Financial Data and Key Metrics Changes - The company reported high single-digit growth in instrumentation, with a notable performance in the base business, continuing momentum from previous quarters [3][4] - Service attachment rates have reached 52%, and e-commerce penetration is above 45% [4] - The company experienced a 20% decline in TA in the U.S., primarily due to R&D testing in material science, while international markets, particularly China, showed strong growth [7][8] Business Line Data and Key Metrics Changes - New product launches contributed significantly to the overall growth, with the Alliance IS achieving three times the sales compared to last year and TQ Absolute XR setting new standards in its category [5][18] - PFAS testing grew by 30% this quarter, although it slowed from 90% growth in Q1, with year-to-date growth close to 50% [6] - GLP-one testing saw a 70% increase in the first half of the year, and India generics experienced growth in the high teens to low twenties [6] Market Data and Key Metrics Changes - The U.S. market for TA declined, but outside the U.S., growth was robust, particularly in China, which saw double-digit growth driven by CDMO activity [7][8] - The LCMS segment maintained high single-digit growth, indicating a healthy replacement cycle still in progress [9][10] Company Strategy and Development Direction - The company aims to build a biologics QC domain, focusing on acquiring technologies and capabilities to enhance its portfolio, particularly in mass spectrometry and flow cytometry [21][24] - Strategic synergies from the recent acquisition are expected to yield significant operational improvements, with a target of $200 million in synergies identified [26][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth in China, particularly in the pharma segment, despite a cautious outlook for the remainder of the year [70][71] - The company is focused on maintaining its base business performance while preparing for the integration of the new acquisition [53][54] Other Important Information - The company plans to raise $4 billion in debt to fund the acquisition, with an expected leverage ratio of about 2.5 to 2.6 [63] - Management emphasized the importance of cultural integration and maintaining operational efficiency during the merger process [56][58] Q&A Session Summary Question: What is the state of the instrument replacement cycle? - Management indicated that the replacement cycle is progressing well, with high single-digit growth in LCMS, suggesting that there is still significant room for growth beyond the average [9][10] Question: How is the CapEx approval process evolving? - The company noted that while the replacement cycle is strong, the velocity of the CapEx approval process has not improved post-pandemic [14][15] Question: What are the competitive dynamics in the LC market? - Management highlighted that displacing competitors in the replacement segment is challenging, but new product offerings have been well received, leading to significant growth in that area [16][17] Question: How will the company integrate with BD post-acquisition? - The integration plan involves securing the base business, validating plans developed pre-announcement, and identifying key individuals accountable for delivering synergies [53][56] Question: What is the outlook for the generics industry amidst tariff discussions? - Management indicated that the generics industry is exempt from tariffs, and there are no significant concerns regarding the impact of tariffs on the business [64][66]

Financial Data and Key Metrics Changes - The company reported high single-digit growth in instrumentation, with a notable performance in the base business, continuing momentum from previous quarters [3][4] - Service attachment rate reached 52%, and e-commerce penetration exceeded 45% [4] - The company experienced a 20% decline in TA in the U.S., primarily due to R&D testing in material science, while international markets, particularly China, showed strong growth [7][8] Business Line Data and Key Metrics Changes - New products contributed significantly to the overall growth, with Alliance IS sales tripling compared to the previous year and TQ Absolute XR setting new standards in its category [5][6] - PFAS testing grew by 30% this quarter, although it slowed from 90% growth in Q1, with year-to-date growth close to 50% [6] - The generics market in India showed growth in the high teens to low twenties percentage range [7] Market Data and Key Metrics Changes - The U.S. experienced a decline in TA, while China reported high single-digit to double-digit growth driven by CDMO activity [8] - The company noted that the LCMS growth remained strong, indicating that the replacement cycle is still ongoing, with significant growth potential in segments that have not yet participated [9][12] Company Strategy and Development Direction - The company aims to build a biologics QC domain, focusing on acquiring bioanalytical instruments and reagents, particularly antibodies [22][24] - The strategic fit of the recent acquisition was emphasized, with plans to enhance operational improvements and synergies [26][28] - The company is focused on maintaining its base business while integrating the new acquisition, ensuring that cultural elements from both organizations are respected [58][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth in China, particularly in the pharma and CDMO segments, despite some challenges in the generics market [70][72] - The company is cautious about future growth, projecting low to mid-single-digit growth in China for the remainder of the year [71][72] - Management highlighted the importance of operational improvements and synergies from the acquisition, with a focus on execution and accountability [61][63] Other Important Information - The company plans to raise $4 billion in debt to fund the acquisition, with an expected leverage ratio of about 2.5 to 2.6 [64] - There is a focus on cultural integration and ensuring that the strengths of both companies are leveraged effectively [59][60] Q&A Session Summary Question: What are the growth drivers in the current market? - Management highlighted the ongoing replacement cycle in the LCMS market and the strong performance of new products as key growth drivers [9][10] Question: How does the company plan to integrate the new acquisition? - The integration will focus on maintaining the base business while validating plans developed prior to the acquisition announcement, with a clean team to oversee the process [56][58] Question: What are the expected synergies from the acquisition? - The company anticipates $200 million in cost synergies, with potential for additional savings based on operational improvements [26][38] Question: How is the company addressing cultural integration post-acquisition? - Management emphasized the importance of respecting the existing cultures of both organizations and focusing on execution and accountability [59][60]

Financial Data and Key Metrics Changes - Sales grew 9% as reported and 8% in constant currency, with non-GAAP earnings per share at $2.95, up 12% year on year [9][10][21] - GAAP EPS was $2.47, with gross margin at 58.3% and adjusted operating margin at 29.1% [21][24] - Free cash flow was $159 million after funding $23 million of capital expenditures, with a net debt position of $1.1 billion at the end of the quarter [22][24] Business Line Data and Key Metrics Changes - Instruments grew mid-single digits, led by high single-digit growth in the LC and mass spec portfolio [9][10] - Recurring revenue grew 11%, driven by 9% service growth and double-digit chemistry growth [10][21] - Chemistry benefited from approximately $8 million of sales pull forward related to tariff dynamics, with overall constant currency growth rate at 7% and chemistry up 10% [11][21] Market Data and Key Metrics Changes - By end market, pharma grew low double digits, industrial grew 6%, and academic and government declined low single digits [11][17] - In the Americas, growth was partially offset by weakness in the TA division, particularly in macro-sensitive polymer and materials testing applications [10][11] - China grew high single digits, with strong performance across all end markets, particularly in pharma and CDMO segments [20][76] Company Strategy and Development Direction - The company is focused on three strategic pillars: commercial execution, revitalizing innovation, and capturing long-term growth in high-growth adjacencies [12][15] - The pending combination with BD's biosciences and diagnostic solutions business is expected to accelerate entry into high-growth adjacencies and enhance the company's growth trajectory [27][28] - The company is raising its full-year 2025 constant currency sales growth guidance to 5.5% to 7.5% and non-GAAP EPS guidance to $12.95 to $13.05 [16][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum of the core business and the positive impact of the upcoming combination with BD [27][28] - The company anticipates a gradual return to growth for BD's biosciences and diagnostics solutions business, with expected growth rates improving in the coming years [31][32] - Management remains cautious about the impact of tariffs and macroeconomic conditions on certain segments, particularly in the TA division [10][71] Other Important Information - The company expects to deliver $345 million in adjusted EBITDA synergies by year five from the combination with BD, with $200 million in cost synergies and $290 million in revenue synergies [34][39] - The microbiology business from BD is seen as a strategic fit with significant value creation opportunities, particularly in infectious disease diagnostics [46][49] Q&A Session Summary Question: Can you provide an update on the replacement cycle in LC and competitive dynamics? - Management noted that the LCMS segment continues to grow high single digits, with strong replacement activity among large pharma customers and increasing growth in the CDMO customer base [57][58] Question: What is the timeline for bringing new products to market in microbiology? - Management indicated that it would take approximately three to five years to fully realize the opportunities in microbiology, with potential product introductions in two to three years [63][64] Question: How sustainable is the growth in China? - Management reported double-digit growth in China, driven by strong performance across all end markets, and remains cautiously optimistic for the back half of the year [76][78] Question: What are the drivers behind the operating margin being lighter than expected? - Management explained that the margin impact was primarily due to geographical mix and tariff remediation costs, with expectations for progressive improvement in margins in the second half of the year [82][84] Question: Can you elaborate on the $8 million sales pull forward? - Management expressed confidence in the $8 million figure based on order patterns and customer discussions, indicating it may impact both Q3 and Q4 [85][86]

Financial Data and Key Metrics Changes - The company reported sales of $771 million, reflecting a 9% increase as reported and an 8% increase in constant currency compared to the previous year [16] - Non-GAAP earnings per share (EPS) were $2.95, up 12% year on year, while GAAP EPS was $2.47 [19] - Gross margin for the quarter was 58.3%, and adjusted operating margin was 29.1%, impacted by regional sales mix and tariff surcharges [20] Business Line Data and Key Metrics Changes - Instruments grew in mid-single digits, led by high single-digit growth in the liquid chromatography (LC) and mass spectrometry (MS) portfolio [7] - Recurring revenue grew 11%, driven by 9% service growth and double-digit chemistry growth [8] - Chemistry benefited from approximately $8 million in sales pull forward related to tariff dynamics, with overall constant currency growth rate at 7% and chemistry up 10% [10] Market Data and Key Metrics Changes - By end market, pharma grew low double digits, industrial grew 6%, and academic and government declined low single digits [9][16] - In the Americas, growth was partially offset by weakness in the TA division, particularly in macro-sensitive polymer and materials testing applications [8] - Asia grew 14%, driven by double-digit growth in China, India, and Japan, while Europe grew 8% [18] Company Strategy and Development Direction - The company is focused on three strategic pillars: commercial execution, revitalizing innovation, and capturing long-term growth in high-growth adjacencies [11] - The pending combination with BD's biosciences and diagnostic solutions business is expected to accelerate entry into high-growth adjacencies and enhance the company's growth trajectory [26] - The company raised its full-year 2025 constant currency sales growth guidance to 5.5% to 7.5% and adjusted EPS guidance to $12.95 to $13.05 [15][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong momentum of the core business and the positive impact of the upcoming combination with BD [26] - The company anticipates a gradual return to growth for BD's biosciences and diagnostics solutions business, with expected growth rates of 4.5% in 2026 and 5% in 2027 [31] - Management acknowledged ongoing industry headwinds in pharma drug discovery and academic funding but remains optimistic about the overall growth potential [30][97] Other Important Information - The company plans to use free cash flow to pay down $100 million of debt and increase cash reserves in the second half of the year [22] - The company expects to deliver $345 million in adjusted EBITDA synergies from the combination with BD by year five, with $200 million in cost synergies and $290 million in revenue synergies [33][37] Q&A Session Summary Question: Can you provide an update on the replacement cycle in LC and competitive dynamics? - Management noted that the LCMS segment continues to grow high single digits, with strong replacement activity among large pharma customers and increasing growth in the CDMO customer base [55] Question: What is the timeline for bringing new products to market in microbiology? - Management indicated that it would take approximately three to five years to fully realize the opportunities in microbiology, with potential product introductions in two to three years [61] Question: How do you expect the margin to evolve in the fourth quarter? - Management expects progressive improvement in margins as volume leverage kicks in, with specific impacts from geographical mix and tariff remediation costs [80] Question: Can you elaborate on the $8 million sales pull forward? - Management expressed confidence in the $8 million figure based on order patterns and discussions with customers, indicating it may impact both Q3 and Q4 [84] Question: What is the outlook for the drug discovery business? - Management stated that the drug discovery segment remains slow, with no significant changes expected in the replacement cycle for this area [97]

Summary of Waters (WAT) 2025 Conference Call Company Overview - **Company**: Waters Corporation (WAT) - **Date of Conference**: June 04, 2025 - **Industry**: Life Science Tools and Diagnostics Key Points and Arguments Innovation and Product Development - Waters has revitalized its product portfolio, focusing on innovation in equipment, instruments, consumables, and software [3][4] - The **Alliance IS** HPLC system has achieved a **40% reduction in errors**, setting a new standard in the category [4] - The **TQ Absolute mass spectrometer** is leading in sensitivity for PFAS testing, becoming the largest selling quantitative mass spec instrument [4] - Approximately **70% of R&D spending** is now directed towards biologics innovation, significantly impacting product development [4] - The **MaxPeak Premier columns** have seen a growth of nearly **30%** since their launch four years ago [5] - Introduction of **charge detection mass spectrometry (CDMS)** technology allows for the analysis of large molecules intact, marking a significant advancement in mass spectrometry [6] Market Dynamics and Growth - The company reported **mid-teens growth** in LCMS in Q1, indicating strong demand without pull-forwards affecting the results [13] - Pharma companies are rethinking supply chains, leading to increased production in regions like Ireland, which has affected chemistry consumption [14][15] - The overall market for LCMS instruments is projected to see an additional **$50 million** in support over the next five years due to incremental CapEx [17] Replacement Cycle and Long-term Growth - The replacement cycle for instruments is expected to be independent of new CapEx, with **70% of business** coming from replacements [21] - The growth rate from trough to peak in the replacement cycle is typically **2-3 years**, with a long-term average growth of **5%** for instruments [22] - The company anticipates a longer cycle this time due to pressures in China and the biotech sector [22] Regional Insights - In China, Waters experienced **5% growth** in Q1, driven by academic and industrial segments, but branded generics are declining [24] - The innovative biotech segment in China is expected to expand, with many large pharma companies licensing products from Chinese firms [40][41] - India has shown strong growth, with a **20% increase** in Q1, and the company expects continued growth in the low to mid-teens [46] PFAS Market and Regulatory Changes - Waters anticipates continued growth in the PFAS testing market, with a **90% increase** in Q1, driven by new EPA regulations demanding more sensitive detection methods [47] - The TQ Absolute can detect PFAS at **one part per quadrillion**, significantly exceeding EPA requirements [50] Capital Deployment and M&A Strategy - The acquisition of **Halo Labs** aligns with Waters' strategy to enhance its portfolio in biologics and bioanalytical characterization [51][52] - The company is focused on capital allocation towards high-growth areas, including clinical diagnostics and battery testing [53] - Discussions around share buybacks and M&A will continue as the company evaluates trade-offs [54] Software and Service Enhancements - Waters is transitioning its **Empower software** to a subscription model, enhancing cash flow and customer satisfaction [36] - The service team has improved attachment rates, with a target of **10%** over five years, reflecting strong customer reliance during challenging times [31][32] Additional Important Insights - The company is cautious about the long-term impact of CapEx on overall medicine production volumes, indicating potential short-term growth followed by a catch-up period [19][20] - The dynamics of the market are influenced by geopolitical factors, particularly in China and India, which may affect future growth trajectories [38][46] This summary encapsulates the key insights and developments discussed during the Waters conference call, highlighting the company's focus on innovation, market dynamics, and strategic growth initiatives.