Mettler-Toledo International Inc. (MTD) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, we are currently experiencing some technical difficulties. Please stand by. Hello, everyone. Thank you for joining us, and welcome to the Mettler-Toledo third quarter 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 *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Adam William Uhlman, Head of Investor Relations. Please go ahead.

Adam William Uhlman: Thanks, Jonathan. Good morning, everyone. I appreciate you joining us. On the call with me today is Patrick K. 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 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 U.S. Securities Act of 1.93 thousand and the U.S. Securities Exchange Act of 1.93 thousand. These statements involve risks, uncertainties, and other factors that may cause our actual results, financial condition, performance, and achievements to be materially different from those expressed or implied by any forward-looking statements. For a discussion of these risks and uncertainties, please see our recent annual report on Form 10 k and quarterly recent reports filed with the SEC. The company disclaims any obligation or undertaking to provide 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 ks and is available on our website. Let me now turn the call over to Patrick.

Patrick K. Kaltenbach: Thank you, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we informed our third quarter financial results the details of which are outlined for you on page 3 of our presentation. We delivered an excellent third quarter, achieving relatively broad based growth across our portfolio while capitalizing on improving market demand. Performance was particularly strong in Asia and the rest of the world. Improved sales volume and strong execution of our strategic initiatives resulted in another quarter robust growth in adjusted EPS. We continue to benefit from investments in recent years that have strengthened our competitive position and prepared us for the growth of opportunities we see ahead of us. We have accelerated our innovation expanded our digital capabilities, further enhanced our Spinnaker sales and marketing excellence program, and evolved our global supply chain setup for increased resilience and agility. As market conditions improve, we are well positioned to deliver strong financial performance going forward. Let me now turn the call over to Shawn to cover the financial results and our guidance and I will come back with some additional commentary on the business and our outlook. Shawn?

Shawn Vadala: Thanks, Patrick, and good morning, everyone. Sales in the quarter were $1.1 billion up 6% in U. S. Dollars and in local currencies. Organic local currency sales growth was also 6%. On slide number 4, we show local currency sales growth by region. Organic sales increased 3% in The Americas, 2% in Europe, and 13% in Asia rest of world. Including 13% growth in China. Slide number 5 shows sales growth by region on a year to date basis. On slide number 6, we summarize sales growth by product area. Organic sales increased 6% in laboratory, and 6% in industrial, which included 5% growth in core industrial and 8% growth in product inspection. Food retail declined 2% in the quarter. Lastly, service revenue grew 7%. Slide number slide number 7 details 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. Gross margin was 59.8% in the quarter, an increase of 60 basis points due to benefits from favorable price realization lower tariff rates compared to the prior year, and volume growth. Partially offset by higher material and transportation costs. R&D amounted to $54 million in the quarter, and was up 4% on a local currency basis over the prior period. SG&A amounted to $267 million and an 8% increase of local currency over the prior year includes sales and marketing investments and higher variable compensation. Offset in part by cost savings. Adjusted operating profit amounted to $333.5 million in the quarter up 8% versus the prior year. Adjusted operating margin was 30.5% an increase of 40 basis points versus the prior year. Adjusted EPS for the quarter was $12.57, a 13% increase over the prior year. On a reported basis in the quarter, EPS was $12.29 as compared to $10.57 in the prior year, and a reconciliation to GAAP is located in our press release. That covers the P&L, and let me now comment on adjusted free cash flow amounted to $652 million on a year to date basis and was negatively impacted by the timing of tax payments which $72 million higher than the prior year. Excluding taxes, free cash flow per share increased 7% versus the prior year. I will now share additional thoughts on our guidance for the fourth quarter and our initial thoughts for 2027. You review our guidance, please keep in mind the following factors. First, we are encouraged by the relatively broad based momentum in our business. 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. Third, we are encouraged by the increasing momentum related to onshoring investments. While we have-- while we are. Excuse me. Third, while we are encouraged by the increasing momentum in related to onshoring investments, we have not assumed this will be meaningful to our 2027 results. And 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 fourth quarter of 2026, our local currency sales growth forecast is approximately 5%. Adjusted EPS is forecast to be in the range of $14.84 to $15.04. Which represents a growth rate of 11% to 13%. At recent spot rates, foreign exchange is not expected to significantly impact our results. For the full year 2026, we have increased our local currency sales growth forecast from approximately 4% to 5% to approximately 5%. Reflecting organic growth of 4%. Note that our forecast also excludes the impact on sales and cost of sales from tariff refunds. Adjusted EPS is forecast to be in the range of $47.70 to $47.90, which represents a growth rate of 12%. We have also provided our initial guidance for 2027. And based on our assessment of market conditions today, we expect local currency sales to increase approximately 5%. Our outlook reflects continued strength in China and emerging markets, favorable trends in The U. S, and benefits from our Spinnaker sales and marketing growth initiatives and robust product portfolio. Offset in part by a cautious view in Europe given various macro uncertainties. Adjusted EPS is forecast to be in the range of $52.50 to $53.50, which represents a growth rate of 10% to 12%. At recent spot rates, foreign exchange has estimated to be a 1% headwind to sales growth and neutral to EPS. Some further comments on our 2027 guidance. We expect total amortization including purchased intangible amortization, to be approximately $76 million Purchased intangible amortization is excluded from adjusted EPS and is estimated to be $27 million on a pretax basis for approximately $1 per share. Interest expense is forecast to be $68 million for the year, Other income is estimated at approximately $22 million. We expect our tax rate before discrete items will decline from 19% in 2026 to 18% in 2027. Free cash flow is expected to be approximately $950 million in 2027, which represents 8% growth on a per share basis. Share repurchases are also expected to be $950 million that is it from my side, and I will now turn it back to Patrick.

Patrick K. Kaltenbach: Thanks, Sean. Let me start with some comments on our operating businesses. Starting with Lab, which had broad based growth in the quarter across nearly all product areas. In addition to growth in bioprocessing, it was encouraging to see another quarter of strong growth from customers in quality labs, where we sell a wide range of analytical instruments and lab balances. While trends in biopharma and biotech research improved resulting in very strong growth in our liquid handling business. We also benefited from growth in hot segments, such as semiconductor, semiconductor, battery, and GLP 1 among others. Our innovative our innovative portfolio resonates well with customers. And we have a deep pipeline of new innovations that will reinforce our technology leadership. In process analytics, launched a new online bioburden analyzer that provides real time monitoring of microbial contamination, for example, in pharmaceutical water systems. The launch further strengthens our position in critical bioprocess applications. Turning to industrial. Core industrial had another quarter of solid growth on top of 10% organic growth in the prior year. Sales growth this quarter was again led by our automation and digitalization solutions. We have maintained a steady cadence of new product introductions in recent years, and further expanded our portfolio recently by introducing the ACT305 weighing transmitter which is a high performance device designed for fast, accurate transmission of weight data and status to control systems, enabling enhanced process control. It is easy to use, quick to commission, and integrates seamlessly into industrial environments for filling and dosing, checkweighing, and other applications. Moving on to product inspection, we had a very good quarter with organic growth of 8%, with strong results across the portfolio. Our mid market strategy is working well and helping us target growth opportunities within growth segments of the food manufacturing market. We have also further expanded our portfolio of client solutions to help our customers tackle how to detect physical contamination. We also introduced AI enabled image recognition software for our X-ray systems, improving contamination detection while reducing false rejects for customers. Finally, food retail sales declined slightly due to the timing of project activity especially in The Americas. Now let me make some additional comments by geography. Starting in The Americas where sales grew 3% versus 9% organic growth in the prior year. We had strong results across most lab product categories and it is encouraging to see strengthening demand for products used in research and development applications, especially pipettes. Industrial also had good growth on top of double digit growth in the prior year, with strong product inspection results and strength across our core industrial products, that enable automation and digitalization. Growth in these areas was offset in part by slower sales in food retail and transport and logistics due to timing of project activity. Turning to Europe, growth in Europe was modest but broad based across the portfolio. While macroeconomic conditions remain subdued, customer activity is good, and our team continues to execute well on capturing available growth opportunities. Finally, Asia, rest of world, had excellent growth results again this quarter, with strong growth across the portfolio. This included 13% growth in China, which was led by our industrial business and strong results across our laboratory products. Other emerging markets also grew double digits. That concludes my comments on our Q3 results, and now let me share with you some additional thoughts our initial guidance for 2027. I recently came off of our annual virtual tour meeting with our senior leaders around the world. I came away incredibly encouraged by the energy, optimism, and focus I saw throughout the business. What stood out most was the breadth of growth initiatives that are being pursued across the organization. Our teams have a deep pipeline of initiatives to drive growth and enhance profitability, and are executing at a high level. Importantly, many of the investments we have made over the past several years are beginning to generate tangible results. We have strengthened our product portfolio accelerated innovation, deploy new tools across our Spinnaker sales and marketing excellence program, and enhanced our digital footprint. We have also invested in a more resilient and agile global supply chain. We remain committed to investing to support future growth and see significant opportunities ahead as replacement demand improves, companies increase investments to support onshoring, and supply chain resilience, particularly in The United States and customers place increased emphasis on automating and digitizing their operations. These trends align exceptionally well with our strategy and provide confidence in our ability to drive growth over the long term. Our biopharma customers are making substantial investments in artificial intelligence digitalization, and next generation research capabilities that we expect will accelerate drug discovery and development. We are uniquely positioned to support customers with our broad portfolio innovative solutions across the entire value chain, for research and development, all the way to manufacturing. From a regional perspective, we expect solid growth in The United States in 2027 where investments in advanced manufacturing and automation are expected to build as the year progresses. We also expect good growth in China despite more difficult comparisons given the strong second half results in 2026. We are well aligned with the investment priorities in China, life sciences, technology, new materials, and clean energy, as well as trends in automation and digitalization. We are also well positioned globally to capture growth in various hot segments such as semiconductors, advanced materials, and batteries to name a few. We expect to see strong momentum across emerging markets and expect these regions to remain important contributors to our long term growth strategy. We also expect to translate these growth opportunities into another year of double digit growth in adjusted EPS through the focused execution of our initiatives. In summary, we delivered an excellent third quarter and are pleased to have increased our full year outlook. We are entering 2027 with positive momentum across the business as the investments we have made over the past several years are producing results and our growth initiatives remain on track. We remain confident in our ability to continue creating compounding value over the long term, and we look forward to discussing our strategy in greater detail at our investor meeting on Monday. So that concludes our prepared remarks. and operator, I would now like to open the line to questions.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 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 is from the line of Luke Sergott from Barclays. Your line is now open. Please go ahead.

Luke Sergott: Great. Thanks for the question, guys. Just wanted to talk about kind of the. What you are seeing there in China. I know I appreciate some of the color that you gave. But when I am thinking about the puts and takes that we are seeing here and it. it is starting to recover for the rest of the group pretty strongly. Just kind of dig in from an end market perspective and then what is also embedded within that 2027 guidance? Luke, is there or is there any material improvement in some of the slower parts of the areas?

Patrick K. Kaltenbach: Hey. Thanks, Luke, for the question. Of course, we are very pleased with the 13% growth we have seen in China this quarter. In Q3, to give you a little bit more flavor, also included a strong industrial growth and lab growth. They are actually feeling very good about the momentum in China. Because we are. As I said in the pre- remarks, we are really well aligned with the investment priorities in China to invest into the future, building out, the pharma portfolio, investment in life sciences and technology, and new energy and others. This really fits our portfolio very well. We are also benefiting from the in China for China strategy. We have a strong manufacturing footprint there. We have a strong local sales team and can also benefit from our global tools like Spinnaker to really address the hot markets. there is overall, I would say, broader based trend clearly into automation and digitalization in China as well. And given the all the updates we have made to our portfolio and innovation we have put in there, we believe feel really well positioned for the future growth in China. Of course, next year, we face. Especially in the second half, we will face some tougher comps. But we overall really complement. I hand it over to Sean to really give you some more details in terms of the growth rates in China and extent.

Shawn Vadala: Yeah. Hey. Thanks, Patrick, and good morning, Luke. Yeah. Hey. Patrick and I were just in China recently to meet with them, and then we also, of course, were on our annual budget tour when we got to meet with all the other colleagues in the in the region as well as around the world. And we really came back feeling very positive on the region in general. You know, what was nice to see is that the breadth of the growth kind of throughout the portfolio, particularly in China, You know, if you think about earlier in the year, we started to see this momentum building on the industrial side. Which we continue to see. But we also saw good results in lab in the quarter. I think in the quarter, industrial was up probably, like mid-teens, and lab was a very, very high single digit in the quarter. As we kind of look to Q4, we see that lab growth probably even further improving. And, you know, overall, we are thinking mid teens for Q4 in China in both businesses. For next year, we are a little bit more modest, just mostly because of the comps that we are facing. We are probably thinking more mid single digit in China for the year as we know things in China can always change quickly, you know, going in either direction. But we feel really good about what we are seeing, the momentum throughout the portfolio, especially in the pharmaceutical side, I think, as Patrick mentioned too. And when we think about next year, that mid-single-digit is probably more like mid to high on the lab side and maybe more low to mid on the industrial side, acknowledging there could be some ups but we are just a little bit more cautious given the comps.

Luke Sergott: Okay. Great. And then I guess just a follow-up there and continuing on the 2027 guide theme. You guys usually frame kind of what you are looking for from that could be up driver, downside drivers. Outside of geography and macro, but I kinda look at when I am thinking about the upside, you have a pretty large installed base from an instrumentation perspective. And you know, as I think AI kind of hits in the manufacturing sector. You know, that is an unappreciated aspect of it. And I am just trying to think about the upgrade cycle from an instrumentation perspective you know, how much of your stuff is cloud-agnostic ready? And I am sure that is a huge focus for you on innovation. But as I think about some of the upside drivers next year, like could a rebirth or restart of an instrument upgrade cycle be 1 of them?

Patrick K. Kaltenbach: Well, look, I think you are hitting a good point here is that we have invested a lot into our technology and digitalization capabilities over the last years and you are absolutely right. Have put a lot of emphasis on making sure that our instruments, our sensors, our instruments really seamlessly plug into the customer's digital environment. So we provide what I will call across the value chain all the sensors that you need to take the relevant data to either optimize a manufacturing workflow processes or in the R&D environment drive automated labs, etcetera. What is important is that we also provide what I call the mid layer data infrastructure that connect to our sensors and instruments that then seamlessly integrates into our customers' AI software solutions and where everybody uses something else. But it is important that they have a good interface that they can connect against with our instruments and it with all the newer products that we have out there, Connect to it, LabX, for example, is a really strong platform with that connects to almost the entire field of instruments we have in a lab space and typically cover 40% of them off the bench in the QAQC lab, which is also heavily used. So that drive still self driving labs, and I think those of you who will be here Monday will be excited about some of the showcases we have. Here in that direction as well. So, yeah, I think we definitely will benefit from the trend of AI and said our portfolio's extremely well.

Shawn Vadala: Yeah. And just to be clear, Luke, I think you framed it correctly. Luke, you know, as Patrick says, we are really well positioned for these trends. We will talk more about it on our Investor Day on Monday. But it is not like we have built anything meaningful into our guidance. For next year. I feel for our upsides. Yep. Great. Thanks.

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

Tycho Peterson: Hey, thanks. Just sticking with the 2027 outlook wondering if you can break down some of the other assumptions by end market and geographies. You obviously hit on China already, but you know, you are seeing a broader recovery here across the board. Right? And are there other areas that are, you know, lagging that, you know, potentially could come back next year? Maybe just do a walk through by end market and geography, which baked into that 5%.

Shawn Vadala: Yeah. Sure, Tycho. Okay. I will take that 1. And so, for 2027, I will start with the division. So for lab, we are our guidance is mid to high single digit. So that would be, like, an improvement from what we saw this year, kind of like the momentum we saw in the second half of the year kind of continuing. 1 of the nice things with lab is if you kinda think about our business, we kind of serve the different aspects of the customer's workflow or value chain. Earlier in the year, we were seeing, you know, good trends in bioprocessing, Last quarter, it was Q2, was last quarter. We saw things really improving in the QA QC bench. And then this quarter, we saw better activity in r and d and. Which was really nice to see, like, in areas like pipettes. And so we are encouraged as we kind of go into 2027 in lab. And core industrial, we are guiding mid-single-digit for next year. kind of also benefiting from a lot of the favorable trends in automation and digitalization. In product inspection, we are maybe a little bit more cautious, maybe low to mid single digit. in PI. And then in food retailing, we are also a little bit more cautious with low single digit. In terms of The Americas, we are guiding mid to high single digit. With, kind of some of these favorable trends that we see kind of exiting this year. In terms of the market. Europe, we are a little bit more cautious, in guiding to low single digit. And then China, we already mentioned mid single digit.

Tycho Peterson: Okay. that is helpful. And then, you know, industrial has come back better. You had, you know, an acceleration on a tougher comp here. Is any of that receiving help from the chemical recovery or recapturing delayed orders? Maybe just talk about whether there is any sort of timing elements in what you are seeing now versus broader underlying, improvement?

Shawn Vadala: Yeah. I would say certainly chemical is better than it was in Q1. You know, we had that soft start. I would say out of our core segments, it is still a softer you know, market relative to, like, pharma. Pharma was probably the more standout in the quarter. But nothing special here. You know, like, that market, you know, certainly has different you know, has had different challenges in the past with higher energy costs. But right now, we are seeing decent activity there, but it is relatively softer compared to the other markets. Okay. I will leave it at that. Thanks.

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

Vijay Kumar: Hi, Patrick. Good morning, and thank you for taking my question. Hey, maybe a big picture 1 for you, Patrick. We have heard a lot of your peers speak about AI lab in the loop. How some of the things that you speak about liquid handling being very strong, process analytics being strong, Are these things, products that go into some of these AI lab in the loop end markets? And have you tried to quantify what it means for Mettler?

Patrick K. Kaltenbach: Yeah. Vijay, thanks for the question. Look, Lab in a loop or self driving labs are. there is several ways you can call this I mean, bioprocessing, I think we benefit most, of course, from our process analytical portfolio. Where the connectivity of the sensors and digital interfaces these sensors provide our customers and seamless integrating into their data systems allow them to optimize their process. that is mainly manufacturing with our digital sensors and increase yields and productivity, etcetera, and also use their own AI solutions to optimize processes and their setup. But it is important that they have the right data points, and this is where our potential sensors play a role for the world. On the self driving labs, or lab in a loop approach I would point them more to, let's say, the late stage R&D or R&D sites, whether it is in the pharmaceutical industry or in areas like batteries and other areas where we see these labs applying our instrumentation solutions together with robots that we serve our instruments that could then control together with all of our solutions to control the entire workflow. And then do self optimizing experiments. We have, again, this in several accounts already. there is quite a lot of interest in these solutions. And the important part there is also is connectivity to the AI driven approach that customers use on their side. Again, everybody has a different model, but it is also that they have the right data aggregation, right, layer that we provide, for example, with LabX, that they can plug into and then run fully automated experiments and with that also then experiment design. Optimization. So it is still. I would say it is still early innings, but we see really strong interest. And you know, again, for those of you who will be here on Monday, we will see a practical example of that as well.

Vijay Kumar: Understood. that is helpful. Sean, maybe 1 for you on this Q4 guidance assumptions. 5%, your comps get easier Why, you know, you just did 6%. Why is organic going to slow down in Q4? Maybe if you could just talk about what are pricing in 3Q in Q4 assumptions and why Q4 is stepping down, that would be helpful.

Shawn Vadala: Yeah. Sure, Vijay. So maybe I will start with the pricing assumption. So in pricing in Q3, it was just over 2.5 percent. And we expect to be in that 2.5 percent range also in Q4. You know, the probably the biggest difference in Q4 versus Q3 is if you know, like, on 1 hand, I kind of see the lab getting, that mid to high single digit. Core industrial probably being high single digit, but then maybe going the other way. You see, retail down mid single digit and you know, as a reminder, you know, retail was up like, I think 19% in Q4 of last year. So it is just lapping a really big comp. And as you know, that business can tend to be lumpy based upon customer activity. And then we are also a little bit more cautious on our product inspection business. I mean, PIs had a very good year to date, had a strong quarter. it is probably gonna be more flattish in the in the fourth quarter. And it is just probably if you look at the comp there for last year and then the year before, I think it grew organically double digit last year in Q4 and double-digit the year before. So we are just kind of lapping some difficult comps there on a stacked basis, but just more customer activity. We are actually competing really well, and the product portfolio looks great. We have some you know, introducing new products as well that you will see it on Monday as well too. Understood. Thank you.

Operator: Your next question comes from the line of Daniel Arias from Stifel. Your line is now open. Please go ahead.

Dan Arias: Hey. Good morning, guys. Thank you. Sean, low singles for Europe. Can you just maybe talk a little bit about what we should expect out of labs specifically in Europe as we look to the end of the year here and then into next year. that is been an area that is soft. It sounded like you felt better about things like bioprocess. At least earlier in the year. So how might that translate? Are you assuming just sort of similar activity overall in European lab? Or might there be an acceleration trend that we can look forward to?

Shawn Vadala: Yeah. So for Europe, I mean, you know, we feel like our team continues to execute really well in a more challenging environment. You know, if you think about all the different topics in the world, Europe, you know, is probably a little bit more under pressure for different reasons, whether it be energy costs or whether it is like how some of these you know, trade disputes are playing out. You know, if you think about the pharmaceutical industry, certainly, we see a lot more activity outside of Europe than we see inside of Europe. But nonetheless, we still feel like you know, within that low single digit, you know, it is probably about the lab business is probably still in that kind of mid-single-digit single digit kind of a range. In terms of the fourth quarter. And with the other businesses being a little bit more cautious and a little bit more exposed to the macro. As we kind of look forward to next year, I mean, of course, we are only sitting on about 1.5 months of backlog at any point in time. But just looking at the different regions, this is the 1 area that we, you know, have probably a little bit of a closer eye on. Kind of going into next year. Yep. Okay. Okay.

Dan Arias: And then, Patrick, maybe as a follow-up to Vijay's question there on that. You guys have been talking about automation and digitalization for a while now, certainly before the AI discussion became what it is today. Is that tangibly accelerating as a growth driver? I mean, is that something that you think will mean more to the P&L next year than this year? And maybe that is what you were saying to those questions. I just need to hear it again. But I am just curious about how much more you are seeing that kind of falls into that camp versus prior periods and future periods.

Patrick K. Kaltenbach: Clearly, as the portfolio is shifting more in a direction, I mean, you see about interest shifting more in the direction of it, but you can call it broader. Digitalization and automation, but behind it, of course, there is a lot of also opportunities as customers now drive leveraging AI. And I think we are exceptionally well positioned because we provide them the instruments and the terminals to connect to these sensors and instruments and stop at the connection and empower them to drive these AI based solutions. This is still a bit early innings, but we see really good interest in this area. And really good engagements with customers across the board, whether it is in pharma, in drug discovery areas where they try to drive and optimize the experimentation. Whether it is into, for example, in the battery segment that you think about things like electrolyte composition optimization for different battery types that are where they really work at these labs and these automated setup running around the clock to optimize the chemical. The chemistry that they need for the batteries and etcetera. This is very exciting to see this. But, again, it is what customers are looking for is really. And open environment and a data aggregation layer that they can plug into. And drive them the experiments using their own AI approach. The different ones customers use, They. I think we are really well positioned there with our digital with our digital sensors, with our analytical instruments that we have. And the connection layers on software and terminals that customers need to do that. Thank you.

Operator: Next call is from the line of Jack Meehan from Operon Research. Your line is now open. Please go ahead.

Jack Meehan: Thank you. Good morning, guys. Wanted to ask about the 2027 guide. If you look at the 5% local currency growth, can you just talk about like, a few of the factors, like price versus volume? How you are thinking about Spinnaker share gain versus market growth, And then are you assuming any recovery in the replacement cycle? Or could that be upside?

Shawn Vadala: Yeah. Hey, Jack. Maybe I will start at Patrick wants to add some color as well. So in terms of the 5% between volume and price, we expect to do just over 2% next year on price, kind of our typical baseline is about 2. We will have a little bit We will have a-- we will do a little bit more than that just given some of the pricing actions we did mid year this year. And, of course, we will continue to evaluate that as we go through next year based upon the inflationary environment. So that, you know, puts the volume in, you know, the 3% ish kind of a range. In terms of you know, replacement cycle, I feel like it is always difficult to tell, like, how much of things are replacement. But, certainly, we look at some of the categories that lend themselves to replacement, we have seen really good activity, like, in the analytical instrument category now for at least a couple quarters in a row, and so that is very encouraging same with lab balances. And so, you know, right now, we kind of expect what we are seeing to continue into next year. We have not necessarily built in an acceleration from where we are You know, we will talk a little bit more about this at the Investor Day on Monday, but we see this to be, you know, certainly a broader theme, you know, kind of going forward in terms of exactly how things play out with replacement kinda given the significant sales we had back in 2021 and 2022 and how the. That could play out with the life of our products. And then in terms of market share, you know, our market you know, we do not have, like, of course, a perfect view on what the market growth would be just given the breadth of our portfolio, but we certainly feel very, very good about our ability to gain just a little bit of share each year through our Spinnaker program. And, you know, we spent, you know, a lot of time this past week with our executive team and the board kind of going through that, you know, a lot of the different things that we are doing there and the program just continues to increase with sophistication. And we will actually share a little bit of that on Monday as well too.

Jack Meehan: Great. Looking forward to it. Just as a follow-up, would be great to get an update on onshoring just what visible activity are you seeing either quotes, project funnel, anything in terms of just trying to get visibility into when revenue might start to manifest. Thanks.

Patrick K. Kaltenbach: Yeah. Okay. We are really excited to see increasing activity in that regard. We use also, for example, as Sean mentioned, Spinnaker as a tool to identify investments in the same area. it is very, very early. We have a really good tool there to do and sense market activity and then guide our sales force to these activities. As we see the need investment happening and then the increase with some of these investments over longer term plans, for. If the pharmaceutical company likes to build a new facility and then and then ramp it up over the next couple of years it takes probably 2 to 5 years until we see a big momentum of that out of that facility or there is a simple product expansion of an existing facility. So it is a, I would say, multiyear. Multiple year cycle. But what we see in terms of leads activity and investment activity and alerts we are getting from our systems, it is really encouraging here in the United States to. And it is definitely linked to reshoring activities. Excellent. Thank you, guys.

Operator: Your next question comes from the line of Douglas Schenkel from UBS. Your line is now open. Please go ahead.

Analyst: Hey, guys. This is Avery on for Douglas. Thanks for taking the question. I guess just to follow-up on reshoring. Does the election change how your pharma customers are thinking about The U. S. Manufacturing projects? And how you are thinking about semis and data center demand?

Patrick K. Kaltenbach: Look, I think we do not have a crystal ball here. it is probably early, but I would not expect that it is impacting, on data centers, which is, of course, 1 of the. What we call hot segments for us, but it is really, in terms of overall revenue contribution, small or low. But it provides great growth opportunities because for those, for example, we provide the solution, for example, to, you know, check the cooling systems like our ultra pure water solutions or if they use coolants also to use other sensors like and others to control the cooling systems. I think what is in again, I do not have a crystal ball about what this election will do to the build out. I even if it slows down, we still would see this as an exciting opportunity moving forward. And, again, many of those are still under construction or build out. Then we have. They are coming into the deal a little bit later when those. When they go really light.

Shawn Vadala: Yeah. A lot of these projects are already started. Yeah, right committed, and then they have been on the onshoring side. I mean. And just to be fair in both, of them was slightly they are more. They are very much upsized to our guidance. Luke, we did not really build any specific for them as we kinda built our guidance for next year. If you think about even the onshoring topic, you know, this was-- this was something that also started you know, really coming out of COVID where companies wanted to have more resilient and agile supply chains and I think most companies were already on that path to have more region for region production. And then I think that the trade disputes you know, and tariffs just kind of accelerated that trend. But I think that is from what we can see, that is very much in motion. You know? The magnitude and timing is always maybe the bigger question and more difficult to be. Answer with precision. But, clearly, the activity is increasing, and we are seeing that as well too in terms of the projects themselves now in terms of, like, translating into sales will still take some time. But we are not sitting here today thinking that it is gonna change significantly. Alright. Thanks. And then on the on the higher material and transportation costs that hit margin in the quarter, I guess, like how big was that headwind to Q3? And then how much of that is built into Q4 in the 2027 guide? Yeah. I mean, you know, like, there is, of course, a lot of different things going on in our margin. You know? You know, we certainly factored that into Q4 as well and then and then also into to 2027. You know, I feel like the team is monitoring it very closely. You know, I think we do a good job in mitigating these things when they come up. We will continue to look at different mitigation actions, you know, as we kind of go into next year and we are kinda, like, in that mode of just trying to make sure we. We are prepared to mitigate as it changes. But it is, you know, very dynamic environment for sure.

Operator: Your next question comes from the line of Casey Woodring from JPMorgan. Your line is now open. Please go ahead.

Casey Woodring: Great. Thank you guys for taking the questions. Maybe first, just on product inspection, which grew 8% in the quarter. You just talked about flat expectations for 4Q in that business, which sounded like a comp dynamic. But you are guiding to low- to mid-single-digit there for 2027. So maybe just talk a little bit about the 8% you did in 3Q versus the guide for 2027. How conservative is that? And just kind of what is embedded there in product inspection.

Patrick K. Kaltenbach: Okay. Look, Casey, we are really pleased with the growth. We had seen here this quarter, and once we have seen, we see our growth is really a combination of our own mid-market strategy, but we also very well at the high end, which is recently introduced also new high end products, which really differentiates us really well in the market. For Q4, as Sean mentioned, the growth expected to slow due to customer projects and then it is also tough comparisons. So it is also. In this business, also the timing of projects, it is always how they play in. But we also are facing really tougher comps moving forward, and that is why we also set our expectation a bit more moderate. I think they competing extremely well with the portfolio. But overall, of course, the food market is nothing that we overall expect really high single digit, right, For us, it is important that we are competing really well. That we continue to take market share, which we are really very relevant for us.

Casey Woodring: Okay. Okay. Understood. And, you know, I think your comments around labs growth this quarter sounded like the consumables business, in particular, pipettes, was a nice contributor there. Can you maybe just talk about, you know, that was softer you know, several quarters ago. It seems like that is very much back to normal. Maybe just talk about how you are thinking about the consumables focused parts of the lab business in 2027. Thank you.

Patrick K. Kaltenbach: Yeah, maybe I will start with the pipettes, and we are really pleased to see that improving conditions because this segment has been subdued. In recent years, we think market conditions have been improving across biopharma and biotech research. But I also want to mention that we are really competing well. Launched new pipettes, new electronic pipette, and also some really nice new PFAS free tips, low retention tips, we call them. That are really very well received in the market. So we are well positioned as market conditions improve, and then, of course, we will also then increase contribution of the consumables business overall. Thank you.

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

Analyst: I guess, first, a quick follow-up on the stronger liquid handling. If I recall, this category has a much stronger margin profile. I guess, is that right And if so. Or I guess, regardless more broadly, how are you thinking about margins both gross margins, op margins for 2027? And would you expect mix to be a driver to margin expansion next year just given some of the strength in your kind of new pockets within the portfolio?

Shawn Vadala: Yeah. Hey, Josh. I will take that 1 So our lab business in general tends to be higher than our, you know, the rest of our business in terms of margins. And then within the lab business, certainly, our liquid handling business is 1 of our better margin businesses for sure. You know, the countries that we are. We are very encouraged to see market conditions improve, but also really happy to see some new products being launched, some new innovation that is really well received in the market, and that and that, of course, is the key to sustaining margins into the future. In terms of 2027, you know, as we kinda, like, look at the year with lab being a little bit better versus the other divisions, of course, that implies that we probably have a little bit of favorable mix within the within the portfolio. But you know, maybe I will kinda, like, walk through things for next year at the operating margin level. We are probably thinking, you know, of course, this depends on where you are in our range. At the midpoint, it is maybe at operating margin plus 70 basis points. To put in order of magnitude, if you are at the high end of the range, it would be about 90 basis points in terms of margin improvement. Year over year. We are a little bit more modest when it comes to the gross profit margin expansion next year. it is probably flattish, you know, maybe up slightly. But 1 of the things we are we are just a little bit more cautious with 2 things. 1 is, you know, we are keeping an eye on this inflation. But then the other thing is the tariff rates. Right? Look, we are kind of assuming that the rates go back to the previous IEPA rates. Next year, we will see how that plays out. But that is at least how we are you know, kind of positioning ourselves sitting here today.

Analyst: Okay. And then, Patrick, you commented on strong core, I guess, any more detail or context you can provide on where you are seeing, pockets of acceleration or maybe deceleration within core industrial. And then And then, yeah, regarding onshoring, is this something that primarily hits pharma, or are you also starting to see onshoring opportunities show up in the more industrial accounts? And then where are these opportunities in the pipeline? Is it already hitting revenue? Or do you think it is more opportunities that have yet to hit orders and yet to hit revenue?

Patrick K. Kaltenbach: Good. Good. Great question, Josh. Yeah. Yeah. So let me start first with industrial, our industrial. And the majority of the growth we have seen here is really industrial automation. Customers are building out automation capabilities that meets the needs of not only end customers, but also customers like system fabricators and system integrators who build automation solutions for customers, whether it is pharma or other industrial opportunities out there. So that. that is really driving the growth there and across the board, and we talked about that in China, but we also see that in The US. And some of it is also linked, of course, to the to the re shoring and onshoring activities to The United States because as customers expand the facilities over here, build new facilities over here, they are looking then to also use our automation solution coming from industrial. Overall, on reshoring and onshoring, as I said, we are excited to see the activity. What we see in the funnel that is really good customer engagement there. We see a lot of activity it is still really early. We see this as a increasing momentum that will be able to contribute in the second half of 2027 and the years ahead. There is some revenues, of course, also that we have seen in this quarter, but still very early. I think the maturity there is really still to come. I expect this to be a stronger, longer-term way for us, especially in The United States. We have seen some of it also in our. For example, in the emerging markets around China over the last years, that will continue potentially as well. Got it. Thanks for the detail, guys.

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

Analyst: Great. Thank you for taking my questions. So I think this is the 2nd quarter you have mentioned strength in emerging markets. Maybe just talk through the investments you are making there and then the durability of those trends and then any particular geographies you would specifically call out.

Shawn Vadala: Yeah. Hey, Evie, this is Shawn. I will take that 1. So, as I mentioned earlier, Patrick and I just came off of our annual budget tour. And we kind of wrapped up in Asia Pacific, and it was just a great way to end the tour because just the number of opportunities and, like, the enthusiasm, frankly, that we felt from the teams was really encouraging. You know, we. We have always felt like we have a really great footprint in the region. You know, we have been there for so many years with dedicated direct sales organizations in a lot of these countries, like, you know, the various countries within Southeast Asia or India or Korea, etcetera. And I think that dedicated focus with direct sales is a real key differentiator for us, and, you know, they all benefit from the same program Spinnaker that we see worldwide. And I think we have also been incrementally investing in these countries for a while. You know, we have. Most of them have very specific dedicated strategic growth plans that they review with us on a regular basis. And then, frankly, just even coming off this tour, we were looking at, you know, opportunities for incremental investment, going into next year just given the strength of momentum. So we feel really good. And then when you when you think about our, you know, this global footprint of all the emerging markets, including, you know, Eastern Europe and Latin America as well, You know, I think emerging markets outside of China are about 17%. Of our sales, and then, you know, China is gonna be in that, you know, 16%, maybe this year, probably around 17%. So it is a very you know, it is it is a very chunky piece of business, you know, more than a third or maybe a little bit more than a third of our business in these, you know, faster growth areas right now. So and if, you know, if you think about these regions, of course, they are the ones benefiting a lot from, you know, nearshoring or China plus 1 strategies or, you know, India with a lot of the generics opportunities, etcetera. Great. that is super helpful. And then on pharma, given the strength there, maybe just walk through biotech versus large pharma. And then any particular instruments that are selling into that space that have seen recent strength and then contributions from, you know, a broader market improvement versus any new product launches? Yeah. The 1 thing we saw in the quarter is. Maybe I will start to answer is, you know, biotech had been under a lot more pressure, right, for several quarters in a row. And what was nice is that know, if you think about the 1 area-- we do not have a significant exposure there, but the 1 area we do is liquid handling and pipettes. And we certainly saw you know, and, a lot, you know, you know, improved activity for sure with strong growth in the quarter there. So that was that was very encouraging. Very encouraging for us to see. And in addition to that, it was kind of like a great 1-2 punch because as the market was recovering, we also have some new products that we are bringing to the market as well too. So it is hard to say how much of it was market versus product, but it was-- clearly, the market conditions have improved. And, But, you know, hey, these new products that are. They are just being launched, so it is still a little early, but very well received.

Operator: Hello. And thank you for your question. Got it.

Patrick K. Kaltenbach: Back to you. Maybe I will just add 1 sentence. So back to your question regarding the portfolio, it is across the board from all of QA/QC into manufacturing and manufacturing So not only the sensors that go, for example, in the bioreactors, but it is also industrial weighing applications. That we sell in pharma as well. So it is really driving a lot of good contribution across the portfolio.

Operator: Your last question is from the line of Michael Polark from Wolfe Research. Your line is now open. Please go ahead.

Michael Polark: Good morning. Thank you. 1 topic, 2 parter, China. If I have it, the math correct, the original for China in 2026 was low single digit growth. I think you are tracking to do something like 9% or 10% How would you bridge that variance? Was there. Is that broad based upside or is there 1 or 2 things that deviated positively from your model? And the second part is for the mid single digit growth guide for China in 2027. I understand it is a volatile geography and know, your visibility is generally low. Regarding backlog, so things can swing. But as you reflect on a long history in China, what is a reasonable up/down band versus an initial Mettler forecast for, say, mid singles? I would appreciate some perspective on that. Thank you.

Shawn Vadala: Yeah. So, I mean, when you look at the full year guidance and if you kind of squeeze out, you know. Well, if you kind of apply the Q4 guidance that we talked about earlier, we are probably more in the 10% range. For China, frankly, for this year. You know, this has been a great year for China. Right? Look, we saw things starting to gradually improve as every quarter, it started you know, with the industrial business, and now we are seeing it also in the laboratory business. So, like it is really nice to see that it is I like the fact that it is also been a little bit more gradual even though it is it is a lot different than it was at the beginning of the year instead of being very spiky. But at the same time, we. We have said for many years, things in China in particular can change very quickly more than other regions. And so it is just a little bit what we given that we only have about 1.5 months of backlog at any point in time, that is why we are a little bit more cautious as we look to next year. But, clearly, there could be you know, there clearly could be a swing factor going into next year and acknowledging that know, it is. You know, sitting here today, this probably looks like there is more upside there than downside.

Operator: Thanks, Sean. There are no further questions further questions at this time. I will now turn the call back to Adam for closing remarks.

Adam William Uhlman: Great. Hey. Thanks, Jonathan, and thank you, everybody, for your excellent questions. If you have any follow ups, please feel free to reach out to me. And, I hope you all have a great weekend.

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