Waters Corporation Q2 FY2025 earnings call

• Commercial execution: In 2025, key initiatives ahead of expectations. Service plan attachment in first half rose 200 basis points to 52%. E-commerce adoption above 40% of chemistry revenue. CDMO penetration at 27% of pharma revenue.
• Revitalizing innovation: Alliance iS grew 300% y-o-y, Xevo TQ Absolute platforms grew 40%, Xevo TQ Absolute XR orders double expectations, MaxPeak columns grew north of 30%, launched BioResolve Protein A Affinity Columns, light scattering on Empower ahead of target.
• Capturing long-term growth: GLP testing revenue grew 70% y-o-y, PFAS testing revenue grew over 50% y-o-y, India revenues high teens, 200 basis points of price contribution in quarter and first half.

Sales grew 9% as reported and 8% in constant currency. Instruments grew mid-single digits, led by high single-digit growth in LC and mass spec portfolio. Recurring revenue grew 11%, driven by 9% service growth and double-digit chemistry growth. Sales growth was led by Waters Division, which grew in the high single digits or better across Americas, Europe and Asia. Instruments grew mid-single digits, with LC and mass spec portfolio up high single-digit. Recurring revenue was 11% growth, service up 9%, chemistry double-digit. Waters Division's sales grew high single digits in Americas, Europe, Asia.

• Raised full year 2025 constant currency sales growth guidance to 5.5%-7.5% and reported sales growth guidance to 5%-7%.
• Expected full year 2025 gross margin approximately 59% and adjusted operating margin approximately 31%.
• Raised full year 2025 adjusted earnings per fully diluted share to range of $12.95-$13.05.
• Third quarter 2025 expected constant currency sales growth 5%-7%, reported sales growth 4.5%-6.5%, adjusted earnings per fully diluted share range $3.15-$3.25.

• Actual events or results may differ materially from statements on the call, subject to risks in Form 10-K, 10-Qs and other SEC filings.
• Uncertainty regarding tariffs and trade policy environment, which had an impact on margin and may continue to affect.

Q: Jack Meehan asked about high single-digit growth in Waters segment instruments, replacement cycle in LC and competitive dynamics.

A: LCMS grew high single digits, replacement cycle in pharma on track, Alliance iS grew 300% y-o-y, TQ Absolute XR exceeded expectations.

Q: Tycho Peterson asked about LCMS growth follow-up, TA down in Americas, China growth sustainability.

A: LCMS replacement cycle healthy, TQ XR doing well, TA down due to macroeconomic and tariff challenges in material science and polymers, China grew double digits with strength across end markets but prudent assumptions for back half.

Q: Rachel Vatnsdal Olson asked about margin, tariff impact, third quarter margin.

A: Margin impact from geographical mix and tariff remediation, tax rate headwind in quarter, margin expected to improve in Q3 and Q4.

Q: Puneet Souda asked about academic market outlook, synergy sequence after acquisition.

A: Academic and government assumed to decline in back half, immediate impact on instrument replacement, service attach rate, e-commerce with acquisition.

Q: Sung Ji Nam asked about drug discovery business outlook, India tariffs.

A: Pharma drug discovery slow, India funnel activity healthy, customers not fearing tariffs much.

Q: Catherine Schulte asked about synergy breakdown, microbiology business confidence.

A: Synergies split across commercial excellence, high-growth adjacencies, cross-selling, confident in improving microbiology business with new product and operational initiatives.

Q: Dan Brennan asked about LCMS follow-up, China market specifics.

A: LCMS funnels strong, China growth from CDMO, battery testing, localized portfolio, but conservative assumptions for back half.