Waters(WAT) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q1 2025, sales grew 4% as reported and 7% in constant currency, reaching $662 million, at the high end of guidance [10][25][28] - Earnings per share (EPS) were $2.25 on a non-GAAP basis, reflecting low single-digit growth, and $2.03 on a GAAP basis [11][29] - Gross margin was 58.2%, and adjusted operating margin was 25.5% [29][36] Business Line Data and Key Metrics Changes - Instrument sales grew 11%, driven by mid-teens growth in liquid chromatography and mass spectrometry, particularly in pharma and industrial markets [11][27] - Recurring revenue increased mid-single digits, consistent with expectations for a quarter with two fewer days [11][28] - The chemistry consumables business saw MaxPeak Premier columns grow more than 30% [15] Market Data and Key Metrics Changes - Pharma sales grew 8%, industrial sales grew 6%, and academic and government sales grew 3% [25][26] - In China, sales grew 5%, with double-digit growth in industrial and academic/government applications [11][25] - India delivered revenue growth close to 20% in constant currency, driven by strong demand from generics manufacturers and CDMOs [18][61] Company Strategy and Development Direction - The company is focused on operational excellence, innovation, and maintaining close customer relationships to navigate a dynamic macro environment [8][21] - The strategy includes launching differentiated new products and investing in capabilities to enhance competitive positioning [8][21] - The company raised its full-year constant currency sales growth guidance to 5% to 7% due to better-than-expected Q1 performance [22][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving 2025 objectives despite challenges from newly announced tariffs [9][38] - The company expects high single-digit earnings growth for the year, supported by strong sales volume and favorable foreign exchange movements [10][21] - Management noted that the pharma industry remains attractive, with strong innovation and customer spending [52][72] Other Important Information - The company established a cross-functional task force to assess tariff exposure and implement mitigation plans, limiting the net impact of tariffs to $10 million on adjusted operating margin for 2025 [24][36] - The company is actively evaluating M&A opportunities to enhance long-term shareholder value and may resume share repurchase programs in 2025 [31][99] Q&A Session Summary Question: Can you discuss the replacement cycle dynamics in pharma biotech? - Management noted strong double-digit growth in instruments, particularly in large pharma, with the replacement cycle well underway [45][46] Question: Have you seen any change in behavior related to tariffs from pharma customers? - Management indicated no significant change in behavior, with strong momentum continuing through the quarter [49][50] Question: What are your expectations for pricing this year? - Management expects 200 basis points of like-for-like pricing gains, with additional surcharges related to tariffs contributing another 50 basis points [56][57] Question: How do you view the growth in India? - Management expressed confidence in the sustainability of growth in India, driven by strong demand from generics manufacturers [60][61] Question: What is the impact of tariffs on your supply chain? - Management detailed actions taken to mitigate tariff impacts, including inventory adjustments and selective surcharges [64][66] Question: What are your expectations for China for the balance of the year? - Management anticipates low single-digit growth in China for the remainder of the year, despite a strong start [76][77] Question: What is the latest on the academic and government segment? - Management indicated that this segment is small, accounting for about 3% of total revenue, and has seen a significant decline forecasted for the rest of the year [86][89]