Waters(WAT)2024-01-09 17:21Company and Industry Overview * Company: Waters Corporation (NYSE: WAT) * Industry: Life Science Tools and Diagnostics * Focus: Serving regulated markets with large unmet needs, including pharmaceuticals, clinical, food and environmental, and materials testing. Key Points Business Model and Market * Market Size: Approximately $12 billion, growing mid-single digits. * Pharmaceuticals: Largest market, growing high single digits, driven by demand for high-quality medicines and biologics. * Clinical: Expected to grow high single digits, focused on early disease detection and biomarker identification. * Food and Environmental: Mid-single digit growth, driven by the need for more sensitive testing for PFAS and other impurities. * Materials: Mid-single digit growth, driven by the need for safe and renewable energy, particularly in batteries and electric vehicles. Business Model * Deep understanding of customer needs. * Development of complex instruments into simple, yet sophisticated systems. * Focus on QA/QC in the pharmaceutical space. * High recurring revenue. * Industry-leading profitability. Transformation and Execution * Three-year transformation plan: * Strengthen execution. * Revitalize innovation. * Enter faster-growing adjacencies. * Revenue growth: Flat year-to-date, despite China's decline, driven by strong performance outside of China, particularly in pharmaceuticals. * Execution of commercial initiatives: * Replacement of instruments. * Increase in service attachment rates. * Increase in e-commerce adoption of chemistry portfolio. * Increase in footprint with contract research and contract manufacturing customers. * Focus on innovation. * Margin expansion: Achieved through cost management and operational excellence. Innovation * Liquid chromatography: Alliance iS, reducing errors by over 50%. * Mass spectrometry: Xevo TQ Absolute, setting a new standard in sensitivity. * Thermal analysis: TAM IV battery cycler microcalorimeter, detecting early heat signatures of parasitic reactions in batteries. * Precision chemistry: MaxPeak Premier Column, growing well into the 20%. * Acquisition of Wyatt Technology: Adding capabilities in light scattering and expanding into new adjacencies. Adjacencies * Biologics: Revenue growth from large molecules exceeding 35%. * Clinical: Growth from low single digits to double digits. * Battery: Growth tenfold compared to three years ago. * Other adjacencies: Substantial progress in bioseparations, bioanalytical characterization, early disease detection, battery testing, and sustainable polymers. M&A * Acquisition of Wyatt Technology: Largest acquisition in Waters' history, adding capabilities in light scattering and expanding into new adjacencies. * Integration of Wyatt Technology: On track to deliver synergies, including increased attachment rates and integration of data and software. Future Outlook * Growth drivers: Secular tailwinds, including increased prescription growth, demand for high-volume testing, and new applications in biologics. * Volume growth: Expected from new therapies, PFAS testing, and biologics characterization. * Pricing: Expected to increase by 100 basis points. * EPS growth: Expected to benefit from revenue growth, margin expansion, and capital deployment, including M&A. ESG * Renewable energy: Over 75% of electricity comes from renewable low-carbon sources. * Corporate Equality Index: Scored 100 out of 100 in 2023 and 2024. * Governance: Board selected as the 2024 Public Company Board of the Year by the National Academy of Corporate Directors in New England.