Waters(US:WAT)2023-02-15 17:08Financial Data and Key Metrics Changes - Revenue for Q4 2022 grew 3% as reported and 9% on a constant currency basis, with full-year revenue growth of 7% as reported and 12% in constant currency [21][24][62] - Non-GAAP adjusted earnings per share for Q4 was $3.84, up 5% year-over-year, while full-year non-GAAP adjusted EPS was $12.02, up 7% year-over-year [23][58] - Gross margin for Q4 was 59.4%, up 140 basis points year-over-year, and operating margin for Q4 was 33.7%, an increase of 110 basis points [54][55] Business Line Data and Key Metrics Changes - Instrument sales grew 16% for the full year, with mass spectrometry growing over 30% [24][51] - Recurring revenues grew high single digits, supported by e-commerce and service attachment growth initiatives [23][51] - New product launches contributed significantly, with Arc HPLC, ACQUITY Premier, and cyclic unit sales growing over 40% [22][23] Market Data and Key Metrics Changes - Industrial was the fastest-growing end market, up 14%, led by environmental testing, which grew over 20% [21][24] - Pharma saw continued robust growth, up 6%, with strength in both small and large molecule applications [21][24] - Sales in Asia grew 7%, with Japan growing 25% and India growing 15%, while China experienced a low single-digit decline due to COVID-related issues [50][52] Company Strategy and Development Direction - The acquisition of Wyatt Technology is seen as a significant step to enhance Waters' capabilities in bioprocess characterization, targeting a $1.8 billion market growing at 10% to 12% [9][31] - The company aims to integrate Wyatt's light scattering technologies with its existing portfolio to create a comprehensive bioanalytical platform [40][41] - The strategy includes augmenting organic growth with M&A to accelerate entry into high-growth adjacencies [20][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robustness of end markets and strong customer demand for products, despite macroeconomic challenges [25][62] - The company anticipates that the strong instrument sales from 2022 will drive future growth in recurring revenues [25][62] - Guidance for 2023 includes organic constant currency sales growth of 5% to 6.5%, with the Wyatt acquisition expected to add 2% to 3% to revenue growth [63][64] Other Important Information - The transaction with Wyatt Technology is valued at $1.36 billion and is expected to close in Q2 2023, subject to regulatory approval [46][48] - The company plans to temporarily suspend its share buyback program for the remainder of 2023 to focus on debt repayment following the acquisition [47][67] - The expected annualized revenue synergies from the acquisition are projected to exceed $70 million by year five [44][96] Q&A Session Summary Question: Continued instrument strength and backlog growth - Management confirmed that instrument growth finished with double-digit growth in Q4 and 16% for the year, driven by successful commercial initiatives and new product launches [74][75] Question: Integration of Wyatt's technologies into the portfolio - Wyatt's light scattering technologies will complement Waters' existing capabilities in biophysical characterization, enhancing the overall bioanalytical characterization portfolio [79][82] Question: Guidance assumptions regarding pricing and China outlook - Management expects a high single-digit growth for China in 2023, with pricing contributing approximately 200 basis points to growth [84][88] Question: Revenue synergies from the Wyatt acquisition - The expected $70 million in revenue synergies is based on geographic expansion, increased product offerings, and integration of software platforms [91][96]