Waters Corporation

Corporation first quarter 2025 financial results conference call. All participants will be in listen-only mode until the question and answer session begins. This call is being recorded. If you have any objections, please disconnect at this time. It is now my pleasure to turn the call over to Mr. Kaspar Tudor, head of investor relations. Please go ahead, sir.

Thank you, Leila, and good morning, everyone. Welcome to Waters Corporation's first quarter earnings call. Joining me today are Dr. Udit Batra, our President and Chief Executive Officer, and Amol Chawal, our Senior Vice President and Chief Financial Officer. Before we begin, I will cover the cautionary language. In this conference call, we will make forward-looking statements regarding future events or future financial performance of the company. We will provide guidance regarding possible future results, as well as commentary on potential market and business conditions that may impact Waters Corporation over the second quarter of 2025 and full year 2025. These statements are only our present expectations, and actual events or results may differ materially. Please see the risk factors included within our Form 10-K, our Form 10-Qs, and the cautionary language included in this morning's earnings release. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are attached to our earnings release, and in the appendix of the slide presentation accompanying today's call. Both are available on the investor relations section of our website. Unless stated otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of fiscal year 2024. In addition, unless stated otherwise, all year-over-year revenue growth rates and ranges given on today's call are on a comparable constant currency basis. Finally, we do not intend to update our guidance, predictions, or projections, except as part of a regularly scheduled earnings release or as otherwise required by law. Now, as we begin, thank you all for joining us today. We've structured today's call to highlight how water's resilient growth profile, operational agility, and innovation are driving strong results as we navigate a dynamic global environment, including recently announced tariffs. Udit will start by framing our key messages and cover how we are well positioned to deliver against our 2025 objectives. Amol will then walk you through a detailed review of our first quarter performance, updated guidance, and the actions we have taken to stay ahead of evolving external conditions. After their remarks, we will open the lines for questions. With that, let me turn it over to Udit.

Thank you, Kasper, and good morning, everyone. We had a fantastic start to the year. Double digit instrument growth drove our performance as customer spending, especially in pharma, exceeded expectations. Demand remained solid across all our end markets and geographies. These results are driven by our strong commercial execution and our steadfast commitment to operational excellence. I want to take a moment to thank all my colleagues for their dedication and outstanding performance. Their focus and agility enable us to accelerate the benefits of pioneering science and deliver solid financial outcomes, especially in dynamic market conditions. We have consistently shown leadership through turbulent times. Just look at the last five years where we have successfully navigated the pandemic, the global chip shortage, supply chain disruptions, and inflationary pressures. Through it all, Waters has become a stronger company by focusing on three guiding principles. First, We stay close to our customers and work tirelessly and with urgency to support their evolving needs as conditions shift. Second, while mitigating risks, we never lose sight of opportunities to enhance our competitive position. We remain focused on launching differentiated new products and investing in our capabilities. Third, we redouble support and communication with our colleagues who are dedicated to the mission of the company and lead with an indomitable spirit. Staying true to these principles has enabled us to consistently deliver robust results over the past five years. Today, we continue to navigate a dynamic macro environment. However, our resilient, downstream-weighted revenue profile and swift operational actions position us to deliver high single-digit earnings growth this year, even after accounting for newly announced tariffs. Amol and I will discuss these points in greater detail later in the call. Turning now to our results. In the first quarter, sales grew 4%, as reported, and 7% in constant currency, landing at the high end of our guidance. Instruments grew 11%, led by mid-teens sales growth in both liquid chromatography and mass spectrometry, with strength driven by pharma and industrial end markets. Recurring revenue increased mid-single digits, which is in line with our expectations for a quarter with two fewer days. In China, sales grew 5%, led by double-digit growth in both industrial and academic and government applications. Earnings per share were also at the high end of guidance, supported by strong sales volume and an improvement in FX. Non-gap earnings per share were $2.25, reflecting low single-digit growth, and high single digit growth in constant currency terms. On a GAAP basis, EPS was $2.03. Our 11% instrument growth was led by mid-teens growth in pharma. Additionally, order growth exceeded sales growth, highlighting continued momentum in our business. These results underscore our strong position in attractive secular markets, particularly as customer capex spending has continued its recovery. As I highlight the drivers behind our strength, our message remains consistent. First, our team is executing well in an analytical instruments market still early in its recovery phase. Second, our revitalized portfolio closely aligns with customer needs at a time when instruments are ripe for replacement. Our innovation remains highly differentiated in markets that we serve, commanding premium pricing. And thirdly, our leadership position in downstream high-volume applications enables us to capture growth across an exciting mix of fast-growing testing opportunities, such as those of GLP-1, PFAS, and genetics testing. Innovation played a key role this quarter, reflecting in excellent customer adoption of our new products. In liquid chromatography, sales of our Alliance IS HPLC system more than tripled year over year, driven by growth across replacement and greenfield opportunities. Within replacement, customers are upgrading to leverage its smart features, flexibility, and productivity advantages. At the same time, adoption at new and expanding manufacturing facilities within pharma is particularly strong, notably among large U.S. CapEx investments. We recently expanded the Alliance IS BioHPLC product line by adding the photodiode array detector to enhance spectral insights for biopharma development and QC. Waters now has four configurations of Alliance IS HPLC platform to support routine quantitative analysis and expanded spectral analysis of small and large molecules in development and in QC. Mass spectrometry growth was led by our Zivo TQ Absolute system, our top-selling mass spec again this quarter, achieving sales growth of over 50%. Its superior sensitivity and sustainable design continue to drive demand, particularly in high-volume testing areas such as food and environmental analysis and pharma quantitation. In our chemistry consumables business, Maxpeak premier columns again significantly exceeded expectations, growing more than 30%. These products provide excellent solutions for separating complex molecules such as biologics and novel therapeutic modalities. Our differentiated portfolio continues to command strong pricing. As we look ahead, this combination serves us well as a mechanism to provide offsets and capitalize on new demand opportunities in a dynamic global environment. Our unique exposure to emerging high-volume testing drivers also contributed meaningfully to our growth this quarter. For JLP1 testing, we saw continued demand of our patrol UPLC systems. This advanced analytical tool has become indispensable for in-process testing of these peptides during manufacturing. Additionally, our chemistry and HPLC offerings saw continued momentum in post-fill finish quality testing supported by solid CapEx investment and production volumes. While we have a leading position in the analytical testing of current GLP-1 injectables on the market today, we are also very well positioned for future oral introductions. PFAS-related testing sales grew over 90% in the first quarter, continuing the 40% plus growth trend seen both in 2023 and 2024. LC-MS has become the dominant workhorse technique for regulated analysis of these compounds, including drinking water, soil, and wastewater compliance monitoring. This is because most regulated compounds are polar and non-volatile, making them best suited for liquid chromatography. We expect emerging regulations governing PFAS to drive testing in areas like food packaging and consumer products, which is an attractive opportunity for waters. Given the need to detect these same non-volatile compounds, LC-MS is also the method of choice in these areas. Our India team again delivered revenue growth close to 20% in constant currency, driven by strong demand from generics manufacturers and CDMOs. Looking ahead, as outlined at our recent investor day, we expect approximately 30 basis points of annual growth accretion from both GLP-1 and PFAS testing and an additional 70 to 100 basis points from growth in India. These volume growth drivers combined with the instrument replacement cycle and our strong pricing performance present a compelling high single digit plus growth profile for our company in the near to midterm. Turning now to new products. In the first quarter, we launched two new products in the TA division. The Electroforce Apex 1 for precise mechanical testing of high performance polymers and composites. and TGA smart seal pans, which support analysis of atmosphere-sensitive materials in battery, polymer, and drug development testing. Today, we also announced the launch of Empower for multi-angle light scattering detectors, which is an important milestone and commitment from our integration of WIAT. This advancement expands the scope of critical quality attributes that a biopharmaceutical laboratory can manage and submit to regulators using our Empower software. Our Steady's team of innovation continues to strengthen our core business and support our expansion into higher growth adjacencies. I will now cover our updated 2025 full-year guidance. Waters has a unique and resilient revenue profile, anchored by our focused exposure to downstream high-volume applications. This includes pharma QAQC, where growth is closely tied to manufacturing output and capex spending trends. Within these segments, customer spending has remained robust. Looking ahead, customer manufacturing needs continue to evolve, with potential for additional investment driven by tariff-related capacity shifts and U.S. pharma reshoring initiatives. Our team continues to execute well with our revitalized portfolio, particularly as the instrument replacement cycle continues to ramp. We also expect sustained contribution from our idiosyncratic growth drivers and continued achievement of strong like-for-like pricing gains. Given our better-than-expected first quarter performance, we are raising our full-year constant currency sales growth guidance to 5 to 7%. while adequately accounting for U.S. policy developments in the academic and government end market. Our adjustment to A&G growth expectation represents a 50 basis point impact on our full year growth outlook. But incremental price accretion from trade-off related actions is separately expected to contribute an equivalent 50 basis point tailwind. As such, our growth assumptions for the rest of the year remain unchanged. I will now talk about the current tariff situation and how Waters is positioned to meet the challenges from recent global trade policy changes. Our manufacturing footprint is highly globalized, and it includes a strong existing US presence. A significant portion of our ex-US manufacturing also takes place in jurisdictions subject only to the lower baseline tariff rate. We also do not have a significant tariff exposure to goods entering the U.S. from China or vice versa. After the tariffs were announced, we quickly stood up a cross-functional task force to assess tariff exposure and implement mitigation plans. We rapidly assessed the impact of tariff exposure and implemented supply chain adjustments, selective surcharges for tariffs and limits to discretionary spending. Thanks to our swift and decisive actions, we are well positioned to limit the net impact of the newly announced tariffs to a modest 10 million on our 2025 adjusted operating margin, effectively offsetting the majority of a 45 million gross impact. Within our EPS, the combined resulting effect of tariffs and U.S. policy changes is fully offset by favorable foreign exchange movements. As a result, there is no net impact to our original earnings per share guidance. Reflecting our first quarter outperformance, we are raising our full year 2025 adjusted EPS guidance to a range of $12.75 to $13.05. This translates to approximately 8% to 10% EPS growth or 10% to 12% on a constant currency basis. Now, I will pass the call over to Amol to cover our financial results in more detail and provide further details on our guidance. Amol?