WAT - Earnings call transcript Q2 2024

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Operator

Good morning. Welcome to the Waters Corporation Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded. If anyone has objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Investor of Head Tudor, Relations. Caspar sir. Please go ahead,

Caspar Tudor

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

make cover financial regarding statements future or future Before will language. this forward-looking the we begin, conference various In of the company. performance cautionary I call, we will events

as our possible Corporation expectations regarding year the potential the cautionary future quarter guidance Form are present and commentary only morning's see provide events well that Waters language included differ on statements and as risk impact of will in over conditions or business our We XXXX. release. within These results this full included market results materially. Please XX-K, XX-Qs may third XXXX factors may earnings and actual Form and the our

Reconciliations or During presentation today's most the will certain fiscal call. GAAP are the available refer of on directly and the to increasing call, financial website. Unless stated comparison we Investor are in today's slide year to the release our to appendix comparable in earnings the accompanying measures attached of otherwise, XXXX. references measures. Both second quarterly results section quarter of to to Relations are our decreasing non-GAAP

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

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

deliver to over Now our to Udit I'll remarks. key hand

open Over the and more Udit. detailed to phone guidance, present lines will after of review Amol questions. a our that, you, for results up we'll Following

Udit Batra

of call and science. innovation. management to top differentiated for and today's to strong This good everyone. want Thank thanking our execution, deliver line quarter second benefits in results operational accelerate my and that commercial you, performance us to their bottom reported begin line dedication exceeded by I colleagues pioneering and both achieved guidance. the We the enables Caspar, morning,

year-over-year built initiatives of better again good in We the downstream second for momentum quarter resilient the throughout a expectations. customer reflects currency Orders with constant as earnings finish our strong year. the were outpaced results half sales levels. in and strength steady QX spending sales basis improvement We points surpassing spirit. In indomitable the for with business a delivered on our the and model, saw June. quarter, This operational our the we strategic organic of progress XXX quarter than operational our

stream We highly releasing Waters key portfolio has also of needs. a further address competitive innovations continued steady our end markets. now launches, attractive new serving customer product that

this we pace. cycle instrument We expect up benefit and us expect this picks to benefit recovers replacement the market the as --

We continue I the Head Waters to welcome Waters like to has build talented of Rob would future, of Carpio, us who and Division. and as a sciences. strategy. seasoned new the is operator the in appointment, he performance further a enhance Rob the With record with delivering will his and long-term transformation results a financial strong leader life Waters' of a joined growth

Turning the now reported as currency. constant declined In to X% in and our second quarter, results. sales organic X%

$X.XX. earnings EPS was non-GAAP a share basis, On Our per GAAP $X.XX. was

end China, of markets better is low was which the of to declined digits. across sales showing in Customer our industrial. all improvement. In early especially quarter, previous consistent end China, signs with expected. in sales Growth expectations spending was each rates in in Excluding compared declined the in our low pharma markets. single improved Growth than CapEx and teens,

of still in government Chinese early the measures stimulus implementation. the this While the are stages announced by year

conversations these initiatives. from who benefit are with customers We to active having stand

begin the to of orders M&A markets in year to contribution serving were the schedule. led to declined and first XX company X% delivered where the far, in has in trends a acquisition, Overall, annualized near to XX% delivered cell, was applications, It of and high-growth to quoting XXXX. improved which midterm. ahead in RNA Altogether, operates well it revenue a following X%. So are and Wyatt Wyatt synergies recurring large across total points expected especially These growth therapies. strong basis the grew should to to funnel the deliver sales, close converting this gene better opportunities marks expected. molecule instruments region. than accretion

will solid performance. our with FX remained operational about and management. successfully again Now volume, inflationary I talk operational we headwinds counteracted Margins resilient as

the was from margin our far over. and Our at quarter for gross flat XX.X% solid Even at with XX.X%. work is operating was margin progress, our adjusted recent

to We ahead of still in the is have early productivity that expansion such where and historical yield This margin by operational areas strategic our time, pricing further are well various driven on our includes enhancement contribution have runway long-term initiatives. towards the levels. programs continues we as that focus same stages. At

challenging Looking good forward, about our recent margin and given success future margins we opportunity conditions. expanding our business during preserving our in very feel

products, greater which standards levels, new of Spectrometer. It the Xx resolution fast customers. MRT factor. and resolution to to At performance, Mass at competitive our the a more unveiled we ASMS on by launched more particularly Series form up better high steady the has which unmet Benchtop our compact Xx quarter, Select more multi the volume reflecting when second mass speeds. is than in we blazingly time-of-flight greater industry for With our Xevo solving builds throughput sets a expect margin highest pioneered MRT, typical MRT, XXXX Xevo a deliver and leverage now accuracy returns. In we performing June, systems, technology long-term Beyond on needs pronounced of the stream the impact new

discovery speed R&D impressed our critical are new far, pharma accelerate and by and accuracy capabilities. So serve value where includes as drivers. other for its customers upstream such identification will metabolite It all where resolution, workflows areas have will times it drugs. This been

detector, green best-selling analytical It less all-time identification benefits our and consuming We analysis also to QDa one instruments. energy QDa benefit launched II of which of our The is increased mass credentials in enhancement up excellent This a the than XX% importance of Acquity large latest XX% products. has evolution customers. provides routine mass a competing also our of to molecules. range,

importantly, Most QDa Empower, for II runs large on of the which submission for allows data compliance-related regulatory seamless molecules.

long-term positioned plays As look well volume Waters we in is where growth. ahead, testing secular growth pivotal with attractive drivers in driving a role markets

our chemistry of nature positions vehicles. these generation. In electric in results and very profitability full made aligning instruments, of applications ecosystem and years, water informatics, molecule meaningful we've ensure medicine, faster-growing business and in with to free Our flow in excellent with cash food applications. model, help leading recurring us and of well Waters the regulated the batteries safety service advanced Along large recent and progress

is modalities. GLP-Xs Now and time, with and revitalized volume over we pharma X/X the future With testing. large from portfolio, of as capitalize excellent testing novel At to PFAS to an faster are our growth opportunities. same volumes, levels than on molecules revenues these areas historical grow such our expected comes including position prescription increased in

traction iS innovation products both drive helps routine instrument replacement. spectrometer, core launched gaining as of to is in adjacencies, our past edge all years, the new created and areas rapid Alliance and serves clinical It battery PFAS given for includes applications, levers. Serving critical we've -- needs solve. bioanalytical characterization, small Within -- products drive our QA/QC Absolute also that which helps we've are LC mass which enhanced testing. TQ our platform, unmet competitive Over seeing high-growth multiple pricing Xevo launched growth our that and innovative analysis workflows into such new have where large next-generation better our several molecule testing the they

dynamic -- opportunity Weak replacement that macroeconomic temporary of lies by to catch-up X quarters a CapEx have lasted X and has been spending for opportunities constraints for deferral on a has catch-up conditions catch us. ahead Finally, created instrumentation. Historically, has recent downstream customer up. followed put routine instrument of this

long-term and of seventh X% we early decline. indicator facts, will XXXX Improving full CAGR X% QX is marks the new for LC the quarter below This environments versus growth XXXX cycle. I instrument XXXX are equates levels. replacement of same, the leading at a Looking the two that positive recovery a no approaching our innings are consecutive year guidance. growth a of to while rate. cover the funnel macro Expected significantly average initiation now a trends are instrument

of While are we improvement is half adding recovery, pace showing we're the revising in our of year. sales guidance Accordingly, customer XXXX activity our second signs the a of caution gradual more guide. year to assume full to

operating margin in our leverage updated we P&L guidance currency of constant growth around X.X%. X% adjusted Therefore, expect commitment our XX%. to full negative As range guidance $XX.XX. result, build $XX.XX our a is an to year is the deliver and adjusted organic EPS in negative excellent operational performance, revised With to our of sales to

over the details our Amol to to -- pass financial covering provide I guidance. Now further will continue and in detail guidance Amol? results more on further to call our

Amol Chaubal

than with exceeded X%, In growth constant orders of and We X.X currency on a Organic to in X% in levels. revenue contributed quarter, a guidance improvement covering second expected sales Thank declining the able compared integration. saw our you, Udit, our quarter. sales. declined basis, months sales customer morning, in as good first accelerate X%. M&A part were outpacing we QX the of also spending to range everyone. a quarter reported better improvement the the was which results steady Wyatt with synergies throughout X% sales as was This

growth China, cases, rates the in well sales declined strong declined XX%. the improvement FX digits, headwind sales led digits. for low both been X% the by EPS low Americas. accretive growth again We was by China, to excluding second We compared year outside declined constant in this for quarter which Industrial, acquisition, are quarter. saw the organic sales. while Government remains the double end Wyatt terms, rates In Pharma, declined previous in China, single-digit is currency pleased a previous digits, execution also double sales globally Pharma improvement In PFAS-related margin and declined Industrial Academic sales applications, and X% track. Overall, growth compared was that of reflects growth within has environmental of low low and X%, an which consistent declined on the to China a X% quarter. tailwind an already and single in market, to declined In M&A our testing. In first In

the segments advanced geography, division, materials services, instruments number in and lumpy of elevated grew comparison driven and and stimulus Academic Americas the our global a patterns Chemistry while in by electronics, were For China weak as X%. remained growth declined and quarter. By as quarter. drove the in service was In TA year's X%, Government, in X%. chemicals. Europe spending improvement flat, sales funding products in versus declined and such tough sales XX% sales By year both days declined in no prior XX%. prior Asia There both change and and

to growth year with increasing the planned continue service support our have by our revenue quarter. XXX from growing initiatives points goal single headwinds attachment plan Within commercial this ongoing despite China. already recurring digits Our in basis further of business, high a achieved robust we service revenue service

We year. points the of are plan of XXX now remainder service basis to attachment targeting additional an XX over the

Now FX quarter resilience comment Despite challenges and second financial non-GAAP with to lower volume, inflation, our sales and these versus respond I team our prior headwinds from continued performance to the will on commitment. year.

at quarter. Our Gross us operating as expected. to was pricing, resilient a productivity and and prudent XX.X% margin spend management excellence the quarter flat performance allowed focus margin deliver operational our second was adjusted margin with in XX.X% on

gross Excluding basis XX expanded and points FX, margin margin operating adjusted both year-over-year.

share was effective average our quarter for tax million XX.X%, the was Our XX.X shares. count and rate operating

GAAP in of GAAP appendix this $X.XX. fully was a per release On share presentation. our call of and share press diluted to was diluted non-GAAP is Our reconciliation morning's attached per earnings earnings our basis, earnings $X.XX. fully non-GAAP earnings A in the

million to of Turning cash special balance as million deployment cash resulting second capital investing basis, to strength cash sales or well-structured maturity sheet, income of was now balance expenditures On cash free capital excludes This cash to us of access adjusted profile. to $XXX We items. In and a sheet. free conversion XX% quarter $XXX ratio free strong allows XXXX, debt flow million XXX%. and year-to-date cash is $XX net capital free of flow a We funding liquidity growth. in expenditures. a flow free the and flow, after flow prioritize from define our in less operations, maintain

$XX $XX will We million. items to enhance delever million continue tax that shareholders. In opportunities quarter, we other totaling paying and evaluate out payment the of value for creation M&A reform continued second this our year's while to

at net the X.Xx. of ratio net of approximately expected, a As $X.X end which debt-to-EBITDA the position debt about was billion our quarter, is

of sheet, of we the to repurchase we delever our resumption year. will As our remainder share evaluate program continue the the throughout balance

share full third Now for quarter. our commentary provide I guidance on the our and further like with to would year you outlook

business of recovery guidance. our the to While caution quarter, conditions signs in adding are showed second we

As of XXXX assume year a the result, sales we half revising guidance full improvement gradual are pace a our more second in the of year. to

quarter-over-quarter versus caution, expecting Our half of It updated in the flat typical the the return in QX to implies budget still relatively the are we a progression to revenue year. flush business quarter. Despite in the dynamics assumes guidance growth also fourth weaker second QX. added than

from we exchange constant negatively sales full dynamics, growth for these X% between that by currency sales impact the currency Given incurred sales transaction of full X.X% rates, added year will translation our is current months Wyatt contribution guidance negative from our revised inorganic year first organic negative in and has year the year. At anticipate X.X%. M&A to full XXXX Meanwhile, X.X%. X.X approximately

With P&L, Therefore, commitment guidance, total in in be to the is build our reduction is we to range XXXX. versus even basis our performance, sales excellent Consistent XX.X%, previous XXXX expected negative X.X% approximately expect XX X.X%. our in full expansion our leverage our which year guide. year of full margin the to the growth for guidance negative with with to operational of points is gross reported

around expense is be full we the approximately XX%. million. expected adjusted to line, expect $XX interest Our operating net be year margin to Below

XXXX approximately our Our full basis, diluted be to rate count our is expected all be to year Rolling XX.X% average tax share together, this million. expected is a and XX.X non-GAAP on X% fully and revised share exchange. to range is diluted approximately an XXXX foreign unfavorable the due headwind $XX.XX per of estimated includes to full projected of year guidance earnings in $XX.XX

spending quarter we third anticipate of of the that XXXX, remain signs to recovery. but Looking further customer cautious, will show

improvement compared growth an the improvement quarter easier expect continued second China in in funnel translates We activity in as become comparisons, orders. in previous year year-over-year to to has that particularly and

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

for Now to turn back to Udit? our comments. like I Udit closing would the call

Udit Batra

Amol. you, Thank

that on market So with now results to commercial rate and We're demonstrate for global customer our the spending strong recover. in with remains growth quarter execution deliver long-term historical various CapEx ability to solid performance, Waters' well to our as second future summarize, operational X% conditions. a above results continues track positioned resilient outlook and is our of volume testing continued growth

has first Certification team and chromatography Last announced that sustainability. liquid to from Waters the it professionals My month, than receive we provider designation what applies has to more to sustainable of products. columns accomplish proud easier the also to Ecolabel XX our LC become am and more This of continued lab ESG column scientists I ACT procurement on Lab. and our makes for Green choose

I that, will with over now back to call Caspar. turn the So

Caspar Tudor

our concludes That formal comments. Udit. Thanks,

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

Operator

of [Operator Evercore question for will Vijay come ISI. Instructions] today from Your first Kumar

Vijay Kumar

June guidance I the One to maybe a in the of should light commentary? progression the high level we a finish change square light change? change, the the just the on order Or momentum your about orders in that surprise. Help in conservatism a revenues. don't strong was input guide above guide right? think June, strong how comments us what Is quarter, of finish this

Udit Batra

you thank First, for the question.

first progressing, you I we different looking look we time of from of own at XX the quarter-on-quarter, progressed back We, course, guidance, of question. ending, of taking mean as approach not a the XX,XXX-foot and on we answered have many just a history. funnel, look think lot businesses through data at years sort your how changed then facts that So view. We X I spend things. quarter-on-quarter. of has how quarter that the Vijay step I there's at not sort right? just a our mean, it's instruments is to

that. And at we how third and look we sentiment do orders thing sales is, we the to is So customers how our progressing. what the the are progressing, the talk see are

it that, answer, through on you you take long to context but for give the our guide. just and So sorry philosophy the will and

Sales And So in us, I for right. big QX. seen on month less QX. as we've June the know, in declined totally -- from you're mean, momentum QX progressive QX June. to have improvement is significant We progressed, will saw you QX fact, we as saw a versus

quality March, sales about convert to end we we start You'll QX. orders. said in into orders remember, And of talked and of towards we'll see the them

Exactly -- happened. that's growing equally, the orders June quarter even Lot what and of faster sales. sales of at in end the momentum exactly than

feel about So the funnels see very good we and with we what see where we facts. the

when just trough, usually Now data, you it XX LC of through LC, look Waters' at goes business, business, of when you I to is between the X said, it at the of, years we quarters historically, X have as look especially if negative benefit growth.

QX quarter the growth. was And negative seventh of

just minus of we're on So X%. we QX a are a it's LC. -- in we're CAGR at recovery And if operating seeing for X-year you signs poised at recovery look basis, and

Europe is and improving. particular to finally, large pieces both a in in that customers, of quarter factual in pharma in of China are with in spent the I factored into U.S. we've So verified. those our lot then And of customers, evidence thinking. the talking time

we're as expecting the we quarter improvement second So look year, to go from the we see the to quarter-on-quarter as other. half one at of

The a quarter will out, our assume lower growth, second than taken down, pointed fourth guidance as slightly see ramp especially historically. you the just we half rightly see we've to in would

So bit of caution just built little into a it.

basis, I a think constant million. on than more it's $XX not currency

as seeing. of a us there's into we're bit that. And more So what you'll caution built see emerges, data correct

the long the but sure know for -- same people I many answer, question. I'm Sorry have

Vijay Kumar

derisking understand more seeing it's you, trends is, the we're right conservative the saying in in of Is helpful. quarter. positive seen It's being anything it. perspective, a summary? No, you're in guidance the look, And if from fair you're having not perspective versus anything But just a quarter. And direction. that's I from that the what

Udit Batra

Yes.

Vijay Kumar

maybe I Revenues, cut QX street in roughly implied line the Street. think, were Fantastic. revenues. X% dollar below the with EPS --

there So Is contribution the margins QX implied operating is what that's driving in better? any changed coming below-the-line EPS?

Amol Chaubal

I year Look, you've also through inflationary last mean, year as this and 'XX Yes. pressures. in seen against us back

is able to resilient, team to margin even and volume we down and able margin. cycles, are Our defend expand super we're during

have a we we margin able As of and them. set we've how we've of to And accelerate have last initiatives reflects are even able been productivity that a sort in discussed before, very expand year. runway, to long of that some

our embedded in look margin the you at guide. implied If profile

second margin last half Our is relatively flat versus year.

step-up second in we've that relatively up flat will that sort in some taken QX. than actions other we a and the last already there help prior the view year. see is half little guide, is The bit year. of not in as any of we've So us versus a more half is QX, thing will the cautionary second meaningful versus in place put show only But on that

Operator

next from of Dan question Brennan The come TD Cowen. will

Daniel Brennan

guide XX%. just in with line, instruments. about right, down was QX what Maybe your expected on

instrument back of the you are just Can how the year? versus flush I for outlook a the bit you little to of out we thinking LC half And down that. what's think about math updated kind the support And MS? were mid-teens.

Udit Batra

can So let Dan. me and Amol jump start in,

minus the quarter. a TA So LC and minus instruments bit in that, was than modest declined quarter. X%, about more, Mass XX% XX% the spec was declined a so in around mid-teens. bit

and seeing the front. mentioned we're quarter look the I went funnels the we earlier, on especially strong, improvement As steady as extremely through LC

flat we're assuming versus back So the rate the year. instrument of that half growth the previous year, the would for be

flat. the decline, bit in now initiating So as to is overall, And is the second of a across quarter now seventh see cycle. go just of LC the half we're replacement its customers sort numbers, cycle the starting and earlier, I to their globe beyond replacement mentioned

expect is with QX, to see bit that So decline -- growth replacement we with funnels. in or which start in we consistent flat for QX what LC, we a little expect kick to of we the cycle expect but the in,

So cycle across where instruments just exciting renewed an feel the we very sitting good time about today. begins, a we all as given quite replacement portfolio the are

Daniel Brennan

'XX? were are the maybe changed in guide And what in start our the Great. I that orders down stimulus guide I there then think and back how with what assuming previously think kicks will a that of kind at guys mid-teens now And impact? we say kind color stimulus you Is in I Any thought of bit full on quarter China, you commentary the and about the push? of you just think then then around China year? is the back kind Like was. it anything a the on And half 'XX. for orders heard I of come

Udit Batra

Sure.

of facts, expectations, I just to I mean, right? the ahead of give China bit mean, for Firstly, came driver of mean you I part the QX, that's a China in mean from around a XX%, I market beat. XX%. again it And QX. what mean, decline largest we QX, a decline. XX% in declined about pharma, In went to XX% I XX% was end in decline the the

sort to in lower kept decline watch steady year of low more but base, see has So second in China just the at data. half improvement for we've guide double-digit of and a the China, full a year the

digits, when LC decline in for of first China. And world, that. the fact So long an of growth whereas rest single -- higher sort than LC China's was the declined time things than a and compare LC a this bit good in the China overall rate, in the the happening for high interesting you time, So right? was is decline again, very less

stimulus, We're things. One, lot customers, age has with the as you of the a think Now identify time really changed versus previous them instruments. spending of helping nothing commentary. of doing three

recall do funding. stimulus stimulus of this for for as is We of the submit be applications the XXXX, visibility helping targeted is only to the instrument impact paperwork this -- instruments, the in. You the they this to maybe and to going impact towards factor replacements, particular is age their them going think year, not the growth in but end modest towards that a would start

Operator

The next question will come from Tycho Peterson of Jefferies.

Tycho Peterson

Maybe guidance a into the little just back half in diving bit the year. in of the

to out kind So line you're guiding up XQ normal with sequentially revenues that's from of of seasonality.

mid-to-high So year. to normal then in in maybe that touch I But on drives guide. in that know seems half the plant quarter, just visibility? the quarter particular? -- seasonality? line fourth the your flat are operating EPS with fourth in said And are what think margins you That hit back I operating margins for of XXs ramp

Amol Chaubal

Yes.

flat. to look, mean, relatively I Q-on-Q, is QX QX So

between as If you well QX. confidence X%, on plus is built that within oscillated have and XX look the and in range. what minus us our gives progressing the we And is years, and funnel last right? of the in activity as that backlog at that sort fact comfort has it some of sort we what it's So

helps. also So that

half second other to margins. question around Going your

already we've QX impact put on prudence the view around sort a certain certain cautionary of some initiatives. And relatively taken more spend, that in the measures through how second QX. particularly As will second I around and to as are more a versus one than last we've place is is, outside year. playing in see out the growth services of piece resource cost guide, flow you we QX are small There's QX, difference half in particularly said, flat that QX, in between start margins

relatively QX, there year. between overall, operating So half QX, last is are plus/minus margins flat versus second but some

Tycho Peterson

Europe? for ease And U.S. the what talk I was are then Academic? the of but Academics the XX% you that you maybe of much Can thinking mix, XX%. year know, is half the And on as Okay. only it down was versus comps follow-up, how of back there just

Udit Batra

I in our change Academic portion think small such side. a assumption on Tycho. of the no It's business,

So previous assumptions. really from the change no

Amol Chaubal

at mean between was I and of year, you And and U.S. look funded the was well China Yes. like stimulus first Europe. super right, last this what happening it in half way,

is you If basis, it at every X.X% much growth. see you pretty X-year like stack look will quarter on a

Operator

The Sykes Goldman comes Sachs. next of from Matt question

Matthew Sykes

'XX. it next Or China? part of of some fairly remain half in maybe into subdued in first, back into And is you China of the weakness the recently guys and channel to just in sort area of about to the of going have of Could of is CDMO this into the CDMO that's in of the what past an Maybe and towards maybe leaned you see talk inflection couple channel that the over for seeing you're overcapacity. year been kind you years that year? balance this due year

Udit Batra

the you question. thank Matt, for

in a were probably on in of gave we we year and than details think I even around China lot earlier -- this CDMOs that time last particular.

pick what low activity CDMO up now steady recall, in from very side a but a improvement is it's not low And base, from an in to the we So really no improvement last change CapEx on starts CapEx as segment. You'll assumed the extremely bit any still recurring subdued. base right? we saw quarter, have

starting bit QX. we -- expectations QX why China growth in now mean in is generics in in get is our growth better. a to and Now in overall, exceeded the pharma this I market

go year. cycles LC on see some we're the in So through you the as steady replacement get to starting side, Especially China improvement initiated there.

see there. So life more starting CDMO but less, bit a to generics

Matthew Sykes

on longer-term just then your just back expectations. and And Amol, I'm sort half basis. Got you on margins, discussed it. of a wondering

some You longer-term made about drivers. some margin -- positive pretty margin commentary

continue some Going move for over levers those business? or of kind where we a we operating think the on are to about of expand forward, longer-term the as term framework? margin how longer cadence 'XX the should margins And to through maybe

Amol Chaubal

such benefit that produces look, volume to feel on broad line in X points pricing. for have we a we've volume well here. are if from margin SG&A more we pricing, the the sort we it One gross that as move do put our XXX more structured able we line. Two, question. largely leverage up to in levers I And mean, historically the of than recurring mix Matt, seen the shows there of basis these points challenging what X%, on grow done market comfortable is, we've than we've that situations even as leverage. to with basis discipline more X than that XX is Thanks, versus on are better And little business we like as

And sort accretive our so excellence started then of have productivity and of that And is a mix fruit, and various we operational to profile. couple right? bearing ago, started years margin pricing initiatives

Things years, these manufacturing, in and excellence, initiatives a approximately runway. up excellence these over So India, a in GCC about I the have basis XXX right? operational cover profile. mean, points long initiatives, expect procurement between setting add up like X course of we to to they

to start of the productivity year, margin will accretion, saturated. sort produce when then then expect Xth the fund impact growth expansion as two, to board some gains take we points to of to we about our basis So initiatives higher points initiatives on to saturate, start to growth higher XX productivity will margin of basis between and that revenue that growth adjacencies. And goal these adjacencies XXX of use one XX have overall, into X over these X, X, vectors the is put get these and about and from

was of through gone years we've not the was last headwind. there, as where Now in leverage volume a fact, couple

have pricing, these as to productivity volume got also margin, benefit able cycles. allowed well defend accelerate were proactive to us which some margin actions took expand from just teams during not and of the we down on cost Our benefits as but initiatives

right? And it that's where look at the always XX margin difference last lies, has and people Because say, Waters at XX%. been sticky years,

up around, much leverage, was cycle. And volume in across. down not that it a in cycle is leverage. up like so comes we're volume up a -- gave answer stronger the giving And cycle the where we to come time it was And that more so but the we a out down we always there when this

Udit Batra

a Amol answer. has given comprehensive

have. thing. number Just muscle we points during number pricing see teams great two, X a have excited very cycle summarize been the prospects margins product resilient of that -- to the down down we is about now expand come about as excited mean, portfolio we renewed. to And One, that I the the given and one. totally the it's this cycle, I'm whole out

have We chance during a have customers products that across the had down leading test board cycle. the to

about what So see. we're very to excited about

Operator

of The from Vatnsdal come question will next Rachel JPMorgan.

Rachel Vatnsdal Olson

bit Brennan's by are China peers expected there? stimulus here. sounds the better but they've wanted on the to end in And unpack also customers than as a China LC dynamic, around then on and out China like market called we've was to I you an quarter, a up stimulus question heard your performance China can little follow Dan It orders. few that really off pocket of holding from the within air related submitting

guys And region? from seen that you if in been can you customers why have of more not, us, in kind So scenario? orders clarify to the for pause any immune you have

Udit Batra

Thank mean, what less you, thought as I said this earlier, it we than overall, Rachel. China, declined for had I quarter. Look,

mean, board. show And in Government, a again less over So I cycle interesting decline, decline the which percent decline it thing was different which to here to XX% in and decline. had XX% went to that in the was comps XX-ish decline. Across XX% the with went starting improvement China very replacement than QX -- life QX. which from has across to XX% from already. in Same the still slightly markets, Academic most there high is XX% about is QX XX% from decline in about end thing Pharma decline went XX% Industrial, QX.

look, conversations longer of right? having customers period your remains quarter-on-quarter. From remained decline It's than over stimulus, I to activity So ton as versus better XX% a replacement. question we mean, over instrument level from LC, a it's in consistent, starting has which up It's in in QX we're negative pick said the growth less time, than it's stimulus, So the better on customer XX% rest stimulus perspective, as now and to over broader quarter-on-quarter. still of level a specifically consistent. our actually earlier, XX%, get activity activity I of years, with went a it's the it targets see the are improving world, right? And on We was a to previous starting but the China.

we've our that XXXX. So for will But of revenue expect proposals eligibility impact to their that defining time paperwork in has surely, the available. We targeted instruments, age government year. becomes impact the with see to we funding of what don't this lot been the a them spending identifying customers, it versus what and submit helping do

customers is across So baseline sign real overall, better no Activity the prepared you're calling to stimulus. level, especially air end getting an in funding Pharma, at and LC, conditions markets, pocket. from improving especially are getting get what of in all continuing a

Rachel Vatnsdal Olson

then follow on want I up to And XXXX quickly. Great. did

dynamics So in the You've starting really cycle your that the learn about this can on XXXX? we underpinning heat a are currently exit exit half. through growth organic weaker If of of comps is us walk well, kind some X% at rate. It back shy rates Street some the XQ? China looks that talked you about about rate of you how just as you to like up talked thinking of replacement the

you with So just how early that? starting comfortable point, an at are

Amol Chaubal

needing where gives we're starting historic aged China and quarters. in sort with QX there of points of for good already companies when I when Yes. a 'XX meaningfully than will China comfort then and the for equation good status and us couple the out had companies fleet Look, LC beyond guide right? a its generic life is few And a their if twofold that, will say, generic in a below be hundred exit So particularly of more even follow next question others few whole when is of is replacement hope are these will and slowdown does feel of think we at And and this course the the LC. then ex-China over right? replacement mean, far we lot do of and aged that be comfortable extrapolate will start the cycle has is, that for we our We've the that. ex-China, signs rates a our seeing average. this they bottom of But replacing. And and fleet to replace the MS fleet basis their --

Udit Batra

surpassed just end I the months us. want seeing on sales and to expectations, that And at confidence, June to embellish largest of a starts for one QX it both in of of us what right, the give orders. the little is year right? our has in bit we're

So QX. that there's a we've lot momentum of into built going

discussed, we've us consistent that So it's gives trend an its right? a in areas just confidence improving the industry. So the lot in in that with

I said, in time this in especially are spent steps used amount the a of both I and Pharma. customers, now last U.S. as with Customers Second, in Europe process. quarter the procurement in to additional the fair large

-- the This them of fast gave introduced quality In which is about largest into March, time sales several a process, how the also seen we pause little converting June. of orders bit were to order around, we've fact, the sort to internal in of convert we the pharma of companies one teams like were learning and learning high, also that clockwork, towards had end in when steps said sales. and their were that

seen, good the strength looking is and quality half So into and year. as back the the of predictability large the funnel is now than better especially pretty funnel in the order way we've the Pharma sit -- we funnel

Operator

come Stifel. will from of question Arias next Dan The

Daniel Arias

Can And on just by this cycle place side. CapEx obviously, things the are picking that us refresh here? upgrades the you is, around this still taking out replacement shaky we're maybe within mean talking I on what about the there

that we UPLC and should do during historical HPLC typical? you see what customers upsell less periods? to maybe back come Or LC these the when to think fairly and conversion could So there's transitioning UPLC these into the assume dynamics you be market,

Udit Batra

advance right? I trend And QC the HPLC is And iS, the for now biologics HPLC then look errors that the at itself. last a sight which many the right? decade HPLC, and it's probably think of allowed to a of what the the HPLC we conversion, a which would that's premier line I significant XX%, been fleet really, great in One, really ways. Alliance it in sample of important reduces iS, the extremely by a And is. has is most X which on advance in have Alliance environment customers offer in And also technology, to question, well. In Arc And to our we even is the Dan, way, robust market which our the segment the go options, customers downturn. received slowdown well, with the there, the during available right? our benefits done X

good the we So already. very like-for-like feel on replacement

case the see seen X transitions, our Second, revenue when on well One, point not in that in XX% tailor-made premier a Pharma the that technology, UPLC transition which you make roughly for over just Biologics what now me to also overall as you've that has side, seeing we we to effort, fraction to has that last HPLC think of molecules. HPLC but comments. UPLC a the very been are UPLC where and XX% are of as to GLP-Xs we in that, let And from introducing happening. large gone deliberate X on right? X years, side So is call

is which That available the which now very premier to of is part reduced larger the also comfortably dramatically now experimental Biologics customers segment, to allows the with transition HPLC where on is UPLC time UPLC from the the pipeline, technology.

dramatically. HPLC to molecules transition. through the UPLC continue now receiving as end, pipeline gives seeing have come the and the if from time So I novel remain equally, modalities and HPLC. are color well our with again, we seeing hope that more on are people UPLCs the And which transitioning we're experimental trend but the reduce premier decides into to there, both we the basically technology, more and you to prepared large customer

Amol Chaubal

And upsell, that, pattern, And so X% right? when comes just numbers, points from really I instrument or about our historical quote geography. X% XX price right, XX remaining instrument to the volume, like-for-like we look growth to if basis their add and of at you growth price mean, and of our the like-for-like X.X% has roughly SKU to

need say, super doesn't achieve about X% that iS Arc or Arc or to when we an And there. unmet Alliance some And order our choose newer X%, upgrade of only of is pricing chooses include are to HPLC that these that or So HPLC. we in X.X%, customers which innovation a and given customer current feel Alliance with appreciating. out addressing, directly needs that customers huge comfortable are the the launches

Operator

question from is next Partners. of Puneet Leerink Souda The

Puneet Souda

June still the has this growth that June, ask, could I July you talked the improving. in Pharma, elaborate like well? is get it order some But you improvement, as -- could on into if some that's continued And if you, for mostly Europe, in North Udit, significant America momentum seems about and just China details some in caution there's to momentum wanted more there.

Udit Batra

has gives been been Great guided question. very, think trends was And in very we've we QX. know, I and we're this Customer in can that we've what on won't comment confidence July very June through but you as that for on assume And activity before, seeing what robust. you -- us good.

replacement cycle, confidence confidence ramp the a QX, we've we've also in in we the ramp built So do that in June that -- to in QX. towards the built built lot confidence with has the the

Puneet Souda

Got it. an question you. And then for Asia

Japan just risks Just cover for retaliatory terms to and to all, and understand tariffs. thinking about want China, wanted first in of China, of just then India. I

about in sorry, geographies? little tariffs elaborate If bit a Could of In Japan, India, of the grew tariffs talk in is grew on in and you you if were How XXXX? Japan, I happened retaliatory believe you you in down about China those China is what quarter. case the for then -- much business XX%. position? XX% your are manufacturing in And where you could there sort

Udit Batra

Sure.

China. First, right? So on three questions,

is we think come to as going help downturn the us used in an I way used stimulus -- that the we through. in manufacturing our footprint China interesting and improve to

presence We also increased our commercial China. across

or So is the either the instrument on we portfolio about both feel of and now side, of for equally manufactured holds future China, in good where very finished our local China commercial manufacturing, good. what in bulk terms

for a Now star India has quarters. on India, been performer on your many us question for many,

to And no right, XX%. Pharma, grew different. in of there in close to back We you was excess quarter XX% on grew largely XX%, that of right? LC This Pharma. heard close And the

that to we're goes there, is countries constant is was to the quite strength stimulus X% their many captured. lot. grew And like from benefiting too, India to so other rapidly the And currency Indian And Government That funding where it growth. government giving and a Academic And a on segments. strength. segment then Japan,

Amol Chaubal

Puneet Japan, you And headwind. you XX% likely has Yes. last at been over Japanese yen the mean, look, that's year, I reported are where looking the like right? know number, close to

flat have or is us at coming Japan relatively team the and currency, footprint. well that's by because why less year-end. impact our is more also a sort the and doing out X.X% for And somewhat we're Japan had to reasonable it increase constant So the driven reason of March of currency higher we we to

and demand, see what healthy good funnel in So we activity in we see Japan. progressing and QX onwards see you

Udit Batra

Yes. back India. excited prospects just there. about And Very the then coming to

presence a more of than to sales been in business sales, out X with India collaborations So increased China, becoming from Board. we our gone to well. to across growing our it's during right? commercial As really has last increase to commercial the where our X% less on We've really, presence close has the of years of go strength sort The to part strength. a the X from our of India, figured in and increased our we've it's X% And downturn, ground. significant

Operator

Jack from Research. question will Nephron Meehan The come of next

Jack Meehan

actually but to of XXXX, like gross mix just -- for margin looking a starting what from instruments of perspective, it of this recover, progression? means the about how dynamic a the dynamic kind margin I year and wanted that was at ask So changing into curious, more in half second to that Amol what

Amol Chaubal

look come mix Look, to, instruments more the there XXXX negative I back. impact, guide, adverse be place. to say, points is have the And margin, always. be expansion basis largely the there it, call back as we mix Yes. if as when instruments that's for will levels, XX productivity of Great in into the going as to But sort with but factored year, outlined sort question, we've gross in that's next returns points at you go our of from covered start we impact that year. mean, some Jack, basis of XX-ish initiatives

got still the XX to remains points So marginal to intact. XX basis

Jack Meehan

it. Got

And ones. two just Okay. then housekeeping

selling us you first returning buyback The fourth any is day that? thoughts second, throughout third just updated and can year changes quarter? in the the And to the any on remind

Amol Chaubal

Yes.

one, from first right, on acquisition. mean I Wyatt the continue debt we pay to the down So

We are at X.X% now.

a flexibility down buying intention between where actively at much to debt switch as the considering are I we versus we gain are is point So back paying strategic the shares. possible. as mean,

number in last helps of the of days continue that is and year. year to this QX partly mean, we days, X mean, than more about on ramp key year, X.X% days year from I we So QX. on this of review I there QX are is than And QX in thing QX QX the the to have of QX roughly options. And more other to note this then X the versus that, same.

Operator

from next of The come will Baird. Schulte Catherine question

Catherine Ramsey

business, and of in just maybe exposure to cell Are Wyatt, great molecule trends expectations. large to any ahead different in seeing you therapy? in given of . just see coming terms that First, that improvement in the on gene it's market

Udit Batra

of way on as it's, being That's itself. faster why molecule the which working working QA/QC vectors. into integration saw Empower exciting customers the target. take scattering Look, we're than that has for for growth large synergies you viral most it multi-angle well delivered the are the that to you RNA be What's you And applications, molecule had We're with mAbs, right? Wyatt question. thank it be Catherine, the progressed. know, guided happy what Yes. wire basically it applications. higher small very The are is software, we light applications, our the technology growing are focused with AAVs, teams now be than closely increasing with on is therapy, ahead

this And exciting. is really

in QA/QC. now regulators, these chromatography, liquid It all If in scattering. we're very techniques seeing these don't on and now, of gives multi to different exciting, light light multi-angle molecules many some large mass for Empower now that the on and demand so imagine some that has if are all analytical a angle II to to really they they are analysis. capillary talk customers us to can scattering, good extent, already progress now data our if down you even that QDa electrophoresis front, have allow market, submit of good Now

Catherine Ramsey

you Great. added elaborate areas to be you conservatism And then than maybe guidance really further any China, would the is your that? or Any just going back to it of Pharma color if broader it assumptions? update. Can on Was around there that just appreciated? specific are that

Amol Chaubal

mean, a X place we've around guidance is We Look, caution of expectations. for No. our if pace if ex-China slower-than-anticipated most of I in you that just at our we've anything, our caution China, exceeded put business. quarters, recovery. last look

year, the surprise rest of the in for the have cautiously been X remain just team like they done we but sort guidance haven't to We bold then enough will optimistic our continue improve first us positively of to the that quarters.

Udit Batra

what with, from lot talked the of the setup expectations the we've a we go it's along. it's to all of of done sort as We through call. place And data a a exceeding funnels. and the the guidance at customers, look It's just great beginning from year. end at it's Vijay call philosophy basically great about for we that I mean started

how second time spending of customers to lot on we've replacement our a growing receiving than third, of their how history and seen. X-point a at talk they're which And new in well. a year spend all we towards more Second, positive the particular, LC bodes looking of and half lot products, of

for in Caspar? So you Thank Catherine. that's all that factored question. been

Caspar Tudor

day. and this available seeing section you great Relations Thank and Investor you your our at website. events This our the Thanks. conferences. concludes we future for A today us be Have support joining of look call, a Waters. in replay call for and of forward and will to interest in

Operator

At disconnect your for time, today's conference lines. this all call. all your may participation parties you Thank on

Waters (WAT) 31 Jul 242024 Q2 Earnings call transcript