WATERS CORP /DE/ Q1 FY2025 earnings call

• Strong commercial execution and operational excellence drove results, with double-digit instrument growth. • Focused on staying close to customers, mitigating risks while seizing opportunities, and maintaining operational excellence. • Launched new products like ElectroForce APeX-1, TGA Smart-Seal Pans, and expanded Alliance IS HPLC product line. • Innovation in LC, Mass Spec, and Chemistry Consumables contributed to growth, with products like Xevo TQ Absolute and MaxPeak Premier Columns exceeding expectations. • India team delivered close to 20% constant currency revenue growth driven by generics manufacturers and CDMOs.

In the first quarter, sales were $662 million, up 4% reported and 7% constant currency. Instrument sales grew 11%, led by mid-teens growth in liquid chromatography and mass spectrometry. Recurring revenue grew mid-single digits. By end market: Pharma grew 8%, industrial 6%, academic and government 3%. By region: Asia grew 13% (China 5%), Americas 6%, Europe low-single digits. Specific products: Alliance IS HPLC system sales more than tripled, Xevo TQ Absolute system had over 50% sales growth, MaxPeak Premier Columns grew over 30%. Revenue contribution: Instruments were a key driver, with Pharma, industrial, and Asia regions contributing significantly.

• Raised full-year constant currency sales growth guidance to 5%-7%, with adjusted EPS guidance to $12.75-$13.05 (8%-10% growth). • Second quarter 2025 expected constant currency sales growth 5%-7%, reported sales growth 4%-6%, non-GAAP EPS $2.88-$2.98. • Accounted for tariff impacts by implementing supply chain adjustments and surcharges, limiting net impact to $10 million on adjusted operating margin.

• Impact of recently announced tariffs, with a gross exposure of $45 million, but mitigated through supply chain adjustments and surcharges. • Potential pushback on pricing from customers, though efforts to communicate tariff-related surcharges are ongoing. • Macro environment challenges, including continued uncertainty in academic and government markets, particularly in the U.S.

Q: Talk about replacement cycle dynamics in Pharma biotech and update on instrument forecast.

A: Instruments performed strongly in Q1. Replacement cycle is underway with large Pharma, generics, and CDMOs growing in double digits. For 2025 guide, U.S. A&G forecast adjusted with a 50 basis points headwind offset by tariff-related surcharges.

Q: Expectations on pricing this year and pushback from pharma.

A: Q1 had 200 basis points of like-for-like price, with additional 50 basis points from tariff surcharges. Collaborated closely with customers, with 80%-90% understanding tariff-related surcharges.

Q: China's performance and expectations for the balance of the year.

A: China grew 5% in Q1, with balance of year expected to be low single-digit growth, assuming prudence due to stimulus timing.

Q: Reshoring potential and cadence of demand for products.

A: Early days on reshoring, in close conversation with customers, but no detailed plans yet. Service team is first to know about new manufacturing sites.

Q: PFAS business growth and assumptions.

A: PFAS business grew 90% in Q1, with strong funnel and EPA regulations driving continued growth. Not a one-quarter phenomenon, with focus on sensitive instruments like Xevo TQ Absolute.

Q: Appetite for acquisitions and macro volatility.

A: Excited about Wyatt acquisition, open to other acquisitions with strategic fit and reasonable valuations; will resume share buybacks if not.

Q: Instruments outlook for 2Q and balance of the year.

A: Instruments had double-digit growth in Q1, with balance of year guidance at 5%-7%, recurring revenues in high end of guidance.

Q: Services revenue and TA business.

A: Services revenue affected by two fewer days in the quarter and lower third-party service provider parts purchases. TA business is lumpy but strong on battery testing, with new launches in polymer and material testing.