Patrick Kaltenbach: Yeah. Thanks. Thanks, Josh, for the question. I mean, I’m extremely proud of our service organization and that’s definitely also an area where we continue to invest this year as well. We also had a headcount in services to make sure that we can deliver on the demand of our customers have in our services. As I mentioned in one — in some of the earlier earnings calls, we increased our portfolio and improved our portfolio of service offerings. That helps us of course to also drive not only more — to drive more services at the point of sales, getting a higher connect rate, but also good people after our installed base that we have out there and potential products that are currently not yet on the service contract we have established telemarketing campaigns et cetera.
So really performing well. In Q3, I think, our growth rate, Shawn, correct me if I’m wrong, was 6%. And that’s for the full-year still holds up in the high-single digits and low-double digits growth for the full-year on services. It has been very strong in the first-half. Now, of course, we’re also facing tougher compares, because we also had strong growth in the second half of last year. Now, looking forward, again, we still have, I think ample of opportunity to go after our installed base, products that are currently not under contract, making sure that the customers, yes, understand the full benefits of being on a contract with us. We know the customers who are on the service contract are much more likely buy again from us, because they have seen the benefits of being on the service contract with Mettler-Toledo.
We continue to look into the offerings we have, more sophisticated services for more complex solutions out there and that will also continue to drive momentum for us in service. I’m — again, I’m very happy about the long-term opportunity in service and would expect it to continue to grow mid-single digit at least next year.
Joshua Waldman: Got it. Appreciate all the detail, guys.
Operator: Our next question comes from the line of Vijay Kumar with Evercore ISI. Please go ahead.
Vijay Kumar: Hey, guys. Good morning, and thanks for taking my question. Patrick, maybe one on, you know, when you look at the Q4 guidance sequentially stepping down from 3Q shouldn’t be a surprise given your commentary. Like what is changing from a Mettler’s perspective, right? Can you comment on end market, you know, pharma versus industrial, like what are you seeing in China versus non-China, trying to figure out if this is all China or ex-China you’re seeing softening?
Patrick Kaltenbach: Yeah. Good question, Vijay. I mean, the biggest part of it is, as Shawn also outlined, is absolutely China, because we had initially we had planned for double-digit to mid-double digit declines in China, I’ll be facing probably again 25%, 50% decline in Q4. That’s what we are planning for. That’s certainly one important piece of it. The other piece is the overall budget flush that also affecting mainly the Lab business, which we basically don’t account for this year. We see very limited action there from customers and we should see by now, to be honest. So we didn’t factor that into the Q4 growth as well. So in that regard, it’s kind of a bit unusual Q4 for the margin and I think some of our peers also mentioned that you’re seeing similar lack of demand, budget flush demand at the end of the year this year.
Customers are just more cautious with their spending, and they’re not really using their budgets. I have contact with several key customers out there, and they said, look, we have to hold our budget together this year and we will continue to look into opportunities next year, but don’t expect a big budget flush from us in Q4 this year. I think that’s probably the biggest things with China together with the lack of a budget flush. In terms of the other industry, I would say no significant changes, whether it’s US or Europe. Maybe a little bit in the chemical market in the US, where we saw a slowdown in Q3 and we also factored into Q4. But we have to see how that plays out long-term, unless there is a major disruption in the market, I would expect it to still be with, I would say, normal momentum going into 2024, the chemical market.
Vijay Kumar: Understood. That’s helpful. And Shawn, maybe one for you. Did I hear you right about pricing being normalized, you know, two points next year? Like just given Patrick’s comments and end markets being little tougher, does the pricing — like what gives you the visibility on pricing for next year? Should we assume gross margins being consistent flattish year-on-year?
Shawn Vadala: Yeah. So, I mean, yeah, I think, I feel very confident with the 2% for next year. I think there’s a lot of factors that go into it. Of course, we have a pretty robust process. I’m sure you’re familiar with that we literally start in the summer and we go through the whole portfolio with the organization and we look at different metrics. But, I think when you step back from it all, our value proposition remains very strong. And I think that’s always the key and that’s why we’re always of course investing in innovation to make sure we maintain that leadership in terms of the value proposition. But what we’ve seen is over the last couple of years is the market actually also move towards our portfolio in a way as customers seek more automated solutions, more digitalization.
These are strengths of our portfolio relative to competition. And I think we’re very well differentiated in many respects. And so, I think, that certainly helps us kind of maintain our pricing position versus competition. In terms of the operating margin, I mentioned flattish, but if you look at the gross margin, I think it will actually be up a little bit next year.
Vijay Kumar: Fantastic. Thanks, guys.
Shawn Vadala: Yeah. Thanks.
Operator: Our next question comes from the line of Derik de Bruin with Bank of America. Please go ahead.
Derik de Bruin: Hi. Good morning. Thank you for taking my question. So I guess the first one is, last November, when you had your Analyst Day, you raised the long-term guide to 6% to 5% for revenue growth. Look, I agree with you that China is not going to be down for a long time or not going to be down forever, and it will pick-up some point. But what do you think — what do you think it looks like once the market sort of rebounds? I mean, we’re in a different world today. Politics is different, things are different. How much of that 6% topline assumes that it was just going to be business-as-usual as it had been for those prior years and — or what did you — what do you embed in that guide for sort of like that China assumption with it? So I think the broad question — I know you don’t have the crystal ball, but I do think it’s important.
Patrick Kaltenbach: Yeah, it is important. Let me start and I’ll let Shawn chime in, in here. So, look, we think our — when we talk about a 6% growth long-term growth model for Mettler-Toledo, I think that number is still very relevant in the mid and long term. And there are several reasons for that. Number one, we have factory in China in that equation to be high-single digits to long-term. So it’s not that the growth rates that we have seen over the last two years, but still I would say high-single digit is probably not unlikely that we will see this in the mid-term again in China. The other important piece for us, and remember, when — that we also shifted our portfolio sequentially into faster-growing segments over time, and that continues into the Lab business and the life science market; in Industrial, automation, these are all markets that are still where we see — will see strong demand, just given the underlying demand in different industries, whether it’s related to aging working populations like a flavor out there driving automation, the whole story around digitalization, where we have a very, very strong portfolio both on the Lab side, but also on the Industrial side.
