Mettler-Toledo International Inc (MTD) 2010 Q1 法說會逐字稿

Good day, ladies and gentlemen. And welcome to our first quarter 2010 Mettler-Toledo International earnings conference call. My name is Louisa and I will be your audio coordinator for today. (Operator Instructions) After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) I would now like to turn our presentation over to your hostess for today's call, Ms. Mary Finnegan. Please proceed, ma'am.

Thank you, Louisa. Good evening. I'm Mary Finnegan, Treasurer, and responsible for Investor Relations at Mettler-Toledo. And I am happy to welcome you to the call. I am joined by Olivier Filliol, our CEO, and Bill Donnelly, our CFO. I want to cover just a couple of administrative matters. This call is being webcast and is available for replay on our website at www.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.

Let me summarize the Safe Harbor language which is outlined on page one of the presentation. Statements in this presentation, which are not historical facts, constitute forward-looking statements within the meaning of the US Securities Act of 1933, and the US Securities Exchange Act of 1934. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or 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 the discussion in our recent Form 8-K. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed under the captions, factors affecting our future operating results, and in the business and management discussion and analysis of financial conditions and results of operation in our Form 10-K. One other item, on today's call we may use non-GAAP financial measures. More detailed information with respect to the use of and differences between the non-GAAP financial measures and the most directly comparable GAAP measures is provided in the 8-K. I will now turn the call over to Olivier.

Thank you, Mary. Good evening and welcome to the call. I will start with a summary of the quarter, and then Bill will provide details on our financial results and an update on our guidance for the year. I will then continue with additional comments on the business. As always, we will have time for Q&A at the end.

On page two of the presentation, highlights of the quarter are presented. Economic conditions further improved during the quarter, and after experiencing sales declines last year, we are pleased to generate local currency sales growth of 6% in the quarter. We saw strong growth in emerging market countries, particularly in China. Demand for our laboratory solution was greater than expected, and from a regional perspective, growth in the Americas also exceeded our expectations.

Gross margin were up a strong 210 basis points in the quarter, which drove a 16% increase in operating profit, and 19% increase in EPS. In addition, we were very pleased with the level of cash flow generation in the quarter. Based on our strong start to the year, we are increasing our full year guidance. Bill will provide details on our guidance, as well as our financial results for the quarter. Bill?

Thanks, Olivier, and hello, everybody. Let me start with additional details on sales, which were $416.7 million in the quarter, an increase of 6% in local currency. We estimate that acquisitions contributed approximately 1% of this growth. On a US dollar basis, sales increased 11% as we had a 5% benefit from currency.

Let me ask you to turn to page three of the presentation where we outline sales by geography. Local currency sales increased by 11% in the Americas, and by 15% in Asia rest of world. In Europe, local currency sales declined by 1%. On slide number four, we have sales by product area. In the quarter, laboratory sales increased by 9%, and industrial sales increased by 7%, while food retailing declined by 5%. Turning to now slide number five of the presentation, you can see a full P&L. Let me walk you through the key items. Gross margin was 52.3% in the quarter, a 210 basis point improvement over the prior year. We benefited from pricing, as well as reduced material costs during the quarter.

We also benefited from sales volume leveraging our fixed overheads. These positives were offset by some unfavorable currency during the quarter. R&D amounted to $22.5 million in the quarter, or 5.4% of sales. SG&A amounted to $135 million, an increase of 13% in local currency. The increase is principally due to our variable compensation programs which are significantly higher than one year ago, due to our much stronger results. The two acquisitions we recently completed also contributed to our higher SG&A levels. Partially offsetting these increases was the benefit of our cost reduction activities initiated last year. Adjusted operating income amounted to $60.4 million, which represented a 16% increase over the prior year amount of $52.3 million.

Operating margins increased 50 basis points to 14.5%. While on a constant currency basis, operating margins would have actually been 15.2%. A couple of final comments on the P&L. Amortization amounted to $3.4 million, interest expense was 5.3. Fully diluted shares for the quarter were 34.5 million. We reduced our effective tax rate in the quarter to 26%. We feel that this is a reasonable expectation for the remainder of 2010. And finally, adjusted earnings per share was $1.13, a 19% increase over the prior year amount of $0.95 per share.

Now, let me turn to cash flow. We are pleased with the strong start to the year and generated $39.3 million in free cash flow, or $1.14 per share, which is an increase of 34% over the prior year level. Our working capital initiatives continued to yield strong results. We further reduced our DSO by five days to 44 days, while our ITO remained constant at 5.1 time. We also paid much lower bonuses this year as compared to the previous year. During the quarter, we spent $29 million to repurchase 285,000 shares at an average price of $1.02. We are currently planning to spend approximately $150 million on share repurchases this year.

Now, lets turn to guidance. It is now clear that the bounceback in demand is faster than we originally expected. This reflects an improving investment environment for our customers. It also reflects that large part of our business is replacement by nature, and much of the 2009 decline reflected temporary deferral of replacements by our customers. Given these factors and based on our assessment today, we now expect local currency sales growth in 2010 to be in the range of 6% to 7%. This includes the effect of acquisitions. We expect the adjusted earnings per share to be in the range of $6.26 to $6.36, which is a 12% to 14% increase over 2009. This compares to adjusted -- this compares to the previous adjusted EPS guidance of $5.90 to $6.15 per share. Adjusted EPS excludes $0.11 of purchased intangible amortization.

With respect to the second quarter, we expect local currency sales growth to be in the range of 7% to 9%, including the impact of acquisitions. Adjusted EPS is expected to be in the range of $1.30 to $1.35. As a reminder, the adjusted EPS forecast exclude purchased intangible amortization, restructuring charges, discreet tax items and one other one time items. Okay. That's it for my side. I'd like to turn it back to Olivier.

Thank you, Bill. I will start with some comments on business results both by product area and geography for the quarter. As mentioned growth in laboratory was better than expected, with analytical instruments, pipettes and process analytics all recognizing strong growth. Balances also had growth, while automated chemistry was down. In industrial, our product inspection business had very good results with demand, particularly strong in the United States. Core industrial had solid growth, driven mainly by demand in China. Food retailing was down, as expected.

As we mentioned last quarter, we expect to see some unevenness to this business due to its project related nature. Finally, let me also comment on sales by region. In Europe, we continue to see weakness in certain segments, particularly in industrial and food retailing. We are seeing improvement in Eastern European countries, while Western Europe, which still had growth in the first quarter of last year, was down in the quarter. As mentioned earlier, growth in the Americas has come back stronger than expected, while growth in Asia is also very strong. That covers our business by product and geography.

Turning to page six of the presentation, let me now provide some additional comments on our pipette business, which is a great example of how we continue to expand our market share with new product launches, comprehensive marketing campaigns and strong growth in international markets. Under the Rainin brand name, we have a leading offering in the industry of manual liquid handling devices, BioClean Tips and related services. This business is largely focused on the life science market where our strong product innovation and second to none service is deeply appreciated by our customers. Rainin is an attractive business due in part to its high service and consumer (inaudible) Our franchise has a unique position in the industry, as we were the first to bring truly economic pipettes to the market. Second, we have deployed a direct sales and service model which has been unique to the industry, and when combined with our strong reputation for innovation, has allowed us to enjoy very strong brand recognition and very high levels of customer satisfaction. Results for our pipette business in the first quarter were again very strong.

Let me update you on how we continue to drive market share gains. We continue to bring innovative products to market. For example, our new Liquidator 96 pipette, is a unique manual pipetting system for medium to high throughput applications. It can fill 96 wells simultaneously in less than a minute, or a 384 well plate in about 1.5 minutes. It is simple to use. It is operator controlled, requires no power supply and no software programming. It is portable and can easily be moved between labs.

It uses our proprietary LTS tips which make this unique solution possible. These tips require less force and help to prevent leaks. No instrument on the market today has this type of capacity or accuracy. Customer reception has been very strong. International expansion has long been a vital part of our growth strategy for Rainin. As mentioned last quarter, we substantially increased our presence in the UK with the acquisition of the region's largest distributor. We continue to expand our pipette sales force internationally and deploy the same strong sales and marketing programs that have made us successful in the United States.

By highlighting the benefits of our ergonomic pipettes and BioClean Tips, we continue to gain significant share outside the US This year we expect to enjoy the 9th straight year of double-digit sales growth in our international markets. Finally, our service offering and capabilities is a strong driver for growth. Our worldwide presence provides Rainin with the largest global service network in the industry. Pipette calibration and service is critical to our customers to ensure accuracy in their experiments. We have worked very hard to develop a best in class service model which is deeply appreciated by our customers. We start by closing integrating our service processes with our customer's internal operations and then tailor the offering to best fit their needs.

Our calibration service labs are ISO 17-025 certified, which is important for our regulated customers and has the necessary temperature and humidity controlled rooms to ensure proper calibration. Customers can send in the pipettes and will receive a 48-hour turnaround. We also provide service on site when this benefits customer needs. Many customers elect to have comprehensive service offerings which include preventative maintenance, asset management and training programs all aimed at leveraging our customer's resources. We believe we do this better than anyone in the industry. Our pipette and tip business has been a strong contribution to our results over the last 10 years. We are happy to report that we see continued opportunity to further grow this very profitable business in the coming years. Recently, we began establishing a Chinese manufacturing operation for both pipettes and tips. This manufacturing presence should help us to grow even faster in this important and growing market.

Our pipette business is just one illustration of how we use our product innovation, sales and marketing programs, and global reach to gain market share. I want to conclude the prepared remarks by stating that we are very pleased with the strong start to the year. While we are benefiting from the improving economy, we are also realizeing the benefits from the investments we made over the last year. We remain cautious on certain markets as uncertainty still exists. We continue to believe we will further strengthen our market position as the global economy recovers.

Louisa, if you could open the line for questions?

(Operator Instructions) Your first question comes from the line of Jon Groberg with Macquarie Capital. Your line is now open.

Hi, guys. Thanks a million for taking the question and congratulations on a good -- obviously a solid quarter. Can you maybe just talk about SG&A a little bit more in terms of how you expect it to play out through the year. Are there synergies associated with these acquisitions or is this the run rate to think about on an absolute basis as we go throughout the year?

I guess, Jon, you're asking in the context of local currency growth?

Yes. I guess. Yes. Obviously, you have to take into account the FX, but just local currency.

I would expect that next quarter you'll probably see a number in a similar range, but that would come down over the second half of the year. The acquisitions added something there and, of course, the incentive programs are running at a much higher level than a year ago. And I would guess that absent -- assuming that sales come in around where we expect them to currently in our current estimates, you could expect that there'd be a slight decline in terms of local currency sales growth next quarter.

So --

Sorry, local currency SG&A growth next quarter.

Okay. But if I just look at your guidance then and consider that the next two quarters are some of your -- the real easy comps, maybe talk a little about what you're seeing in terms of your end markets. Maybe in Europe, obviously there are difficulties in some of the countries over there. Maybe just talk about your view over the next couple of quarters given what you are seeing now?

I think you already touched on it. Europe will certainly take some more time until we see sustainable improvements. When it comes to th US, we certainly already experienced better environment in Q1, and we definitely would expect that this goes on, this has been particularly true for the lab business. I would also expect product inspection continue to do well, and gradually, industrial will improve. When it comes to emerging markets, particularly China, we did expect that 2010 will be good.

Q1 came in even a little better. And we would certainly hope that this goes on. That's clearly also reflected in our guidance. So, all in all, I would expect similar texture as in Q1 when it comes to business mix and geography, hoping that, however, Europe will be a notch better.

But, if I do the math you guys used to do, in terms of take a two year average, minus 8% organic growth and now 6%, so that 2% range. Shouldn't you be growing double-digits organically in the next couple of quarters?

If, as you know, we did project often using the two-year growth rate, comparing '08 to '09. I think we haven't used that, from a guidance point of view, in how we came up with the numbers this year, not that that was our only source either last year. We did take into account that we did have more positive trends in the order entry and easier comparison a pretty good backlog. And as our guidance implies, we certainly see an accelerating growth rate going into next quarter. But, at this point, we think it would be premature -- we'd have to see more positive order growth than we've been seeing recently to think that it would be a double-digit type of number next quarter. But that's certainly -- if things did improve, continue to improve on order entry, certainly a possibility, but at this stage I think a high single digit, 7%, 8%, 9% number looks more realistic to us.

Okay. And then I'll let other people jump into queue. But just last question on that. So, if you were to grow double-digits, both you may be -- would you try and -- given all the costs that you took out of the business and the opportunity to get significant amount of leverage, if those were numbers coming in, would you think about taking some of that and reinvesting in the business to some degree? I am trying to think of the incremental margin that would come with those revenues.

Incomes that we would see the --

If you saw this much higher revenue growth than you're currently anticipating.

We always said when we exceed our own planning in terms of sales, the pullthrough is really strong. Yes, we would see also some increased investments, but they wouldn't be that significant that it would offset the pullthrough that we typically see.

To say it differently, we think we're already making good investments in the business for the future. But, yes, we would probably see a pullthrough something north of 30% on that incremental rev.

Okay. Thanks a million.

Our next question comes from the line of Peter Lawson, with Thomas Weisel Partners. Your line is now open.

How do you see the business trending for the quarter and how does April look? Sounded like backlog was looking encouraging.

Like many other companies, we saw mainly a strong momentum coming into March. March was definitely a highlight. And I would say early signs for April also look very promising. I think also a reflection of the behavior of our customers. What we see is that many leads that we generated already last year have been converting in March, in particular, and now in April. I think that's a reflection that customers start to have budgets available and that the decision makers in particular, and also the CFO's of our customers, are willing to provide the necessary funds to make the investments. So, I think that's a little bit an interim benefit that we have.

When it comes more to the long-term stainable benefits, that's maybe more driven by capacity utilization. I would say that's a favorable trend, but that is a very gradual improvement. That's also why I say March strong, April strong, but these two months will not yet make the full year. It's an encouraging trend, but, again, we need some more time to really say that this is sustainable. So I would isolate a little bit these two months to say that it really is a long, sustainable, very high growth.

Are we getting closer to a replacement cycle? Are you seeing more use of spare parts?

Yes. We saw a little bit of that. Not a dramatic one, but, yes, parts usage went up again. I think that's connected to the utilization rates that we see in the industry going up. And that is particularly for the industrial business, the core industrial business.

And then, just the last question, really upon the drivers of the double-digit growth in North America, what where they?

Lab was very strong and product inspections was very strong.

And, of course, we had some acquisition contribution, as well, during that period.

What was the the scatter there?

Couldn't quite hear you.

Oh, sorry. What was the scatt -- what was the benefit from acquisitions in the quarter?

It was about 1% for the group in total. Contribute it a little bit to lab and a little bit to industrial, a little bit to Europe and a little bit to the Americas.

Really. Thank you so much.

Your next question comes from the line of Jon Wood with Jeffries. Your line is now open.

Hey. Good afternoon.

Hey.

Hello, Jon.

Hey, so Bill, could you quantify the year-over-year cost benefit from the restructuring actions last year?

We were doing some calculations. Roughly $6 million to $7 million would be the amount coming from the sustainable cost savings piece.

So that was year-over-year in 1Q, right?

In 1Q.

And is that net or -- I mean, are you netting that against the comp increases, or the increase in the valuable pay you talked about?

That's the pay for -- and I'm not giving these as precise numbers, but that's the idea that hey, maybe the quarterly sustainable savings rate was around $25 million per quarter. By the time we got to the fourth quarter of last year and the first quarter of this year, and that offsets the fact that maybe we were more in the $15 million to $20 million range in Q1 of last year.

Understood. So, in the gross margin, can you kind of break out the major buckets between net pricing and raw materials, and then FX?

Sure. In terms of price increase, so, we had a net realized price increase in the quarter of about 1.2%. Of course, that was mixed, different depending on product categories. Stronger in lab, maybe weaker in a couple of industrial categories, particularly in emerging markets. But if you look at the impact on gross profit, that's about half that number when you do the math, so about 60 basis points. Raw material costs were actually down in the quarter by about 1.5%, which had about a 30 basis point benefit on gross profit margin.

I would highlight to you that we do see that probably being one of the -- we're at the bottom now in terms of material cost, that we do see signs of inflation in steel, and we see shortages in electric components, which, of course, leads to increased prices in electrical components. And those are our two biggest spend areas, metal-related and electrical components. Currencies hurt us by about 100 [bips] and then the benefit of sales, incremental leverage on our fixed costs was about 120 bips, benefit on gross profit margin. Those were the key items.

Okay. Great. And then are you still expecting about $20 million or so from the acquisitions for the year in revenue?

In terms of sales, yes. It should be in the area of 1% to maybe 1.5%, and I think we just heard about a couple of good orders recently, so I'm thinking the 1.5% number could be realistic.

Okay. Great. Then, Olivier, do you see the opportunity to do more of these bolt-on deals this year? What does the pipeline look like from an acquisition standpoint?

Yes. I stated on previous occasions, we have more attention to the topic. And I think we have more attention has led to this to two bolt-ons we did early in the year, and the pipeline is richer than in the past. So, yes, it could well be that we succeed to do maybe another one or so this year. I look at it, however, as a journey and the fact that we are nurturing this pipeline should hopefully allow us to do a couple of ones every year. But don't look at it as a certain change and that we would have too many of them certainly happening. So, again, I do hope that one will materialize during this year.

Okay. Great. Thanks a lot.

Your next question comes from the line of Richard Eastman with Robert W. Baird. Your line is now open.

Good afternoon. Olivier, could you just speak a minute to Europe? I think the minus 1%, -- you mentioned industrial was weak and food was weak. Does that imply that lab was higher?

Yes. Actually lab was higher. Bill you might help us with the number.

Lab in the quarter was up mid single digits, even a little bit better.

Okay. Is there a -- can you give us any commentary at all about spending patterns and spending levels within that large pharma marketplace worldwide? It seems to be one area that maybe is a little sticky in improving.

I think -- first, I need to remind ourselves, life science is important for us. Within life science, pharma is an important market, but pharma is not just big pharma for us. And when I look at, on a global scale, it's quite diversified across the globe. In the working world, the global pharma companies would have a more significant share, but not a single customer is more than 1% of our revenue. Now, back to big pharma, yes, we have some head winds also coming from the mergers. We have seen that sites getting closed. And when sites are closed, sometimes some of our instruments are being redeployed and reused in auto labs. So, that's kind of negative on our business.

But at the same time, I feel for big pharma when making dedicated investment in productivity, and while it wasn't so much the case in Q1, we have some promising projects in the pipeline from one of the other big pharma farmer companies that goes exactly in that direction. They want to make investments to further automate lab processes, and also to a certain degree harmonize their approaches across labs around the world. So, all in all, I think it's still a healthy end user market for us.

And, again the big picture being we see the number of scientists continue to grow because of areas like food safety, academic research, and just in general there's more science particularly this emerging markets. And so we see our lab business very much lining up to this idea that there are more and more scientists around the globe.

You know, the head count reductions that we see in western pharma companies is more than offset by far by the number of scientists joining the life science industry in China, India and other markets, by far. And since we have a lot of personalized instruments, we benefit from that net increase.

When you speak to Asia and rest of the world, did the lab business grow there at kind of the lab average, in other words, high singles? And the outsized growth in Asia, was that industrial?

The answer is kind of in the middle. We had higher growth in industrial and emerging markets than we did in lab, but clearly the lab business grew faster than emerging markets.

It did? Well, okay. Just maybe one last question. Have you recalibrated? I think at one time we used to speak to the percentage of sales that are now manufactured maybe in low cost regions. And obviously for you I guess that would be predominantly China?

Correct.

Do you have a number like that or can you get us in the ballpark?

The number is more than 20 and less than 25.

Okay. And that's -- does that just keep somewhat migrating slowly? Because it sounds like you're doing something on the pipette side now?

Yes. It gradually goes up for two reasons. First, we continue to transfer product lines. Remember, last year, for example, we migrated two. We had certain balance businesses that we further migrated to China. The second one is for metal detection.

We are transferring more production capacity over to China. Today I was just talking about the Rainin business that we are building up also production in China. These product line transfers that take place, and the other part that has also significant impact, the emerging market mix in our overall sales goes up, and accordingly, we sell off more locally produced products. So, yes, its a number that will every year go up a little bit.

1% to 2% every year.

Have you seen in the details, have you seen your strategy to introduce and boost your competitiveness in the (inaudible)in China? Is that product really to protect your high end scale business? Has that product line grown quicker there?

There is an emphasis on that strategy that you exactly described. That multi-formed, I think what we certainly do is we expand the dealer network in China. We have more marketing programs than ever behind it. We have, with the transfer of the leadership team of that strategic business unit to China, a much better proximity to the market, and that all helps. And, yes, our intention is to expand our market share with the second brand to be even more competitive with the low end local competitors. This is an offensive, but also defensive strategy, yes. To a certain degree we want to avoid that any of these local competitor could become stronger.

Also because its our dealer-focused brand, we also see the opportunity to expand the offering to be even more attractive to dealers. So we see the breadth of the offering (inaudible) to continue to grow, as well.

Okay. Very good. Well, thank you.

Thank you.

Thank you our next question comes from the line of Derik De Bruin, of UBS. Your line is now open.

Hi, good afternoon.

Hi, Derik.

Hi, Derik.

Hi. So, what are your FX expectations for the full year? What's the impact? Obviously the comps get tougher as you move forward.

Yes. It will go negative starting next quarter. Mildly negative, maybe 1%, a little bit more. And I expect for the full year it'll be down slightly, maybe 1% to 1.5%, again, based on today's exchange rates. So that implies that Q3 and Q4 will get a little bit tougher because we obviously had a 5% benefit this quarter.

Right. I guess obviously you guys have a little more exposure with the Franc Euro crosser there. How has that impacted your SG&A costs?

In terms of SG&A, of course, maybe that's part of the explanation for the higher growth in local currency -- sorry, in dollars versus what it was in local currency in the SG&A line. I think in terms of what impact the Swiss brand versus the Euro will have on our going-forward OP, that will be a few million dollars, it will be a headwind and built into what we've assumed in terms of the guidance we've provided you. Today the Swiss Franc Euro is at about 1.43 and change, and for the ending, last nine months of last year, that was a number more in the 1.50 range.

Right. You've often had in your financial model, kind of this 5, 10, 15 model built in. How does the cost initiatives you have done over the last 12 months -- how has that really changed the business as you look at it going forward? Is the 10 more like 12 and then you compare this? I'm just trying to get a sense of how do we really base the business?

I think that there's a couple of things to think about, Derik. Let's start out with maybe a reminder about the sales number this year. The sales number we need to back off the impact of acquisitions. So, the 6 to 7 number for the full year implies -- lets pick the midpoint of the range, it implies about a 5% organic growth number.

Okay.

So the acquisitions we make this year will be pretty much -- or that we made the beginning of this year, end of last year are pretty neutral to earnings, it's not worth the math. So, we don't quite get to the 15 this year, but we do get to the 10, and the reason for that is that we have not been doing the share repurchase program and we started that up kind of late. So this year's five will translate to 10, but not quite to 15.

Right.

At least, based on current projections. As you know, we've resumed the program, so we would expect that that could -- we should be running at that kind of level next year. Maybe one final comment, is that there is a little bit of pluses and minuses going into the -- getting to the 10 this year. There is, of course, the fact that we get the full year benefit of some incremental cost savings, the hundred million we took out in cost, but there's also, coming back into the SG&A structure, a return to normalization on our cash incentive plans. And, the fact that we're off to this better than expected start to the year, and that we, by raising guidance so much, expected that to continue also implies that is that number is even a little bigger than maybe we be originally projected at the end of this the year, so that offsets some to have cost savings benefit. So I think we're kind of around that five, 10 level for what we're providing guidance on.

Right. Very, very helpful. And, so, I know that when you were putting up double-digit organic revenue growth toward the end of 2008, a lot of it had to do with, you were seeing big capacity expansion, globally, particularly in Asia. When you put on your thinking cap and you look forward, what -- it sounds like this is going to be against easy comps, more of a 5% year. When do you think you'll see capacity expansion really starting to pick up? Is that a 12 to 24-month type of thing in your view?

I think, actually, it will come gradual. I will certainly see it in America as well as Asia, always bringing on this gradual improvement. We don't see that much in Europe. And I would certainly also have to differentiate by segments. For example, more recently the news for the chemical industry is better, but you would of course, they have not yet seen new grass green (inaudible) -- so I think gradual, and we need to differentiate by segments.

Okay. Thank you very much.

(Operator Instructions) Your next question comes from the line of Suong Nam with JPMorgan. Your line is now open.

Hi, this is Suong Nam, sitting in for Tycho Peterson today. Thanks for taking the questions. Could you talk about your academic exposure, I know you have very little - relatively little exposure there. But given all the stimulus flow around the world, if you're increasing your investment activity there potentially, and what you're seeing with respect to that market?

Sure. The whole academia segment for us is not so big that we would actually really break it out. But it's actually an area that we have more focus on than in the past. We actually started with that last year. It was certainly one of the segments that was more resilient than many others. It has been a segment that in the past we had not so much focus on. We have given it more attention in terms of tracking what are the right decision makers. We have developed marketing programs specific to the academia world and as a consequence, has been an outperforming segment for us. We have also specific programs that track opportunities, in particular, in China where we see government still having a very important influence on all these academia programs. Funding, and so on, is favorable. This is still going well and I would expect that this segment will do well for us also this year, across the world, including also Europe.

Great. That's helpful. And then, as far as your food retail business is concerned, could you give us an update of your strategy there? Talked about in the past how it's a profitable business for you guys, but just going forward if there are any strategies and if there will be additional investments going towards that segment?

Yes. Okay. Food retail, as we mentioned, we had in Q1 were down. That came in as expected. The food retail business depends on large projects and there is certain softness in these big projects across the world. And the second thing is, as you all know, the food retail business profitability is below corporate average. And we feel very strong that we need to be disciplined in which large projects we want to participate. If margins do not satisfy our hurdles, and in that sense, I have to say our focus should not just be to grow, rather say we need to selectively grow, but when it comes to the group's absolute profit, it doesn't have that much impact if we walk away from a project that doesn't have a good profitability. Because, again, food retail has a below average contribution.

Okay. Thank you. And then finally, just quickly, would you mind breaking out percentage of revenue by the three divisions?

Yes. Just a second. So, this is on page four of the presentation. For you guys, it is 46% lab, 43% industrial, and 11% food retail.

Great. Thank you very much.

You're welcome.

Thank you.

Good day.

There are no further questions at this time. I would now like to turn the call back over to management for their closing remarks.

Okay. We thank you all for joining us this evening. We know how busy you are, and appreciate taking the time with us. We will speak to you again at the end of of the 2nd quarter and thanks again, and good-bye.

Good-bye. Thank you.

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