WATERS CORP /DE/ Q4 FY2024 earnings call

• Delivered excellent Q4 performance with high single-digit constant currency revenue growth and low teens adjusted EPS growth.
• Instruments grew 8% outpacing expectations, with LC Mass Spec, light scattering, and TA system sales each growing high single digits or better.
• Recurring revenues grew 9%, with chemistry and service both up high single digits.
• Achieved non-GAAP earnings per share of $4.10, reflecting 13% EPS growth, with adjusted EPS growing 22% excluding FX impact.
• Full year non-GAAP earnings per fully diluted share was $11.86, reflecting 1% growth including 5% FX decline.
• Strong performance in Pharma, Academic, and non-pharma segments, with Europe, Asia, and Americas all showing growth.
• New product launches like Alliance iS and Xevo TQ Absolute driving growth, with PFAS revenue growing over 40% in Q4 and year.
• Operational excellence led to 60 basis point increase in adjusted operating margin to 35.5% in Q4, and full year adjusted operating margin at 31%.

In the fourth quarter, Pharma, the largest end market, saw sales grow low double digits. Industrial segment sales grew 6%, and Academic & Government grew 16%. Instruments grew 8% outpacing expectations, with LC Mass Spec, light scattering, and TA system sales each growing high single digits or better. Recurring revenues grew 9%, with chemistry and service both up high single digits. For the full year, sales were flat in organic constant currency, with recurring revenue growing 6%. Pharma end market grew 1% full year, Industrial was flat, and Academic & Government declined 7%.

• Full year 2025 constant currency sales growth guidance 4.5% to 7%.
• Full year 2025 non-GAAP earnings per fully diluted share guidance $12.70 to $13, reflecting 7%-10% growth including ~4% FX headwind.
• First quarter 2025 constant currency sales growth guidance 4% to 7%, with total reported sales growth guidance 1% to 4% due to currency translation.
• First quarter 2025 non-GAAP earnings per fully diluted share estimated range $2.17 to $2.25.

• FX headwinds impacting financial performance.
• Macro-economic conditions affecting customer CapEx spending.
• Uncertainties in instrument replacement cycle dynamics and market recovery pace.

Q: Tycho Peterson asked about budget flush dynamics, replacement cycle spread among pharma customers, and capital allocation.

A: Udit Batra mentioned 2024 had typical budget flush dynamics, replacement cycle beginning in large pharma, CDMOs, and India generics market. Amol Chaubal discussed capital allocation focusing on EPS accretive assets with max leverage up to 2.5 times.

Q: Vijay Kumar asked about incorporating macro risks into guidance, PFAS/GLP-1 contribution, and China-India within guidance.

A: Udit Batra said guidance has prudence on lower end, GLP-1 and PFAS expected to contribute 30 basis points each, India to contribute 70-100 basis points, China with low single-digit growth.

Q: Puneet Souda asked about Q1 guide, US academic impact, and Europe/India dynamics.

A: Amol Chaubal said Q1 guide has prudence due to day count differences, Europe executing well, India with strong growth and generics opportunity.

Q: Eve Burstein asked about replacement cycle comparison and China impact.

A: Udit Batra explained replacement cycle with 2%-3% outperformance vs long-term 5%, 15% pending replacement from 2015-2019, China with low single-digit growth.

Q: Brandon Couillard asked about instrument growth by segment and PFAS market sizing.

A: Udit Batra said instrument segments mid-single digit growth, PFAS market growing due to unmet needs and best-in-class instruments.

Q: Dan Arias asked about Mass Spec uptake and PFAS lab scaling.

A: Amol Chaubal said Mass Spec uptake not tied to LC replacement, PFAS lab scaling in early innings. Udit Batra elaborated on Mass Spec growth drivers.

Q: Catherine Schulte asked about Pharma budget flush and services contract target.

A: Udit Batra said Q4 Pharma growth typical of pre-pandemic years, services target 55% with progress in installed base attachment.