WAT - Earnings call 4 2023 | Waters Corporation

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Operator

Good morning, and welcome to Waters Corporation Fourth Quarter 2023 Financial Results Conference Call. [Operator Instructions] [indiscernible] call that be recorded. If anyone [indiscernible] time. It is now my pleasure to turn the call over to Caspar Tudor, Investor Relations. Go ahead, sir.

Caspar Tudor

Cedric. you, Thank and Earnings everyone, the Corporation Waters Good welcome Quarter Call. Fourth morning, to am Today, by joined I Dr. Chief Water's Officer; Water's and and Batra, Amol Officer. Udit President Chaubal, Senior and Vice Chief Executive Financial President

make of year will Before point ir.waters.com. differ section presentation forward-looking financial of Investor over future conditions first our Corporation provide various commentary These supplementing materially. cover we our only XXXX. may call that that we future and company. on this performance begin, the language. regarding conference available and full like Waters impact the out the I and release future the at Relations are statements events will are first regarding our In particular, In events results or expectations business cautionary call, results earnings today's website to would may present guidance slide quarter will statements the we I on potential of actual and market and possible XXXX or

more in release. report our risk our included most factors cautionary in earnings details, included this Form language annual Form XX-K morning's on the recent please For and XX-Q the see

issued currency Unless company's quarter decreasing in and which otherwise, terms. constant appendix are the financial today's morning financial fourth most to the refer During will available certain website. to including this GAAP measures of to stated comparison year comparable of the of the quarterly our directly we our release in in measures of XXXX presentation, to increasing in our discussions references organic results on non-GAAP earnings Reconciliations call, operations. the of fiscal results measures, non-GAAP to attached or are are

and on otherwise, given revenue growth call, ranges basis. organic comparable In addition, are all constant year-over-year currency unless given stated on a today's rates

release our by update to law. intend scheduled earnings quarterly as our projections, not except predictions guidance, as do we otherwise or part of or regularly Finally, required

then remarks, our up phone a detailed to the call results. Amol look Udit lines more to financial questions. like at open key to over take the turn will I'd our Udit. will to Now deliver provide we After,

Udit Batra

and like call Caspar, good gratitude by colleagues. you, Thank everyone. begin I to to all expressing today's morning, my my would

teams focus Throughout customers, XXXX was the launched performance, our innovative transformative on for an and delivered business unwavering year new Waters. year, dynamic all with eventful highly kept conditions. market products another strong times during

above results of on the ended, XXXX, then, the several transformation make delivered in Since manage exceptionally growth. our XXXX growth. showed through to have while having we As a strong downturn for continuing top ability clearly average our years well of to line, sales very demonstrated investments

great of next a it In value creation XXXX, to our This M&A with a we and to also through with we're initiated the transformation off new acquisition vector Wyatt. of shareholders the for phase our brings start.

journey accelerated added investments an our innovative of organic benefit, our next-generation As made with has markets, the adjacent Alliance IS into columns exclusion spec combined expanded over with TQ even with and Data company We malls size wired that clinical first instruments. our LC our platform. mass Star. scattering course and including We launched high-growth where viral for applications We year. progress our developed Xevo in XXXX, a as products light new we it vectors launch into bear continued the had

on indicators. list, Companies XXX awards. companies X This ranking as includes Barron's we Sustainable ESG world's Most which sustainable scores X,XXX over traded our companies most top recognized of achieving the Finally, performance variety a based were of publicly X on ESG

of what at very Waters are in proud we've achieved XXXX. We

as key share I Today, quarter X our and I fourth have year results, full messages.

execute to well. continued First, we've

well results. our long-term is And transformation positioned third, future are our we for growth. Second, to contributing

our Turning X.X% sales as in with which reported, line expectations. declined now quarter, was fourth the to our results. In

the high at Our driven share non-GAAP basis, earnings was strong our GAAP performance. end per guidance a EPS at by $X.XX. On $X.XX of landed margin diluted fully

X% of currency. constant reported terms. year, XXXX as declined grew in organic X.X% in our constant regions outside China sales Even currency full CapEx in with the organic For and environment, a all constrained

And M&A before As QX, on fully expected, from result contribution per the Wyatt of diluted came X% delivered of growth X.X% successfully strong acquisition. to headwinds X% underlying of a with Wyatt which dilution $XX.XX, at share approximately in sales. earnings non-GAAP and EPS in X% reflects FX

instruments detail. The now will challenging results I our sales for remained year-end. into spending describe more in environment

Reported in levels QX quarter third increased that our a in were all However, as consistent a This was to macro fourth budget quarter. $XXX with geographies, conditions. our sales million revenue QX higher muted guidance the reflects China, XX% flush. tough well in versus the for continue execute year-end ramp even we than

For our organic sales year, the X% constant excluding currency full year-over-year, grew China.

a opportunities all As I earlier, This Europe team did Asia, XXXX. Americas, in grew competitive mentioned and fantastic portfolio. on available excluding capitalizing sales market in with job lot the our of the who effort China, from our a the took

stack a result, digits. a X-year high a As on single healthy our at remains ex-China growth basis,

the A deteriorated progressed. particularly the was year in pharma turn key revenues where This our in market case was saw most heavily the XXXX abrupt we as challenge in are the weighted. conditions China where

was more to sales which headwind China total year, XX% full X% our the declined a than growth. For overall,

reflection margin now margin effective us is the that performance. things operational when believe best management good execution slow our to of This We brings down.

volume began as responded allowed further undertook excellent our operational saw focus to productivity and pricing FX deliver Capability discipline proactive while We commitment Global alignment the India. P&L. operational results pressure resilience in our we including We redoubled And with efforts, our objectives. and and the us of continued. Center XXXX, During in added This we slowdown to stronger headwinds, our opening to emerge. Bangalore, cost inflationary

points XX.X%, gross previous Our better margin is basis than full year the year. XXX was which

year points of is basis adjusted was expansion. margin XX.X%, Our full which operating XX

X.X% spending higher offset on-target contributing between lead allowed are and I resulting of the to year to full sales. to progress The our let me part Now and some Waters biotech share growth sharing an with Wyatt give to our us as details segments Technology. transformation. of contribution how in our and in slowdown growth will Wyatt now start acquisition of alignment strong our revitalized portfolio M&A with a

strong helped results were drive customer XXXX Our our portfolio, by innovative spending. in which supported

products perspective, are instrument MaxPeak as in and traction good an new GX as our Our Absolute, an and such of high-res well several the in excellent puts TQ instruments Columns position gaining Premier From cyclic budgets normalize. to us IS, market, MRT. this adoption begin mass including when as spec Alliance

adjacencies. our to now Turning

and be deployed. solving applications into downstream can regulated have expand in to high-growth our markets invest adjacent where model of We continued problems business

and to made and deployed products trend applications bioseparations are up we've investments, from of new just a pharma organic expected molecule M&A. characterizations, XX% For Large launched our XX% and bioanalytical capital revenues around higher, few to years now ago.

spec. our growth several and of of For added in to specialty the double mass mid-single related Diagnostics, business revenue have for we in has from years. that past digits clinical workflows applications This transformed invested low to digits

is levels, our Each TA aligned revenue is over to throughout the incremental paying revenue where very growth with at our the is focus of company. applications on XXXX XXx from faster-growing less Finally, dividends, increasingly year. areas battery delivering strong applications. batteries now Revenues cyclical exciting and are growth business these has remained

constant Now and grown, has growth Since terms. organic guidance. some provide XXXX, on our outlook share X% Waters XXXX supporting I above-average will in facts average, long-term currency for the

the long-term has deviation For growth average Instruments, while standard been is high, X%.

the is For lower revenues, X%. the is and standard recurring growth deviation much average

could As even this ahead, that vectors growth several we higher. be look make confident us

in volume segments drug faster The first by that growth even is prescription global serve, environmental driven and regulations. we sales

long-term in characterizing for modalities. instruments a novel analytical point growth. And historic of we pricing large basis use to increased sustain where molecules it's is incremental about third, Second and expect XXX tailwind

vectors X of key growth these are of in take drivers There volume least acceleration. each turn. Let's testing at

QA/QC where specified and related adoption The of the into testing X drugs manufacturers. Instruments are at GLP-X first is and in-process the leading Waters' to testing Columns

expect position XX now per contribute between revenue We basis of average year XXXX. to an and points our additional growth

testing size second Xevo driven mass of been where sensitivity PFAS we've Absolute our expanding the part TQ in rapidly and gaining The share by compact market, in is a spec.

for PFAS testing expect XX basis revenue contribute to additional foreseeable points growth the our We to an future.

applications. serving molecule a business, light Finally, large high-growth scattering Wyatt is attractive

workflows. core our we points We annualized bioanalytical solve accretion expect and QA/QC characterization basis. XX testing, to accelerates for basis spec positive our formulation and increasingly it on to ability into an It Columns, business has also business which growth our of as repercussions to these customer Waters development, LC contribute mass challenges in our tie

cover now year XXXX our will guidance. full I

as prior a as slow up, caution spending to downstream year comparisons the to the easier. customer implementation. become open expect then the with remainder budget gradual releases improve expect of continue of market conditions improvement and for budgets first year quarter We We for see the year in

the With this the We be of to plays outlook guide. which year, continue, currency organic also growth to between sales expect the first particularly weakness positive into China constant our X.X% expect in negative phasing we growth X.X%. in of half to full XXXX, year for initial

growth points in still build expansion X% and with performance EPS while operating continued the of to X% further strong we leveraging operational $XX.XX. P&L to adjusted XX to expect our of to of We XX $XX.XX range expect basis growth reinvesting margin for

our continue in Amol? quarter pass over guidance and give to more will results call fourth the detail I our XXXX. on financial commentary Amol Now to covering additional for

Amol Chaubal

declined tough across morning, in were for We in year constant a delivered quarter, high continued comparison that budget grew a single-digit the challenges. expectations good reported, observe revenues fourth and Thank all you, everyone. the as In quarter the Organic line a in QX. currency declined and our market X% increase sales fourth quarter last reported our Udit, aligned flush X.X% a geographies as in XX% sales which did QX against in year. sales versus to with QX. solid growth versus with the close expectations despite with We sales

more budget typical, consistent year's our this However, with flush expectations. muted was than

declined In adding results excellent constant Pharma organic the declined growth Government Academic & sales. by delivered declined acquisition and X%. Wyatt market, Industrial over to end currency reported XX%, X% again, X% Our

XX% X% of China, a by quarter. instrument as In impacted muted sales flush a sales Outside our results for were Pharma, were budget our Pharma by which declined China, line expectations. weakening the impacted with further in in declined

to areas. has of year in partially to observed approximately weak Overall, applications due prior growth tough China weakness was XX% into which continued a Industrial, battery-related high economic nonpharma against we teens in and outside cyclical China strong comparison. conditions. offset have weakness PFAS more flat In segments and as broadened growth continued declined

In Economic mid-single-digit perform & to our business Government, growth. continued ex-China well with

However, a in almost quarter. decline stimulus of deteriorated China, XX% where the benefits this in more ended of demand the offset second has was after than by

muted year's Instruments mid-single-digit Asia and offset this geography, Asia. Europe in more the continued budget By services, declined By digits X%, high dynamics. growth versus Americas grew X the than growth additional outside single-digit in rest quarter year. of flush with X% China mid-single Recurring in weakness of driven fell products was and declined revenues declined XX% prior as the day The There by XX%. China.

was year XX%. grew Looking Government & full now end at declined results. market, flat our and Academic Pharma X%. By Industrial

Industrial China, each the digits, grew and Excluding comps. grew double-digit solid against Pharma and low reflecting for A&G year, results mid-teens single

geography, By which Asia Now declined Asia is Americas products with China. X% by grew Europe driven while XX%, XX%, grew sales digits. declined Instruments grew The single services, in ex X%. than and by high X%, China China primarily more and declining

outside growth digits of of growth China, robust X% high MaxPeak and healthy CAGR. e-commerce. Excluding been by low demand grew workflows Instruments Recurring XXXX, overall adoption digits revenues single for Columns year. serving customer single-digit reflecting Chemistry has molecule supported X-year strong the high and Premier China throughout with in single large declined

attachment. delivered objective our For In the been year. XXXX, service, points XXX we further service a has of XXX point basis for exceeded increase supported attachment and of basis plan by growth plan a for expansion

financial resilience and non-GAAP our Now I from versus Despite and year. prior team headwinds the performance responded fourth and in lower these on sales quarter inflation, challenges commitment. comment will our FX full with XXXX, volumes, to year

margin deliver XXX a and with together of of lower excellence basis compensation, proactive and quarter an allowed cost gross XX.X% us of XXX continued points operational quarter points. and expansion expansion XX.X%, of fourth adjusted pricing, on to incentive alignment Our fourth focus basis operating productivity margin with

and margin points, XX.X% basis adjusted and focus gross our adjacencies. year, XX XX.X% of of an operating in points expansion full the expansion after reinvesting of our is basis in margin resulted and XXX high-growth of which an efforts and For

quarter the for basis Our effective XX quarter. tax below operating points rate year was XX.X%, prior

year, full it the was XX.X%. For

which Our at million fourth share came average less count year. last than XXX,XXX in XX.X quarter of is shares, the about

fully per were share $X.XX. fully our share diluted basis, diluted GAAP per On earnings non-GAAP a were Our earnings $X.XX.

For the share non-GAAP diluted per earnings fully our $XX.XX. full year, were

growth X% non-GAAP the was attached X%, a On and headwinds in from there EPS basis, press reconciliation a $XX.XX GAAP release of morning's Wyatt Foreign this was by earnings acquisition. earnings and our A dilution EPS the our is to non-GAAP appendix call exchange of lowered GAAP our presentation. to

capital cash million free free capital and deployment our free million balance $XX capital $XXX less from as after operation flows We Now cash turning cash of funding flow, expenditures. was to define flow sheet. cash expenditure

M&A prioritize us related For precision the access returning payments and free in shareholders. and $XXX chemistry balance million capital to million from our debt in full million cash reform, free and profile. liquidity tax assumed growth, of strength investment to flow was including maturity year, allows to We $XX sheet, related Wyatt to to flow Taunton expenditures. well-structured $XXX million strong after operations. a $XX investing cash capital maintain Excluded $XX were This million funding of for the liabilities

We continue debt-to-EBITDA decrease accelerate of that evaluate debt the our of creation. delivered opportunities represents $XXX the Wyatt about quarter acquisition. to position ratio This declined At end M&A during as value approximately we Xx. to meaningfully a of net billion, net million will $X the a quarter, further the

has As transaction. the buyback disclosed, been incurred debt suspended Wyatt previously pay program our down enable part as to us of to share temporarily

will repurchase part share resumption We throughout of deployment balanced evaluate our capital of objective. the XXXX program as and our

growth the our industry, provide by year driven XXXX. market in as high-level from regions. would XXXX the in China XXXX. view to than unprecedented we you in sales usual, throughout spending and I cautious customers temporary growth Similar these weakness toward We anticipate a and others as Now slower in like look recovery other conditions our for thoughts gradual ahead, with was to in

and positive guide. X.X%. XXXX uncertainty necessitates X% under currency customers year At remains dynamics in support current growth organic rates, exchange to a negative our These While result full translation remain constant impact guidance of just negative our on sales sales. still is to expected healthy, market currency full prudence X.X% in of year

transaction reported sales expect revenues the approximately first is X.X of to growth to X% Therefore, X.X% in X%. to XXXX guidance year our Wyatt the incurred total M&A approximately We from full add months sales contribution inorganic year. our

the XXXX. gross points of extend We margin our of which XX.X% expect full XX to and year, a strong margin performance is XXXX into basis for versus deliver expansion

We also operating to deliver operating margin basis XX additional XX expansion expect points XX%. in XXXX, of resulting margin versus to adjusted an of slightly over

expect million. net be $XX full interest year We to our approximately expense

to largely Our full rate expected levels year tax is consistent XXXX XX.X%. with remain at

Our average XX.X approximately expected to share count million. be XXXX diluted is

on which estimated projected per to basis, growth year in $XX.XX exchange. diluted due rolling X% range earnings Now non-GAAP the to XXXX X% together, is approximately fully $XX.XX, unfavorable of all this to approximately full our share is guidance an includes foreign of a and X% headwind

budget slower than release in believe quarter. first now customer that the Turning of our will for timing typical first quarter expectations We the XXXX. to be

last and weakness picked of in are up first reflected not in addition, current significantly year's in Last fully quarter thereafter. comparison. deterioration year's China levels second the In quarter market

last first year from stimulus China. benefited The A&G quarter in also

we a decline China approximately year-over-year in expect As our to result, QX. XX% business

currency approximately X.X% X%, Given to translation At is the while these to range of XX% first per current estimated add currency for currency to our at is includes first growth $X.XX are the these be negative constant of impact to rates, Based expected a dynamics, reported percentage subtract X diluted the fully quarter in quarter. quarter we growth negative is $X.XX range revenue guidance on X%. to earnings points in approximately and to current expect negative expected FX X.X%. non-GAAP which organic rates. to negative Wyatt X.X% expectations, total Therefore, sales negative share approximately sales sales

I the Now to summary turn like comments. call for Udit? to some would Udit back

Udit Batra

you, Thank Amol.

So year in for transformative summary, Waters. another

earnings environment and in growth well current We will the navigate market deliver our shareholders continue for to XXXX.

I now We've electricity XXXX, renewable ESG our made progress a share -- goals sources. few close, to from XX% towards of sourced updates we with like I low on further carbon working with our with started Before or our targets efforts. In XX% would also environmental reporting. Waters We've companies U.S. this targets. to reduction build develop enhanced as recognized the our TCFD-related on work emissions initiative best science-based disclosure our to the progress X climate-related and was for the by strong of

by Human also Equality and that Rights a Campaign Index. named Board Corporate of XXX World achieved Year score the of recognized. News company Corporate Directors the on of Report, England chapter. the We're Board and proud Directors, New XXXX governance our Water's of has National was been public we Foundation's Association perfect

So to back I'll Caspar. with over turn that, the call

Caspar Tudor

Udit. Thanks, comments. That formal concludes our

now open phone are We the for to ready lines questions.

Operator

with question from First Vijay Evercore ISI. comes Kumar

Vijay Kumar

China here. the guidance assuming At Udit, markets, can for it's about & I the Government basis Industrial gave talk think What those annual markets? XX assumptions. just is the you know end midpoint, for be on non-China I China just is you guide versus assumptions. to you of growth. points China between and out Pharma, could end down about parse price? And expected sort the Academia,

Udit Batra

Sure.

The the of So Amol assume of in Look, high of for thanks, balance you comment and we the markets teens zip that the XXXX let part, a we low at geographies a end So what the start and digits in sort end couple similar large were saw XXXX. high-level in morning. looking on right? continue in for comments, then same in And were roughly I'll and Vijay, just markets XXXX. assume mean, general, sort China, mid-teens to happened then or the assumes all decline off digits of code. good single So Outside of China, to all go low I and the thereabouts, guidance, trends pricing XXXX question, right? in we and year end and all single geographies markets trend for grew question. the

when basically the at of when The start a Now and slower that higher stimulus, so than has arithmetic, year at right? do be Academic first growth. a the look first the you see half & of you then half the the the half of will in second the especially comps, alleviates half, you you bit comps to second the year, Government look year significantly the of China

on question for your to now the So full end assumption markets. and different the year

expecting full on or grow is of single it thereabout low back this XX%, year, And in Pharma, are XXXX. saw digits, for growth. to year, low single-digit there the be roughly we we strong For was to for XXXX. very and what we flat the XXXX with expect full year, again XX% the A&G Industrial in a

you We in sort growth. single-digit low China, of the back of the of low be expect comps decline. double-digit it Basically, declining significantly to of go the trends long-term world, to quite a and because high rest

So expecting saw same and sort of really, XXXX, in focus. China by outside similar of decline markets performance the market, with we growth to in basically low end Pharma due overall, QA/QC really mid-teens China, in in execution single-digit nice that our strength continuing

pricing? the on Amol

Amol Chaubal

XXX team Vijay. the when Yes. gathered after quarter we started done. But on And historically, basis as full look, XX and with we'll XXX quarter our what assumption better of we've XXX, to we done about XX And do we've started we right? said historically had points. basis Thanks, 'XX, we term, an out, long see price, XXX about points you panned basis year strength points year, basis Now finished than on points. pricing,

we're reflects that. better of right? basis our around where gains But I to starting that's in doing and better should XXX our than trend underlying margin is in I which again, we're guide it -- is And it, mean clear roughly So loud assumption gross see XXXX. it expansion where up. mean is points show pricing

Udit Batra

opening by lot margin. I we cost in the talk I you confidence margin gives basis good an our what that then saw environment, think actions can year by end, and game and Yes. points expanded in margin But is what P&L, has XXX we of sort on took even what the for more, of. mean operating basis the up show of such XX at we're gross And I and our emphasize proactive mean point margin to really me points. that's proud just full in pricing. to gross a it

Vijay Kumar

gross for -- impact maybe revenues really expansion, be margins? helpful that's Operating you Constrain on in organically. margins? just think could an were past, driving talk noted almost FX have FX that what's flattish That's gross on Absolutely. X you. pretty Is assumptions margins? Udit. being all Amol, and comment year by margin about the Should OMX I impressive. driven

Amol Chaubal

points from expansion was we Yes. year. expanded points. margins and basis, points XX full of of a our good XX The we had basis Look, year XXX basis by volume during headwind constant on negative mean, a I partially FX mix because currency And the leverage by AIP. that's basis offset

added So points. basis was actions points. another points, added Pricing freight points And XX growth basis higher basis savings points invested negative adjacencies. and XX we cost other net-net, XX and XXX about basis nurturing in then it material basis XX

that's the breakout. So roughly

Udit Batra

All hands basically. on deck

Operator

Matt next comes question Sachs. Goldman Our Sykes with from

Matthew Sykes

first one, a the just level question, higher Udit. Maybe

the on replacement cycle impact. Just

kind has the a of particularly the COVID spend of claim concentrated Do of this period. impact? in impact was back outsized XXXX biopharma, of has given think replacement sort we the see in you been this What had you impact do instruments of saw that a Just lot pushed in you'll it that replacement out? cycles cycle do you growth is year? during given there. the Or that think Or think more on

Udit Batra

Matt, question, great thank a it's you, and you for thank Yes, that.

trends, QX, is But ramp the right? year, it's And cycles QX for this in right? that from to right? the historical especially -- ramp in sales suddenly it's intact, versus water. a QA/QC of of seen QX is would about me business, QX, tells end I business, driven -- us XX% typical naive driven start have very that a what first replacement talking trend is QA/QC You So right? ramped So to QX right? This just So towards still are in have think that the ongoing. about think we China, you see cycles by let there replacement replacement a outside our we've are much do in by muted have seen which XX%, roughly stopped,

Alliance Now -- the -- with right? what customers is environment, question trigger underlying a capital in do them, have our to outside a and around that you the we've CapEx compare reflected Pharma HPLC both allow group. IS, and in peer when conversations you and So our replacement new as question And have results these are gained new right? largely that how to sort a had receptivity, cycles centered right, -- which muted China to in the it of of you lot you So of you muted see on ARC nice products replacements have continue products, conversation.

to execution due from I years. question we to did it's pushback during depression very was -- cycle an saw Now COVID not the replacement difficult replacement a the think We we in had outsized XXXX. from post-COVID outsized that we and had to saw see mean that the your tell. you more XXXX the on to during it that

growth. So pent-up helped sort outsized us really of demand get

a again, X growth is should trends And you how X% XX% a year at Now full if long-term that at look basis -- LC and corroborate on to roughly replacement is LC, X-year the CAGR. we you just ended at business. long-term point, XXXX, look right, so if on look LC

CAGR So LC well X%. roughly you long-term is on about average pricing. of X-year growing below basis, which And the to X% add X% is a

So growth. in X% it's to the below actually X% trend volume long-term X-ish of percent LC sort versus of

imminently. So expect start do replacement we LCE to

are what revert point mean don't the we've don't prepared call lot Now marks to we visibility exactly to think a about inflection we it. inflection you and with Long of with the data back have to get term, extra any is. term, when better or Short ton that ask talked trends of the conversations a remarks, customers. me of lot given going in point, our even a

to same trends is persist. XXXX, in in So up assumed LCE rates. growth we due we definitely, believe XXXX come the to as But

a context gives So a hope that long but lot of how you it. we are thinking answer, I about on

Matthew Sykes

Yes, a And that's PFAS. quick just on then X great color.

that had You the is slide which probably is mentioned expected. in into deck the food, market earlier to we starting expand than

of relative from long assume to of be water basis your Just water, big the food market annual the you how one, relative term? in potential given do contribution from of how food points two, the over assumptions? comes that And actually to size the food to XX market PFAS much

Udit Batra

$XX food testing significant roughly that this back I out, testing and assumed as days, time, expand Early not we've could want XX from we dynamic. pretty of to at now expect here, to be for $XX on the mean, Matt. the to be million you point. a But PFAS pointed is a market. bit cautious in it right? market. So much market said, the We basis million super points the largely food is that And over water well

companies stream. expansion and sort tissue to So into of analyze mass samples, industrial to into we've gone from specs affluence their water testing, testing into soil sewage samples purchasing into food into

And cautious So bit XX% sort going each that's with that size is every expand. a market segments. it's opportunity exactly in you of We're to these significantly trying we're going growth. what that a is, in after see focused to and guess what on roughly

mean tuned. increased market you'll information emerge. sizes the I better find we see So out or progressively stay more, as

Operator

Vatnsdal from comes question with next JPMorgan. Our Rachel

Rachel Vatnsdal Olson

of have weaker XQ But bit. little level And difficult that and into guide was led terms why other there as anticipated. pull dig is this that have to in dynamic, well? of may pretty XQ one-timers XQ. to guide helped really any there This comps of are some us sequential want just in a down? than had Appreciate China most would that I that XQ that you market's step any forward you softer during have the

Amol Chaubal

are out Yes. the gate see. the A&G right? the No, that weakness muted And be I And how of year mean the where all. the we seeing what flush the the we based now budgets year's mean will largely Rachel. sort of quickly Thanks for the we stimulus trend guidance. baseline onetimers somehow are to released had out slow customers that's at we in China on In your and QX question,. that's level think, will in we the was that that customers. reflect and last you rest of in doesn't last in assuming are world, versus I China, of playing typically budget in reflect saw QX in are

Udit Batra

to on way what a is build And the XX% was at Amol different mean than in down. right? assuming said, really it's X.X%, midpoint what QX we roughly just of year. QX X% the versus down of no sort QX I we're guide, to previous Yes, almost overall, saw

We especially in from as the QX or right, through. roughly coming said, where single-digit-ish the to A&G the flat QX, stimulus to from of had was growth XX% decline from into China, expect, due growth and ex low persist Amol year benefit the trends -- heavy comps China in we last

starting roughly starting open recurring revenues. And more more XX% and CDMO in bit on more to reemerge. spending I'll and pharma say where challenge. in I starting to also branded And real we're and see is mean, which just our X to we're hospitals Pharma to more sort particular, stabilization, right? start up. the to cities in China, of generics segment, We're of biotech We're no spending of see more in see a are So thing starting market,

trend, at we in cautious in QX. see but calling point this we are that that So

QX. So QX basically to similar trends

Amol Chaubal

on keep our changes just QX So the quarter, right? in mind, And small meaningful have a impact smallest is pattern.

Rachel Vatnsdal Olson

year. throughout assuming then that Which bit you just embedding geographies gradual Can assumptions? markets, follow-up a And of just you are That's are helpful. others. which an improvement guys dig my on those this into than assumed little more the Great. improvement more you

You talked about and some of the comp the dynamic. China

how much improvement you're the that that So to as really do throughout expecting comps have with well? year

Amol Chaubal

look, different it mean, various I we've great vantage points. sort mean, of And looked Yes. from I at question.

face the of year how in And the expect later performed how slow China, some we sort then into the we flush talked the will and budget because of we about If half But you slowness sort with ex the you for look QX things are released at China, lot case we've a gate we low to reflected. grown you muted of in of will year. sort digits, baseline because budgets that full think the baseline QX. as of second normalize we've a as pretty part be of demand out the with is single decline of the get towards see strong. the is China,

digits for look second look for sort point, half, of mid-single both second we as of growth, as it sort When XXXX, for half. at digits. declined versus you the we first that the a first it the if So mid-single the mid-single it's at from you X-year digits grow sort roughly well half, of vantage on stack half

Udit Batra

the half similar QX -- the mean, in second -- first are I than -- in comps higher second comes first arithmetic than trends Yes. in the QX the higher the half half just are is half. in half, and it that

Operator

Doug Schenkel with our comes from And Wolfe next Research. question

Douglas Schenkel

look which X thing, dangerous. think as Actually, XX% want always in China is few math fly, noticed is some way, is of about typically to I've last revenue quick China a I I I'm in But I revenue QX QX look just different on the back China. and doing the at years,

that historical it how given this year use your Just has few to kind can the again. like last of that seems you guidance we years into you're thinking over essentially do pattern different if But the pattern embedding about been. that as sequential precedent that extent

year. So revenue which kind Well, comps when QX at basis? normalization at the are a assuming going you not over China, the of million mind in $XXX I of growth sequential a level, QX some each. half and to look is in and look really relative Are tough were great on the of to I the growth of course keep that sequential QX first the in about and XXXX

Udit Batra

what look with have mathematically. sequential at And in at changes conversations look funnel saying and at you look when itself is guidance. you lot XX Yes, third, the we the and nailed You back, you orders. And of the which it's it, also is have, come basically Then funnel a time guidance incredibly similar math, with mean, of of a term low. up we did in pretty questions on visibility great was we welcome customers is -- how what of sort mean like use and a people look during the the difficult is visibility. there gave I visibility years you what right? data, right. just and want Look, at our ironically, the year, question, QX short Doug. say Well, high. We we've and -- seeing. last it's I terms you we're

talking customers. pretty we're we visibility very in things The is so give visibility Analytically, at looking us. every getting really, well opportunity executing things We're carefully. front And just to just We're will slow. really that's of high.

embedded quarter-on-quarter, question, the yes, math using of year growth that answer to that's guidance. we your in So and are full sequential

improves, customers. assumed of that CapEx. continue yes. want is many guide are see cautious philosophy same -- in elements I'm we've see in bit of the see we ex-China of that QX, starting from which course, sort start and our hearing improves, But largest from QX, QX before upside, we they the anticipating if you trends right? of look China, from what to question, got And I nailed, in QX is which Now They QX, end a trends X the that in is customers were QX, how releasing cautious you've are which the to sort the especially they geographies, pharma. so if in in In lands mean, better our next of market, especially are like of

Douglas Schenkel

in I may into think trending if thinking unfair cutting willing been you're on way. to if Super helpful. how molecule you're Udit, side. trending be I'm to that's growth was Okay. to or I guidance. Amol. and us, it that's curious just you'd then But been and between large and indulge either for delineate wondering small about be you That things how what's XXXX? hear how be the willing interesting And just really an would incorporated that for for chemistry

Udit Batra

revenues are less results right? let's look revenues XX%. than like, give our Back of out in affected clean shutdowns -- at think pharma Overall, I our total not I XXXX and ex from China, statistic. were I the by can things you the biologics overall -- which mean, the is where

the that of is points organic acceleration excess the XX Now is applications. number in molecule And in rest of XX%. large basis but base wired, it of is that

applications. can't bio tell that a of I point, top up, I chemistry Column ZGX picking tell picking our to that sort how the introduced XX% molecule mix would in from We've in biologics gene third off But column. therapy it's its is is of instruments. a growing comes argue can and much now comes a in basically this up. chemistry, you of Now the of from roughly I XX%. R&D excess large of what year and is MaxPeak my card how Premier you spend two, head XX% mix. of at It's on much of new

So really doing we're large with XX% on pleased from biologics. really, our revenues Pharma molecule applications coming with of what now

Operator

Our from Dan TD next question with Cowan. comes Brennan

Unknown Analyst

strength just Stephens one, see industrial the testing world in the follow like? of And and half is why the you others guide. category on maybe cyclical is of shouldn't of testing today. with PFAS I Brennan kind first X That and we got continues rest of battery for up. couple the momentum to confidence I What of first and Tom back a This on slowdown? gives kind my that guess given my the a

Udit Batra

very roughly industrial challenges, we've grew sensitive were Look, due a large about assume difficult year you the flat business year business right? that in and I macro we while, testing mean really ex growing single-digit be XXXX, to negative full digits. to business, of thank year thereabouts, to in the X% low there DA, in growth the bit back get, flat, given that PFAS was China, And number single industrial segments territory Now significant offsetting included, and includes where will look the in mid-single -- right? low a but question. talked full and PFAS, as our macro there environmental. largely XXXX, in on recovery right? a single this and not and And Tom, in low was of DA on battery battery the really right? for year growth, other in low And So the China China right, for food digits into finished you that comps that And a the XXXX or the where the now

muted of China expecting stronger XXXX of a overall, comps XXXX to China, look growth. in sort ex So similar of to especially bit little maybe bit a

industrial assume of sort So to in single-digit low you that will should growth flat XXXX. be

Unknown Analyst

be would really That's Great. helpful.

is then of your maybe different could market you Just the China and/or a you basis? in potentially kind on to long-term prior kind China how remind and think larger LCs contribution years the into of And the of kind X that of muted what going trajectory, long-term applications? to with was kind pivot mix that of trend us kind trajectory of molecule of forward net kind

Amol Chaubal

Yes.

So if was our of to XX% XXXX at XX% look China, mean, or look, revenue. I you XXXX roughly

it's China, maybe situation feel are Most there of about these issues cyclical the -- or at of in 'XX, in of are finished than we where barring current issues. but Now different X XX% X structural. we rather When look generally sort our revenue. you compounding issues smaller

pulling and as as with because will anticorruption back. CDMOs spend well generics, government overcapacity industrial It's branded pulling So a hard come slowing largely these reimbursement, will very for campaigns challenges question example, back or to and we down struggling predict of back geopolitical environmental because when cyclical. of They it's food business, or think when happen. issues just especially are that all

up that term, volume is the in before, be we said as resultant the come we've funding this on Tier is of because are is about they million that are 'XX, today. then right, a is But taking closely. the structural. And we On And are we for journey and so we issue of 'XX think part be not we is to they're value want good hand, $XX But that placed newer And significant steps the business see super to starting China, our to new 'XX that what create X to whole the and least be will and baseline. opening have going issues, levels to And issue, think we in $XX we vector that's more think molecules will million of structural, the think near news X, which Tier on sort in that correction that The and there's and there eventually push at we we participate absolutely going at the that other the that CDMOs [indiscernible]. biotech is presence equation, on excited bottom found remaining whole spending. back. local to funding.

Udit Batra

mentioned LC just extremely embellish below covered it basis, it's you mind. in our actually to X-, keep I mean, to stack digits. factors to It's of should Amol's LC, flat as sort on X On or general, expect a Tom, long-term X I in X-year well. earlier, that, a averages, And mid-single on to X%. well long-term be basis, right? So traversing

right? the So LC. bulk for be of your LC we -- right? to that to in on declined single-digit sort that were number at how XX%, of coming came maybe in XX% almost to And decline with in China. look XXXX, back XX%. from recovery actually roughly of declined You impacted close China, XX%, question overall, LC, decliners will So growth low China, China Outside

saw the second we to opening we We we're especially of back. up. start Branded see to will customers starting that to relief a Generics, start as trends And And Pharma, see which again. of are expect the We're CDMOs a we the in customer to year, starting the in LC revenue second largest segment, more spend and that hospitals talk our to come see similar in recurring in half our in year to half biotechs the of first more growth. of half year, the bit we'll in see is

in a of recovery to China So replacement beginning in be again China it's mix markets in ex Pharma. going and cycles

We're together, in to that start are definitely, assuming in guide that should X point. you put -- direction. and those see it trends assuming this come So there But our back. not at

Operator

with comes question Catherine next Baird. Schulte Our from

Catherine Ramsey

e-commerce targeting improvements touching just attachment 'XX? comments what your initiatives. or you're of first, Maybe in rates Any on on for commercial some service

Udit Batra

Thank Sure. you for that Catherine. question,

seen in trend, already, grow attach service XX% initiative to by attachment, the percent So the from went end right? basis service closer XXXX. the points years roughly to points XXX the XX, about XXXX. expect about XX% time from XX% of really it's for attachment e-commerce, I to we already for planning and XX-plus mean, And So increase ago, of e-commerce having XXX in are X we that already we increase started basis in service from we another continuing of

So continuing on with our commercial initiatives.

Operator

Our next with America. De Bruin question comes from of Derik Bank

Derik De Bruin

you on Pillar more stuff? through pick in tax if I QX, mean X see So a X you how orders sequentially? did work we up comment as rate Could we the should the I And trends I've order have I couple. missed apologize. follow-up. got it, I in sort think about And of XXXX

Udit Batra

Sure.

the talk piece. start in and I'll with Orders Derik. then let about order Amol with I'll the So line again, sales, tax are

difference orders real ramp with we to from expected. the from QX to I QX. the XX% Same as QX, between a And for saw mean, QX it's really QX. trend no thing X almost So

QX talked about. on landed Amol we So tax. as really had

Amol Chaubal

Derik, great question tax. on

that taken last about few U.S. charges the a that of right? you some we coming those of to the if of and And are the years is gone place P&L, have non-GAAP us, Section from expenses those of with tax And rate think I roughly and But we've that's XXX points. company, our So the really of P&L, on our up an which of bulk is bulk mean, part R&D sector, has ongoing absent look, capitalization. not a our are XXX basis as in excluding changes non-GAAP the us sort future we from different XXX P&L legislation, effect change. from position

XX%. is there Ireland The Singapore other to and to things that are creeping X% X% X adopting in Pillar going going from

do X will, provide and adopt they what I in adopt what think and big 'XX, form in that. Singapore the when offsets they is

seen. to that So remains be

will commentary And that. out, plays watching happens. that closely as when more are that We provide we

Derik De Bruin

I may. one, deal, And was Wyatt if X great a nice why fit expect final Great. I would in. have

sort program. how be you terms talk other expect could capital about Your in outlay what thinking of augment? you just buyback is. leverage in to curious potentially the I what potentially you just terms Could to would deployment down, is of about of restart of technologies your sort I'm

Udit Batra

are strides them BioCord mean to spec, simple it's as mean, LC is cell look, So just some of QA/QC therapy to of bioanalytical molecules. move for gene cellular like simple. the Derik, analysis to need QA/QC other high-end [indiscernible] is QA/QC into belong make domain. a And to already all also so and my scattering has simplify characterization of technologies molecules I it question. simple there. small downstream this Mass spec and take that, in enter regulators made should technologies the sooner. But a to like is there testing hinges is environment for having great as them, couple you ahead applications analytical And I some with it light -- our and large use. do goal Empower. software mature they're become the fantastic in simple that process in that like on trust going as The

for that wired of requirement end to single scattering version And to light in software think And after commercial the commercial QA/QC the largest of get Empower. that's our the is become like delivering year. with molecules beta have results to on will initiative our primary large we So by I -- small. Wyatt a

the future exciting So are while we're navigating carefully. we area, stay the tuned, investing really really, a and present really in

Caspar Tudor

Q&A much. to our like over you back our turn now That deliver call closing remarks. the Thank Udit very session. to I'd concludes to

Udit Batra

in has We've China management. every well. peer navigated as is geography well Thank every Caspar. you, Thank you, And our results XXXX extremely thank So market, of year. which Look, listening. and Amol. challenging cost this group on focus environment is end an what unprecedented pleasing look is our you for our you, as amongst at unusual more it's outside everyone, been even

up achievement. line the XX done future. setting that dramatically, while down So where really the basis is ourselves very quite for expansion margin of an points third well went in we've year And the top

and our intact and what the very based expect growth to on long-term accelerate Amol to business much We be you. I of described

So again your thank and you for interest attention. your

Operator

Thank you, and that conference. concludes today's

You this may disconnect time. all at

Waters (WAT) 6 Feb 242023 Q4 Earnings call transcript