Mettler-Toledo International Inc. (MTD) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the Mettler-Toledo Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Adam Uhlman, Head of Investor Relations. Please go ahead.

Great, Jonathan. Thank you very much, 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 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 1933 and the U.S. Securities Exchange Act of 1934. These statements involve risks, uncertainties and other factors that may cause our actual results, financial condition, performance and achievements to be materially different from those expressed or implied by any forward-looking statements. For a discussion of these risks and uncertainties, see our recent annual report on Form 10-K and quarterly and current reports filed with the SEC. The company disclaims any obligation or undertaking to provide any updates or revisions to any forward-looking statements, except as required by law. On today's call, we will use non-GAAP financial measures, and a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure is provided in the 8-K and is available on our website. Let me now turn the call over to Patrick.

Thank you, Adam, and good morning, everyone. We appreciate you joining our call today. Last night, we reported our second quarter financial results, the details of which are outlined for you on Page 3 of our presentation. Our second quarter results were strong and reflected better-than-expected organic sales growth across our portfolio, including very good growth in China and emerging markets. It was driven by improved market conditions and our focused Spinnaker sales and marketing program. Combined with our productivity initiatives, this resulted in excellent adjusted EPS growth in the quarter. Going forward, we are optimistic market conditions will gradually improve. Our team remains agile and focused on capturing growth opportunities, leveraging our sophisticated Spinnaker program and innovative product portfolio while benefiting from trends in automation, digitalization and onshoring investments. I am confident that strong execution of our strategic initiatives will continue to deliver solid financial performance. 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?

Thanks, Patrick, and good morning, everyone. Before I review our Q2 results, I'd like to highlight a special item in our financials this quarter related to tariffs. As disclosed last quarter, we had a onetime gross benefit of $52 million from IEEPA tariff refunds in Q2 that benefited cost of sales, and was offset in part by a $28 million related refund to our customers that reduced our reported net sales by 3%. Discussion of our results today will exclude the impact of both of these items. Sales in the quarter were $1 billion, up 7% in U.S. dollars. And in local currency, our growth was 6% and above our price -- our prior guidance of approximately 3% local currency sales growth. Acquisitions contributed approximately 1.5% to sales growth, and organic local currency sales growth was 4%. On Slide #4, we show sales growth by region. Organic sales, excluding acquisition and tariff refunds, increased 1% in the Americas, 4% in Europe and 9% in Asia/Rest of World, including 9% growth in China. Slide #5 shows core organic sales growth by region on a year-to-date basis. On Slide #6, we summarize sales growth by product area. Organic sales increased 4% in laboratory and increased 3% in industrial, which included 4% growth in core industrial and 1% growth in product inspection. Food retail grew 11% in the quarter. Lastly, service revenue grew 9% or 7% organically. Slide #7 details organic sales growth by product area on a year-to-date basis. Let me now move to the rest of the P&L, which is summarized on Slide #8. Adjusted gross margin was 59.3% in the quarter, an increase of 30 basis points. Excluding unfavorable foreign currency and acquisitions, gross margin expanded approximately 90 basis points due to benefits from favorable price realization, lower tariff rates compared to the prior year, volume growth in our productivity and cost savings initiatives partly offset by higher transportation costs. R&D amounted to $53 million in the quarter and was up 3% on a local currency basis over the prior period. SG&A amounted to $263 million, a 4% increase in local currency over the prior year and includes sales and marketing investments, offset in part by cost savings. Adjusted operating profit amounted to $309 million in the quarter, up 9% versus the prior year. Adjusted operating margin was 29.3%, an increase of 50 basis points versus the prior year or up 100 basis points, excluding unfavorable currency. Adjusted EPS for the quarter was $11.46, a 14% increase over the prior year. On a reported basis in the quarter, EPS was $11.55 as compared to $9.76 in the prior year. Reported EPS in the quarter included a $0.92 net tariff refund benefit, $0.26 of purchased intangible amortization, $0.22 of restructuring costs and a $0.04 tax headwind related to the timing of stock option exercises. Finally, we had a $0.31 acquisition-related charge related to higher earn-out achievements on previous acquisitions. That covers the P&L, and let me now comment on adjusted free cash flow, which amounted to $367 million on a year-to-date basis and was negatively impacted by the timing of tax payments, which were $55 million higher than the prior year. DSO was 35.6 days, while ITO was 4.2x. Let me now turn to our guidance for the third quarter and the full year 2026. As you review our guidance, please keep in mind the following factors. First, we are encouraged by our Q2 results and improved market conditions, especially in China and emerging markets. Second, conditions in the Middle East remain volatile. And while we have limited exposure to the region, this could impact customer decision-making should conditions significantly change. We are not currently seeing any change in related customer behavior and have not included an escalation of the conflict in our forecast. Lastly, we are very confident in our ability to execute on our growth and productivity initiatives and believe we are well positioned to gain market share regardless of the macro environment. Now turning to our guidance for the full year 2026. We have increased our local currency sales growth from approximately 4% to approximately 4% to 5%, reflecting organic growth of 3% to 4%. Our forecast excludes the impact of the previously described tariff refunds. Adjusted EPS for the year is forecast to be in the range of $47.15 to $47.50, which represents a growth rate of 10% to 11% or 11% to 12%, excluding currency. This reflects an increase from our previous guidance of 8% to 10% growth. At recent spot rates, foreign currency is estimated to be a 1% benefit to sales growth and a slight headwind to EPS for the year. For the third quarter of 2026, we expect local currency sales to grow approximately 4%, which includes approximately 0.5% benefit from acquisitions. We expect adjusted EPS to be in the range of $12 to $12.15, a growth rate of 8% to 9% or 9% to 10%, excluding currency. Currency for the quarter at recent spot rates would be neutral to third quarter sales and a 1% headwind to adjusted EPS. Some further comments on our 2026 guidance. We expect total amortization, including purchase intangible amortization to be approximately $78 million. Purchased intangible amortization is excluded from adjusted EPS and is estimated at $28 million on a pretax basis or approximately $1.07. Interest expense is forecast at $67 million for the year. Other income is estimated at approximately $24 million. We expect our tax rate before discrete items will remain at 19% in 2026. Free cash flow is expected to be approximately $900 million in 2026, which represents 6% growth on a per share basis. Share repurchases are now expected to increase to $875 million for the full year as compared to our annualized repurchase level of $825 million during the first half of the year. 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, starting with lab, which had good growth in the quarter across most product areas. We saw improving trends across our biopharma customer base and continue to see strong growth in process analytics and bioproduction. Laboratory balances and analytical instruments growth was also strong and benefited from the many innovations we have brought to the market in the recent years, our LabX software and growing demand from hot segments like semiconductor, advanced materials and batteries. Turning to industrial. Core industrial did well this quarter with sales growth driven by strong demand for our solutions that enable automation. We saw strength across markets like biopharma, food manufacturing, semiconductor and new energy. As expected, product inspection organic sales growth this quarter was modest due to the timing of customer projects, but organic growth is expected to pick up again in the second half. Lastly, food retail sales growth was better than expected due to the timing of project activity. Now let me make some additional comments by geography. Starting in the Americas, where sales grew 1%, excluding acquisitions. We had strong momentum in most lab product categories and in our core industrial automation solutions and product inspection. These results were offset in part by timing of food retail and transportation and logistics project activity. Turning to Europe. Sales growth this quarter was solid and included growth across most of the business, including strong growth in core industrial and food retail. Finally, Asia/Rest of the World had very good growth this quarter across the portfolio and in most major markets. Our business in China grew 9% and was stronger than expected as our team continues to do an excellent job identifying high-growth markets and leveraging our innovative portfolio. Biopharma customers demand was also healthy and contributed to our results. Markets outside of China also had strong growth this quarter. Emerging markets have been an important element of our long-term growth strategy for many years. India, Southeast Asia, Eastern Europe and Latin America offers us excellent growth opportunities as these markets develop and mature, and we believe many of them will also benefit from nearshoring investments over the coming years. Our company is uniquely positioned to capitalize on emerging market growth over the coming years. In the second quarter, emerging markets outside of China represented approximately 18% of our sales, slightly more than our business in China, and grew high single digits in the quarter. Emerging markets, excluding China, have also grown high single digits on average in local currencies over the last 5 years, above the company average and are an important contributor to our growth. To take advantage of these growth opportunities, we have long-standing dedicated market organizations in emerging markets, China and around the world. Our market organizations are a significant competitive advantage, allowing us to stay close to customers and better understand local market needs. We have dedicated growth plans for each major country and we leverage our broad portfolio of solutions across a range of price and value points to meet varying customer requirements. Additionally, in markets like Mexico, we have further developed local assembly and manufacturing capabilities in recent years, which strengthen our ability to serve local market needs and enhance our competitive position. The market organizations and emerging economies also leverage the same Spinnaker sales and marketing programs we have developed in other countries, including various digital tools, value selling guides and sales enablement tools. We have also rolled out Blue Ocean to most of our [indiscernible] and having a single instance of a global information technology infrastructure provides rich data, analytics and unique real-time business insights. This is a significant competitive advantage that allows us to target opportunities in various hot segments like bioprocessing, GLP-1s, semiconductor and battery in an agile way. As domestic and foreign direct investments continues to grow over the coming years, we expect emerging markets to remain a healthy contributor to our growth well into the future. In summary, we are very pleased with our Q2 results and the solid growth our team has delivered. We remain focused on capitalizing on our customers' investments in automation, digitalization and onshoring around the world. After a few years of disruptions and uncertainties related to tariffs, governmental policies and geopolitics, we believe customers will continue to return to a more normal replacement activity going forward. We have maintained a strong focus on investing in innovation and growth in recent years while protecting profitability, which will serve us well as our markets recover. This concludes our prepared remarks. Operator, I'd now like to open the line to questions.

[Operator Instructions] Your first question comes from the line of Dan Arias from Stifel.

Shawn or Patrick, last quarter, you raised the guide for China. So I guess, not a surprise to see the pick up there, but it does seem like maybe it improved a bit sooner. Can you just dive into the acceleration a bit? What does the momentum there look like when it comes to pharma versus nonpharma and just sort of the consistency that you expect in the coming quarters? If I remember correctly, the improvement seemed like it was due more to core industrial last quarter so to what extent do you have pharma improvement sort of baked into the outlook for the rest of the year here?

Yes. Thank you, Dan. And yes, of course, we are very happy with the growth we have seen in China, 9% in Q2 was really a very strong result versus the guidance we initially had for the quarter. I mean, the growth has really been led by industrial, which had double-digit growth in China. We are benefiting from many of the core segments such as biopharma, but also food as well as the hot segments like investments in battery that is happening in China. For lab, the growth was a bit more modest. We expect continued improvement there also in the second half, both also from biopharma and maybe also academia will pick up towards the end of the year. We see or we had at least some indications of some additional funding for academia in China as well. But then again, also the good hot segments and the strong investments in areas like lithium battery and new energy. So overall, I would say, really led by industrial, the growth across many segments, and pharma was a good part of that as well.

Dan, and then just to be specific, like in terms of the second half of the year. We're looking at high single digit now for China also for Q3 and for the full year. And we kind of -- this momentum that Patrick referred to on industrial, we feel very good about entering the second half. Also the trends around automation and digitalization that we talk a lot about, we're definitely seeing those benefits in China as well. And then I think as we kind of go into the second half of the year, too, we also feel like that the lab business is gradually improving as well.

Yes, okay. Thank you for closing the loop on that. And then maybe just on product inspection. A little bit of growth in that piece. I think you had been pointing to that being down a touch this quarter on some timing elements that you referred to. Can you just maybe expand on that? Was there anything that got pulled forward from 3Q as it relates to that timing? And then if you put the timing aspect aside, maybe just talk about spending and demand relative to the way that you saw things last quarter in PI specifically.

Yes. No, thanks, Dan. So if you remember, we had a really good Q1 in PI, and then we were trying to caution people that Q2 would be a little bit lighter just given the timing of how the project activity was looking like it was playing out. But as we kind of like go into the second half of the year, I mean, we feel very good. I mean we're probably looking at mid-single-digit growth in the third quarter. And for the full year, we're probably looking at high single-digit growth, which is probably more like a mid-single-digit growth on an organic basis. But when you step back, 70% of that business is food manufacturing. So from an end market perspective, not quite like pharma. But when we look at how the team is executing, we actually feel really good. I mean we talked a lot about the benefits of innovation in this business over the last few years, and we kind of continue to see that. We're coming out with a couple of new products this year, which is pretty exciting. And then this general strategy that we talked a lot about in terms of how to better position ourselves for the mid-market segment seems to be working very well and well received in the marketplace.

Your next question comes from the line of Tycho Peterson at Jefferies.

Just wanted to maybe unpack some of the other trends from 2Q. I guess as we think about the revised guide in the back half of the year, can you just talk a little bit more about some of the underlying assumptions by end market and segment? Obviously, you just covered PI in China, but maybe walk through where you're changing your assumptions otherwise.

Yes. Tycho, I'll take that one. Thank you. So I'll start with the product categories, and then I'll give you the division. So lab for Q3 would be mid-single digit. Core industrial, we're looking at low single digit. And I think it's important to remember that core industrial had a very challenging comparison to the prior year in Q3 of last year. It grew 10% organically. Product inspection, mid-single digit, which I just said. And then retail, we're guiding at flat. In terms of the Americas, we're guiding at low to mid-single digit. Again, this one had a more challenging comparison, just to highlight in Q3 of last year, which was up, I think, 9% organically. Europe, up low single digit. China, we talked about high single digit. And then maybe just to kind of wrap it up with the full year. Full year lab would be low to mid-single digit. Core industrial would be low to mid-single digit. Product inspection would be high single digit. And of course, there's a little bit of acquisition from the -- largely from the first half of the year in these numbers. So core industrial would be low single digit organically. PI would be mid-single digit. Retail would be low to mid-single digit. And if we look at the regions, Americas would be low single digit or about flattish organically. Europe would be low single digit and then China would be high single digit.

Okay. Very helpful. And then a follow-up, you've guided 2.5% on price for 2Q. Just curious where you landed and what you're thinking for the back half of the year? And then separately, did you capture -- recapture any of the delayed chemical orders?

Yes, sure. So on the pricing side, continue to be really pleased with the team's execution. But ultimately, pricing comes back to value proposition. I think a lot of the investments we've been making over the last few years on innovation continue to pay off well. So in the end, our price realization for the quarter was around 3%. So we're very happy with that. So a little bit better than the 2.5% that you were mentioning in terms of our original guidance. Towards the end of the quarter, we also put in place some additional pricing measures isolated in a few areas where we were seeing a little bit of inflationary pressures. So our guidance for the second half of the year is more in the 2.5% kind of a range. And again, as a reminder, we're also lapping a lot of the midyear price increase actions that we did last year in response to all the tariffs from last year. So when you kind of wrap that all up, our full year price realization is now approaching 3% for the full year. I think the other part of your question was China. I mean, not China, chemical in Europe. Do you want to take that one?

I can take that one. So yes, on chemical, just as a reminder, I mean, overall, it's under 15% of our total sales, and we had the biggest exposure across industrial and lab for chemical. For us, it's mostly specialty chemicals. And when we talked in Q1 about the pressures we have seen in the EU, it was mainly energy related, our view on things. Actually, the EU chemical results were better in Q2, so they recovered. But we still would say we take a bit more cautious stance on the overall segment still because they are more exposed to energy cost fluctuations than other segments that we're seeing. But overall, of course, in the quarters to come, we will also have easier comps in the segment.

Your next question is from the line of Josh Waldman from Cleveland Research.

I think one for Patrick and one for Shawn. Patrick, nice to see the reacceleration in lab. I guess, can you give more details on what drove this? It would be great to get a sense on what you're hearing from customers on the why behind the inflection in the second quarter following what seemed to be a softer start to the year. Was it budgets being delayed, concern around the war or other? And then as you think about durability kind of going forward, the comps get more difficult, but it sounds like you're expecting mid-singles again in the third quarter. Do you think lab kind of should stay in the steady state of mid-single digits here as we work through the second half and maybe into '27?

Yes. We will not talk -- thanks, Josh. We will not talk about '27 yet. But of course, we are actually quite delighted with how lab is performing. And a lot of that is based not only on our strong go-to-market strategy and our local market teams that we have that are really very close to our customers. I think it's also based on the fact that we have really put a lot of effort into innovation over the last years. We launched a lot of new great products. cross the lab portfolio. And within lab, at the moment, of course, the process analytics business is performing extremely well in biopharma, as you can imagine. So that drives a lot of the growth as well. And then you look at the rest of the portfolio that we have, analytical instruments have been very good in Q2, and we see that also moving forward. We saw the pipette business coming back to growth as well last quarter, which is very promising. So I would say, yes, we're actually quite pleased with the momentum we have in lab moving forward. We do expect, as Shawn said, for lab, mid-single digits growth about that range, and it's pretty broad-based. I think if there is even some upside there, it would be potentially an acceleration in China that still has to materialize. Again, we saw some initial good momentum, but that was more in industrial in China, and I think the lab is more to come. Overall, extremely well positioned for lab products with our LabX software platform. As you know, we provide about 40% of the instruments that are used typically in the QA/QC lab and most of them are connected to our LabX portfolio, which gives our customers a really unique opportunity to do their testing in a very compliant way and using LabX as a complete workflow control system and also aggregate the data to use AI on the next level if they want to. So I think we are very pleased with where we are at lab, and I think there's more to come. Thank you.

Yes. Good to hear. Okay. And then, Shawn, can you give an update on how margins are tracking versus your plan? Any updated view on the full year margin expectation? I mean it seems like you're tracking ahead of plan. Is this reflecting moving pieces on the tariff refunds? Or are there other drivers you'd highlight?

Yes. So just to be clear, the tariff refund topic is excluded from our results, our adjusted results and our guidance. Now of course, changes in tariff rates is a different story. And so that can be a factor here. But we feel very good about the team's execution. We really -- I think we've been trying to like really focus on this always in the past. I think if you look at the different initiatives that we have kind of underlying margin expansion, like the SternDrive program, productivity programs, cost savings initiatives there, they're all, I think, very important, and I think it definitely highlights, I think, some of the culture in the company as well. If we look at Q2, you kind of heard we -- if you look at the operating margin, we were up like 100 basis points if you exclude currency. If you look at that from a full year perspective in terms of what we're thinking for 2026. We'll probably be excluding currency, probably up 60, 70 basis points, maybe modestly better than what we were thinking before. Now there's some currency in that. So on a reported basis or not excluding currency, it would be up slightly, maybe in the 10 to 20 basis point kind of range. And that's at the operating margin level, yes.

Your next question is from the line of Vijay Kumar from Evercore ISI.

I guess, Shawn, my first one, a quick housekeeping. What was the FX in M&A contribution in the quarter?

Yes, it was about -- so in terms of -- and you're talking -- I'm sorry, Vijay, you said -- did you say FX in M&A in terms of revenue?

Foreign exchange in that. Correct.

Yes, yes, yes. So I usually don't think in terms of foreign exchange. So the acquisition contribution was about 1.5%. And then in terms of FX, I think if you kind of like look at our reported numbers versus our local currency, it implies 1%, but I think with rounding, it's north of 1%.

That's helpful. And I guess, when I look at the updated guidance, Shawn, when you do the math, I think the implied exit rate for Q4 is somewhere between 4% to 5% there putting on the midpoint or high end of the guidance. That's a step up, right? That's a sequential step-up from 3Q. I know in the past, you've spoken about the backlog and order visibility, right? Is that what's driving the sequential step-up? What gives the confidence in this fourth quarter exit rate?

Yes. So I think, so Vijay, a couple of things. So first of all, I think if you look at it from a growth perspective, yes, the implied Q4 is a little bit higher than the Q3 guidance. I think a lot of that also has to do with the fact that Q3 has a much more challenging comparison to the prior year. I kind of called out a little bit the industrial business as an example, and also the Americas had a challenging comp. So I think that's kind of part of it. But I think if you also just look at sequentials in terms of just like the flow of quarters and dollars from one quarter to another, I feel like the sequentials are pretty in line with historical sequentials. And then as we kind of like exit the year, we feel like we have some good momentum entering into the back half of the year. And I think, yes, when you look at what we're seeing in the business today, we definitely feel good about the momentum that we're kind of carrying into the second half.

Your next question is from the line of Michael Ryskin at Bank of America.

I really want to dig a little bit more into biopharma. It sounds like that's one of the places you're feeling a little bit better this quarter and had some comments on bioprocess analytics, bioproduction balances. Just would love to expand more on that. Did you see -- was it sort of like -- how big of a step-up was it? Was it above your expectations? Anything about where you're seeing that momentum the most and just expectations for that going forward? You feel like you're early on? Or are you already sort of like crested it, if you know what I mean.

Yes. Thanks, Mike. I'll take that question. Look, let's talk about biopharma and bioprocessing here. I'll start with bioprocessing, which is overall, I think, a low double digit of our total sales. It's mostly pro, but also part of the industrial automation portfolio place here. Pro had really good growth again in Q2, especially in Americas with bioprocessing. And there's also some good equipment demand from industrial coming on from these automation providers where we serve them with our automation solution equipment from industrial products that we have. So there's really good momentum there. When you ask about the investments in pharma and biopharma, you're probably referring here to the reshoring activities, I guess. I think we are -- number one, we are extremely well positioned for that because about 50% of our sales go into production, plus about 20% QA/QC, where we cover a lot of the value chain there. And we are in an excellent position with our biopharma portfolio, but also helping on the industrial automation portfolio. We see some good activities, some RFQs here related to reshoring, but I still would say it's early innings. I think it is momentum will continue to pick up in the second half and also as we go into 2027. But yes, there are some activities, and you probably all have heard about companies expanding their manufacturing in the U.S. I think until then, there will be really some groundbreaking of additional facilities that will still take some time and then there will then be more investment coming in the years '27 and '28. For now, again, most of what we see is facility investments and capacity expansion in the U.S.

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

Okay, okay. And then maybe just going back to what Vijay was just asking about in terms of the second half outlook. Yes, as you just touched on in that answer, you do have a little bit of a step-up. But you also talked about in your prepared remarks expectations for Middle East and geopolitics and the macro and all that. It sounds like you're not expecting -- you're kind of expecting status quo for that. I guess what I was trying to get at is it feels like you did get bit by that a little bit in the first quarter. So I just kind of want to get at how much buffer there is in the guide, if things do escalate. Just maybe a degree of conservatism or areas of upside potentially to offset if the macro Middle East gets a little bit worse, just to have a repeat of what happened in 1Q.

Yes. Mike, maybe I'll take that one, and Patrick can add some color, if you like. But hey, I think there's a little bit of a difference right now. I think one is like there is very strong momentum that we're seeing in terms of customer activity. And so we feel very good about how we're sitting to the second half. Now we always acknowledge we're a pretty short cycle with 1.5 months of backlog. But when we look at everything holistically, we actually feel good and we start to lap also some topics from a year ago like academia and biotech, which are smaller end markets in general, but we view still like some of these end markets are starting to improve. We're starting to see growth again in the pipetting, liquid handling business, which has also been really good. It's been a headwind for a while for us. If you look at like the Q1 dynamic, like you mentioned, absolutely. And I think one of the issues there was that we expected companies to maybe start the year slow. I think with all the uncertainty that was hitting companies right at the beginning of the year, one of the things that we kind of felt was that a lot of customers were holding off on finalizing budget commitments within their organization. So a lot of things were also getting held up as kind of like a generic statement. Right now, it seems like people have their budgets. They know what they want to do. There are other projects. And while things can always change, we feel like there's pretty good momentum going into the second half of the year. And then I think we'll learn a lot more about what it means over the next 3 months and it might be more of a question on what it could mean for 2027. But I think the reality is that there's a lot of dynamic topics going on always in the world, and we'll continue to monitor them. But regardless of the environment, I feel like the team has tried to stay focused on what we can control and executing well.

Your next question is from the line of Jack Meehan at Operon Research.