turn it back to Patrick.

Thanks, Shawn. Let me start with some comments on our operating businesses, which will exclude the impact from last year's shipping delays. I will start with Lab, which had a very strong performance in the quarter. We had excellent growth across most of the portfolio, including very strong growth across process analytics and analytical instruments, especially with pharma and biopharma customers. We continue to receive very positive feedback from the market on our innovative portfolio and on our service solutions, which we believe is contributing to market share gains. Shifting now to our Industrial business, our underlying sales growth was led by our product inspection business, which has gained momentum as the year unfolded. Our growth initiatives and new products targeting the mid-markets are delivering market share gains, and we have also benefited from growing adoption of X-ray inspection technology as customers look to increase product safety by detecting a wider range of physical contaminants. Our X2 X-ray platform has allowed us to offer differentiated solutions at attractive price points across a wide range of applications. It also provides valuable features that simplify maintenance and cleaning. The strong wins we have had with our X-ray platform are helping mitigate weak underlying demand from the food manufacturing industry which continues to face challenges and longer investment cycles. Switching over to our core Industrial business, our underlying sales growth this quarter was modest as market headwinds persisted, especially in China. While customer demand in some market segments like pharma and biopharma have improved recently, general industry and chemical sector have remained soft. Lastly, Food Retail declined against very significant project-related growth in the prior year. Now, let me make some additional comments by geography, which will also exclude the impact of last year's shipping delay. Starting in the Americas, our underlying sales growth was led by our process analytics business that continues to benefit from the recovery in bioprocessing, and we also had good growth in other laboratory products and our product inspection business. This growth was offset by a significant decline in Food Retail following very large projects related to growth in the prior year. Now shifting to Europe, we had excellent underlying sales growth this quarter that included very strong growth across both Laboratory and core Industrial. Our pharma and biopharma customers have led our growth over the past year as we have benefited from our innovative portfolio and our unique direct sales and marketing strategies. And finally, our Asia/Rest of the World results were also better than expected with strong results throughout the region outside of China. We have significant growth opportunities across the Asia Pacific region and have accelerated growth plans in various countries such as Japan and India to expand our market share. Our results in China were in line with our expectations with modest underlying growth as improved lab demand was partially offset by weaker industrial sales. Market conditions in China remain subdued and we expect low single-digit growth in 2025. As we have mentioned in the past, trends in China can change quickly, and our team remains focused on taking advantage of growth opportunities. In summary, again, we are very pleased with the successful close to 2024, and we are optimistic that market conditions will gradually improve as we move throughout 2025. The many important growth investments we have made in recent years have further enhanced our market leadership and will support above-market growth and margin expansion well into the future. As we enter 2025, we will remain focused on implementing our new strategies and techniques with Spinnaker 6, which include expanded big data and analytics efforts for our lead generation and sales force guidance programs and new digital solutions that enhance our customer experience. We will also make further progress with our Blue Ocean program, which is a critical backbone for many of our corporate programs such as Spinnaker and SternDrive. Blue Ocean is our global process harmonization initiative built on a single instance of SAP, and it provides us valuable real-time business intelligence insights that allow us to react quickly to changes in the business and operating environment. We are also very pleased with the growth in service sales over the past year and our team is focused on continuing to drive strong growth over the coming years. We are making important investments to support our service growth initiatives, which includes additional resources to help us address a larger proportion of our installed base that we do not service today. We also have dedicated initiatives underway to help increase our sales of service contracts at the point of new instrument sales. We will also continue to sustain important investments in innovation over the coming year. Innovation empowers our customers to generate new insights, improve and digitalize their workflows and make their results more precise and reliable. Innovation is also important as it helps stimulate replacement cycles, support our market share gains and enhance our value proposition that reinforces our pricing. Over the past several years, we have launched many important enhancements to our portfolio, and we will have many exciting innovations to be introduced over the coming years as well. Now lastly, in 2025, we will look to capture additional benefits from new tools in our SternDrive program, which aims to drive operational excellence in our manufacturing facilities and our global supply chain. As a reminder, we are on the third wave of SternDrive, which is focused on smart automation and digitalization technologies to drive productivity and capture material cost savings. The Mettler-Toledo franchise is stronger than ever and we remain focused on the things that we can control through diligent execution of our initiatives. We are well positioned and continue to implement strategies with a good balance of initiatives focused on growth, innovation and operational excellence. Now, this concludes our prepared remarks. Operator, I'd now like to open the line to questions.

Your first question comes from the line of Vijay Kumar of Evercore. Your line is open.

Hi, good morning and thank you for my question. Congratulations on a solid report. Patrick, my first question is about the Q4 performance, which shows a headline of 12%. Excluding the shipping comparison, the underlying rate is 6%. If that's your exit rate, wouldn't it suggest that your underlying rate should be in the mid-single digits for Q1? Were there any unusual factors in Q4, such as customers prebuying in anticipation of potential tariffs and geopolitical risks?

Hey, thanks, Vijay, and good morning. That's a very good question. Of course, we are extremely proud of our strong finish to 2024 and the strong Q4. As you said, 6% underlying growth, if you exclude shipping delays, has been a very strong result. It has been especially strong in Lab as we said and in Europe. But also across the entire portfolio, we have been really, really pleased with the results. Now looking at what drives the growth, I think a lot of that is driven by, of course, a lot of innovation that we pushed in the market last year. I mean customers see the strength of our portfolio. We probably have seen a little bit of a budget flush in Europe. It's always hard to quantify that. But if we have indications of what contributed to a higher growth that we potentially would have expected, it was probably a bit of a budget flush in Europe. Regarding your point whether there had been pull-ins because of the tariffs, we have actually no real indications that that triggered this strong result. I think it's more really our exceptional portfolio that we have out there, our strong go-to-market strategies being close to customers when they have been ready to spend money. As I said, in Europe, specifically, we had, I would say, some releases of budget flush that we have not seen a year before.

Yeah. I think too, Vijay, if you kind of look at the sequentials, we feel like it makes sense. If you look at kind of like a longer-term CAGR for Q1, we also think it makes sense. And we still kind of stand by the comments we made last quarter where we do expect the beginning of the year in '25 to start off a little bit slower and then things gradually improve throughout the year. With all the different uncertainties in the world, we wouldn't be surprised if our end-markets start off a little bit more cautiously this year.

Understood. And that sort of segues into my follow-up on the macro geopolitical situation. I know the guide isn't contemplating any risk in China for low singles growth. Maybe if you can talk about what is your competitive landscape in China? Do you have local competition? And then how should we think about potential risk related to China? I know one of your peers was put on a list. Is there any risk for that spreading broader to life science companies?

We have been operating in China for over 30 years and have always faced local competition. Our team in China is very strong, including our R&D, manufacturing, and sales teams. We believe we are competing effectively in the market. Our portfolio is broad, making it hard to pinpoint a single competitor, as the space is quite fragmented in areas like Lab, Industrial, and product inspection. No competitor has the same range of offerings that we do. Additionally, since we manufacture and source products in China, and our R&D teams are creating solutions specifically for the Chinese market, I would say the risks are likely more limited for a company like ours that has a long-standing presence in China and provides local solutions.

Yeah, as Patrick says, we clearly benefit from our diversity there as well too.

Understood. Thank you, guys.

Hey, good morning, guys. Thanks for the questions. Shawn, on the Industrial business there and following up on those comments, is there any change in the way that you're feeling about industrial this year? I mean, to Patrick's point, it does seem like there's some good overall momentum in product inspection. I think you have been picking low singles for both core Industrial and PI, if I remember correctly. So is it fair to assume that that's still the view? Or are you maybe tracking a little bit differently at this point?

We're being cautious regarding our guidance for the core Industrial side. While we were pleased with our overall performance this quarter, there are still challenges in the core Industrial market, particularly in our Chinese business. However, we are very satisfied with the results from product inspection, which exceeded our expectations with 12% growth for the quarter. Looking ahead for the full year, we expect mid-single-digit growth for product inspection, but we anticipate a stronger start in that business. We believe some of the momentum in product inspection will carry into the first quarter, where we expect to see high single-digit growth. It's worth noting that while the end-markets are under pressure, we are competing effectively. The new products we've discussed are being well received, and our teams are performing excellently.

Yeah. Okay. And then maybe just sort of a similar idea on Lab. I just want to understand the assumptions on biopharma, which looks like it's gradually recovering here. So, on the low to mid-singles growth that you had penciled in for that business, is the simple way to think about it just that low singles is modest improvement and mid-singles is better improvement? Or was there not a lot that was baked in? I mean, Patrick, last quarter, you had expressed some optimism there. But it was early, so I wasn't sure whether that was translating to the outlook. I'd just love to sort of get your view there at this point as we're a couple of months into the year, at least 1.5 months in the year.

For Labs in 2025, we experienced a very strong quarter with broad performance across our portfolio. Specific categories, such as analytical instruments and process analytics, performed exceptionally well. It was encouraging to see the positive trends from Q3 carry into Q4, with even better results. As Patrick mentioned, there was a notable budget flush in Europe that exceeded our expectations. For the full year 2025, our guidance remains similar to our previous outlook, with a reported increase of low to mid-single digits for Labs. However, excluding the impact of shipping delays, we anticipate growth in the mid- to high single digits. That said, we expect a more moderate start to the year, with the Lab business likely to decline by low single digits on a reported basis, while excluding the shipping delay, we expect an increase in the mid-single digits.

Okay. And Shawn, just to maybe drive home the point, so there is some level of improvement that you have assumed in the biopharma environment, so to speak, that kind of underpins that growth rate that you're talking about there?

The guidance hasn’t changed, but we observed improvements in market conditions for biopharma, especially in bioprocessing, during the fourth quarter. Our expectations for 2025 have always indicated a gradual improvement throughout the year. We did see some affirmation in the fourth quarter. However, the biotech sector within biopharma has not yet fully recovered, and we continue to experience mixed conditions regarding liquid handling pipettes and small biotech.

Okay. Very good. Thank you, guys.

Thank you, and good morning. First question is on the core Industrial piece of the business. We're just curious what your latest take is on some of the macro factors. You saw the PMI go over 50 for the first time in a while on Monday for the US. Was curious if you feel like there's a little bit more wind in the sails entering the year, potential for that business to improve.

Good morning, Jack, that's a great question. Regarding core Industrial, as we've mentioned before, we don't directly tie it to PMIs. Many of our products contribute to automation and digitalization initiatives across various industries. Our projected industry growth depends significantly on the fact that a large part of our business compares to the growth we have seen in China in recent years, which is currently slow. Investment in the industrial sector in China remains subdued, and we are not witnessing the momentum we had previously experienced, particularly in the battery segment, where demand has definitely declined. Consequently, these customers are not investing as they did before. So, I would advise against linking it directly to the PMIs. We do anticipate strong interest in our digitalization and automation solutions from our customers, but it's not expected to grow at the same rate as Lab or product inspection in 2025. Shawn, could you provide a breakdown of the growth rate?

We are anticipating low single-digit growth for our core Industrial business for the entirety of 2025, both on a reported and adjusted basis. As Patrick mentioned, approximately 60% of this business includes segments like pharma, food, and specialty chemicals, along with connections to automation and digitalization. However, we are aware that the economy affects us, and while an uptick is beneficial, we must consider how customers react to current global uncertainties, which may influence the pace of the year. Nonetheless, it was encouraging to see around 50 PMIs for the first time in quite a while.

Yeah, agreed. And then just one housekeeping one. The raise to the 2025 EPS forecast, is that just a function of Q4 coming in a little bit better? Or were there any other changes to the assumptions that drove that?

A lot of the improvement was due to the better performance in Q4, but there were two factors at play that influenced our results. On one side, we experienced negative foreign currency impacts since our last report, particularly related to the dollar's strength. We are also affected by the Swiss franc's strength against the euro, where a 1% change can impact our operating profit by about $2.5 million. Similarly, we have exposure to the Chinese renminbi against the dollar, which also has a $2.5 million effect for every 1% change. On the other hand, we saw some benefits below operating profit. When we updated our model, we noted that interest expenses decreased slightly, benefiting from lower interest rates and solid cash flow in the fourth quarter. Additionally, other income improved a bit due to updates to actuarial assumptions regarding pensions and similar matters.

Sounds good. Thanks, Shawn.

Hi, good morning. Thanks for taking my questions. I just want to go back to the strength that you cited in Europe, particularly in Lab. I know you mentioned there was some element of a budget flush there. But can we extrapolate sort of that improving demand among that customer segment in Europe into other developed market regions like the US? I mean does this encourage kind of your view as to what Lab globally could do, maybe ex China?

I believe it's encouraging to see how positively our portfolio is received in the market. We've focused heavily on driving innovation and have invested significantly in growth initiatives over the last three years, launching many new platforms that resonate well with customers. In Europe, we may have a slight advantage with these launches. I’m optimistic that the positive trends we've observed in Europe will translate to the US market, leading to a strong uptick. Additionally, much of our business is based on replacements, and our newly launched products should help stimulate replacement cycles. I'm pleased with how well we compete in Europe's challenging environment, which reflects the strength of our platforms and go-to-market strategies. We're quick to capitalize on growth initiatives and our sales force guidance has been effective. If market uncertainty in the US remains manageable, I expect to see positive momentum as the year continues.

Yeah too, and when you look at the fourth quarter, I mean Europe did better than the US, but the US still did very well also. Even if you exclude the shipping delay effect, I think we're up high single-digit. And by the way, China did very well in Lab as well too, they were up high teens. And so kind of as expected, Lab was going to have a much better quarter and then Industrial in China. So Lab globally was good, but Europe was clearly the leader.

Got it. Thank you. And just going back to tariffs for a second, just specifically on Mexico. I know there's been a delay in that, but you do have a manufacturing footprint there. Could you maybe remind us what your exposure is in terms of revenue shipped out of Mexico? And then you've often been very flexible in your manufacturing footprint. If these tariffs were to go through, like what would be the duration? And what would be the decision behind maybe flexing that manufacturing to another region? And what is your capability of doing that?

I'll start by clarifying that we've factored in the recent 10% tariff from China into our guidance. Our exports from China to the US are under $100 million, meaning the impact of the new tariff is less than $10 million. We're confident in our ability to offset this through various programs, which we've incorporated into our guidance. Additionally, our exports from Mexico to the US are less than those from China. We are monitoring the situation closely and are prepared to respond if necessary. This response could involve adjustments to our supply chain or pricing strategies. Regarding market share, Mexico accounts for about 2% of our sales, as does Canada. However, we do not export a significant amount from the US to these markets in terms of direct product sourcing. We've assessed this situation and believe we can effectively manage any potential retaliatory measures in North America.

Thank you very much.

Perfect. Hi, good morning. Thank you so much for taking the question. First, just housekeeping, I wanted to ask on the first quarter guide. Can you walk us through what are you assuming by segment for the first quarter including and excluding that shipping comp across segments and then geographies as well?

Sure, Rachel. I'll go through everything from top to bottom, covering points even if I've mentioned them before to ensure completeness. For Lab, our guidance for Q1 of '25 is expected to show a decline in low single digits on a reported basis, while it will increase in mid-single digits on an adjusted basis, taking into account the shipping delays from last year in Q1. Total Industrial is also projected to decrease in low single digits for Q1, but when adjusting for the shipping delays, it would remain flat. Within that category, core Industrial is anticipated to decline in high single digits on a reported basis and in mid-single digits on an adjusted basis. Conversely, product inspection is expected to rise in high single digits on both a reported and adjusted basis. Regarding geographical expectations, our guidance for the Americas in Q1 is a low single-digit decline, but once we factor in the shipping delays, it would increase in low single digits. For Europe, we foresee a decline in high single digits on a reported basis, while adjusted figures would indicate a low single-digit increase. In China, we expect a rise in low single digits for both reported and adjusted bases. Would you like me to share the full-year outlook as well, or is the Q1 information sufficient?

Sure. Yeah, if anything changed on full year, that would be helpful as well.

Yeah. Okay. So apologies if this is repeating. So, Lab on a reported up low to mid-single-digit on an adjusted basis, up mid- to high single-digit. Total Industrial up low single-digit on both a reported and adjusted basis. Core Industrial up low single-digit on both a reported and adjusted basis. Product inspection up mid-single-digit on both a reported and adjusted basis. Retail flattish on a reported basis and up low single-digit on an adjusted basis. And then if we look at the regions, Americas up low to mid-single-digit on a reported basis and up mid-single-digit on an adjusted basis. Europe up low single-digit on a reported basis and up mid-single-digit on an adjusted basis. And then China up low single-digit on both a reported and adjusted basis. And that was all for the full year.

That's very helpful. If I could follow up on the topic of China, you mentioned low single-digit growth for the year, which aligns with your previous assumption. Have you noticed any effects from the equipment stimulus so far? Is any stimulus included in that overall figure? Additionally, could you break down the specific equipment stimulus that some of your peers have mentioned? How does the broader economic and monetary policy stimulus from China play into this? Should that have a greater influence on your outlook compared to the equipment stimulus? Please elaborate. Thank you.

Yes, thank you, Rachel. I'll respond to that and let Shawn add his thoughts as well. We haven't significantly engaged our product offerings in the current or previous stimulus package, as they were primarily aimed at high-end research products. We did have some agreements where we combined instruments to meet the stimulus thresholds, but this didn't substantially affect us in Q4. We also haven't factored any stimulus projections into our 2025 guidance. If there is a wider stimulus initiative, it could potentially put us ahead of our current forecasts for 2025 in China, but we will have to wait and see. We've chosen to take a cautious approach based on existing market conditions. A broad market stimulus that spans various industries would definitely benefit us more, whereas a targeted stimulus focused on high-end research instruments may not have as much impact, and our outlook would remain the same.

I believe we've discussed this previously, but one of the key issues for us is broader fiscal stimulus. We're anticipating a fiscal approach that's more in line with past measures aimed at supporting economic development. This type of stimulus not only aids the economy but also boosts confidence within the country. The more they can convey strong signals to enhance confidence in the business sector, the more likely it is that companies will begin to invest in capital expenditures and overall spending, which would be very beneficial.

Good morning. Thank you for taking my questions. Patrick, it seems that the strength in Europe, and possibly the US, was mainly within biopharma. Is that correct? Did you notice an increase in other markets? How do you interpret the strong performance in the fourth quarter in terms of customer confidence to return to normal growth and spending in the future? I'm also interested in what you're hearing from customers regarding their interest in making more replacement-type purchases in 2025. Has there been any change in that regard?

Yeah. Thanks, Josh. Look, I'll maybe talk about the growth and what triggered growth in terms of end-market segments, you have pharma, biopharma was a contributor, but so was the food industry, and you have also heard about the numbers that we have, for example, in product inspection. So I would say it was, in Q4 specifically, was across a broader part of the markets, and not just for pharma/biopharma. But we clearly see the strongest demand coming out of pharma/biopharma. And that is also affecting probably more the Lab business and the process analytics business, especially when you think about biopharma process, which is exactly driving the growth that we've seen in process analytics. Now looking forward, is the Q4 for us a good indicator that the market will fully recover to normal levels? We are still cautious there and we are looking at 2025 as also a transitory year still. As we said, we guide first half lower than the second half. I mean the 3% growth and extra shipping delays to 4.5% growth is still not back to what we would consider a normal year, so to speak. But we're hoping that the market growth will continue to pick up. Again, our portfolio competes really well. And in terms of the replacement cycles, yes, the last two years have been probably a bit subdued in terms of product replacement. And once the budgets become available, we have an opportunity to capture also more growth coming from replacements.

Got it. Okay. And then, Shawn, a question on tariffs, maybe asked another way. I mean it sounds like the updated guide contemplates potential impacts on tariffs. Any way to frame up how you're thinking about offsetting the cost impact? I mean do you think more of the offset will come from price? Or is it more weighted towards supply chain levers?

I believe the approach will be similar to our previous discussions on the topic. It will certainly involve a mix of both strategies. We are examining various scenarios and exploring pricing opportunities within our portfolio in a unique manner. We have conducted that analysis and are also reviewing processes in the supply chain to identify areas for adjustment. However, pricing adjustments tend to be more flexible compared to supply chain changes, which may require more time.

Okay. Thanks guys.

Hey, guys. Thanks for taking the questions. Shawn, maybe just to pick up right where you left off there on the margin front. Can you just talk about the margin build this year? It's always helpful to hear about the price contribution, the moving pieces, both 1Q and for the year, would be helpful just to think about the margin side.

We were very pleased with our margin expansion in the fourth quarter, achieving strong results. To provide context, our gross margin improved by 220 basis points. When we exclude the effects of the shipping delay, it still increased by 160 basis points. During the quarter, we returned to volume growth, which was a key highlight for us. Pricing aligned with our expectations, remaining in the 2% range. We are satisfied with our execution and concluded the year strongly with our global pricing initiative. Additionally, we are reaping rewards from various initiatives, including those under the SternDrive umbrella focusing on productivity and cost reductions in select categories. We also continued investing in our business, particularly in our service organization, resulting in an excellent end to the quarter and positive full-year results. Looking ahead to the first quarter, we anticipate pricing to start at 2%, a figure we expect to hold for the full year as well. There may be potential for upside depending on how the tariff situation develops, and we will provide updates in the next quarter as more information becomes available. For now, we are maintaining our 2% assumption. The first half of the year is likely to see lower volume than the second half. Specifically, for the first quarter, we project a decrease of about 220 basis points in operating margin. As mentioned in the prepared remarks, when excluding the shipping delay, it was up by approximately 30, though it’s probably closer to a 40-point increase. For the full year, we expect our operating margin to remain relatively flat or slightly up, as the shipping delay impacted it by about 60 basis points. In terms of gross margin, on a reported basis, we anticipate a decrease of about 40 basis points due to the shipping delay and volume issues. However, when comparing apples to apples on a reported basis, we expect it to increase by roughly 20 basis points. Thus, the shipping delay has reduced our gross margin by about 60 basis points, and we anticipate it will be relatively flat or slightly up for the full year on a reported basis. Excluding the shipping delay from last year, we expect an increase of around 20 basis points.

That's really helpful details. Thanks, Shawn. Patrick, I have a question for you. In response to an earlier question about exit rates, you mentioned that you wouldn't be surprised if end markets began the year a bit cautiously. However, from what I've heard on the call, it seems like product inspection momentum is gaining and the pharmaceutical sector appears to be improving. I'm wondering if your cautious outlook was based more on conservatism or if you are actually seeing specific trends in the markets as we start the year. It sounds like most markets are on the rise, so I'd appreciate any clarification you can provide. Thank you.

Sure. Regarding product inspection, there is a project business that involves longer cycle times. In our sales forecast for Q1, we are seeing longer cycles and a more extended outlook on sales volume compared to other areas of our portfolio where inventory turns around quickly. However, the pharma and biopharma sectors are currently experiencing positive momentum. In the food industry, particularly in product inspection, our offerings are resonating well, allowing us to penetrate new market segments, especially mid-market customers we hadn't previously served. This has opened new opportunities, and many of our recent deals are with first-time customers. That said, we remain cautious about our outlook due to uncertainties surrounding tariffs and other factors affecting various markets, which continue to be volatile. It's crucial for us to respond quickly to leads; we have a robust lead generation system that we can convert into orders. Historically, we have been effective in this regard, and I trust our team to maintain their high performance in converting opportunities in Q1. However, we cannot overlook the uncertainties in places like China and some established markets because of these potential tariffs, and it’s wise to adopt a more conservative approach at this time.

Yeah. Makes a lot of sense. Thank you.

Hey, guys. Thanks for the question. Maybe first on your services business. I think this was the second consecutive quarter of high single-digit growth there. And I believe your guide assumes mid to high single-digits for '25. Do the results this quarter make you confident in hitting the high end of that range?

Yes. Actually, it does. And we had in service, we had a very strong 2024 overall with 7% growth. The first half was, I think, about 6%. Q3 was 9%. Q4 was 8%. And we're really looking forward to continued growth in service. We have launched a growth acceleration program also last year for services where we invest more into service capacity. We've also developed a broader set in our service portfolio and making sure that we address a bigger part of the installed base that we had. I found that it currently is not on the service with Mettler-Toledo. So I think we have a good opportunity to reach that growth rate that we projected for service.

Great. And maybe just on the new administration. I know you don't have much NIH exposure. But are there any other policies more broadly that you think could either disrupt or benefit you other than the tariff piece that you've already talked about?

I don't think so. I mean I think that's the biggest impact probably on the business, there could be tariffs. Again, it creates uncertainty in the market. But in these, I would say, rather turbulent times, we also have demonstrated in the past that Mettler-Toledo is really a company that is very agile and captures opportunity. Of course, uncertainty is never good for the market, but it's also, for companies like Mettler, we have a global footprint who can react quickly in terms of how we can serve our customers. And we have demonstrated also during COVID, it's an opportunity to gain market share. So, I look at it also as an opportunity. It's also the story I tell to my team here, we have to see this as an opportunity to continue to serve our customers in the best possible way. We have tremendous customer trust as a supplier and that should benefit us as well.

Thank you.

Hey, thanks. You guys noted accelerating growth in India. I mean, it feels like it's been a while since you've called that out. Just curious what secular trends you're seeing there that warrant increased investments?

I think we haven't really discussed the accelerated growth in India in detail. We mentioned having growth acceleration plans in countries besides China, specifically highlighting Japan and India. Additionally, we have other regions where we have developed dedicated growth acceleration plans over the past couple of years. India has actually been performing well for us throughout 2024. Shawn, do you have the final number?

Yes, we had a very strong quarter. I can't say for certain how much the shipping delays affected it, but it resulted in a significant double-digit growth. For the entire year, we experienced high single-digit growth. We performed well in India, which we believe will continue to grow faster than other markets in the future.

Okay. And then two quick follow-ups. Shawn, I appreciate your commentary on pricing, 2% for the quarter and first quarter and for the year. How high could you take that if you needed to an inflationary environment? Is there kind of a natural ceiling on where you think you could take it? And then maybe totally separately, you talked about process analytics strength. Is that more greenfield? Or are you taking kind of share there in bioproduction? Thanks.

In terms of pricing, it really depends on the environment. A few years ago, when inflation increased, we were able to raise prices because of that. The presence of tariffs could lead to higher inflation or might cause us to raise prices, but it will depend on the specifics of the tariffs, which countries are impacted, and the overall scope. We're prepared for various scenarios. We believe we've made significant investments in our value proposition, which resonates with our customers. Our global sales team effectively communicates this value, and since we often sell directly to end-users, they appreciate what we offer. Additionally, our average product price is below $10,000, so any percentage increase won't translate into a substantial dollar increase. While I don't want to set a ceiling, I think we are in a good position. Patrick, do you want to add anything about process analytics?

Sure, I believe we are in a strong position with our portfolio as we have launched numerous new products over the past two years. This has been well received by customers not only in pharma and biopharma but also in the semiconductor industry, particularly for ultra-pure water applications where our portfolio is robust. We are also seeing good growth in that segment. While it can be challenging to quantify market share gains, I am proud of our offerings and our team's execution of the go-to-market strategy. So, potentially, yes, we are gaining ground, though I don’t have specific numbers to share. Overall, our portfolio is solid, and our customers appreciate our products and services, which is crucial for sustaining our growth.

Okay. Thank you.

Great. Thanks for squeezing me in guys. I'm sort of scratching the bottom of the barrel for questions, almost everything has been asked by a lot of the other analysts. But maybe just a couple of miscellaneous cleanups. You alluded to this earlier, Shawn, on the EPS bridge for '25, the $0.50 increase. You talked about FX in terms of the Swiss franc have an impact. Any chance you could just give us the numbers. I'm sure we could do the math, but in terms of being more precise in terms of how much each contributed?

Yeah. Hey, Mike, I mean, I think the math is probably pretty clear. I mean, I think you can see the beat, and then we updated the interest in the other numbers. And then the FX and the other probably squeezes out together in the high 50s or something.

Okay, I understand. Regarding the margins, you previously mentioned the gross margin compared to operating margins for the year. I had noted that you expected the gross margin to increase slightly. I believe you indicated a rise of 30 to 40 basis points, but it now appears to be slightly lower. Is that due to foreign exchange issues, or are there other factors at play affecting this?

I believe we ended the year with slightly better numbers than we initially anticipated. The figure for next year remains consistent, but we've exceeded our expectations this year. So, on a reported basis, it's up a bit. If we disregard the shipping delays, it might be up around 30 basis points.

Got it. Okay. That works. All right thanks so much.

Thank you.

Okay. Great. Hey, thanks, everybody, for joining us on the call this morning. If you have any follow-up questions, please feel free to reach out to me. I hope you all have a great weekend, and we'll talk to you soon.

This concludes today's conference call. You may now disconnect.