Mettler-Toledo International Inc. (MTD) Q3 2023 Earnings Call Transcript

Mettler-Toledo International Inc. (NYSE:MTD) Q3 2023 Earnings Conference Call November 10, 2023 8:30 AM ET

Company Participants

Adam Uhlman – Head of Investor Relations
Patrick Kaltenbach – Chief Executive Officer
Shawn Vadala – Chief Financial Officer

Conference Call Participants

Daniel Arias – Stifel
Joshua Waldman – Cleveland Research
Vijay Kumar – Evercore ISI
Derik de Bruin – Bank of America
Matthew Sykes – Goldman Sachs
Patrick Donnelly – Citi
Jack Meehan – Nephron Research
Rachel Vatnsdal – JPMorgan
Catherine Schulte – Baird

Operator

Thank you for standing by and welcome to the Mettler-Toledo Third Quarter 2023 Earnings Conference Call. I would now like to welcome Adam Uhlman, Head of Investor Relations, to begin the call. Adam, over to you.

Adam Uhlman

Thank you and good morning, everyone. Thanks for joining us. On the call with me today is Patrick Kaltenbach, our Chief Executive Officer; and Shawn Vadala, our Chief Financial Officer.

Let me cover some administrative matters. This call is being webcast 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 today is available on our website.

This call will include forward-looking statements within the meaning of the US Securities and Exchange Act of 1933 and 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, see our recent Annual Report on Form 10-K and quarterly and current reports as filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statements except as required by law.

On today’s call, we may use non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K and is also available on our website.

Let me now turn the call over to Patrick.

Patrick Kaltenbach

Thanks, Adam, and good morning, everyone. We appreciate you joining our call today.

Last night, we reported our third quarter financial results, the details of which are outlined for you on page three of our presentation. Market conditions were weaker than expected in the third quarter, especially in China, where market demand significantly deteriorated relative to our expectations. Our team has reacted quickly to address the market challenges and addressed our cost structure and delivered good margin and cash flow performance despite these headwinds.

As we look to the remainder of 2023, we expect market conditions to remain weak, especially in China. And based on market conditions as of today, we would expect these headwinds to persist into next year. However, we remain confident in the factors we can control, including strong execution of our proven corporate programs like Spinnaker to drive growth and capture market share and SternDrive to manage our costs effectively. Our go-to-market strategy, innovative portfolio and unique culture has been important differentiators during challenging conditions. And I’m convinced our efforts have driven market share gains and will help us to emerge stronger in market recovery.

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.

Shawn Vadala

Thanks, Patrick; and good morning, everyone. Sales in the quarter were $942.5 million, which represented a decrease in local currency of 5%. On a US dollar basis, sales declined 4% as currency increased sales growth by 1%.

Sales growth by region:

Local currency sales grew 4% in Europe
Declined 3% in the Americas
Declined 14% in Asia, Rest of the World

Local currency sales in China were significantly lower than expected and declined 25% in the quarter.

Local currency sales growth by product area:

Laboratory sales decreased 9%
Industrial decreased 6% with core industrial down 9% and Product Inspection, up 1%
Food Retail grew 49% in the quarter
Service sales grew 6% in the quarter

The rest of the P&L summary:

Gross margin was 59.4%, an increase of 10 basis points
R&D amounted to $46.1 million in the quarter, a 1% increase in local currency
SG&A amounted to $217.4 million, a 9% decrease in local currency
Adjusted operating profit amounted to $296 million in the quarter, a 4% decrease
Adjusted operating margin was 31.4%, which represents an increase of 20 basis points over the prior year
Amortization amounted to $18.3 million in the quarter
Interest expense was $20.3 million
Other income amounted to $1.2 million
Effective tax rate was 19% in the quarter
Fully diluted shares amounted to 21.9 million, which is approximately a 3% decline from the prior year
Adjusted EPS for the quarter was $9.80, a 4% decrease over the prior year or a 1% decrease excluding unfavorable foreign currency
Reported EPS in the quarter includes $0.24 of purchased intangible amortization, $0.27 of restructuring costs, and $0.08 from the difference between our quarterly and annual tax rate due to the timing of stock option exercises