Waters Corporation

Good morning and welcome to the Waters Corporation first quarter 2022 financial results conference call. All participants will be in a listen-only mode until the question and answer session of today's call. The conference is being recorded. If you have any objections, please disconnect at this time. Now it is my pleasure to turn the call over to Mr. Casper Tudor, Director of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning everyone and welcome to the Waters Corporation first quarter earnings conference call. Before we begin, I will cover the cautionary language. During the course of this conference call, we will make various forward-looking statements regarding future events or future financial performance of the company. In particular, we will provide guidance regarding possible future results of the company and commentary on potential market and business conditions that may impact Waters Corporation over the second quarter of 2022 and full year 2022. We caution you that any and all such statements are only our present expectations and that actual events or results may differ materially from those indicated in the forward-looking statements. For a detailed discussion of some of the risks and contingencies that could cause our actual performance to differ significantly from our present expectations, see the risk factors included in our annual report on form 10 K for the fiscal year ended December 31st, 2021 in part one under the caption risk factors and the cautionary language included in this morning's press release, including with respect to risks related to the effects of the COVID-19 pandemic on our business. We further caution you that the company does not intend to update any of its predictions or projections except during our regularly scheduled quarterly earnings release conference calls and webcasts, or as otherwise required by law. During today's call, we will be referring to certain non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures are attached to our earnings release issued this morning and in the appendix of our presentation, which are available on the company's website. In our discussions of the results of operations, we may refer to non-GAAP results, which exclude the impact of items such as those outlined in our schedule titled Reconciliation of GAAP to Adjusted Non-GAAP Financials, included in this morning's press release and in the appendix of our presentation. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of fiscal year 2021. In addition, unless stated otherwise, all year-over-year revenue growth rates, including revenue growth ranges given on today's call, are given on a comparable constant currency basis. Now, I'd like to turn the call over to Dr. Udit Batra, Water's President and CEO. Udit.

Thank you, Kasper, and good morning, everyone. Along with Kasper, joining me on this morning's call is Amol Chauvel, Waters, Senior Vice President and Chief Financial Officer. We had a record start to the year with first quarter sales led by instruments which grew over 25% with a broad-based, strong performance across all our end markets and geographies. Before summarizing the quarter, let me start by saying how extremely proud I am of our teams who work tirelessly to manage our supply chain, delivering operational excellence and exceptional support for our customers through the ongoing challenges of the pandemic. It is a result of the indomitable spirit of all my colleagues at Waters. I will now provide a brief overview of our first quarter operating results and deliver our key messages. Amol will then review our financial results in detail and provide comments on our financial outlook. We will then open up the phone lines to take your questions. Turning now to slide three, we have three key messages. First, we had a very good start to 2022 with great traction for our new instrument products, strong operational performance, and sustained commercial momentum. Demand has remained robust across all our end markets. Second, we're laser focused on execution, innovation, and growth. We continue to make great progress large and small molecule workflows, as well as in our non-pharma markets such as food testing, environmental and material science. And thirdly, Waters has a firm commitment to leave the world better than we found it. We are delivering sustainable value to our shareholders and stakeholders through our ESG programs. Now moving to slide four, in the first quarter our revenue grew 13% as reported and 16% on across all our end markets and geographies. Orders in the quarter exceeded our sales of 691 million, reflecting a very strong demand. Instruments grew at 26% in constant currency, with strong growth across our LC, mass spec, and TA portfolios. New products contributed meaningfully to growth in the quarter, versus the first quarter of last year. In mass spec, new instruments in our high-end TandemQuad portfolio such as our Zevo TQ-XS also saw strong growth in both industrial and pharmaceutical applications. Instrument strength is a positive indicator for future growth of our consumables and service revenues. Recurring revenues grew 9% for the quarter with chemistry up 8% and service up 9%. This quarter had one fewer day than the first quarter of 2021, which translates to a headwind of approximately 1% for our recurring revenues. Without that, recurring revenues would have also grown double digits. Our MaxPeak premier columns have continued to provide strength and incremental growth to our chemistry business, given the benefit this technology provides for novel modality applications and our increased exposure to biologics. we're seeing increased service plan attachment rates in our key regions at instrument point of sale. By geography, growth was led by the Americas, with the U.S. up 28%, driven by broad performance in each of our end markets. In China, sales grew 17%, with pharma, industrial, and academic and government all up double digits. As lockdowns in certain regions persist, We're beginning to see more of an impact to our business, but we're in close contact with our customers and demand remains robust. Once the lockdowns ease, we expect activity levels to catch up, then normalize with limited impact to our full-year growth. 22% year over year, driven by sales growth, volume leverage, and an ability to manage inflation through pricing. Given the global nature of our business, we're seeing ongoing supply constraints and inflationary pressures. Despite this, we've been successful in working through these challenges, leveraging our global manufacturing footprint, and working closely with our customers and suppliers while delivering good operating results. Turning now to slide five, While each of our initiatives continues to progress, the two areas I would like to highlight this quarter are contract organizations and launch excellence. For contract organizations, our unique technical abilities and ability to collaborate closely with our customers are resulting in market share gains and strong revenue growth. Revenues from these customers were up over 25% for this quarter, led by over 50% growth in China. Turning now to launch excellence, and Max Premier columns. Acuity Premier and Max Premier were specifically designed to solve challenges that are particularly relevant for large, complex molecules. Our customers are using the technology for oligonucleotide analysis as well as separation and purification of novel modalities such as mRNA, peptides, and glycans, just to name a few examples. Meanwhile, small molecule growth remains solid, with customers continuing to purchase new capital equipment, including RKH PLC. Now on slide six, we recently launched the Zevo TQ Absolute, which is up to 15 times more sensitive when analyzing negatively ionized compounds compared to other tandem quads currently on the market, while also using less samples. It is designed to help pharmaceutical, food, and environmental labs meet regulations requiring trace-level quantitative mass spec analysis for a broad set of applications. In food testing, the instrument takes detection of anionic pesticides and their metabolites to a new level of quantitation. In pharma, it can provide highly sensitive analysis for oligonucleotides and peptide bioanalysis, as well as quantification of estrogens which high resolution mass spec have typically been required. The instrument is highly efficient, using approximately 50% less electricity and gas, and also producing 50% less heat than other high performance quantum quads on the market, both of which reduce the carbon footprint of analytical labs. It is also 50% smaller than other instruments in its class, which also adds value to our customers as space in analytical labs is limited and costly. Our TandemQuad portfolio was stronger than ever, and together with Waters Connect, we're able to make customers' workflows easier, faster, and more efficient without compromising performance. Now on slide seven, Immerse Delaware Our second innovation and research lab will be opening tomorrow, part of a multi-year collaboration with the University of Delaware. Its purpose is to develop analytical solutions to better characterize the manufacturing process for biologicals and novel modalities, which will support our path into bioprocess characterization. Researchers from both Waters and the University of Delaware will develop solutions, including sensor and instrument improvements, as well as characterize critical quality attributes that will be a key step towards separating the process from the product in biologics. On slide eight, we are delivering sustainable value to our shareholders and stakeholders through our ESG activities, which continue to be recognized in a number of areas. Earlier this year, we achieved a score of 100 Corporate Equality Index, earning Waters a designation as one of the best places to work for LGBTQ plus equality. In addition, Barron's ranked Waters number six on its 100 most sustainable US companies list for 2022, based on a set of 230 performance indicators, and reflects our efforts of continuous improvement in social and environmental responsibility. On the list, we were the highest placed Recently, within our diversity and inclusion and STEM education efforts, Waters has partnered with three historically black colleges and universities to create STEM opportunities for students through funding, instrument donations, mentoring, and the awarding of scholarships to students exploring the analytical sciences. In summary, we are pleased with our strong start to the year and our results in revenue growth and operational performance, which are demonstrating a continued success in our focus areas of execution, innovation, and growth. With that, I'd like to pass the call over to Amol for a deeper review of the first quarter financials as well as our outlook for the remainder of the year. Amol.